Aim Funds Group (Invesco Funds Group) – ‘NSAR-A’ for 6/30/05 – ‘EX-99.77M MERGERS’

On:  Monday, 8/29/05, at 5:24pm ET   ·   Effective:  8/29/05   ·   For:  6/30/05   ·   Accession #:  950129-5-8809   ·   File #:  811-01540

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Semi-Annual Report by an Investment Company   —   Form N-SAR   —   ICA’40
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: NSAR-A      Semi-Annual Report by an Investment Company           51    213K 
 2: EX-99.77C VOTES  Matters Submitted to a Vote of Security         959±  3.77M 
                Holders                                                          
 3: EX-99.77D POLICIES  Policies re: Security Investments              1      7K 
 4: EX-99.77D POLICIES  Policies re: Security Investments              1      7K 
 5: EX-99.77E LEGAL  Legal Proceeding                                  8     38K 
 6: EX-99.77M MERGERS  Merger Info                                   959±  3.77M 
 7: EX-99.77M MERGERS  Merger Info                                   959±  3.77M 
 8: EX-99.77Q1 OTHR EXHB  Other Disclosure                             3     12K 
 9: EX-99.77Q1 OTHR EXHB  Other Disclosure                             3     17K 
10: EX-99.77Q1 OTHR EXHB  Other Disclosure                             9     29K 
11: EX-99.77Q1 OTHR EXHB  Other Disclosure                             9     37K 
12: EX-99.77Q1 OTHR EXHB  Other Disclosure                            30    116K 
13: EX-99.77Q1 OTHR EXHB  Other Disclosure                            16     59K 
14: EX-99.77Q1 OTHR EXHB  Other Disclosure                             2     11K 
15: EX-99.77Q1 OTHR EXHB  Other Disclosure                             1      8K 
16: EX-99.77Q1 OTHR EXHB  Other Disclosure                             1      8K 
17: EX-99.77Q1 OTHR EXHB  Other Disclosure                             1      9K 
18: EX-99.77Q1 OTHR EXHB  Other Disclosure                             1      8K 
19: EX-99.77Q1 OTHR EXHB  Other Disclosure                             1      8K 
20: EX-99.77Q1 OTHR EXHB  Other Disclosure                             1      8K 
21: EX-99.77Q1 OTHR EXHB  Other Disclosure                             1      8K 
22: EX-99.77Q1 OTHR EXHB  Other Disclosure                             1      8K 
23: EX-99.77Q1 OTHR EXHB  Other Disclosure                             1      9K 

‘EX-99.77M MERGERS’   —   Merger Info
Exhibit Table of Contents

EX-99.77M MERGERS
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                                                                  SUB-ITEM 77M

MERGERS 

AIM FUNDS GROUP 

AIM BALANCED FUND TO AIM BASIC BALANCED FUND

On March 22, 2005, the Boards of Directors AIM Funds Group ("AFG") approved an  
Agreement and Plan of Reorganization (the "Agreement"). On June 28, 2005, at a  
Special Meeting for Shareholders of AIM Balanced Fund ("Balanced Fund"), an     
investment portfolio of AFG, shareholders approved the Agreement that provided  
for the combination of Balanced Fund with AIM Basic Balanced Fund ("Basic       
Balanced"), an investment portfolio of AFG, (the "Reorganization"). Pursuant to 
the Agreement on July 18, 2005, all of the assets of Balanced Fund were         
transferred to Basic Balanced. Basic Balanced assumed all of the liabilities of 
Balanced Fund and AFG issued Class A shares of Basic Balanced to Balanced       
Fund's Class A shareholders, Class B shares of Basic Balanced to Balanced       
Fund's Class B shareholders, Class C shares of Basic Balanced to Balanced       
Fund's Class C shareholders, Institutional Class shares of Basic Balanced to    
Balanced Fund's Institutional Class shareholders and Class R shares of Basic    
Balanced to Balanced Fund's Class R shareholders. The value of each Balanced    
Fund shareholder's account with Basic Balanced immediately after the            
Reorganization was the same as the value of such shareholder's account with     
Balanced Fund immediately prior to the Reorganization. The Reorganization was   
structured as a tax-free transaction. No initial sales charge was imposed in    
connection with the Reorganization.                                             

For a more detailed discussion on the Reorganization, please see the attached   
proxy statement (attached hereto as Attachment A).                              

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                                                                  ATTACHMENT A

[AIM INVESTMENTS LOGO APPEARS HERE]                                             
--Registered Trademark--                                  

AIM BALANCED FUND,
A PORTFOLIO OF AIM FUNDS GROUP

11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046-1173 

                                                                    May 23, 2005

Dear Shareholder:                                                               

    We are seeking your approval of a Plan of Reorganization (the "Plan") that
provides for the sale of the assets of AIM Balanced Fund (the "Fund") to AIM    
Basic Balanced Fund ("Buying Fund"). This transaction will result in the        
combination of the two funds. You will receive shares of Buying Fund in         
connection with the transaction if shareholders approve it.                     

A I M Advisors, Inc. ("AIM"), the investment advisor to the AIM Funds,
conducted a review of the funds and concluded that it would be appropriate to   
consolidate certain funds. The funds identified for consolidation include       
certain smaller and less efficient funds that compete for limited shareholder   
assets and certain funds having similar investment objectives and strategies.   
Your Fund is one of the funds that AIM recommended, and your Board of Trustees  
approved, be consolidated with Buying Fund. The attached Proxy Statement and    
Prospectus seeks your approval of this consolidation.                           

     As more fully described in the attached Proxy Statement and Prospectus, AIM
recommended, and your Board of Trustees approved, that another fund also be     
consolidated with Buying Fund. The proposed combination of your Fund into Buying
Fund is not contingent on that other transaction occurring.                     

The enclosed Proxy Statement and Prospectus describes the proposed    
combination and compares, among other things, the investment objectives and     
strategies, operating expenses and performance history of your Fund and Buying  
Fund. You should review the enclosed materials carefully.                       

   After careful consideration, the Board of Trustees of AIM Funds Group has
approved the Plan and proposed combination. They recommend that you vote FOR the
proposal.                                                                       

   Your vote is important. Please take a moment after reviewing the enclosed
materials to sign and return your proxy card in the enclosed postage paid return
envelope. If you attend the meeting, you may vote in person. If you expect to   
attend the meeting in person, or have questions, please notify us by calling    
(800) 952-3502. You may also vote by telephone or through a website established 
for that purpose by following the instructions that appear on the enclosed proxy
card. If we do not hear from you after a reasonable amount of time, you may     
receive a telephone call from our proxy solicitor, Georgeson Shareholder        
Communications, Inc., reminding you to vote.                                    

              Sincerely,

                        /s/ ROBERT H. GRAHAM

                    Robert H. Graham
             President

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[AIM INVESTMENTS LOGO APPEARS HERE]                                             
--Registered Trademark--                                  

AIM TOTAL RETURN FUND,
A PORTFOLIO OF AIM COMBINATION STOCK & BOND FUNDS 

11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046-1173 

                                                                    May 23, 2005

Dear Shareholder:                                                               

 We are seeking your approval of an Agreement and Plan of Reorganization
(the "Plan") that provides for the sale of the assets of AIM Total Return Fund  
(the "Fund") to AIM Basic Balanced Fund ("Buying Fund"). This transaction will  
result in the combination of the two funds. You will receive shares of Buying   
Fund in connection with the transaction if shareholders approve it.             

A I M Advisors, Inc. ("AIM"), the investment advisor to the AIM Funds,
conducted a review of the funds and concluded that it would be appropriate to   
consolidate certain funds. The funds identified for consolidation include       
certain smaller and less efficient funds that compete for limited shareholder   
assets and certain funds having similar investment objectives and strategies.   
Your Fund is one of the funds that AIM recommended, and your Board of Trustees  
approved, be consolidated with Buying Fund. The attached Proxy Statement and    
Prospectus seeks your approval of this consolidation.                           

     As more fully described in the attached Proxy Statement and Prospectus, AIM
recommended, and your Board of Trustees approved, that another fund also be     
consolidated with Buying Fund. The proposed combination of your Fund into Buying
Fund is not contingent on that other transaction occurring.                     

The enclosed Proxy Statement and Prospectus describes the proposed    
combination and compares, among other things, the investment objectives and     
strategies, operating expenses and performance history of the Fund and Buying   
Fund. You should review the enclosed materials carefully.                       

     After careful consideration, the Board of Trustees of AIM Combination Stock
& Bond Funds has approved the Plan and proposed combination. They recommend that
you vote FOR the proposal.                                                      

   Your vote is important. Please take a moment after reviewing the enclosed
materials to sign and return your proxy card in the enclosed postage paid return
envelope. If you attend the meeting, you may vote in person. If you expect to   
attend the meeting in person, or have questions, please notify us by calling    
(800) 952-3502. You may also vote by telephone or through a website established 
for that purpose by following the instructions that appear on the enclosed proxy
card. If we do not hear from you after a reasonable amount of time, you may     
receive a telephone call from our proxy solicitor, Georgeson Shareholder        
Communications, Inc., reminding you to vote.                                    

              Sincerely,

                        /s/ ROBERT H. GRAHAM

                    Robert H. Graham
             President

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AIM BALANCED FUND,

A PORTFOLIO OF AIM FUNDS GROUP

11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046-1173 

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS 
TO BE HELD ON JUNE 28, 2005 

   We cordially invite you to attend our Special Meeting of Shareholders to:

       1. Approve a Plan of Reorganization (the "Plan") under which all of
  the assets of AIM Balanced Fund (the "Fund"), an investment portfolio of
 AIM Funds Group ("AFG"), will be transferred to AIM Basic Balanced Fund
    ("Buying Fund"), which is also an investment portfolio of AFG. Buying Fund
   will assume the liabilities of the Fund and AFG will issue shares of each
   class of Buying Fund to shareholders of the corresponding class of shares
of the Fund.                                                          

        2. Transact any other business, not currently contemplated, that may
    properly come before the Special Meeting, in the discretion of the proxies
or their substitutes.                                                 

We are holding the Special Meeting at 11 Greenway Plaza, Suite 100,   
Houston, Texas 77046-1173 on June 28, 2005, at 11:00 a.m., Central Time.        

  Shareholders of record as of the close of business on April 22, 2005 are
entitled to notice of, and to vote at, the Special Meeting or any adjournment of
the Special Meeting.                                                            

  WE REQUEST THAT YOU EXECUTE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE
THE ACCOMPANYING PROXY CARD, WHICH IS BEING SOLICITED BY THE BOARD OF TRUSTEES  
OF AFG. YOU MAY ALSO VOTE BY TELEPHONE OR THROUGH A WEBSITE ESTABLISHED FOR THAT
PURPOSE BY FOLLOWING THE INSTRUCTIONS ON THE ENCLOSED PROXY MATERIALS. YOUR VOTE
IS IMPORTANT FOR THE PURPOSE OF ENSURING A QUORUM AT THE SPECIAL MEETING. YOU   
MAY REVOKE YOUR PROXY AT ANY TIME BEFORE IT IS EXERCISED BY EXECUTING AND       
SUBMITTING A REVISED PROXY CARD, BY GIVING WRITTEN NOTICE OF REVOCATION TO THE  
SECRETARY OF AFG OR BY VOTING IN PERSON AT THE SPECIAL MEETING.                 

                       /s/ KEVIN M. CAROME

                   Kevin M. Carome
             Secretary

May 23, 2005                                                                    

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AIM TOTAL RETURN FUND,

A PORTFOLIO OF AIM COMBINATION STOCK & BOND FUNDS 

11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046-1173 

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS 
TO BE HELD ON JUNE 28, 2005 

   We cordially invite you to attend our Special Meeting of Shareholders to:

         1. Approve an Agreement and Plan of Reorganization (the "Plan") under
which all of the assets of AIM Total Return Fund (the "Fund"), an     
    investment portfolio of AIM Combination Stock & Bond Funds ("ACSBF"), will
  be transferred to AIM Basic Balanced Fund ("Buying Fund"), an investment
portfolio of AIM Funds Group ("AFG"). Buying Fund will assume the     
   liabilities of the Fund and AFG will issue shares of each class of Buying
Fund to shareholders of the corresponding class of shares of the Fund.

        2. Transact any other business, not currently contemplated, that may
    properly come before the Special Meeting, in the discretion of the proxies
or their substitutes.                                                 

We are holding the Special Meeting at 11 Greenway Plaza, Suite 100,   
Houston, Texas 77046-1173 on June 28, 2005, at 11:00 a.m., Central Time.        

  Shareholders of record as of the close of business on April 22, 2005 are
entitled to notice of, and to vote at, the Special Meeting or any adjournment of
the Special Meeting.                                                            

  WE REQUEST THAT YOU EXECUTE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE
THE ACCOMPANYING PROXY CARD, WHICH IS BEING SOLICITED BY THE BOARD OF TRUSTEES  
OF ACSBF. YOU MAY ALSO VOTE BY TELEPHONE OR THROUGH A WEBSITE ESTABLISHED FOR   
THAT PURPOSE BY FOLLOWING THE INSTRUCTIONS ON THE ENCLOSED PROXY MATERIALS. YOUR
VOTE IS IMPORTANT FOR THE PURPOSE OF ENSURING A QUORUM AT THE SPECIAL MEETING.  
YOU MAY REVOKE YOUR PROXY AT ANY TIME BEFORE IT IS EXERCISED BY EXECUTING AND   
SUBMITTING A REVISED PROXY CARD, BY GIVING WRITTEN NOTICE OF REVOCATION TO THE  
SECRETARY OF ACSBF OR BY VOTING IN PERSON AT THE SPECIAL MEETING.               

                       /s/ KEVIN M. CAROME

                   Kevin M. Carome
             Secretary

May 23, 2005                                                                    

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                                                                [Download Table]
                                                                              
     AIM BALANCED FUND,                           AIM TOTAL RETURN FUND,      
       A PORTFOLIO OF                                 A PORTFOLIO OF          
      AIM FUNDS GROUP                       AIM COMBINATION STOCK & BOND FUNDS
11 GREENWAY PLAZA, SUITE 100                   11 GREENWAY PLAZA, SUITE 100   
 HOUSTON, TEXAS 77046-1173                      HOUSTON, TEXAS 77046-1173     
       (800) 347-4246                                 (800) 347-4246          

AIM BASIC BALANCED FUND,
A PORTFOLIO OF
AIM FUNDS GROUP 
11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046-1173 
(800) 347-4246

COMBINED PROXY STATEMENT AND PROSPECTUS 
MAY 23, 2005

This document is a combined Proxy Statement and Prospectus ("Proxy    
Statement/Prospectus"). We are sending you this Proxy Statement/Prospectus in   
connection with the special meeting of shareholders of AIM Balanced Fund, an    
investment portfolio of AIM Funds Group, a Delaware statutory trust (the        
"Balanced Fund Special Meeting"), and the special meeting of shareholders of AIM
Total Return Fund, an investment portfolio of AIM Combination Stock & Bond      
Funds, a Delaware statutory trust (the "Total Return Fund Special Meeting" and, 
together with the Balanced Fund Special Meeting, the "Special Meetings"). The   
Special Meetings will be held on June 28, 2005, at 11:00 a.m., Central Time. We 
intend to mail this Proxy Statement/Prospectus, the enclosed Notice of Special  
Meeting of Shareholders and the enclosed proxy card on or about May 23, 2005 to 
all shareholders entitled to vote.                                              

     At the Balanced Fund Special Meeting, the shareholders of AIM Balanced Fund
("Balanced Fund") are being asked to consider and approve a Plan of             
Reorganization (the "Balanced Fund Plan") to be adopted by AIM Funds Group      
("AFG"), acting on behalf of both Balanced Fund and AIM Basic Balanced Fund     
("Buying Fund"). The Balanced Fund Plan provides for the reorganization of      
Balanced Fund with Buying Fund (the "Balanced Fund Reorganization").            

 At the Total Return Fund Special Meeting, the shareholders of AIM Total
Return Fund ("Total Return Fund") are being asked to consider and approve an    
Agreement and Plan of Reorganization (the "Total Return Fund Plan" and, together
with the Balanced Fund Plan, the "Plans") by and among AIM Combination Stock &  
Bond Funds ("ACSBF"), acting on behalf of Total Return Fund, AFG, acting on     
behalf of Buying Fund, and A I M Advisors, Inc. ("AIM"). The Total Return Fund  
Plan provides for the reorganization of Total Return Fund with Buying Fund (the 
"Total Return Fund Reorganization" and, together with the Balanced Fund         
Reorganization, the "Reorganizations").                                         

This Proxy Statement/Prospectus includes information regarding both   
Reorganizations. We have included the request for approval of both              
Reorganizations in one Proxy Statement/Prospectus because we are proposing that 
each of Balanced Fund and Total Return Fund (each, a "Selling Fund" and         
together, the "Selling Funds") be combined with Buying Fund. You should note,   
however, that consummation of each of the Reorganizations is not conditioned on 
consummation of the other reorganization. The reorganization of your Selling    
Fund is contingent only upon your Selling Fund receiving the requisite number of
votes FOR approval of its reorganization.                                       

     Under the Plans, all of the assets of each Selling Fund will be transferred
to Buying Fund, Buying Fund will assume the liabilities of each Selling Fund and
AFG will issue shares of each class of Buying Fund to shareholders of the       
corresponding class of shares of each Selling Fund, as set forth on Exhibit A.  

The value of each Selling Fund shareholder's account with Buying Fund 
immediately after each of the Reorganizations will be the same as the value of  
such Selling Fund shareholder's account immediately prior to each of the        
Reorganizations. The Reorganizations have been structured as tax-free           
transactions. No sales charges will be imposed in connection with the           
Reorganizations.                                                                

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    The Board of Trustees of AFG and the Board of Trustees of ACSBF (together,
the "Boards") have approved the Plans and the Reorganizations as being advisable
and in the best interests of each of the Selling Funds.                         

    AFG and ACSBF are each registered open-end management investment companies
that issue their shares in separate series. AIM serves as the investment advisor
to each Selling Fund and to Buying Fund. INVESCO Institutional (N.A.), Inc.     
("INVESCO Institutional") acts as sub-advisor to Total Return Fund. AIM and     
INVESCO Institutional are wholly owned subsidiaries of AMVESCAP PLC             
("AMVESCAP"), an independent global investment management company.              

    The investment objective of Buying Fund is similar to that of each Selling
Fund. Buying Fund seeks long-term growth of capital and current income. Balanced
Fund seeks to achieve as high a total return as possible, consistent with       
preservation of capital, and Total Return Fund seeks to provide high total      
return through both growth and income. See "Comparison of Investment Objectives 
and Principal Strategies."                                                      

This Proxy Statement/Prospectus sets forth the information that       
shareholders of each Selling Fund should know before voting on the Plans. It is 
both the Proxy Statement of each Selling Fund and the Prospectus of Buying Fund.
You should read and retain this Proxy Statement/Prospectus for future reference.

  The Prospectus of Balanced Fund dated April 29, 2005 (the "Balanced Fund
Prospectus"), together with the related Statement of Additional Information     
dated April 29, 2005, and the Prospectus of Total Return Fund dated December 3, 
2004, (the "Total Return Fund Prospectus" and, together with the Balanced Fund  
Prospectus, the "Selling Fund Prospectuses") together with the related Statement
of Additional Information dated December 3, 2004 are on file with the Securities
and Exchange Commission (the "SEC"). The Selling Fund Prospectuses are          
incorporated by reference into this Proxy Statement/Prospectus. The Prospectus  
of Buying Fund dated April 29, 2005, as revised May 16, 2005, (the "Buying Fund 
Prospectus"), and the related Statement of Additional Information dated April   
29, 2005, and the Statement of Additional Information relating to the           
Reorganizations dated May 23, 2005, are on file with the SEC. The Buying Fund   
Prospectus is incorporated by reference into this Proxy Statement/Prospectus and
a copy of the Buying Fund Prospectus is attached as Appendix III to this Proxy  
Statement/Prospectus. The Statement of Additional Information relating to the   
Reorganizations dated May 23, 2005, also is incorporated by reference into this 
Proxy Statement/Prospectus. The SEC maintains a website at www.sec.gov that     
contains the Prospectuses and Statements of Additional Information described    
above, material incorporated by reference, and other information about AFG and  
ACSBF.                                                                          

     Copies of the Prospectuses of Buying Fund and Selling Funds and the related
Statements of Additional Information are available without charge by writing to 
A I M Distributors, Inc., 11 Greenway Plaza, Suite 100, Houston, Texas          
77046-1173, or by calling (800) 959-4246. Additional information about each     
Selling Fund and Buying Fund may be obtained on the internet at                 
www.aiminvestments.com.                                                         

   AFG and ACSBF have previously sent to shareholders the most recent annual
reports for each Selling Fund, including financial statements, and the most     
recent semiannual reports succeeding the annual reports, if any. If you have not
received such report(s) or would like to receive an additional copy, please     
contact A I M Distributors, Inc., 11 Greenway Plaza, Suite 100, Houston, Texas  
77046-1173, or by calling (800) 959-4246. Such report(s) will be furnished free 
of charge.                                                                      

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR 
HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY 
OF THIS PROXY 
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. 

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TABLE OF CONTENTS 

                                                                [Download Table]

                                                              PAGE
                                                              ----
                                                                  
SUMMARY.....................................................    1 
  The Reorganizations.......................................    1 
  Comparison of Investment Objectives and Principal               
     Strategies.............................................    2 
  Comparison of Performance.................................    3 
  Comparison of Fees and Expenses...........................    3 
  Comparison of Multiple Class Structures...................    5 
  Comparison of Sales Charges...............................    5 
  Comparison of Distribution and Purchase and Redemption          
     Procedures.............................................    6 
  The Boards' Recommendations...............................    6 
RISK FACTORS................................................    7 
  Risks Associated with Buying Fund.........................    7 
  Comparison of Risks of Buying Fund and Each Selling             
     Fund...................................................    7 
INFORMATION ABOUT BUYING FUND...............................    7 
  Description of Buying Fund Shares.........................    7 
  Management's Discussion of Fund Performance...............    8 
  Financial Highlights......................................    8 
ADDITIONAL INFORMATION ABOUT THE PLANS......................    8 
  Terms of the Reorganizations..............................    8 
  The Reorganizations.......................................    8 
  Board Considerations......................................    9 
  Other Terms...............................................   12 
  Federal Income Tax Consequences...........................   13 
  Accounting Treatment......................................   14 
RIGHTS OF SHAREHOLDERS......................................   14 
CAPITALIZATION..............................................   15 
LEGAL MATTERS...............................................   16 
ADDITIONAL INFORMATION ABOUT BUYING FUND AND SELLING              
  FUNDS.....................................................   16 
INFORMATION FILED WITH THE SECURITIES AND EXCHANGE                
  COMMISSION................................................   16 
INFORMATION ABOUT THE SPECIAL MEETINGS AND VOTING...........   17 
  Proxy Statement/Prospectus................................   17 
  Time and Place of Special Meetings........................   17 
  Voting in Person..........................................   17 
  Voting by Proxy...........................................   17 
  Voting by Telephone or the Internet.......................   17 
  Quorum Requirement and Adjournment........................   18 
  Vote Necessary to Approve the Plans.......................   18 
  Proxy Solicitation........................................   18 
  Other Matters.............................................   18 
  Ownership of Shares.......................................   19 

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                                                                [Download Table]
                                                                                  
EXHIBIT A............... Classes of Shares of Each Selling Fund and Corresponding 
                         Classes of Shares of Buying Fund                         
EXHIBIT B............... Comparison of Performance of Each Selling Fund and Buying
                         Fund                                                     
EXHIBIT C............... Comparison Fee Tables and Expense Examples               
EXHIBIT D............... Shares Outstanding of Each Class of Selling Funds on     
                         Record Date                                              
EXHIBIT E............... Ownership of Shares of Each Selling Fund                 
EXHIBIT F............... Ownership of Shares of Buying Fund                       
APPENDIX I.............. Plan of Reorganization for AIM Balanced Fund             
APPENDIX II............. Agreement and Plan of Reorganization for AIM Total Return
                         Fund                                                     
APPENDIX III............ Prospectus of Buying Fund                                
APPENDIX IV............. Discussion of Performance of Buying Fund                 

THE AIM FAMILY OF FUNDS, AIM AND DESIGN, AIM, AIM FUNDS, AIM FUNDS AND
DESIGN, AIM INVESTMENTS, AIM INVESTOR, AIM LIFETIME AMERICA, AIM LINK, AIM      
INSTITUTIONAL FUNDS, AIMFUNDS.COM, LA FAMILIA AIM DE FONDOS, LA FAMILIA AIM DE  
FONDOS AND DESIGN, INVIERTA CON DISCIPLINA, INVEST WITH DISCIPLINE, THE AIM     
COLLEGE SAVINGS PLAN, AIM SOLO 401(K), AIM INVESTMENTS AND DESIGN AND YOUR      
GOALS. OUR SOLUTIONS ARE REGISTERED SERVICE MARKS AND AIM BANK CONNECTION, AIM  
INTERNET CONNECT, AIM PRIVATE ASSET MANAGEMENT, AIM PRIVATE ASSET MANAGEMENT AND
DESIGN, AIM STYLIZED AND/OR DESIGN, AIM ALTERNATIVE ASSETS AND DESIGN AND       
MYAIM.COM ARE SERVICE MARKS OF A I M MANAGEMENT GROUP INC. AIM TRIMARK IS A     
SERVICE MARK OF A I M MANAGEMENT GROUP INC. AND AIM FUNDS MANAGEMENT INC.       

    No dealer, salesperson or any other person has been authorized to give any
information or to make any representation other than those contained in this    
Proxy Statement/Prospectus, and you should not rely on such other information or
representations.                                                                

  ii

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SUMMARY 

 During 2003 and 2004, AMVESCAP, the parent company of AIM, undertook an
integration initiative with respect to its United States mutual fund operations.
Among other things, AMVESCAP's integration initiative included the establishment
of a single distributor for all AMVESCAP U.S. mutual funds, the integration of  
back office support for AMVESCAP's U.S. mutual funds, the allocation of primary 
responsibility for investment advisory, administrative, accounting, and legal   
and compliance services for all of AMVESCAP's U.S. mutual funds to AIM and      
streamlining the various mutual funds offered by AMVESCAP's subsidiaries in the 
U.S.                                                                            

     Since completion of the AMVESCAP integration initiative, AIM has undertaken
an extensive review of its U.S. mutual fund offerings and has concluded that it 
would be appropriate to reduce the number of smaller and less efficient funds   
that compete for limited shareholder assets and to consolidate certain funds    
having similar investment objectives and strategies. The Reorganizations are    
part of a number of fund reorganizations AIM is proposing as a result of this   
review process. AIM believes that the Reorganizations will allow Buying Fund the
best available opportunities for investment management, growth prospects and    
potential economies of scale.                                                   

  The Boards, including the independent trustees, have determined that the
Reorganizations are advisable and in the best interests of each Selling Fund and
that the interests of the shareholders of each Selling Fund will not be diluted 
as a result of the Reorganizations. Each Selling Fund and Buying Fund invest in 
similar securities, have similar investment objectives and strategies and       
compete for limited shareholder assets. The Boards believe that the combined    
fund should have greater market presence and may achieve greater operating      
efficiencies by providing economies of scale in that certain fixed costs, such  
as legal, accounting, shareholder services and trustee expenses, will be spread 
over the greater assets of the combined fund. For additional information        
concerning the factors the Boards considered in approving the Plans, see        
"Additional Information About the Plans -- Board Considerations."               

The following summary discusses some of the key features of the       
Reorganizations and highlights certain differences between each Selling Fund and
Buying Fund. This summary is not complete and does not contain all of the       
information that you should consider before voting on whether to approve the    
Plans. For more complete information, please read this entire Proxy             
Statement/Prospectus.                                                           

THE REORGANIZATIONS                                                             

 The Reorganizations will result in the combination of each Selling Fund
with Buying Fund. Balanced Fund is a series of AFG, a Delaware statutory trust, 
and Total Return Fund is a series of ACSBF, a Delaware statutory trust. Buying  
Fund is also a series of AFG.                                                   

   If shareholders of a Selling Fund approve their respective Plan and other
closing conditions are satisfied, all of the assets of that Selling Fund will be
transferred to Buying Fund, Buying Fund will assume the liabilities of that     
Selling Fund, and AFG will issue shares of each class of Buying Fund to         
shareholders of the corresponding class of shares of that Selling Fund, as set  
forth on Exhibit A. For a description of certain of the closing conditions that 
must be satisfied, see "Additional Information About the Plans -- Other Terms." 

The shares of Buying Fund issued in each Reorganization will have an  
aggregate net asset value equal to the net value of the assets of the respective
Selling Fund transferred to Buying Fund. The value of each Selling Fund         
shareholder's account with Buying Fund immediately after the Reorganizations    
will be the same as the value of that Selling Fund shareholder's account with   
their respective Selling Fund immediately prior to the Reorganizations. A copy  
of the Balanced Fund Plan is attached as Appendix I to this Proxy Statement/    
Prospectus and a copy of the Total Return Fund Plan is attached as Appendix II  
to this Proxy Statement/ Prospectus. See "Additional Information About the      
Plans."                                                                         

     AFG and ACSBF will receive an opinion of Ballard Spahr Andrews & Ingersoll,
LLP to the effect that each Reorganization will constitute a tax-free           
reorganization for Federal income tax purposes. Thus, shareholders will not have
to pay additional Federal income tax as a result of the Reorganizations. See    
"Additional Information About the Plans -- Federal Income Tax Consequences."    
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  No sales charges will be imposed in connection with the Reorganizations.

COMPARISON OF INVESTMENT OBJECTIVES AND PRINCIPAL STRATEGIES                    

    Each Selling Fund and Buying Fund have similar investment objectives. Each
Selling Fund and Buying Fund also invest in similar types of securities. As a   
result, the Reorganizations are not expected to cause significant portfolio     
turnover or transaction expenses from the sale of securities that are           
incompatible with the investment objective of Buying Fund.                      

The chart below provides a summary for comparison purposes of the     
investment objectives and principal investment strategies of each Selling Fund  
and Buying Fund. You can find more detailed information about the investment    
objectives, strategies and other investment policies of each Selling Fund and   
Buying Fund in the Selling Fund Prospectuses and the Buying Fund Prospectus,    
respectively.                                                                   

                                                        [Enlarge/Download Table]

      AIM BALANCED FUND            AIM TOTAL RETURN FUND          AIM BASIC BALANCED FUND   
       (SELLING FUND)                 (SELLING FUND)                   (BUYING FUND)        
      -----------------            ---------------------          -----------------------   
                                                                                            
                                    INVESTMENT OBJECTIVE                                    
- As high a total return as    - High total return through     - Long-term growth of capital
  possible, consistent with      both growth and current         and current income.        
  preservation of capital.       income.                                                    

                                   INVESTMENT STRATEGIES                                    

- Invests in a broadly         - Normally invests at least     - Invests in a broadly       
  diversified portfolio of       65% of its net assets in a      diversified portfolio of   
  common stocks, preferred       combination of common           common stocks, preferred   
  stocks, convertible            stocks of companies with a      stocks, convertible        
  securities and bonds.          history of paying regular       securities and bonds.      
                                 dividends and in debt                                      
                                 securities.                                                

- Normally invests a minimum   - Normally invests at least     - Normally invests a minimum 
  of 30% and a maximum of 70%    30% of its net assets in debt   of 30% and a maximum of 70%
  of its total assets in         securities that are             of its total assets in     
  equity securities and a        investment grade at the         equity securities and a    
  minimum of 25% and a           time of purchase and at         minimum of 25% and a       
  maximum of 70% of its total    least 30% of its net assets     maximum of 70% of its total
  assets in non-convertible      in equity securities.           assets in investment grade 
  debt securities.                                               non-convertible debt       
                                                                 securities.                

- In selecting the             - No corresponding strategy.    - In selecting the           
  percentages of assets to be                                    percentages of assets to be
  invested in equity or debt                                     invested in equity or debt 
  securities, the portfolio                                      securities, the portfolio  
  managers consider such                                         managers consider such     
  factors as general market                                      factors as general market  
  and economic conditions, as                                    and economic conditions, as
  well as trends, yields,                                        well as trends, yields,    
  interest rates and changes                                     interest rates and changes 
  in fiscal and monetary                                         in fiscal and monetary     
  policies.                                                      policies.                  

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                                                        [Enlarge/Download Table]

      AIM BALANCED FUND            AIM TOTAL RETURN FUND          AIM BASIC BALANCED FUND   
       (SELLING FUND)                 (SELLING FUND)                   (BUYING FUND)        
      -----------------            ---------------------          -----------------------   
                                                                                            
- The portfolio managers       - A portion of the fund's       - In selecting equity        
  primarily purchase equity      portfolio invested in equity    investments, the portfolio 
  securities for growth of       securities is managed in a      managers seek to identify  
  capital and debt securities    blend of the growth and         those companies whose stock
  for income purposes.           value investing styles and      prices are undervalued by  
                                 will be primarily invested      investors due to temporary 
                                 in large capitalization         factors and that provide   
                                 stocks that possess one of      the potential for          
                                 three attributes that are       attractive returns.        
                                 attractive relative to the                                 
                                 S&P 500; (i) a low price to                                
                                 earnings ratio, (ii) a high                                
                                 dividend yield, or (iii)                                   
                                 consistent growth.                                         

- No corresponding strategy.   - No corresponding strategy.    - The portfolio managers     
                                                                 purchase debt securities   
                                                                 for both capital           
                                                                 appreciation and income,   
                                                                 and to provide portfolio   
                                                                 diversification.           

- May also invest up to 25%    - No corresponding strategy.    - May also invest up to 25%  
  of its total assets in                                         of its total assets in     
  convertible securities.                                        convertible securities.    

- May also invest up to 25%    - May also invest up to 25%     - May also invest up to 25%  
  of its total assets in         of its total assets in          of its total assets in     
  foreign securities.            securities of non-U.S.          foreign securities.        
                                 issuers.                                                   

COMPARISON OF PERFORMANCE                                                       

A bar chart showing the annual total returns for calendar years ended 
December 31 for Class A shares of Balanced Fund, Investor Class shares of Total 
Return Fund and Class A shares of Buying Fund can be found at Exhibit B. Also   
included as part of Exhibit B is a table showing the average annual total       
returns for the periods indicated for each Selling Fund and Buying Fund. For    
more information regarding the total return of each Selling Fund, see the       
"Financial Highlights" section of the Selling Fund Prospectuses, which have been
made a part of this Proxy Statement/Prospectus by reference. For more           
information regarding the total return of Buying Fund, see "Information About   
Buying Fund -- Financial Highlights." Past performance cannot guarantee         
comparable future results.                                                      

     Effective June 1, 2005, Buying Fund's portfolio management team will become
responsible for day-to-day management of Total Return Fund.                     

COMPARISON OF FEES AND EXPENSES                                                 

A comparison of shareholder fees and annual operating expenses of each
class of shares of Balanced Fund and Buying Fund, as of December 31, 2004 and of
Total Return Fund as of August 31, 2004, expressed as a percentage of net assets
("Expense Ratio"), can be found at Exhibit C. Pro forma estimated Expense       
Ratios, based on historical data at a specified date and related to projected   
data for each class of shares of Buying Fund after giving effect to the         
Reorganizations are also provided as of December 31, 2004 as part of Exhibit C. 

    In connection with the Reorganizations, AIM proposed to permanently reduce
the investment advisory fee applicable to Buying Fund. Accordingly, effective on
the closing of the Reorganizations, the Board of Buying Fund has approved       
amendments to Buying Fund's investment advisory schedule such that AIM will     
receive a monthly fee calculated, based on the average daily net assets of      
Buying Funds at the annual rates described below.                               

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If shareholders approve the Balanced Fund Reorganization and the Total
Return Fund Reorganization is not approved, Buying Fund's investment advisory   
fee schedule will be:                                                           

                                                                [Download Table]

ANNUAL RATE                                                        NET ASSETS       
-----------                                                        ----------       
                                                                                    
0.65%....................................................... First $150 million     
0.50%....................................................... Next $4.85 billion     
0.475%...................................................... Next $5 billion        
0.45%....................................................... Excess over $10 billion

If shareholders approve the Total Return Fund Reorganization and the  
Balanced Fund Reorganization is not approved, Buying Fund's investment advisory 
fee schedule will be:                                                           

                                                                [Download Table]

ANNUAL RATE                                                        NET ASSETS      
-----------                                                        ----------      
                                                                                   
0.65%....................................................... First $1 billion      
0.50%....................................................... Next $1 billion       
0.45%....................................................... Next $2 billion       
0.40%....................................................... Next $2 billion       
0.375%...................................................... Next $2 billion       
0.35%....................................................... Excess over $8 billion

If shareholders approve both Reorganizations, Buying Fund's investment
advisory fee schedule will be:                                                  

                                                                [Download Table]

ANNUAL RATE                                                        NET ASSETS      
-----------                                                        ----------      
                                                                                   
0.65%....................................................... First $150 million    
0.50%....................................................... Next $1.85 billion    
0.45%....................................................... Next $2 billion       
0.40%....................................................... Next $2 billion       
0.375%...................................................... Next $2 billion       
0.35%....................................................... Excess over $8 billion

     In addition, effective for the period January 1, 2005, through December 31,
2009, AIM has contractually agreed to waive its advisory fees to the extent     
necessary so that the advisory fees payable by Buying Fund do not exceed the    
following uniform fee schedule:                                                 

                                                                [Download Table]

ANNUAL RATE                                                        NET ASSETS       
-----------                                                        ----------       
                                                                                    
0.62%....................................................... First $250 million     
0.605%...................................................... Next $250 million      
0.59%....................................................... Next $500 million      
0.575%...................................................... Next $1.5 billion      
0.56%....................................................... Next $2.5 billion      
0.545....................................................... Next $2.5 billion      
0.53........................................................ Next $2.5 billion      
0.515%...................................................... Excess over $10 billion

After giving effect to both Reorganizations, the reduced advisory fee 
schedule to be applicable to Buying Fund would be the same as or lower than each
Selling Fund's current advisory fee schedule, and is the same as or lower than  
the applicable uniform fee schedule at all asset levels other than the first    
$250 million in assets of the combined fund.                                    

    In addition, the expenses of the combined fund after giving effect to both
Reorganizations and fee reductions are expected to be the same or lower than    
those of the Selling Funds.                                                     

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COMPARISON OF MULTIPLE CLASS STRUCTURES                                         

   A comparison of the share classes of each Selling Fund that are currently
available to investors and the corresponding share class of Buying Fund that    
shareholders of each Selling Fund will receive in the Reorganizations can be    
found at Exhibit A. Total Return Fund has Class K shares authorized, but such   
shares have not yet been offered for sale. For information regarding the        
features of each of the share classes of each Selling Fund and Buying Fund, see 
the Selling Fund Prospectuses and the Buying Fund Prospectus, respectively.     

COMPARISON OF SALES CHARGES                                                     

No sales charges are applicable to shares of Buying Fund received by  
holders of each Selling Fund's shares in connection with the Reorganizations. No
redemption of a Selling Fund's shares that could cause the imposition of a      
contingent deferred sales charge ("CDSC") will result in connection with the    
Reorganizations. The holding period for purposes of determining whether to      
charge a CDSC upon redemptions of shares of Buying Fund received by holders of a
Selling Fund's shares in connection with the Reorganizations will begin at the  
time the Selling Fund's shares were originally purchased.                       

    Holders of Class K shares of Total Return Fund will receive Class A shares
of Buying Fund in the Total Return Fund Reorganization. After the               
Reorganization, such shareholders will be able to purchase additional Class A   
shares of Buying Fund without the imposition of an initial sales charge or CDSC.

   The chart below provides a summary for comparison purposes of the initial
sales charges and CDSCs applicable to each class of shares of each Selling Fund 
and Buying Fund. The fee tables at Exhibit C include comparative information    
about maximum initial sales charges on purchases of Class A shares of each      
Selling Fund and Buying Fund and the maximum CDSC on redemptions of certain     
classes of shares of each Selling Fund and Buying Fund. For more detailed       
information on initial sales charges, including volume purchase breakpoints and 
waivers, and reductions of CDSCs over time, see the Selling Fund Prospectuses   
and the Buying Fund Prospectus and the related Statements of Additional         
Information.                                                                    

                                                        [Enlarge/Download Table]

           CLASS A                        CLASS B                      CLASS C         
           -------                        -------                      -------         
                                                                                       
- subject to an initial sales  - not subject to an initial  - not subject to an initial
  charge*                        sales charge                 sales charge             

- may be subject to a CDSC on  - subject to a CDSC on       - subject to a CDSC on     
  redemptions made within 12     certain redemptions          certain redemptions      
  or 18 months from the date                                                           
  of certain purchases                                                                 

                                                        [Enlarge/Download Table]

         CLASS R                    CLASS K               INVESTOR CLASS                            
(EXCEPT TOTAL RETURN FUND)  (TOTAL RETURN FUND ONLY)  (EXCEPT BALANCED FUND)   INSTITUTIONAL CLASS  
--------------------------  ------------------------  ----------------------   -------------------  
                                                                                                    
- not subject to an         - not subject to an       - not subject to an     - not subject to an   
  initial sales charge        initial sales charge      initial sales charge    initial sales charge

- may be subject to a CDSC  - may be subject to a     - not subject to a      - not subject to a    
  on redemptions made         CDSC on redemptions       CDSC                    CDSC                
  within 12 months from       made within 12 months                                                 
  the date of certain         from the date of                                                      
  purchases                   certain purchases                                                     

---------------                                                                 

* Each Selling Fund and Buying Fund waive initial sales charges on Class A      
shares for certain categories of investors, including certain of their      
 affiliated entities and certain of their employees, officers and trustees and
those of their investment advisor.                                          

   The CDSC on redemptions of shares of Buying Fund is computed based on the
lower of their original purchase price or current market value, net of          
reinvested dividends and capital gains distributions.                           

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COMPARISON OF DISTRIBUTION AND PURCHASE AND REDEMPTION PROCEDURES               

Shares of each Selling Fund and Buying Fund are distributed by A I M  
Distributors, Inc. ("AIM Distributors"), a registered broker-dealer and wholly  
owned subsidiary of AIM.                                                        

    Each of the Selling Funds and Buying Fund have adopted a distribution plan
that allows the payment of distribution and service fees for the sale and       
distribution of the shares of each of their respective classes. Distribution    
fees are payable to AIM Distributors for distribution services. The fee tables  
at Exhibit C include comparative information about the distribution and service 
fees payable by each class of shares of each Selling Fund and Buying Fund. Each 
class of shares of Buying Fund will have the same or lower aggregate            
distribution and service fees as the corresponding class of shares of each      
Selling Fund.                                                                   

     The purchase and redemption procedures of each Selling Fund and Buying Fund
are substantially the same. For information regarding the purchase and          
redemption procedures of each Selling Fund and Buying Fund, see the Selling Fund
Prospectuses and the Buying Fund Prospectus, respectively.                      

THE BOARDS' RECOMMENDATIONS                                                     

    The Boards, including the independent trustees, unanimously recommend that
you vote "FOR" this Proposal.                                                   

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RISK FACTORS

RISKS ASSOCIATED WITH BUYING FUND                                               

     The following is a discussion of the principal risks associated with Buying
Fund.                                                                           

    There is a risk that you could lose all or a portion of your investment in
Buying Fund. The value of your investment in Buying Fund will go up and down    
with the prices of the securities in which Buying Fund invests. The prices of   
equity securities change in response to many factors, including the historical  
and prospective earnings of the issuer, the value of its assets, general        
economic conditions, interest rates, investor perceptions and market liquidity. 
Interest rate increases may cause the price of a debt security to decrease; the 
longer a debt security's duration, the more sensitive it is to this risk. The   
issuer of a security may default or otherwise be unable to honor a financial    
obligation.                                                                     

    The values of convertible securities in which the fund invests may also be
affected by market interest rates, the risk that the issuer may default on      
interest or principal payments and the value of the underlying stock into which 
these securities may be converted. Specifically, since these types of           
convertible securities pay fixed interest or dividends, their values may fall if
interest rates rise and rise if market interest rates fall. Additionally, an    
issuer may have the right to buy back certain of the convertible securities at a
time and at a price that is unfavorable to the fund.                            

    Foreign securities have additional risks, including exchange rate changes,
political and economic upheaval, the relative lack of information about these   
companies, relatively low market liquidity and the potential lack of strict     
financial and accounting controls and standards.                                

    An investment in the fund is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government 
agency.                                                                         

COMPARISON OF RISKS OF BUYING FUND AND EACH SELLING FUND                        

     The risks associated with an investment in each Selling Fund are similar to
those described above for Buying Fund because of the similarities in their      
investment objectives and strategies. Set forth below is a discussion of certain
risks that differ between Buying Fund and each Selling Fund. You can find more  
detailed descriptions of specific risks associated with each Selling Fund in the
Selling Fund Prospectuses.                                                      

Each Selling Fund and Buying Fund invest primarily in equity and debt 
securities. However, Buying Fund invests without regard to market               
capitalization. If Buying Fund invests in companies with smaller                
capitalizations, the risk of investing in Buying Fund theoretically may be      
greater than that of each of the Selling Funds. The price of equity securities  
changes in response to many factors, including the historical and prospective   
earnings of the issuer, the value of its assets, general economic conditions,   
interest rates, investor perceptions and market liquidity. This is especially   
true with respect to equity securities of smaller companies, whose prices may go
up and down more than equity securities of larger, more established companies.  
Also, since equity securities of smaller companies may not be traded as often as
equity securities of larger, more established companies, it may be difficult or 
impossible for Buying Fund to sell such securities at a desirable price.        

INFORMATION ABOUT BUYING FUND 

DESCRIPTION OF BUYING FUND SHARES                                               

    Shares of Buying Fund are redeemable at their net asset value (subject, in
certain circumstances, to a contingent deferred sales charge) at the option of  
the shareholder or at the option of AFG in certain circumstances. Each share of 
Buying Fund represents an equal proportionate interest in Buying Fund with each 
other share and is entitled to such dividends and distributions out of the      
income belonging to Buying Fund as are declared by the Board of Trustees of AFG.
Each share of Buying Fund generally has the same voting, dividend, liquidation  
and other rights; however, each class of shares of Buying Fund is subject to    

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different sales loads, conversion features, exchange privileges and             
class-specific expenses. When issued, shares of Buying Fund are fully paid and  
nonassessable, have no preemptive or subscription rights, and are freely        
transferable. Other than the automatic conversion of Class B shares to Class A  
shares at the end of the month that is eight years after the date on which      
shares were purchased, there are no conversion rights.                          

MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE                                     

     A discussion of the performance of Buying Fund taken from its annual report
to shareholders for the fiscal year ended December 31, 2004 is set forth in     
Appendix IV to this Proxy Statement/Prospectus.                                 

FINANCIAL HIGHLIGHTS                                                            

 For more information about Buying Fund's financial performance, see the
"Financial Highlights" section of the Buying Fund Prospectus that is attached to
this Proxy Statement/Prospectus as Appendix III.                                

ADDITIONAL INFORMATION ABOUT THE PLANS

TERMS OF THE REORGANIZATIONS                                                    

     The terms and conditions under which each Reorganization may be consummated
are set forth in the respective Plans. Significant provisions of the Plans are  
summarized below; however, this summary is qualified in its entirety by         
reference to the Plans, copies of which are attached as Appendices I and II to  
this Proxy Statement/Prospectus.                                                

THE REORGANIZATIONS                                                             

     Consummation of the Reorganizations (the "Closing") is expected to occur on
July 18, 2005, at 8:00 a.m., Eastern Time (the "Effective Time") on the basis of
values calculated as of the close of regular trading on the New York Stock      
Exchange on July 15, 2005 (the "Valuation Date"). At the Effective Time, all of 
the assets of each Selling Fund will be delivered to Buyer's custodian for the  
account of Buying Fund in exchange for the assumption by Buying Fund of the     
liabilities of each Selling Fund and delivery by Buyer directly to the holders  
of record as of the Effective Time of the issued and outstanding shares of each 
class of a Selling Fund of a number of shares of each corresponding class of    
Buying Fund (including, if applicable, fractional shares rounded to the nearest 
thousandth), having an aggregate net asset value equal to the value of the net  
assets of the Selling Fund so transferred, assigned and delivered, all          
determined and adjusted as provided in the applicable Plan. Upon delivery of    
such assets, Buying Fund will receive good and marketable title to such assets  
free and clear of all liens.                                                    

In order to ensure continued qualification of each Selling Fund for   
treatment as a "regulated investment company" for tax purposes and to eliminate 
any tax liability of each Selling Fund arising by reason of undistributed       
investment company taxable income or net capital gain, AFG and ACSBF will       
declare on or prior to the Valuation Date to the shareholders of each Selling   
Fund a dividend or dividends that, together with all previous such dividends,   
shall have the effect of distributing (a) all of each Selling Fund's investment 
company taxable income (determined without regard to any deductions for         
dividends paid) for the taxable years ended December 31, 2004 (Balanced Fund)   
and August 31, 2004 (Total Return Fund) and for the short taxable years         
beginning on January 1, 2005 (Balanced Fund) and September 30, 2004 (Total      
Return Fund) and ending on the Closing and (b) all of each Selling Fund's net   
capital gain recognized in their taxable years ended December 31, 2004 (Balanced
Fund) and September 30, 2004 (Total Return Fund), as applicable, and in such    
short taxable years (after reduction for any capital loss carryforward).        

Buying Fund will proceed with each of the Reorganizations if the      
shareholders of the respective Selling Fund approve the applicable Plan         
(regardless of whether the shareholders of the other Selling Fund approve the   
applicable Plan).                                                               

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Following receipt of the requisite shareholder vote and as soon as    
reasonably practicable after the Closing, AFG and ACSBF will redeem the         
outstanding shares of each Selling Fund from shareholders in accordance with the
applicable Agreement and Declaration of Trust, Bylaws and the Delaware Statutory
Trust Act.                                                                      

BOARD CONSIDERATIONS                                                            

   AIM initially proposed that the Boards consider the Reorganizations at an
in-person meeting of the Boards held on February 24, 2005, at which preliminary 
discussions of the Reorganizations took place. After careful consideration and  
after weighing the pros and cons of each Reorganization, the Boards of each     
Selling Fund determined that the Reorganizations are advisable and in the best  
interests of each Selling Fund and will not dilute the interests of each Selling
Fund's shareholders, and approved the Plans and the Reorganizations, at an      
in-person meeting of the Board held on March 22, 2005.                          

 Over the course of the two Board meetings, the Boards received from AIM
written materials that contained information concerning each Selling Fund and   
Buying Fund, including comparative total return and fee and expense information,
a comparison of investment objectives and strategies of each Selling Fund and   
Buying Fund and pro forma expense ratios for Buying Fund giving effect to the   
Reorganizations. AIM also provided the Boards with written materials concerning 
the structure of the proposed Reorganizations and the Federal tax consequences  
of the Reorganizations.                                                         

In evaluating each of the Reorganizations, the Boards of Trustees     
considered a number of factors, including:                                      

- The investment objective and principal investment strategies of each
Selling Fund and Buying Fund.                                     

     - The comparative expenses of each Selling Fund and Buying Fund and the pro
       forma expenses of Buying Fund after giving effect to each Reorganization.

- The comparative performance of each Selling Fund and Buying Fund.   

- The comparative sizes of each Selling Fund and Buying Fund.         

    - The consequences of the Reorganizations for Federal income tax purposes,
      including the treatment of any unrealized capital gains and capital loss
     carryforwards, if any, available to offset future capital gains of each
Selling Fund and Buying Fund.                                     

   - Any fees and expenses that will be borne directly or indirectly by each
Selling Fund or Buying Fund in connection with the Reorganization.

- The projected financial impact to AIM and its affiliates of the     
Reorganizations.                                                  

The Boards noted that no sales charges would be imposed on any of the 
shares of Buying Fund issued to the shareholders of each Selling Fund in        
connection with the Reorganizations.                                            

Based on the information presented at the two Board meetings and the  
considerations discussed below, the Boards determined that the Reorganizations  
are advisable and in the best interests of each Selling Fund and will not dilute
the interests of each Selling Fund's shareholders. Therefore, the Boards        
recommend the approval of the Plans by the shareholders of each Selling Fund at 
the Special Meetings.                                                           

BALANCED FUND REORGANIZATION                                                

AIM proposed the Balanced Fund Reorganization, together with the Total
Return Fund Reorganization, as part of an effort to consolidate the AIM Funds'  
balanced fund offerings. In considering the Balanced Fund Reorganization, the   
Board of AFG noted that the funds have similar investment objectives, are       
managed by the same portfolio management team and invest in many of the same    
securities. In addition, the expenses of the combined fund after giving effect  
to both Reorganizations and fee reductions are expected to be the same as those 
of Balanced Fund. The Board noted that the Balanced Fund Reorganization is not  
contingent on the Total Return Fund Reorganization and therefore considered the 
proposed transaction both on a stand alone basis and in combination with the    
Total Return Fund Reorganization.                                               

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The Board noted that effective December 12, 2003, Buying Fund's lead  
portfolio manager, Bret Stanley, became the lead portfolio manager for Balanced 
Fund. As a consequence, since that date the two funds have been managed using a 
similar investment process, resulting in significant portfolio overlap between  
the two funds. As of November 30, 2004, approximately 97% of Balanced Fund's    
total net assets were invested in securities Buying Fund also owns.             

     The Board considered the relative sizes of the two funds and concluded that
Buying Fund should be the surviving fund in the Reorganization, even though     
Balanced Fund has a larger asset base. As of November 30, 2004, Buying Fund had 
net assets of approximately $173 million, compared to net assets for Balanced   
Fund of approximately $1.9 billion. The Board determined that it was appropriate
for Buying Fund to be the surviving fund in the Balanced Fund Reorganization    
because the current portfolio management team has been managing Buying Fund     
since its inception on September 28, 2001, and has been managing Balanced Fund  
using the same investment process since December 2003. Consequently, the Board  
determined that Buying Fund's performance track record more accurately reflects 
the results of the investment process that will be used for the combined fund   
after the Balanced Fund Reorganization.                                         

The Board considered the performance of Buying Fund in relation to the
performance of Balanced Fund, noting that Buying Fund generally has provided    
better returns to its shareholders than Balanced Fund. As of November 30, 2004, 
the relative performance of Class A shares of the funds (without sales loads)   
was as follows:                                                                 

AVERAGE ANNUAL TOTAL RETURNS

                                                        [Enlarge/Download Table]

                                   ONE    FIVE      TEN     SINCE                      
                                   YEAR   YEARS    YEARS  INCEPTION    INCEPTION DATE  
                                   ----   -----    -----  ---------    --------------  
                                                                                       
Balanced Fund..................... 8.18%  (1.72)%  8.76%    9.44%      March 31, 1978  
Buying Fund....................... 8.57%    N/A     N/A     6.55%    September 28, 2001

  The Board noted that, in these circumstances where the same team manages
both constituent funds, comparing historical performance records is less        
relevant.                                                                       

     The Board also considered the operating expenses the funds incur. The total
annual operating expenses of Buying Fund before giving pro forma effect to the  
Balanced Fund Reorganization, as a percentage of average daily net assets, are  
higher than the total annual operating expenses of Balanced Fund. However, the  
Board noted that AIM has proposed to permanently reduce Buying Fund's investment
advisory fee as described above in "SUMMARY -- Comparison of Fees and Expenses."

    At an in-person meeting of the Board on March 22, 2005, the Board approved
an amendment to the advisory agreement for Buying Fund to reflect a reduced     
advisory fee, effective as of the Closing. Further, AIM has proposed to reduce  
the Rule 12b-1 fee applicable to Class A shares of Buying Fund from 0.35% to    
0.25%. The Board noted that the reduced advisory fee schedule to be applicable  
after the Balanced Fund Reorganization is the same as or lower than Balanced    
Fund's current fee schedule. To the extent the uniform fee schedule results in  
lower advisory fees than the amended advisory fee schedule described above in   
"SUMMARY -- Comparison of Fees and Expenses", AIM has contractually agreed to   
waive its advisory fees to the extent necessary so that the advisory fees       
payable by Buying Fund do not exceed the uniform fee schedule until December 31,
2009. As a result, AIM reported to the Board that, based upon historical data at
a specified date and related projected data, on a pro forma basis giving effect 
to the Reorganizations, the total annual operating expense ratios of Buying Fund
after the Reorganizations are expected to be approximately the same as Balanced 
Fund's total annual operating expenses.                                         

The total expenses to be incurred in connection with the Balanced Fund
Reorganization are expected to be approximately $920,000. Balanced Fund's       
expenses incurred in connection with the Balanced Fund Reorganization are       
expected to be approximately $899,000. The Board noted that AIM will bear all of
Balanced Fund's costs and expenses incurred in connection with the Balanced Fund
Reorganization. Buying Fund's expenses to be incurred in connection with the    
Balanced Fund Reorganization are expected to be approximately $21,000. Buying   
Fund will bear its costs and expenses incurred in connection with the Balanced  
Fund Reorganization.                                                            

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To determine which party would bear the expenses to be incurred in    
connection with the Balanced Fund Reorganization, AIM estimated the amount of   
mailing, printing, solicitation, and legal and accounting fees to be incurred by
both Buying Fund and Balanced Fund. AIM then performed a qualitative analysis   
that took into account, among other things, the expected benefits to be enjoyed 
by Balanced Fund's shareholders through reduced expenses on a pro forma basis,  
the amount of time estimated for Balanced Fund's shareholders to recoup expenses
incurred in the Balanced Fund Reorganization in light of such expected benefits,
the effect incurring such expenses would have on the net asset value of Balanced
Fund, whether there was a financial impact to AIM's profit and loss (positive or
negative) and the relative performance of Balanced Fund and Buying Fund.        

TOTAL RETURN FUND REORGANIZATION                                            

AIM proposed the Total Return Fund Reorganization, together with the  
Balanced Fund Reorganization, as part of an effort to consolidate the AIM Funds'
balanced fund offerings. In considering the Total Return Fund Reorganization,   
the Board noted that the funds have similar investment objectives, are managed  
using similar investment processes and invest in similar securities. In         
addition, Buying Fund's performance track record is better than Total Return    
Fund's and the expenses of the combined fund after giving effect to both        
Reorganizations are expected to be lower than those of Total Return Fund. The   
Board noted that the Total Return Fund Reorganization is not contingent on the  
Balanced Fund Reorganization and therefore considered the proposed transaction  
on a stand alone basis and in combination with the Balanced Fund Reorganization.

The Board noted that Total Return Fund has been managed by several    
different investment teams using different investment styles during the last 18 
months. By contrast, Buying Fund has been managed by the same portfolio         
management team applying a consistent management style since Buying Fund's      
inception on September 28, 2001. Despite the differences in management teams,   
the Board noted that the funds have similar investment objectives and utilize   
similar investment strategies, resulting in moderate portfolio overlap between  
the two funds. As of November 30, 2004, approximately 29% of Total Return Fund's
total net assets were invested in securities Buying Fund also owns. The Board   
concluded that Total Return Fund could benefit from Buying Fund's management    
style.                                                                          

 The Board considered the relative assets of the two funds and concluded
that Buying Fund should be the surviving fund in the Reorganization, even though
Total Return Fund has a larger asset base. As of November 30, 2004, Buying Fund 
had net assets of approximately $173 million, compared to net assets for Total  
Return Fund of approximately $659 million. The Board determined that it was     
appropriate for Buying Fund to be the surviving fund in the Reorganization      
because the investment process Buying Fund's current portfolio management team  
utilizes to manage Buying Fund will be applied to Total Return Fund after the   
Total Return Fund Reorganization. Consequently, the Board determined that Buying
Fund's performance track record more accurately reflects the results of the     
investment process that will be used for the combined fund after the Total      
Return Fund Reorganization.                                                     

The Board considered the performance of Buying Fund in relation to the
performance of Selling Fund, noting that Buying Fund recently has provided      
better returns to its shareholders than Selling Fund. As of November 30, 2004,  
the relative performance of Class A shares of Buying Fund and Investor Class    
shares of Total Return Fund (without sales loads) was as follows:               

AVERAGE ANNUAL TOTAL RETURNS

                                                        [Enlarge/Download Table]

                                   ONE    FIVE      TEN     SINCE                      
                                   YEAR   YEARS    YEARS  INCEPTION    INCEPTION DATE  
                                   ----   -----    -----  ---------    --------------  
                                                                                       
Total Return Fund................. 5.28%  (0.03)%  7.36%    8.84%    September 22, 1987
Buying Fund....................... 8.57%    N/A     N/A     6.55%    September 28, 2001

     The Board also considered the operating expenses the funds incur. The total
annual operating expenses of Buying Fund before giving pro forma effect to the  
Total Return Fund Reorganization, as a percentage of average daily net assets,  
are slightly higher than the total annual operating expenses of Total Return    
Fund.                                                                           

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However, the Board noted that AIM has proposed to permanently reduce Buying     
Fund's investment advisory fee as described above in "SUMMARY -- Comparison of  
Fees and Expenses."                                                             

    At an in-person meeting of the Board on March 22, 2005, the Board approved
an amendment to the advisory agreement for Buying Fund to reflect a reduced     
advisory fee, effective as of the Closing. Further, AIM has proposed to reduce  
the Rule 12b-1 fee applicable to Class A shares of Buying Fund from 0.35% to    
0.25%. The Board noted that the reduced advisory fee schedule to be applicable  
after the Total Return Fund Reorganization is the same as or lower than Total   
Return Fund's current fee schedule. To the extent the uniform fee schedule      
results in lower advisory fees than the amended advisory fee schedule described 
above in "SUMMARY -- Comparison of Fees and Expenses", AIM has contractually    
agreed to waive its advisory fees to the extent necessary so that the advisory  
fees payable by Buying Fund do not exceed the uniform fee schedule until        
December 31, 2009. As a result, AIM reported to the Board that, based upon      
historical data at a specified date and related projected data, on a pro forma  
basis giving effect to both Reorganizations, the total annual operating expense 
ratios of Buying Fund Class A, Class B, Class C, Investor Class and             
Institutional Class shares are expected to be 0.19%, 0.09%, 0.09%, 0.09% and    
0.07%, respectively, lower than those of Total Return Fund.                     

    The total expenses to be incurred in connection with the Total Return Fund
Reorganization are expected to be approximately $362,000. Total Return Fund's   
expenses incurred in connection with the Total Return Fund Reorganization are   
expected to be approximately $341,000. The Board noted that AIM will bear all of
Total Return Fund's costs and expenses incurred in connection with the Total    
Return Fund Reorganization. Buying Fund's expenses to be incurred in connection 
with the Total Return Fund Reorganization are expected to be approximately      
$21,000. Buying Fund will bear its costs and expenses incurred in connection    
with the Total Return Fund Reorganization.                                      

To determine which party would bear the expenses to be incurred in    
connection with the Total Return Fund Reorganization, AIM estimated the amount  
of mailing, printing, solicitation, and legal and accounting fees to be incurred
by both Buying Fund and Total Return Fund. AIM then performed a qualitative     
analysis that took into account, among other things, the expected benefits to be
enjoyed by Total Return Fund's shareholders through reduced expenses on a pro   
forma basis, the amount of time estimated for Total Return Fund's shareholders  
to recoup expenses incurred in the Total Return Fund Reorganization in light of 
such expected benefits, the effect incurring such expenses would have on the net
asset value of Total Return Fund, whether there was a financial impact to AIM's 
profit and loss (positive or negative) and the relative performance of Total    
Return Fund and Buying Fund.                                                    

OTHER TERMS                                                                     

   If any amendment is made to the Plans following the mailing of this Proxy
Statement/Prospectus and prior to the Closing which would have a material       
adverse effect on shareholders, such change will be submitted to the affected   
shareholders for their approval. However, if an amendment is made which would   
not have a material adverse effect on shareholders, the Plans may be amended    
without shareholder approval by mutual agreement of the parties.                

  AFG and ACSBF have made representations and warranties in the Plans that
are customary in matters such as the Reorganizations. The obligations of AFG and
ACSBF pursuant to the Plans are subject to various conditions, including the    
following mutual conditions:                                                    

- the assets of each Selling Fund to be acquired by Buying Fund shall 
       constitute at least 90% of the fair market value of the net assets and at
 least 70% of the fair market value of the gross assets held by such
Selling Fund immediately prior to the Reorganization;             

   - Buyer's Registration Statement on Form N-14 under the Securities Act of
1933 (the "1933 Act") shall have been filed with the SEC and such 
   Registration Statement shall have become effective, and no stop-order
   suspending the effectiveness of the Registration Statement shall have
       been issued, and no proceeding for that purpose shall have been initiated
or threatened by the SEC (and not withdrawn or terminated);       

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- the shareholders of each Selling Fund shall have approved their     
respective Plan; and                                              

     - AFG and ACSBF shall have received an opinion from Ballard Spahr Andrews &
      Ingersoll, LLP that the consummation of the transactions contemplated by
      the Plans will not result in the recognition of gain or loss for Federal
income tax purposes for each Selling Fund, Buying Fund or their   
shareholders.                                                     

   The Board of Trustees of AFG and the Board of Trustees of ACSBF may waive
without shareholder approval any default or any failure to satisfy any of the   
above conditions as long as such a waiver is mutual and will not have a material
adverse effect on the benefits intended under the Plans for the shareholders of 
each Selling Fund. The Plans may be terminated and the Reorganizations may be   
abandoned at any time by mutual agreement of the parties, or by either party if 
the shareholders of each Selling Fund do not approve the Plans or if the Closing
does not occur on or before September 30, 2005.                                 

FEDERAL INCOME TAX CONSEQUENCES                                                 

The following is a general summary of the material Federal income tax 
consequences of each Reorganization and is based upon the current provisions of 
the Internal Revenue Code of 1986, as amended (the "Code"), the existing U.S.   
Treasury regulations thereunder, current administrative rulings of the Internal 
Revenue Service ("IRS") and published judicial decisions, all of which are      
subject to change. The principal Federal income tax consequences that are       
expected to result from each Reorganization, under currently applicable law, are
as follows:                                                                     

     - each Reorganization will qualify as a "reorganization" within the meaning
of Section 368(a) of the Code;                                    

     - no gain or loss will be recognized by a Selling Fund upon the transfer of
    its assets to Buying Fund solely in exchange for shares of Buying Fund
     and Buying Fund's assumption of the liabilities of such Selling Fund or
      on the distribution of those shares to such Selling Fund's shareholders;

- no gain or loss will be recognized by Buying Fund on its receipt of 
   assets of a Selling Fund in exchange for shares of Buying Fund issued
directly to such Selling Fund's shareholders;                     

 - no gain or loss will be recognized by any shareholder of each Selling
 Fund upon the exchange of shares of such Selling Fund for shares of
Buying Fund;                                                      

- the tax basis of the shares of Buying Fund to be received by a      
    shareholder of each Selling Fund will be the same as the shareholder's
  tax basis of the shares of such Selling Fund surrendered in exchange
therefor;                                                         

- the holding period of the shares of Buying Fund to be received by a 
     shareholder of each Selling Fund will include the period for which such
  shareholder held the shares of such Selling Fund exchanged therefor,
      provided that such shares of each Selling Fund are capital assets in the
hands of such shareholder as of the Closing; and                  

    - Buying Fund will thereafter succeed to and take into account any capital
   loss carryover and certain other tax attributes of each Selling Fund,
       subject to all relevant conditions and limitations on the use of such tax
benefits.                                                         

    Neither AFG nor ACSBF has requested or will request an advance ruling from
the IRS as to the Federal tax consequences of the Reorganizations. As a         
condition to Closing, Ballard Spahr Andrews & Ingersoll, LLP will render a      
favorable opinion to AFG and ACSBF as to the foregoing Federal income tax       
consequences of the Reorganizations, which opinion will be conditioned upon,    
among other things, the accuracy, as of the Effective Time, of certain          
representations of AFG and ACSBF upon which Ballard Spahr Andrews & Ingersoll,  
LLP will rely in rendering its opinion. The conclusions reached in that opinion 
could be jeopardized if the representations of AFG or ACSBF are incorrect in any
material respect. A copy of the opinion will be filed with the Securities and   
Exchange Commission. and will be available for public inspection. See           
"Information Filed with the Securities and Exchange Commission."                

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 THE FOREGOING DESCRIPTION OF THE FEDERAL INCOME TAX CONSEQUENCES OF THE
REORGANIZATIONS IS MADE WITHOUT REGARD TO THE PARTICULAR FACTS AND CIRCUMSTANCES
OF ANY SHAREHOLDER OF EACH SELLING FUND. EACH SELLING FUND'S SHAREHOLDERS ARE   
URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC CONSEQUENCES TO THEM 
OF THEIR REORGANIZATION, INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL,
FOREIGN AND OTHER TAX LAWS.                                                     

ACCOUNTING TREATMENT                                                            

The Reorganizations will each be accounted for on a tax-free combined 
basis. Accordingly, the book cost basis to Buying Fund of the assets of each    
Selling Fund will be the same as the book cost basis of such assets to such     
Selling Fund.                                                                   

RIGHTS OF SHAREHOLDERS

     AFG and ACSBF are each Delaware statutory trusts. With respect to the Total
Return Fund Reorganization, generally, there are no material differences between
the rights of shareholders under the Agreement and Declaration of Trust of ACSBF
and the rights of shareholders under the Agreement and Declaration of Trust of  
AFG. With respect to the Balanced Fund Reorganization, Balanced Fund and Buying 
Fund are each separate series of shares of beneficial interest of AFG. Since    
both funds are part of the same legal entity there are no material differences  
in the rights of shareholders.                                                  

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CAPITALIZATION

The following table sets forth, as of December 31, 2004, (i) the      
capitalization of each class of shares of Balanced Fund, (ii) the capitalization
of each class of shares of Total Return Fund; (iii) the capitalization of each  
class of shares of Buying Fund, and (iv) the pro forma capitalization of each   
class of shares of Buying Fund as adjusted to give effect to the transactions   
contemplated by the Plans.                                                      

                                                        [Enlarge/Download Table]

                                                    TOTAL RETURN                     PRO FORMA   
                                   BALANCED FUND        FUND        BUYING FUND     BUYING FUND  
                                   CLASS A SHARES  CLASS A SHARES  CLASS A SHARES  CLASS A SHARES
                                   --------------  --------------  --------------  --------------
                                                                                                 
Net Assets........................ $1,049,415,157   $  4,704,630   $   68,951,179  $1,123,070,966
Shares Outstanding................     41,473,872        196,602        5,815,514      94,685,130
Net Asset Value Per Share......... $        25.30   $      23.93   $        11.86  $        11.86

                                                        [Enlarge/Download Table]

                                                    TOTAL RETURN                     PRO FORMA   
                                   BALANCED FUND        FUND        BUYING FUND     BUYING FUND  
                                   CLASS B SHARES  CLASS B SHARES  CLASS B SHARES  CLASS B SHARES
                                   --------------  --------------  --------------  --------------
                                                                                                 
Net Assets........................ $  604,378,457   $  2,151,013   $   79,967,801  $  686,497,271
Shares Outstanding................     23,938,724         90,458        6,754,534      57,987,969
Net Asset Value Per Share......... $        25.25   $      23.78   $        11.84  $        11.84

                                                        [Enlarge/Download Table]

                                                    TOTAL RETURN                     PRO FORMA   
                                   BALANCED FUND        FUND        BUYING FUND     BUYING FUND  
                                   CLASS C SHARES  CLASS C SHARES  CLASS C SHARES  CLASS C SHARES
                                   --------------  --------------  --------------  --------------
                                                                                                 
Net Assets........................ $  211,297,376   $  2,503,406   $   27,728,863  $  241,529,645
Shares Outstanding................      8,356,529        104,455        2,340,704      20,386,308
Net Asset Value Per Share......... $        25.29   $      23.97   $        11.85  $        11.85

                                                        [Enlarge/Download Table]

                                                    TOTAL RETURN                     PRO FORMA   
                                   BALANCED FUND        FUND        BUYING FUND     BUYING FUND  
                                   CLASS R SHARES  CLASS R SHARES  CLASS R SHARES  CLASS R SHARES
                                   --------------  --------------  --------------  --------------
                                                                                                 
Net Assets........................ $    5,620,985             --   $       18,972  $    5,639,957
Shares Outstanding................        221,893             --            1,598         475,107
Net Asset Value Per Share......... $        25.33             --   $        11.87  $        11.87

                                                        [Enlarge/Download Table]

                                                   TOTAL RETURN                     PRO FORMA   
                                   BALANCED FUND       FUND        BUYING FUND     BUYING FUND  
                                   INSTITUTIONAL   INSTITUTIONAL  INSTITUTIONAL   INSTITUTIONAL 
                                    CLASS SHARES   CLASS SHARES    CLASS SHARES    CLASS SHARES 
                                   --------------  -------------  --------------  --------------
                                                                                                
Net Assets........................ $       10,539  $     11,168   $       10,612  $       32,319
Shares Outstanding................            416           466              895           2,724
Net Asset Value Per Share......... $        25.32  $      23.95   $        11.86  $        11.86

                                                        [Enlarge/Download Table]

                                                   TOTAL RETURN                    PRO FORMA   
                                   BALANCED FUND       FUND       BUYING FUND        BUYING    
                                      INVESTOR       INVESTOR       INVESTOR     FUND INVESTOR 
                                    CLASS SHARES   CLASS SHARES   CLASS SHARES    CLASS SHARES 
                                   --------------  ------------  --------------  --------------
                                                                                               
Net Assets........................             --  $628,887,330              --  $  628,887,330
Shares Outstanding................             --    25,673,810              --      53,036,117
Net Asset Value Per Share.........             --  $      24.50              --  $        11.86

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LEGAL MATTERS 

Certain legal matters concerning the tax consequences of the          
Reorganizations will be passed upon by Ballard Spahr Andrews & Ingersoll, LLP,  
1735 Market Street, Philadelphia, PA 19103-7599.                                

ADDITIONAL INFORMATION ABOUT
BUYING FUND AND SELLING FUNDS 

   For more information with respect to Buying Fund concerning the following
topics, please refer to the following sections of the Buying Fund Prospectus,   
which has been made a part of this Proxy Statement/ Prospectus by reference and 
which is attached to this Proxy Statement/Prospectus as Appendix III: (i) see   
"Performance Information" for more information about the performance of Buying  
Fund; (ii) see "Fund Management" for more information about the management of   
Buying Fund; (iii) see "Other Information" for more information about Buying    
Fund's policy with respect to dividends and distributions; and (iv) see "Other  
Information" for more information about the pricing, purchase, redemption and   
repurchase of shares of Buying Fund, tax consequences to shareholders of various
transactions in shares of Buying Fund, distribution arrangements and the        
multiple class structure of Buying Fund.                                        

For more information with respect to each Selling Fund concerning the 
following topics, please refer to the following sections of the Selling Fund    
Prospectuses, which have been made a part of this Proxy Statement/Prospectus by 
reference: (i) see "Fund Performance" for more information about the performance
of each Selling Fund; (ii) see "Fund Management" and "Portfolio Managers" for   
more information about the management of each Selling Fund; (iii) see           
"Shareholder Information" for more information about the pricing of shares of   
each Selling Fund; (iv) see "Taxes" for more information about tax consequences 
to shareholders of various transactions in shares of each Selling Fund; and (v) 
see "Dividends And Capital Gain Distributions" for more information about each  
Selling Fund's policy with respect to dividends and distributions.              

INFORMATION FILED WITH THE SECURITIES 
AND EXCHANGE COMMISSION 

 This Proxy Statement/Prospectus and the related Statement of Additional
Information do not contain all the information set forth in the registration    
statements and the exhibits relating thereto and annual and semiannual reports  
which AFG and ACSBF have filed with the SEC pursuant to the requirements of the 
1933 Act and the 1940 Act, to which reference is hereby made. The SEC file      
number of AFG's registration statement containing the Balanced Fund Prospectus  
and related Statement of Additional Information and the Buying Fund Prospectus  
and related Statement of Additional Information is Registration No. 811-1540.   
Such Balanced Fund Prospectus and the Buying Fund Prospectus are incorporated   
herein by reference. The SEC file number of ACSBF's registration statement      
containing the Total Return Fund Prospectus and related Statement of Additional 
Information is Registration No. 811-8066. Such Total Return Fund Prospectus is  
incorporated herein by reference.                                               

AFG and ACSBF are subject to the informational requirements of the    
Securities Exchange Act of 1934 and the 1940 Act and in accordance therewith    
file reports and other information with the SEC. Reports, proxy material,       
registration statements and other information filed by AFG and ACSBF (including 
the Registration Statement of AFG relating to Buying Fund on Form N-14 of which 
this Proxy Statement/Prospectus is a part) may be inspected without charge and  
copied at the public reference facilities maintained by the SEC at Room 1014,   
Judiciary Plaza, 450 Fifth Street, NW, Washington, DC 20549, and at the         
following regional office of the SEC: 500 West Madison Street, Suite 1400,      
Chicago, Illinois 60661. Copies of such material may also be obtained from the  
Public Reference Section of the SEC at 450 Fifth Street, NW, Washington, DC     
20549, at the prescribed rates. The SEC maintains a website at www.sec.gov that 
contains information regarding AFG and ACSBF and other registrants that file    
electronically with the SEC.                                                    

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INFORMATION ABOUT THE SPECIAL MEETINGS AND VOTING 

PROXY STATEMENT/PROSPECTUS                                                      

   We are sending you this Proxy Statement/Prospectus and the enclosed proxy
card because the Boards are soliciting your proxy to vote at the Special        
Meetings and at any adjournments of the Special Meetings. This Proxy            
Statement/Prospectus gives you information about the business to be conducted at
the Special Meetings. However, you do not need to attend the Special Meetings to
vote your shares. Instead, you may simply complete, sign and return the enclosed
proxy card or vote by telephone or through a website established for that       
purpose.                                                                        

    AFG and ACSBF intend to mail this Proxy Statement/Prospectus, the enclosed
Notice of Special Meeting of Shareholders and the enclosed proxy card on or     
about May 23, 2005 to all shareholders entitled to vote. Shareholders of record 
of each Selling Fund as of the close of business on April 22, 2005 (the "Record 
Date") are entitled to vote at the Special Meetings. The number of shares       
outstanding of each class of shares of each Selling Fund on the Record Date can 
be found at Exhibit D. Each share is entitled to one vote for each full share   
held, and a fractional vote for a fractional share held.                        

TIME AND PLACE OF SPECIAL MEETINGS                                              

 We are holding both of the Special Meetings at 11 Greenway Plaza, Suite
100, Houston, Texas 77046-1173 on June 28, 2005, at 11:00 a.m., Central Time.   

VOTING IN PERSON                                                                

   If you do attend the Special Meetings and wish to vote in person, we will
provide you with a ballot prior to the vote. However, if your shares are held in
the name of your broker, bank or other nominee, you must bring a letter from the
nominee indicating that you are the beneficial owner of the shares on the Record
Date and authorizing you to vote. Please call AFG and ACSBF at (800) 952-3502 if
you plan to attend the Special Meetings.                                        

VOTING BY PROXY                                                                 

Whether you plan to attend the Special Meetings or not, we urge you to
complete, sign and date the enclosed proxy card and to return it promptly in the
envelope provided. Returning the proxy card will not affect your right to attend
the Special Meetings and vote.                                                  

    If you properly fill in and sign your proxy card and send it to us in time
to vote at the Special Meetings, your "proxy" (the individual named on your     
proxy card) will vote your shares as you have directed. If you sign your proxy  
card but do not make specific choices, your proxy will vote your shares FOR the 
proposal to approve the Plans, as recommended by the Boards, and in accordance  
with management's recommendation on other matters.                              

  Your proxy will have the authority to vote and act on your behalf at any
adjournment of the Special Meetings.                                            

If you authorize a proxy, you may revoke it at any time before it is  
exercised by sending in another proxy card with a later date or by notifying the
Secretary of AFG and ACSBF in writing to the address of AFG and ACSBF set forth 
on the cover page of this Proxy Statement/Prospectus before the Special Meetings
that you have revoked your proxy. In addition, although merely attending the    
Special Meetings will not revoke your proxy, if you are present at the Special  
Meetings you may withdraw your proxy and vote in person. Shareholders may also  
transact any other business not currently contemplated that may properly come   
before the Special Meetings in the discretion of the proxies or their           
substitutes.                                                                    

VOTING BY TELEPHONE OR THE INTERNET                                             

    You may vote your shares by telephone or through a website established for
that purpose by following the instructions that appear on the proxy card        
accompanying this Proxy Statement/Prospectus.                                   

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QUORUM REQUIREMENT AND ADJOURNMENT                                              

 A quorum of shareholders is necessary to hold a valid meeting. A quorum
will exist if shareholders entitled to vote one-third of the issued and         
outstanding shares of each Selling Fund on the Record Date are present at the   
Special Meetings in person or by proxy.                                         

 Under the rules applicable to broker-dealers, if your broker holds your
shares in its name, the broker will not be entitled to vote your shares if it   
has not received instructions from you. A "broker non-vote" occurs when a broker
has not received voting instructions from a shareholder and is barred from      
voting the shares without shareholder instructions because the proposal is      
non-routine.                                                                    

Abstentions and broker non-votes will count as shares present at the  
Special Meetings for purposes of establishing a quorum.                         

   If a quorum is not present at the Special Meetings or a quorum is present
but sufficient votes to approve the Plans are not received, the persons named as
proxies may propose one or more adjournments of the Special Meetings to permit  
further solicitation of proxies. Any such adjournment will require the          
affirmative vote of a majority of the votes cast at the Special Meetings in     
person or by proxy. The persons named as proxies will vote those proxies that   
they are entitled to vote FOR the Reorganizations in favor of such an           
adjournment and will vote those proxies required to be voted AGAINST the        
Reorganizations against such adjournment. A shareholder vote may be taken on the
Reorganizations prior to any such adjournment if sufficient votes have been     
received and it is otherwise appropriate.                                       

VOTE NECESSARY TO APPROVE THE PLANS                                             

 If a quorum is present, approval of the Balanced Fund Plan requires the
affirmative vote of the majority of votes cast by the shareholders of Balanced  
Fund at the Balanced Fund Special Meeting. Abstentions and broker non-votes are 
counted as present but are not considered votes cast at the Special Meeting.    

     If a quorum is present, approval of the Total Return Fund Plan requires the
affirmative vote of the majority of votes cast by the shareholders of Total     
Return Fund at the Total Return Fund Special Meeting. Abstentions and broker    
non-votes are counted as present but are not considered votes cast at the       
Special Meeting.                                                                

PROXY SOLICITATION                                                              

    AFG and ACSBF will solicit proxies for the Special Meetings. AFG and ACSBF
expect to solicit proxies principally by mail, but AFG and ACSBF may also       
solicit proxies by telephone, facsimile or personal interview. AFG and ACSBF    
officers will not receive any additional or special compensation for any such   
solicitation. AIM will bear all of Balanced Fund's and Total Return Fund's costs
and expenses incurred in connection with the Reorganizations, including         
solicitation costs. Solicitation costs for the Balanced Fund Reorganization and 
the Total Return Fund Reorganization are expected to be approximately $17,250   
and $550, respectively.                                                         

OTHER MATTERS                                                                   

Management does not know of any matters to be presented at the Special
Meetings other than those discussed in this Proxy Statement/Prospectus. If any  
other matters properly come before the Special Meetings, the shares represented 
by proxies will be voted with respect thereto in accordance with management's   
recommendation.                                                                 

OWNERSHIP OF SHARES                                                             

     A list of the name, address and percent ownership of each person who, as of
April 22, 2005, to the knowledge of AFG and ACSBF owned 5% or more of any class 
of the outstanding shares of each Selling Fund can be found at Exhibit E.       

     A list of the name, address and percent ownership of each person who, as of
April 22, 2005, to the knowledge of AFG owned 5% or more of any class of the    
outstanding shares of Buying Fund can be found at Exhibit F.                    

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SECURITY OWNERSHIP OF MANAGEMENT AND TRUSTEES                                   

  Information regarding the ownership of each class of each Selling Fund's
shares by trustees and current executive officers of AFG and ACSBF can be found 
in Exhibit E. Information regarding the ownership of each class of Buying Fund's
shares by trustees and current executive officers of AFG can be found in Exhibit
F.                                                                              

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EXHIBIT A 

CLASSES OF SHARES OF EACH SELLING FUND AND CORRESPONDING CLASSES OF SHARES OF 
BUYING FUND 

                                                                [Download Table]

CLASSES OF SHARES OF  CLASSES OF SHARES OF   CORRESPONDING CLASSES OF
  AIM BALANCED FUND   AIM TOTAL RETURN FUND    SHARES OF BUYING FUND 
--------------------  ---------------------  ------------------------
                                                                     
       Class A               Class A                  Class A        
         N/A                 Class K                  Class A        
       Class B               Class B                  Class B        
       Class C               Class C                  Class C        
       Class R                 N/A                    Class R        
 Institutional Class   Institutional Class      Institutional Class  
         N/A             Investor Class           Investor Class     

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EXHIBIT B 

COMPARISON OF PERFORMANCE OF EACH SELLING FUND AND BUYING FUND

(Selling Fund)
AIM BALANCED FUND 

   The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance (before and after taxes) is  
not necessarily an indication of its future performance.                        

The following bar chart shows changes in the performance of the fund's
Class A shares from year to year. The bar chart does not reflect sales loads. If
it did, the annual total returns shown would be lower.                          

BAR CHART 

                                                                [Download Table]
                                                                                
1995...................................................................   34.97%
1996...................................................................   19.25%
1997...................................................................   24.41%
1998...................................................................   12.46%
1999...................................................................   19.04%
2000...................................................................   -4.21%
2001...................................................................  -11.33%
2002...................................................................  -17.85%
2003...................................................................   17.23%
2004...................................................................    7.65%

     During the periods shown in the bar chart, the highest quarterly return was
16.22% (quarter ended December 31, 1999) and the lowest quarterly return was    
(12.21)% (quarter ended September 30, 2001).                                    

The year-to-date return of AIM Balanced Fund as of March 31, 2005 was 
(0.84)%.                                                                        

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    The following performance table compares the fund's performance to that of
a broad-based securities market index, a style specific index and a peer group  
index. The fund's performance reflects payment of sales loads, if applicable.   
The indices may not reflect payment of fees, expenses or taxes. The fund is not 
managed to track the performance of any particular index, including the indices 
shown below, and consequently, the performance of the fund may deviate          
significantly from the performance of the indices shown below.                  

AVERAGE ANNUAL TOTAL RETURNS                                                    

                                                        [Enlarge/Download Table]

                                                                             SINCE      INCEPTION  
                                              1 YEAR  5 YEARS   10 YEARS  INCEPTION(1)    DATE     
                                              ------  -------   --------  ------------  ---------  
                                                                                                   
(FOR THE PERIOD ENDED DECEMBER 31, 2004)                                                           
CLASS A......................................                                           03/31/78   
  Return before taxes........................  2.55%   (3.46)%    8.44%         --                 
  Return after taxes on distributions........  2.11    (4.26)     7.26          --                 
  Return after taxes on distributions and                                                          
    sale of fund shares......................  1.84    (3.33)     6.72          --                 
CLASS B......................................                                           10/18/93   
  Return before taxes........................  1.91    (3.60)     8.28          --                 
CLASS C......................................                                           08/04/97   
  Return before taxes........................  5.90    (3.24)       --        2.15%                
CLASS R(2)...................................                                           03/31/78(2)
  Return before taxes........................  7.43    (2.74)     8.70          --                 
INSTITUTIONAL CLASS..........................                                           03/15/02   
  Return before taxes........................  8.10       --        --        1.90                 
S&P 500(3)................................... 10.87    (2.30)    12.07          --            --   
Custom Balanced Index(4)..................... 11.54     6.59     11.65          --            --   
Lipper Balanced Fund Index(5)................  8.99     2.95      9.44          --            --   

---------------                                                                 

After-tax returns are calculated using the historical highest individual federal
marginal income tax rates and do not reflect the impact of state and local      
taxes. Actual after-tax returns depend on an investor's tax situation and may   
differ from those shown, and after-tax returns shown are not relevant to        
investors who hold their fund shares through tax-deferred arrangements, such as 
401(k) plans or individual retirement accounts. After-tax returns are shown for 
Class A only and after-tax returns for Class B, C, R and Institutional Class    
will vary.                                                                      

(1) Since Inception performance is only provided for a class with less than ten 
calendar years of performance.                                          

(2) The returns shown for the one year period are the historical returns of the 
  fund's Class R shares. The returns shown for the five and ten year periods
   are the blended returns of the historical performance of the fund's Class R
   shares since their inception and the restated historical performance of the
    fund's Class A shares (for periods prior to inception of the Class R shares)
at net asset value, adjusted to reflect the higher Rule 12b-1 fees      
  applicable to the Class R shares. The inception date shown in the table is
   that of the fund's Class A shares. The inception date of the fund's Class R
shares is June 3, 2002.                                                 

(3) The Standard & Poor's 500 Index measures the performance of the 500 most    
 widely held common stocks and is considered one of the best indicators of
U.S. stock market performance. The fund has also included the Custom    
Balanced Index, which the fund believes more closely reflects the       
performance of the types of securities in which the fund invests. In    
  addition, the Lipper Balanced Fund Index (which may or may not include the
fund) is included for comparison to a peer group.                       

(4) The Custom Balanced Index is an index created by A I M Advisors, Inc. to    
benchmark the fund. This index consists of the following indices: 60%   
Russell 1000--Registered Trademark-- Value Index and 40% Lehman Brothers
 U.S. Aggregate Bond Index. The Russell 1000--Registered Trademark-- Value
    Index measures the performance of those Russell 1000--Registered Trademark--
   Index companies with lower price to book ratios and lower forecasted growth
values. The Lehman Brothers U.S. Aggregate Bond Index measures the      
 performance of U.S. investment-grade fixed rate bonds with components for
government and corporate securities, mortgage pass-throughs and asset-  
  backed securities of treasury issues, agency issues, corporate bond issues
and mortgage-backed securities.                                         

(5) The Lipper Balanced Fund Index is an equally weighted representation of the 
30 largest funds in the Lipper Balanced category. These funds invest to 
conserve principal by maintaining at all times a balanced portfolio of  
stocks and bonds. Typically the stock/bond ratio is approximately 60/40.

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(Selling Fund)
AIM TOTAL RETURN FUND 

Performance information in the bar chart below is that of the fund's  
Investor Class shares, which has the longest operating history of the fund's    
classes. The bar chart below shows the fund's Investor Class actual yearly      
performance (commonly known as its "total return") for the years ended December 
31 over the past decade. The returns in the bar chart do not reflect sales      
loads. The table below shows the pre-tax and after-tax average annual total     
returns of Investor Class and pre-tax average annual total returns for Class A, 
B, C and Institutional Class shares for various periods ended December 31, 2003.
The after-tax returns are shown only for the Investor Class shares. After-tax   
returns for other classes of shares will vary.                                  

   The information in the bar chart and table illustrates the variability of
the fund's total return. The table shows the fund's performance compared to a   
broad-based securities market index, a style specific index and/or a peer group 
index. The indices may not reflect payment of fees, expenses or taxes. The fund 
is not managed to track the performance of any particular index, including the  
indices shown below, and consequently, the performance of the fund may deviate  
significantly from the performance of the indices shown below. Remember, past   
performance (before and after taxes) does not indicate how a fund will perform  
in the future.                                                                  

BAR CHART 

                                                                [Download Table]

                                                                         ANNUAL 
YEARS ENDED                                                               TOTAL 
DECEMBER 31                                                              RETURNS
-----------                                                              -------
                                                                                
1995...................................................................   28.64%
1996...................................................................   13.07%
1997...................................................................   25.04%
1998...................................................................   13.62%
1999...................................................................   -1.35%
2000...................................................................   -3.65%
2001...................................................................   -0.93%
2002...................................................................  -12.45%
2003...................................................................   16.42%
2004...................................................................    3.75%

     During the periods shown in the bar chart, the highest quarterly return was
11.86% (quarter ended June 30, 1997) and the lowest quarterly return was        
(11.31)% (quarter ended September 30, 2002).                                    

   The year-to-date return of AIM Total Return Fund as of March 31, 2005 was
(2.78)%.                                                                        

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AVERAGE ANNUAL TOTAL RETURNS(1)(2)                                              

                                                        [Enlarge/Download Table]

                                                                                     10 YEARS OR SINCE  
(FOR THE PERIOD ENDED DECEMBER 31, 2004)                      1 YEAR     5 YEARS         INCEPTION      
----------------------------------------                     ---------  ----------  --------------------
                                                                                                        
CLASS A                                                                                                 
  Return before taxes.......................................   (2.11)%       --            (0.63)%(3)   
CLASS B                                                                                                 
  Return before taxes.......................................   (2.04)        --            (0.20)(3)    
CLASS C                                                                                                 
  Return before taxes.......................................    1.98         --             0.31(4)     
INVESTOR CLASS(5)                                                                                       
  Return before taxes.......................................    3.75       0.19%            7.48        
  Return after taxes on distributions.......................    3.45      (0.78)            6.10        
  Return after taxes on distributions and sale of fund                                                  
     shares.................................................    2.62      (0.31)            5.81        
INSTITUTIONAL CLASS                                                                                     
  Return before taxes.......................................    4.01         --             6.19(9)     
S&P 500 Index(6) (reflects no deduction for fees, expenses,                                             
  or taxes).................................................   10.87      (2.30)           12.07(10)    
Custom Total Return Index(7) (reflects no deduction for                                                 
  fees, expenses, or taxes).................................    8.39       2.00            10.67(10)    
Lipper Balanced Fund Index(8) (reflects no deduction for                                                
  fees, expenses, or taxes).................................    8.99       2.95             9.44(10)    

---------------                                                                 

After-tax returns are provided on a pre-redemption and post-redemption basis.   
Pre-redemption returns assume you continue to hold your shares and pay taxes on 
fund distributions (i.e. dividends and capital gains) but do not reflect taxes  
that may be incurred upon selling or exchanging shares. Post-redemption returns 
assume payment of taxes on fund distributions and also that you close your      
account and pay remaining federal taxes. After-tax returns are calculated using 
the highest individual federal income tax rates in effect at the time the       
distribution is paid. State and local taxes are not considered. Actual after-tax
returns depend on an investor's tax situation and may differ from those shown.  
For investors holding their shares in tax-deferred arrangements such as 401(k)  
plans or individual retirement accounts, the after-tax returns shown are not    
relevant.                                                                       

(1) Total return figures include reinvested dividends and capital gain        
distributions and the effect of each class's expenses.                

 (2) The total returns are for those classes of shares with a full calendar year
  of performance. The effect of each class total expenses, including 12b-1
fees, front-end sales charge for Class A, and CDSC for Class B are    
reflected.                                                            

(3) Since inception of Class A and B shares on March 28, 2002.                

(4) Since inception of Class C shares on February 14, 2000.                   

(5) Inception date of Investor Class shares is September 22, 1987.            

(6) The S&P 500 Index measures the performance of the 500 most widely held    
  common stocks and is considered one of the best indicators of U.S. stock
market performance. The Fund has also included the Custom Total Return
    Index which the Fund believes more closely reflects the performance of the
types of securities in which the Fund invests. In addition, the Lipper
     Balanced Fund Index (which may or may not include the Total Return Fund) is
included for comparison to a peer group.                              

(7) The Custom Total Return Index is an index created by AIM to benchmark the 
   Total Return Fund. The index consists of 60% S&P 500 Index and 40% Lehman
     Brothers U.S. Aggregate Bond Index. The Lehman Brothers U.S. Aggregate Bond
  Index measures the performance of U.S. investment-grade fixed rate bonds
with components for government and corporate securities, mortgage     
pass-throughs and asset-backed securities of treasury issues, agency  
issues, corporate bond issues and mortgage-backed securities.         

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 (8) The Lipper Balanced Fund Index is an equally weighted representation of the
 30 largest funds in the Lipper Balanced category. These funds invest to
conserve principal by maintaining at all times a balanced portfolio of
  stocks and bonds. Typically the stock/bond ratio is approximately 60/40.

(9) Since inception of Institutional Class shares on November 3, 2003.        

(10) Index performance shown for 10-year period ended December 31, 2004.        

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(Buying Fund) 
AIM BASIC BALANCED FUND 

   The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance (before and after taxes) is  
not necessarily an indication of its future performance.                        

The following bar chart shows changes in the performance of the fund's
Class A shares from year to year. The bar chart does not reflect sales loads. If
it did, the annual total returns shown would be lower.                          

                                                                [Download Table]

                                                                         ANNUAL 
YEAR ENDED                                                                TOTAL 
DECEMBER 31                                                              RETURNS
-----------                                                              -------
                                                                                
2002...................................................................  -10.97%
2003...................................................................   22.35%
2004...................................................................    6.89%

     During the periods shown in the bar chart, the highest quarterly return was
14.54% (quarter ended June 30, 2003) and the lowest quarterly return was        
(11.63)% (quarter ended September 30, 2002).                                    

     The year-to-date return of AIM Basic Balanced Fund as of March 31, 2005 was
(1.05)%.                                                                        

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    The following performance table compares the fund's performance to that of
a broad-based securities market index and a peer group index. The fund's        
performance reflects the payment of sales loads, if applicable. The indices may 
not reflect payment of fees, expenses or taxes. The fund is not managed to track
the performance of any particular index, including the indices shown below, and 
consequently, the performance of the fund may deviate significantly from the    
performance of the indices shown below.                                         

AVERAGE ANNUAL TOTAL RETURNS                                                    

                                                        [Enlarge/Download Table]

                                                                       SINCE    INCEPTION  
(FOR THE PERIOD ENDED DECEMBER 31, 2004)                     1 YEAR  INCEPTION    DATE     
----------------------------------------                     ------  ---------  ---------  
                                                                                           
CLASS A.....................................................                    09/28/01   
  Return before taxes.......................................  1.84%    5.67%               
  Return after taxes on distributions.......................  1.30     5.27                
  Return after taxes on distributions and sale of fund                                     
     shares.................................................  1.90     4.72                
CLASS B.....................................................                    09/28/01   
  Return before taxes.......................................  1.12     5.76                
CLASS C.....................................................                    09/28/01   
  Return before taxes.......................................  5.21     6.59                
CLASS R(1)..................................................                    09/28/01(1)
  Return before taxes.......................................  6.80     7.12                
INVESTOR CLASS(6)...........................................    --       --           --   
INSTITUTIONAL CLASS(7)......................................                    09/28/01(7)
  Return before taxes.......................................  7.33     7.40                
S&P 500(2).................................................. 10.87     6.58(3)  09/30/01(3)
Custom Basic Balanced Index(4).............................. 11.54     8.78(3)  09/30/01(3)
Lipper Balanced Fund Index(5)...............................  8.99     6.93(3)  09/30/01(3)

---------------                                                                 

After-tax returns are calculated using the historical highest individual federal
marginal income tax rates and do not reflect the impact of state and local      
taxes. Actual after-tax returns depend on an investor's tax situation and may   
differ from those shown, and after-tax returns shown are not relevant to        
investors who hold their fund shares through tax-deferred arrangements, such as 
401(k) plans or individual retirement accounts. After-tax returns are shown for 
Class A only and after-tax returns for Class B, C, R, Investor Class and        
Institutional Class will vary.                                                  

(1) The returns shown for these periods are the blended returns of the          
 historical performance of the fund's Class R shares since their inception
   and the restated historical performance of the fund's Class A shares (prior
   to inception of the Class R shares) at net asset value, adjusted to reflect
  the higher Rule 12b-1 fees applicable to the Class R shares. The inception
   date shown in the table is that of the fund's Class A shares. The inception
date of the fund's Class R shares is April 30, 2004.                    

(2) The Standard & Poor's 500 Index measures the performance of the 500 most    
 widely held common stocks and is considered one of the best indicators of
  U.S. stock market performance. The fund has also included the Custom Basic
Balanced Index, which the fund believes more closely reflects the       
performance of the types of securities in which the fund Invests. In    
  addition, the Lipper Balanced Fund Index (which may or may not include the
fund) is included for comparison to a peer group.                       

(3) The average annual total return given is since the month end closest to the 
inception date of the class with the longest performance history.       

(4) The Custom Basic Balanced Index is an index created by A I M Advisors, Inc. 
to benchmark the fund. This index consists of the following indices: 60%
Russell 1000--Registered Trademark-- Value and 40% Lehman Brothers U.S. 
Aggregate Bond. The Russell 1000--Registered Trademark-- Value Index    
measures the performance of those Russell 1000--Registered Trademark--  
     Index companies with lower price-to-book ratios and lower forecasted growth
values. The Lehman Brothers U.S. Aggregate Bond Index measures the      
performance of U.S. investment-grade fixed rate                         

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bonds with components for government and corporate securities, mortgage 
    pass-throughs and asset-backed securities of treasury issues, agency issues,
corporate bond issues and mortgage-backed securities.                   

(5) The Lipper Balanced Fund Index is an equally weighted representation of the 
30 largest funds in the Lipper Balanced category. These funds invest to 
conserve principal by maintaining at all times a balanced portfolio of  
stocks and bonds. Typically the stock/bond ratio is approximately 60/40.

(6) The expected inception date of the fund's Investor Class shares is July 18, 
2005.                                                                   

(7) The returns shown for these periods are the blended returns of the fund's   
    Institutional Class shares since April 30, 2004, and the restated historical
performance of the fund's Class A shares (for periods prior to April 30,
   2004) at net asset value, and reflect the Rule 12b-1 fees applicable to the
   Class A shares. The inception date shown in the table is that of the fund's
   Class A shares. The inception date of the fund's Institutional Class shares
is April 30, 2004.                                                      

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EXHIBIT C 

COMPARISON FEE TABLES AND EXPENSE EXAMPLES
FOR SELLING FUNDS AND BUYING FUND 

FEE TABLE                                                                       

 This table compares the shareholder fees and annual operating expenses,
expressed as a percentage of net assets ("Expense Ratios"), of Class A, Class B,
Class C, Class R and Institutional Class shares of AIM Balanced Fund, Class A,  
Class B, Class C, Class K, Investor Class and Institutional Class shares of AIM 
Total Return Fund (each a "Selling Fund") and Class A, Class B, Class C, Class  
R, Investor Class and Institutional Class shares of AIM Basic Balanced Fund     
("Buying Fund"). Pro Forma Combined Expense Ratios of Buying Fund giving effect 
to the reorganization of Selling Funds into Buying Fund are also provided. There
is no guarantee that actual expenses will be the same as those shown in the     
table.                                                                          

                                                        [Enlarge/Download Table]

                                                           AIM BALANCED FUND                            AIM TOTAL RETURN FUND 
                                                             SELLING FUND                                   SELLING FUND      
                                                       (AS OF DECEMBER 31, 2004)                       (AS OF AUGUST 31, 2004)
                                  -------------------------------------------------------------------  -----------------------
                                                                                        INSTITUTIONAL                         
                                   CLASS A        CLASS B      CLASS C      CLASS R         CLASS       CLASS A      CLASS B  
                                    SHARES         SHARES       SHARES       SHARES        SHARES        SHARES       SHARES  
                                  ----------     ----------   ----------   ----------   -------------  ----------   ----------
                                                                                                                              
SHAREHOLDER TRANSACTION EXPENSES                                                                                              
Maximum Sales Charge (Load)                                                                                                   
  Imposed on Purchase (as a                                                                                                   
  percentage of offering                                                                                                      
  price)........................     4.75%          None         None          None         None           5.50%       None   
Maximum Deferred Sales Charge                                                                                                 
  (as a percentage of original                                                                                                
  purchase price or redemption                                                                                                
  proceeds, as applicable)......     None(1)(2)     5.00%        1.00%         None(3)      None           None(1)     5.00%  
ANNUAL FUND OPERATING                                                                                                         
  EXPENSES(5) (expenses that are                                                                                              
  deducted from fund assets)                                                                                                  
Management fees(6)..............     0.52%          0.52%        0.52%         0.52%        0.52%          0.71%       0.71%  
Distribution and/or Service                                                                                                   
  (12b-1) Fees..................     0.25%          1.00%        1.00%         0.50%          --           0.35%       1.00%  
Other Expenses(7)(8)............     0.31%          0.31%        0.31%         0.31%        0.31%          0.40%       0.40%  
Total Annual Fund Operating                                                                                                   
  Expenses(9)(10)(11)...........     1.08%          1.83%        1.83%         1.33%        0.83%          1.46%       2.11%  
Fee Waiver(12)(13)(14)..........       --             --           --            --         0.14%          0.11%       0.11%  
Net Annual Fund Operating                                                                                                     
  Expenses(15)..................     1.08%          1.83%        1.83%         1.33%        0.69%          1.35%       2.00%  


                                                AIM TOTAL RETURN FUND                                                         
                                                     SELLING FUND                                                             
                                             (AS OF AUGUST 31, 2004)                                                          
                                  --------------------------------------------------                                          
                                                            INVESTOR   INSTITUTIONAL                                          
                                   CLASS C      CLASS K      CLASS         CLASS                                              
                                    SHARES       SHARES      SHARES       SHARES                                              
                                  ----------   ----------   --------   -------------                                          
                                                                                                                              
SHAREHOLDER TRANSACTION EXPENSES                                                                                              
Maximum Sales Charge (Load)                                                                                                   
  Imposed on Purchase (as a                                                                                                   
  percentage of offering                                                                                                      
  price)........................     None          None       None         None                                               
Maximum Deferred Sales Charge                                                                                                 
  (as a percentage of original                                                                                                
  purchase price or redemption                                                                                                
  proceeds, as applicable)......     1.00%         None(4)    None         None                                               
ANNUAL FUND OPERATING                                                                                                         
  EXPENSES(5) (expenses that are                                                                                              
  deducted from fund assets)                                                                                                  
Management fees(6)..............     0.71%         0.71%      0.71%        0.71%                                              
Distribution and/or Service                                                                                                   
  (12b-1) Fees..................     1.00%         0.45%      0.25%          --                                               
Other Expenses(7)(8)............     0.40%         0.40%      0.40%        0.43%                                              
Total Annual Fund Operating                                                                                                   
  Expenses(9)(10)(11)...........     2.11%         1.56%      1.36%        1.14%                                              
Fee Waiver(12)(13)(14)..........     0.11%         0.11%      0.11%        0.11%                                              
Net Annual Fund Operating                                                                                                     
  Expenses(15)..................     2.00%         1.45%      1.25%        1.03%                                              

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                                                        [Enlarge/Download Table]


                                                     AIM BASIC BALANCED FUND                       
                                                           BUYING FUND                             
                                                    (AS OF DECEMBER 31, 2004)                      
                              ---------------------------------------------------------------------
                                                                           INVESTOR   INSTITUTIONAL
                              CLASS A       CLASS B   CLASS C   CLASS R     CLASS         CLASS    
                              SHARES        SHARES    SHARES    SHARES      SHARES       SHARES    
                              -------       -------   -------   -------    --------   -------------
                                                                                                   
SHAREHOLDER TRANSACTION                                                                            
  EXPENSES                                                                                         
Maximum Sales Charge (Load)                                                                        
  Imposed on Purchase (as a                                                                        
  percentage of offering                                                                           
  price)....................   4.75%         None      None      None        None         None     
Maximum Deferred Sales                                                                             
  Charge (as a percentage of                                                                       
  original purchase price or                                                                       
  redemption proceeds, as                                                                          
  applicable)...............   None(1)(2)    5.00%     1.00%     None(3)     None         None     
ANNUAL FUND OPERATING                                                                              
  EXPENSES(5) (expenses that                                                                       
  are deducted from fund                                                                           
  assets)                                                                                          
Management fees(6)..........   0.65%         0.65%     0.65%     0.65%       0.65%        0.65%    
Distribution and/or Service                                                                        
  (12b-1) Fees..............   0.35%         1.00%     1.00%     0.50%       0.25%          --     
Other Expenses(7)(8)........   0.49%         0.49%     0.49%     0.49%       0.49%        0.30%    
Total Annual Fund Operating                                                                        
  Expenses(9)(10)(11).......   1.49%         2.14%     2.14%     1.64%       1.39%        0.95%    
Fee Waiver(12)(13)(14)......   0.03%         0.03%     0.03%     0.03%       0.03%        0.03%    
Net Annual Fund Operating                                                                          
  Expenses(15)..............   1.46%         2.11%     2.11%     1.61%       1.36%        0.92%    


                                                     AIM BASIC BALANCED FUND                       
                                                           BUYING FUND                             
                                                       PRO FORMA COMBINED                          
                                                    (AS OF DECEMBER 31, 2004)                      
                              ---------------------------------------------------------------------
                                                                           INVESTOR   INSTITUTIONAL
                              CLASS A       CLASS B   CLASS C   CLASS R     CLASS         CLASS    
                              SHARES        SHARES    SHARES    SHARES      SHARES       SHARES    
                              -------       -------   -------   -------    --------   -------------
                                                                                                   
SHAREHOLDER TRANSACTION                                                                            
  EXPENSES                                                                                         
Maximum Sales Charge (Load)                                                                        
  Imposed on Purchase (as a                                                                        
  percentage of offering                                                                           
  price)....................   4.75%         None      None      None        None         None     
Maximum Deferred Sales                                                                             
  Charge (as a percentage of                                                                       
  original purchase price or                                                                       
  redemption proceeds, as                                                                          
  applicable)...............   None(1)(2)    5.00%     1.00%     None(3)     None         None     
ANNUAL FUND OPERATING                                                                              
  EXPENSES(5) (expenses that                                                                       
  are deducted from fund                                                                           
  assets)                                                                                          
Management fees(6)..........   0.49%         0.49%     0.49%     0.49%       0.49%        0.49%    
Distribution and/or Service                                                                        
  (12b-1) Fees..............   0.25%         1.00%     1.00%     0.50%       0.25%          --     
Other Expenses(7)(8)........   0.35%         0.35%     0.35%     0.35%       0.35%        0.23%    
Total Annual Fund Operating                                                                        
  Expenses(9)(10)(11).......   1.09%         1.84%     1.84%     1.34%       1.09%        0.72%    
Fee Waiver(12)(13)(14)......     --            --        --        --          --         0.05%    
Net Annual Fund Operating                                                                          
  Expenses(15)..............   1.09%         1.84%     1.84%     1.34%       1.09%        0.67%    

---------------                                                                 

(1) If you buy $1,000,000 or more of Class A shares and redeem those shares   
    within 18 months from the date of purchase, you may pay a 1.00% contingent
deferred sales charge (CDSC) at the time of redemption.               

(2) If you are a retirement plan participant and you buy $1,000,000 or more of
Class A shares, you may pay a 1.00% CDSC if a total redemption of the 
retirement plan assets occurs within 12 months from the date of the   
retirement plan's initial purchase.                                   

(3) If you are a retirement plan participant, you may pay a 0.75% CDSC if the 
distributor paid a concession to the dealer of record and a total     
   redemption of the retirement plan assets occurs within 12 months from the
date of the retirement plan's initial purchase.                       

(4) If you are a retirement plan participant, you may pay a 0.70% CDSC if the 
distributor paid a concession to the dealer of record and a total     
   redemption of the retirement plan assets occurs within 12 months from the
date of the retirement plan's initial purchase.                       

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(5) There is no guarantee that actual expenses will be the same as those shown
in the table.                                                         

(6) Effective upon the closing of the Reorganization of both AIM Balanced Fund
    and AIM Total Return Fund, the Board approved a permanent reduction of the
advisory fee of the AIM Basic Balanced Fund to 0.65% of the first $150
  million, plus 0.50% of the next $1.85 billion, plus 0.45% of the next $2
billion, plus 0.40% of the next $2 billion, plus 0.375% of the next $2
    billion, plus 0.35% of the Fund's average daily net assets in excess of $8
billion.                                                              

(7) Effective April 1, 2004, the Board of Trustees approved a revised expense 
   allocation methodology for AIM Total Return Fund. Effective July 1, 2004,
    the Board of Trustees approved an amendment to the administrative services
  and transfer agency agreements for AIM Total Return Fund. Other expenses
have been restated to reflect these changes.                          

(8) Other Expenses for AIM Total Return Fund's Class K shares and AIM Basic   
    Balanced Fund's Class R, Investor Class and Institutional Class Shares are
based on estimated average net assets for the current fiscal year.    

(9) The advisor for AIM Total Return Fund has contractually agreed to waive   
  advisory fees and/or reimburse expenses to the extent necessary to limit
 Total Annual Fund Operating Expenses (excluding certain items discussed
   below) to 2.00%, 2.65%, 2.65%, 1.90% and 1.65% on Class A, Class B, Class
C, Investor Class and Institutional Class shares, respectively. In    
determining the advisor's obligation to waive advisory fees and/or    
    reimburse expenses, the following expenses are not taken into account, and
    could cause the Total Annual Fund Operating Expenses to exceed the limits:
(i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) 
   extraordinary items (these are expenses that are not anticipated to arise
    from the Fund's day-to-day operations), or items designated as such by the
Fund's Board of Trustees; (v) expenses related to a merger or         
reorganization, as approved by the Fund's Board of Trustees; and (vi) 
    expenses that the Fund has incurred but did not actually pay because of an
expense offset arrangement. Currently, in addition to the expense     
 reimbursement arrangement with AMVESCAP described more fully below, the
  only expense offset arrangements from which the Fund benefits are in the
 form of credits that the Fund receives from banks where the Fund or its
transfer agent has deposit accounts in which it holds uninvested cash.
   Those credits are used to pay certain expenses incurred by the Fund. This
expense limitation agreement is in effect through August 31, 2005.    

(10) The Fund's advisor has voluntarily agreed to waive advisory fees and/or    
reimburse expenses to the extent necessary to limit Total Annual Fund 
   Operating Expenses (excluding certain items discussed above) of AIM Total
   Return Fund's Class A, Class B, Class C, Investor Class and Institutional
     Class shares to 1.34%, 1.99%, 1.99%, 1.24% and 0.99% of average net assets,
respectively. These expense limitation agreements may be modified or  
   discontinued upon consultation with the Board of Trustees without further
notice to investors.                                                  

(11) The advisor for AIM Basic Balanced Fund has voluntarily agreed to waive    
    advisory fees or reimburse expenses to the extent necessary to limit Total
  Annual Fund Operating Expenses (excluding certain items discussed below)
   for the Fund's Class A shares to 1.50% (e.g., if the advisor waives 0.04%
  of Class A share expenses, the advisor will also waive 0.04% of Class B,
     Class C, Class R and Institutional Class share expenses). Total Annual Fund
  Operating Expenses restated for this agreement for the fiscal year ended
 December 31, 2004 for Class A, Class B, Class C and Institutional Class
  shares are 1.50%, 2.15%, 2.15% and 1.15%, respectively, and restated for
    Class R shares are 1.65%. In determining the advisor's obligation to waive
 advisory fees and/or reimburse expenses, the following expenses are not
taken into account, and could cause the Total Annual Fund Operating   
Expenses to exceed the limits: (i) interest; (ii) taxes; (iii)        
   extraordinary items (these are expenses that are not anticipated to arise
from the Fund's day-to-day operations), as defined in the Financial   
   Accounting Standard's Board's Generally Accepted Accounting Principles or
 as approved by the Fund's Board of Trustees; (iv) expenses related to a
    merger or reorganization, as approved by the Fund's Board of Trustees; and
     (v) expenses that the Fund has incurred but did not actually pay because of
an expense offset arrangement. Currently, in addition to the expense  
 reimbursement arrangement with AMVESCAP described more fully below, the
only expense offset arrangements from which the Fund benefits are     

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    in the form of credits that the Fund receives from banks where the Fund or
    its transfer agent has deposit accounts in which it holds uninvested cash.
   Those credits are used to pay certain expenses incurred by the Fund. Upon
   the closing of the Reorganizations, the advisor has agreed to voluntarily
 limit the Total Annual Fund Operating Expenses (excluding certain items
discussed above) of AIM Basic Balanced Fund Class A, Class B, Class C,
 Class R, Investor Class and Institutional Class to 1.25%, 2.00%, 2.00%,
   1.50%, 1.25% and 1.00%, respectively. These expense limitation agreements
may be modified or discontinued without further notice to investors.  

(12) The transfer agent has contractually agreed to reimburse class specific    
     transfer agent fees to the extent necessary to limit transfer agent fees to
0.10% of average net assets of the Institutional Class. The expense   
     limitation agreement is in effect through December 31, 2005. The Fee Waiver
reflects this agreement.                                              

(13) Effective January 1, 2005 through June 30, 2006, the advisor for AIM Total 
 Return Fund has contractually agreed to waive a portion of its advisory
    fees to the extent necessary so that the advisory fees payable by the Fund
 (based on the Fund's average daily net assets) do not exceed the annual
rate of 0.62% of the first $250 million, plus 0.605% of the next $250 
    million, plus 0.59% of the next $500 million, plus 0.575% of the next $1.5
    billion, plus 0.56% of the next $2.5 billion, plus 0.545% of the next $2.5
 billion, plus 0.53% of the next $2.5 billion, plus 0.515% of the Fund's
    average daily net assets in excess of $10 billion. The Fee Waiver reflects
this agreement.                                                       

(14) Effective January 1, 2005 through December 31, 2009, the advisor for AIM   
Basic Balanced Fund has contractually agreed to waive a portion of its
    advisory fees to the extent necessary so that the advisory fees payable by
   the Fund (based on the Fund's average daily net assets) do not exceed the
 annual rate of 0.62% of the first $250 million, plus 0.605% of the next
    $250 million, plus 0.59% of the next $500 million, plus 0.575% of the next
    $1.5 billion, plus 0.56% of the next $2.5 billion, plus 0.545% of the next
$2.5 billion, plus 0.53% of the next $2.5 billion, plus 0.515% of the 
  Fund's average daily net assets in excess of $10 billion. The Fee Waiver
reflects this agreement.                                              

(15) At the request of the Trustees of AIM Funds Group, AMVESCAP has agreed to  
 reimburse the Trust for fund expenses related to market timing matters.

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EXPENSE EXAMPLE                                                                 

This Example is intended to help you compare the costs of investing in
different classes of Selling Funds and Buying Fund with the cost of investing in
other mutual funds. Pro Forma Combined costs of investing in different classes  
of Buying Fund giving effect to the reorganization of Selling Funds into Buying 
Fund are also provided. All costs are based upon the information set forth in   
the Fee Table above.                                                            

    The Example assumes that you invest $10,000 for the time periods indicated
and shows the expenses that you would pay both if you redeem all of your shares 
at the end of those periods and if you do not redeem your shares. The Example   
also assumes that your investment has a 5% return each year and that the        
operating expenses remain the same. The Example reflects fee waivers and/or     
expense reimbursements that are contractual, if any, but does not reflect       
voluntary fee waivers and/or expense reimbursements. To the extent fees are     
waived and/or expenses are reimbursed on a voluntary basis, your expenses will  
be lower. Although your actual returns and costs may be higher or lower, based  
on these assumptions your costs would be:                                       

                                                                [Download Table]

                                                       ONE   THREE   FIVE    TEN  
                                                       YEAR  YEARS  YEARS   YEARS 
                                                       ----  -----  ------  ------
                                                                                  
AIM BALANCED FUND (SELLING FUND)                                                  
Class A............................................... $580  $802   $1,042  $1,730
Class B...............................................  686   876    1,190   1,951
Class C...............................................  286   576      990   2,148
Class R...............................................  135   421      729   1,601
Institutional Class...................................   70   251      447   1,012
AIM TOTAL RETURN FUND (SELLING FUND)                                              
Class A............................................... $680  $976   $1,294  $2,191
Class B...............................................  703   950    1,324   2,267
Class C...............................................  303   650    1,124   2,433
Class K...............................................  148   482      840   1,847
Investor Class........................................  127   420      734   1,626
Institutional Class...................................  105   351      617   1,376
AIM BASIC BALANCED FUND (BUYING FUND)                                             
Class A............................................... $617  $915   $1,235  $2,156
Class B...............................................  714   961    1,334   2,294
Class C...............................................  314   661    1,134   2,459
Class R...............................................  164   508      876   1,930
Investor Class........................................  138   431      745   1,654
Institutional Class...................................   94   293      509   1,151
AIM BASIC BALANCED FUND (BUYING FUND) --                                          
  PRO FORMA COMBINED                                                              
Class A............................................... $581  $805   $1,047  $1,741
Class B...............................................  687   879    1,196   1,962
Class C...............................................  287   579      996   2,159
Class R...............................................  136   425      734   1,613
Investor Class........................................  111   347      601   1,329
Institutional Class...................................   68   225      396     890

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 You would pay the following expenses if you did not redeem your shares:

                                                                [Download Table]

                                                       ONE   THREE   FIVE    TEN  
                                                       YEAR  YEARS  YEARS   YEARS 
                                                       ----  -----  ------  ------
                                                                                  
AIM BALANCED FUND (SELLING FUND)                                                  
Class A............................................... $580  $802   $1,042  $1,730
Class B...............................................  186   576      990   1,951
Class C...............................................  186   576      990   2,148
Class R...............................................  135   421      729   1,601
Institutional Class...................................   70   251      447   1,012
AIM TOTAL RETURN FUND (SELLING FUND)                                              
Class A............................................... $680  $976   $1,294  $2,191
Class B...............................................  203   650    1,124   2,267
Class C...............................................  203   650    1,124   2,433
Class K...............................................  148   482      840   1,847
Investor Class........................................  127   420      734   1,626
Institutional Class...................................  105   351      617   1,376
AIM BASIC BALANCED FUND (BUYING FUND)                                             
Class A............................................... $617  $915   $1,235  $2,156
Class B...............................................  214   661    1,334   2,294
Class C...............................................  214   661    1,134   2,459
Class R...............................................  164   508      876   1,930
Investor Class........................................  138   431      745   1,654
Institutional Class...................................   94   293      509   1,151
AIM BASIC BALANCED FUND (BUYING FUND) --                                          
  PRO FORMA COMBINED                                                              
Class A............................................... $581  $805   $1,047  $1,741
Class B...............................................  187   579      996   1,962
Class C...............................................  187   579      996   2,159
Class R...............................................  136   425      734   1,613
Investor Class........................................  111   347      601   1,329
Institutional Class...................................   68   225      396     890

 THE EXAMPLE IS NOT A REPRESENTATION OF PAST OR FUTURE EXPENSES. SELLING
FUNDS' AND BUYING FUND'S ACTUAL EXPENSES, AND AN INVESTOR'S DIRECT AND INDIRECT 
EXPENSES, MAY BE MORE OR LESS THAN THOSE SHOWN. THE TABLE AND THE ASSUMPTION IN 
THE EXAMPLE OF A 5% ANNUAL RETURN ARE REQUIRED BY REGULATIONS OF THE SEC        
APPLICABLE TO ALL MUTUAL FUNDS. THE 5% ANNUAL RETURN IS NOT A PREDICTION OF AND 
DOES NOT REPRESENT SELLING FUNDS' OR BUYING FUND'S PROJECTED OR ACTUAL          
PERFORMANCE.                                                                    

THE ACTUAL EXPENSES ATTRIBUTABLE TO EACH CLASS OF A FUND'S SHARES WILL
DEPEND UPON, AMONG OTHER THINGS, THE LEVEL OF AVERAGE NET ASSETS AND THE EXTENT 
TO WHICH A FUND INCURS VARIABLE EXPENSES, SUCH AS TRANSFER AGENCY COSTS.        

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COMPARISON FEE TABLE AND EXPENSE EXAMPLE
FOR AIM BALANCED FUND AND BUYING FUND 

FEE TABLE                                                                       

 This table compares the shareholder fees and annual operating expenses,
expressed as a percentage of net assets ("Expense Ratios"), of Class A, Class B,
Class C, Class R and Investor Class shares of AIM Balanced Fund ("Selling Fund")
and Class A, Class B, Class C, Class R and Institutional Class shares of AIM    
Basic Balanced Fund ("Buying Fund"). Pro Forma Combined Expense Ratio of Buying 
Fund giving effect to the reorganization of Selling Fund into Buying Fund are   
also provided. There is no guarantee that actual expenses will be the same as   
these shown in the tables.                                                      

                                                        [Enlarge/Download Table]

                                                                 AIM BALANCED FUND                                  
                                                                   SELLING FUND                                     
                                                             (AS OF DECEMBER 31, 2004)                              
                                              -------------------------------------------------------               
                                              CLASS A     CLASS B   CLASS C   CLASS R   INSTITUTIONAL               
                                              SHARES      SHARES    SHARES    SHARES    CLASS SHARES                
                                              -------     -------   -------   -------   -------------               
                                                                                                                    
SHAREHOLDER TRANSACTION EXPENSES                                                                                    
Maximum Sales Charge (Load) Imposed on                                                                              
  Purchase (as a percentage of offering                                                                             
  price).....................................  4.75%       None      None      None         None                    
Maximum Deferred Sales Charge (as a                                                                                 
  percentage of original purchase price or                                                                          
  redemption proceeds, as applicable)........  None(1)(2)  5.00%     1.00%     None(3)      None                    
ANNUAL FUND OPERATING EXPENSES(4) (expenses                                                                         
  that are deducted from fund assets)                                                                               
Management fees(5)...........................  0.52%       0.52%     0.52%     0.52%        0.52%                   
Distribution and/or Service (12b-1) Fees.....  0.25%       1.00%     1.00%     0.50%          --                    
Other Expenses(6)............................  0.31%       0.31%     0.31%     0.31%        0.31%                   
Total Annual Fund Operating Expenses(7)......  1.08%       1.83%     1.83%     1.33%        0.83%                   
Fee Waiver(8)(9).............................    --          --        --        --         0.14%                   
Net Annual Fund Operating Expenses(10).......  1.08%       1.83%     1.83%     1.33%        0.69%                   


                                                                     AIM BASIC BALANCED FUND                        
                                                                           BUYING FUND                              
                                                                    (AS OF DECEMBER 31, 2004)                       
                                              ----------------------------------------------------------------------
                                              CLASS A     CLASS B   CLASS C   CLASS R     INVESTOR     INSTITUTIONAL
                                              SHARES      SHARES    SHARES    SHARES    CLASS SHARES   CLASS SHARES 
                                              -------     -------   -------   -------   ------------   -------------
                                                                                                                    
SHAREHOLDER TRANSACTION EXPENSES                                                                                    
Maximum Sales Charge (Load) Imposed on                                                                              
  Purchase (as a percentage of offering                                                                             
  price).....................................  4.75%       None      None      None         None           None     
Maximum Deferred Sales Charge (as a                                                                                 
  percentage of original purchase price or                                                                          
  redemption proceeds, as applicable)........  None(1)(2)  5.00%     1.00%     None(3)      None           None     
ANNUAL FUND OPERATING EXPENSES(4) (expenses                                                                         
  that are deducted from fund assets)                                                                               
Management fees(5)...........................  0.65%       0.65%     0.65%     0.65%        0.65%          0.65%    
Distribution and/or Service (12b-1) Fees.....  0.35%       1.00%     1.00%     0.50%        0.25%            --     
Other Expenses(6)............................  0.49%       0.49%     0.49%     0.49%        0.49%          0.30%    
Total Annual Fund Operating Expenses(7)......  1.49%       2.14%     2.14%     1.64%        1.39%          0.95%    
Fee Waiver(8)(9).............................  0.03%       0.03%     0.03%     0.03%        0.03%          0.03%    
Net Annual Fund Operating Expenses(10).......  1.46%       2.11%     2.11%     1.61%        1.36%          0.92%    

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                                                        [Enlarge/Download Table]

                                                                                 AIM BASIC BALANCED FUND                        
                                                                                       BUYING FUND                              
                                                                                    PRO FORMA COMBINED                          
                                                                                (AS OF DECEMBER 31, 2004)                       
                                                          ----------------------------------------------------------------------
                                                          CLASS A     CLASS B   CLASS C   CLASS R     INVESTOR     INSTITUTIONAL
                                                          SHARES      SHARES    SHARES    SHARES    CLASS SHARES   CLASS SHARES 
                                                          -------     -------   -------   -------   ------------   -------------
                                                                                                                                
SHAREHOLDER TRANSACTION EXPENSES                                                                                                
Maximum Sales Charge (Load) Imposed on Purchase (as a                                                                           
  percentage of offering price)..........................  4.75%       None      None      None         None           None     
Maximum Deferred Sales Charge (as a percentage of                                                                               
  original purchase price or redemption proceeds, as                                                                            
  applicable)............................................  None(1)(2)  5.00%     1.00%     None(3)      None           None     
ANNUAL FUND OPERATING EXPENSES(4) (expenses that are                                                                            
  deducted from fund assets)                                                                                                    
Management fees(5).......................................  0.51%       0.51%     0.51%     0.51%        0.51%          0.51%    
Distribution and/or Service (12b-1) Fees.................  0.25%       1.00%     1.00%     0.50%        0.25%            --     
Other Expenses(6)........................................  0.32%       0.32%     0.32%     0.32%        0.32%          0.26%    
Total Annual Fund Operating Expenses(7)..................  1.08%       1.83%     1.83%     1.33%        1.11%          0.77%    
Fee Waiver(8)(9).........................................    --          --        --        --           --           0.08%    
Net Annual Fund Operating Expenses(10)...................  1.08%       1.83%     1.83%     1.33%        1.11%          0.69%    

---------------                                                                 

(1) If you buy $1,000,000 or more of Class A shares and redeem those shares   
    within 18 months from the date of purchase, you may pay a 1.00% contingent
deferred sales charge (CDSC) at the time of redemption.               

(2) If you are a retirement plan participant and you buy $1,000,000 or more of
Class A shares, you may pay a 1.00% CDSC if a total redemption of the 
retirement plan assets occurs within 12 months from the date of the   
retirement plan's initial purchase.                                   

(3) If you are a retirement plan participant, you may pay a 0.75% CDSC if the 
distributor paid a concession to the dealer of record and a total     
   redemption of the retirement plan assets occurs within 12 months from the
date of the retirement plan's initial purchase.                       

(4) There is no guarantee that actual expenses will be the same as those shown
in the table.                                                         

 (5) Effective upon the closing of the Reorganization of AIM Balanced Fund only,
 the Board approved a permanent reduction of the advisory fee of the AIM
   Basic Balanced Fund to 0.65% of the first $150 million, plus 0.50% of the
   next $4.85 billion, plus 0.475% of the next $5 billion, plus 0.45% of the
Fund's average daily net assets in excess of $10 billion.             

(6) Other expenses for AIM Basic Balanced Fund's Class R, Investor Class and  
  Institutional Class shares are based on estimated average net assets for
the current fiscal year.                                              

(7) The advisor for AIM Basic Balanced Fund has voluntarily agreed to waive   
  advisory fees and/or reimburse expenses to the extent necessary to limit
 Total Annual Fund Operating Expenses (excluding certain items discussed
    below) for the Fund's Class A shares to 1.50% (e.g., if the advisor waives
     0.04% of Class A share expenses, the advisor will also waive 0.04% of Class
   B, Class C, Class R and Institutional Class share expenses.) Total Annual
 Fund Operating Expenses restated for this agreement for the fiscal year
 ended December 31, 2004 for Class A, Class B, Class C and Institutional
    Class shares are 1.50%, 2.15%, 2.15% and 1.15%, respectively, and restated
  for Class R shares are 1.65%. In determining the advisor's obligation to
   waive advisory fees and/or reimburse expenses, the following expenses are
 not taken into account, and could cause the Total Annual Fund Operating
Expenses to exceed the limits: (i) interest; (ii) taxes; (iii)        
   extraordinary items (these are expenses that are not anticipated to arise
from the Fund's day-to-day operations), as defined in the Financial   
   Accounting Standard's Board's Generally Accepted Accounting Principles or
as                                                                    

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     approved by the Fund's Board of Trustees; (iv) expenses related to a merger
 or reorganization, as approved by the Fund's Board of Trustees; and (v)
    expenses that the Fund has incurred but did not actually pay because of an
expense offset arrangement. Currently, in addition to the expense     
 reimbursement arrangement with AMVESCAP described more fully below, the
  only expense offset arrangements from which the Fund benefits are in the
 form of credits that the Fund receives from banks where the Fund or its
transfer agent has deposit accounts in which it holds uninvested cash.
   Those credits are used to pay certain expenses incurred by the Fund. Upon
  the Closing of the Reorganization, the advisor has agreed to voluntarily
 limit the Total Annual Fund Operating Expenses (excluding certain items
discussed above) of AIM Basic Balanced Fund Class A, Class B, Class C,
 Class R, Investor Class and Institutional Class to 1.40%, 2.15%, 2.15%,
   1.65% and 1.15%, respectively. These expense limitation agreements may be
modified or discontinued without further notice to investors.         

(8) The transfer agent has contractually agreed to reimburse class specific   
     transfer agent fees to the extent necessary to limit transfer agent fees to
0.10% of average net assets of the Institutional Class. The expense   
     limitation agreement is in effect through December 31, 2005. The Fee Waiver
reflects this agreement.                                              

(9) Effective January 1, 2005 through December 31, 2009, the advisor for AIM  
Basic Balanced Fund has contractually agreed to waive a portion of its
    advisory fees to the extent necessary so that the advisory fees payable by
   the Fund (based on the Fund's average daily net assets) do not exceed the
   annual uniform fee schedule rate of 0.62% of the first $250 million, plus
    0.605% of the next $250 million, plus 0.59% of the next $500 million, plus
    0.575% of the next $1.5 billion, plus 0.56% of the next $2.5 billion, plus
    0.545% of the next $2.5 billion, plus 0.53% of the next $2.5 billion, plus
     0.515% of the Fund's average daily net assets in excess of $10 billion. The
Fee Waiver reflects this agreement.                                   

(10) At the request of the Trustees of AIM Funds Group, AMVESCAP has agreed to  
 reimburse the Trust for fund expenses related to market timing matters.

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EXPENSE EXAMPLE                                                                 

This Example is intended to help you compare the costs of investing in
different classes of Selling Funds and Buying Fund with the cost of investing in
other mutual funds. Pro Forma Combined costs of investing in different classes  
of Buying Fund giving effect to the reorganization of Selling Funds into Buying 
Fund are also provided. All costs are based upon the information set forth in   
the Fee Table above.                                                            

    The Example assumes that you invest $10,000 for the time periods indicated
and shows the expenses that you would pay both if you redeem all of your shares 
at the end of those periods and if you do not redeem your shares. The Example   
also assumes that your investment has a 5% return each year and that the        
operating expenses remain the same. The Example reflects fee waivers and/or     
expense reimbursements that are contractual, if any, but does not reflect       
voluntary fee waivers and/or expense reimbursements. To the extent fees are     
waived and/or expenses are reimbursed on a voluntary basis, your expenses will  
be lower. Although your actual returns and costs may be higher or lower, based  
on these assumptions your costs would be:                                       

                                                        [Enlarge/Download Table]

                                                             ONE   THREE   FIVE    TEN  
                                                             YEAR  YEARS  YEARS   YEARS 
                                                             ----  -----  ------  ------
                                                                                        
AIM BALANCED FUND (SELLING FUND)                                                        
Class A..................................................... $580  $802   $1,042  $1,730
Class B.....................................................  686   876    1,190   1,951
Class C.....................................................  286   576      990   2,148
Class R.....................................................  135   421      729   1,601
Institutional Class.........................................   70   251      447   1,012
AIM BASIC BALANCED FUND (BUYING FUND)                                                   
Class A..................................................... $617  $915   $1,235  $2,156
Class B.....................................................  714   961    1,334   2,294
Class C.....................................................  314   661    1,134   2,459
Class R.....................................................  164   508      876   1,930
Investor Class..............................................  138   431      745   1,654
Institutional Class.........................................   94   293      509   1,151
AIM BASIC BALANCED FUND (BUYING FUND) -- PRO FORMA COMBINED                             
Class A..................................................... $580  $802   $1,042  $1,730
Class B.....................................................  686   876    1,190   1,951
Class C.....................................................  286   576      990   2,148
Class R.....................................................  135   421      729   1,601
Investor Class..............................................  113   353      612   1,352
Institutional Class.........................................   70   238      420     947

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 You would pay the following expenses if you did not redeem your shares:

                                                        [Enlarge/Download Table]

                                                             ONE   THREE   FIVE    TEN  
                                                             YEAR  YEARS  YEARS   YEARS 
                                                             ----  -----  ------  ------
                                                                                        
AIM BALANCED FUND (SELLING FUND)                                                        
Class A..................................................... $580  $802   $1,042  $1,730
Class B.....................................................  186   576      990   1,951
Class C.....................................................  186   576      990   2,148
Class R.....................................................  135   421      729   1,601
Institutional Class.........................................   70   251      447   1,012
AIM BASIC BALANCED FUND (BUYING FUND)                                                   
Class A..................................................... $617  $915   $1,235  $2,156
Class B.....................................................  214   661    1,134   2,294
Class C.....................................................  214   661    1,134   2,459
Class R.....................................................  164   508      876   1,930
Investor Class..............................................  138   431      745   1,654
Institutional Class.........................................   94   293      509   1,151
AIM BASIC BALANCED FUND (BUYING FUND) -- PRO FORMA COMBINED                             
Class A..................................................... $580  $802   $1,042  $1,730
Class B.....................................................  186   576      990   1,951
Class C.....................................................  186   576      990   2,148
Class R.....................................................  135   421      729   1,601
Investor Class..............................................  113   353      612   1,352
Institutional Class.........................................   70   238      420     947

 THE EXAMPLE IS NOT A REPRESENTATION OF PAST OR FUTURE EXPENSES. SELLING
FUND'S AND BUYING FUND'S ACTUAL EXPENSES, AND AN INVESTOR'S DIRECT AND INDIRECT 
EXPENSES, MAY BE MORE OR LESS THAN THOSE SHOWN. THE TABLE AND THE ASSUMPTION IN 
THE EXAMPLE OF A 5% ANNUAL RETURN ARE REQUIRED BY REGULATIONS OF THE SEC        
APPLICABLE TO ALL MUTUAL FUNDS. THE 5% ANNUAL RETURN IS NOT A PREDICTION OF AND 
DOES NOT REPRESENT SELLING FUND'S OR BUYING FUND'S PROJECTED OR ACTUAL          
PERFORMANCE.                                                                    

THE ACTUAL EXPENSES ATTRIBUTABLE TO EACH CLASS OF A FUND'S SHARES WILL
DEPEND UPON, AMONG OTHER THINGS, THE LEVEL OF AVERAGE NET ASSETS AND THE EXTENT 
TO WHICH A FUND INCURS VARIABLE EXPENSES, SUCH AS TRANSFER AGENCY COSTS.        

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COMPARISON FEE TABLE AND EXPENSE EXAMPLE
FOR AIM TOTAL RETURN FUND AND BUYING FUND 

FEE TABLE                                                                       

 This table compares the shareholder fees and annual operating expenses,
expressed as a percentage of net assets ("Expense Ratios"), of Class A, Class B,
Class C, Class R, Class K, Investor Class and Institutional Class shares of AIM 
Total Return Fund ("Selling Fund") and Class A, Class B, Class C, Class R,      
Investor Class and Institutional Class shares of AIM Basic Balanced Fund        
("Buying Fund"). Pro Forma Combined Expense Ratios of Buying Fund giving effect 
to the reorganization of Selling Fund into Buying Fund are also provided. There 
is no guarantee that actual expenses will be the same as those shown in the     
table.                                                                          

                                                        [Enlarge/Download Table]

                                                     AIM TOTAL RETURN FUND                           AIM BASIC BALANCED FUND   
                                                          SELLING FUND                                     BUYING FUND         
                                                    (AS OF AUGUST 31, 2004)                         (AS OF DECEMBER 31, 2004)  
                                ----------------------------------------------------------------  -----------------------------
                                                                        INVESTOR   INSTITUTIONAL                               
                                CLASS A   CLASS B   CLASS C   CLASS K    CLASS         CLASS      CLASS A     CLASS B   CLASS C
                                SHARES    SHARES    SHARES    SHARES     SHARES       SHARES      SHARES      SHARES    SHARES 
                                -------   -------   -------   -------   --------   -------------  -------     -------   -------
                                                                                                                               
SHAREHOLDER TRANSACTION                                                                                                        
  EXPENSES                                                                                                                     
Maximum Sales Charge (Load)                                                                                                    
  Imposed on Purchase (as a                                                                                                    
  percentage of offering                                                                                                       
  price).......................  5.50%     None      None       None      None         None        4.75%       None      None  
Maximum Deferred Sales Charge                                                                                                  
  (as a percentage of original                                                                                                 
  purchase price or redemption                                                                                                 
  proceeds, as applicable).....  None(1)   5.00%     1.00%      None(2)   None         None        None(1)(3)  5.00%     1.00% 
ANNUAL FUND OPERATING                                                                                                          
  EXPENSES(5) (expenses that                                                                                                   
  are deducted from fund                                                                                                       
  assets)                                                                                                                      
Management fees(6).............  0.71%     0.71%     0.71%      0.71%     0.71%        0.71%       0.65%       0.65%     0.65% 
Distribution and/or Service                                                                                                    
  (12b-1) Fees.................  0.35%     1.00%     1.00%      0.45%     0.25%          --        0.35%       1.00%     1.00% 
Other Expenses(7)(8)...........  0.40%     0.40%     0.40%      0.40%     0.40%        0.43%       0.49%       0.49%     0.49% 
Total Annual Fund Operating                                                                                                    
  Expenses(9)(10)(11)..........  1.46%     2.11%     2.11%      1.56%     1.36%        1.14%       1.49%       2.14%     2.14% 
Fee Waiver(12)(13)(14).........  0.11%     0.11%     0.11%      0.11%     0.11%        0.11%       0.03%       0.03%     0.03% 
Net Annual Fund Operating                                                                                                      
  Expenses(15).................  1.35%     2.00%     2.00%      1.45%     1.25%        1.03%       1.46%       2.11%     2.11% 


                                     AIM BASIC BALANCED FUND                                                                   
                                           BUYING FUND                                                                         
                                    (AS OF DECEMBER 31, 2004)                                                                  
                                ----------------------------------                                                             
                                          INVESTOR   INSTITUTIONAL                                                             
                                CLASS R    CLASS         CLASS                                                                 
                                SHARES     SHARES       SHARES                                                                 
                                -------   --------   -------------                                                             
                                                                                                                               
SHAREHOLDER TRANSACTION                                                                                                        
  EXPENSES                                                                                                                     
Maximum Sales Charge (Load)                                                                                                    
  Imposed on Purchase (as a                                                                                                    
  percentage of offering                                                                                                       
  price).......................   None      None         None                                                                  
Maximum Deferred Sales Charge                                                                                                  
  (as a percentage of original                                                                                                 
  purchase price or redemption                                                                                                 
  proceeds, as applicable).....   None(4)   None         None                                                                  
ANNUAL FUND OPERATING                                                                                                          
  EXPENSES(5) (expenses that                                                                                                   
  are deducted from fund                                                                                                       
  assets)                                                                                                                      
Management fees(6).............   0.65%     0.65%        0.65%                                                                 
Distribution and/or Service                                                                                                    
  (12b-1) Fees.................   0.50%     0.25%          --                                                                  
Other Expenses(7)(8)...........   0.49%     0.49%        0.30%                                                                 
Total Annual Fund Operating                                                                                                    
  Expenses(9)(10)(11)..........   1.64%     1.39%        0.95%                                                                 
Fee Waiver(12)(13)(14).........   0.03%     0.03%        0.03%                                                                 
Net Annual Fund Operating                                                                                                      
  Expenses(15).................   1.61%     1.36%        0.92%                                                                 

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                                                        [Enlarge/Download Table]

                                                     AIM BASIC BALANCED FUND                        
                                                           BUYING FUND                              
                                                        PRO FORMA COMBINED                          
                                                    (AS OF DECEMBER 31, 2004)                       
                                ------------------------------------------------------------------  
                                                                          INVESTOR   INSTITUTIONAL  
                                CLASS A     CLASS B   CLASS C   CLASS R    CLASS         CLASS      
                                SHARES      SHARES    SHARES    SHARES     SHARES       SHARES      
                                -------     -------   -------   -------   --------   -------------  
                                                                                                    
SHAREHOLDER TRANSACTION                                                                             
  EXPENSES                                                                                          
Maximum Sales Charge (Load)                                                                         
  Imposed on Purchase (as a                                                                         
  percentage of offering                                                                            
  price).......................  4.75%       None      None       None      None         None       
Maximum Deferred Sales Charge                                                                       
  (as a percentage of original                                                                      
  purchase price or redemption                                                                      
  proceeds, as applicable).....  None(1)(3)  5.00%     1.00%      None(4)   None         None       
ANNUAL FUND OPERATING                                                                               
  EXPENSES(5) (expenses that                                                                        
  are deducted from fund                                                                            
  assets)                                                                                           
Management fees(6).............  0.65%       0.65%     0.65%      0.65%     0.65%        0.65%      
Distribution and/or Service                                                                         
  (12b-1) Fees.................  0.35%       1.00%     1.00%      0.50%     0.25%          --       
Other Expenses(7)(8)...........  0.44%       0.44%     0.44%      0.44%     0.44%        0.19%      
Total Annual Fund Operating                                                                         
  Expenses(9)(10)(11)..........  1.44%       2.09%     2.09%      1.59%     1.34%        0.84%      
Fee Waiver(12)(13)(14).........  0.05%       0.05%     0.05%      0.05%     0.05%        0.05%      
Net Annual Fund Operating                                                                           
  Expenses(15).................  1.39%       2.04%     2.04%      1.54%     1.29%        0.79%      



                                                                                                    
SHAREHOLDER TRANSACTION                                                                             
  EXPENSES                                                                                          
Maximum Sales Charge (Load)                                                                         
  Imposed on Purchase (as a                                                                         
  percentage of offering                                                                            
  price).......................                                                                     
Maximum Deferred Sales Charge                                                                       
  (as a percentage of original                                                                      
  purchase price or redemption                                                                      
  proceeds, as applicable).....                                                                     
ANNUAL FUND OPERATING                                                                               
  EXPENSES(5) (expenses that                                                                        
  are deducted from fund                                                                            
  assets)                                                                                           
Management fees(6).............                                                                     
Distribution and/or Service                                                                         
  (12b-1) Fees.................                                                                     
Other Expenses(7)(8)...........                                                                     
Total Annual Fund Operating                                                                         
  Expenses(9)(10)(11)..........                                                                     
Fee Waiver(12)(13)(14).........                                                                     
Net Annual Fund Operating                                                                           
  Expenses(15).................                                                                     

---------------                                                                 

(1) If you buy $1,000,000 or more of Class A shares and redeem those shares   
    within 18 months from the date of purchase, you may pay a 1.00% contingent
deferred sales charge (CDSC) at the time of redemption.               

(2) If you are a retirement plan participant, you may pay a 0.70% CDSC if the 
distributor paid a concession to the dealer of record and a total     
   redemption of the retirement plan assets occurs within 12 months from the
date of the retirement plan's initial purchase.                       

(3) If you are a retirement plan participant and you buy $1,000,000 or more of
Class A shares, you may pay a 1.00% CDSC if a total redemption of the 
retirement plan assets occurs within 12 months from the date of the   
retirement plan's initial purchase.                                   

(4) If you are a retirement plan participant, you may pay a 0.75% CDSC if the 
distributor paid a concession to the dealer of record and a total     
   redemption of the retirement plan assets occurs within 12 months from the
date of the retirement plan's initial purchase.                       

(5) There is no guarantee that actual expenses will be the same as those shown
in the table.                                                         

(6) Effective upon the closing of the Reorganization of AIM Total Return Fund 
   only, the Board approved a permanent reduction of the advisory fee of the
     AIM Basic Balanced Fund to 0.65% of the first $1 billion, plus 0.50% of the
    next $1 billion, plus 0.45% of the next $2 billion, plus 0.40% of the next
  $2 billion, plus 0.375% of the next $2 billion, plus 0.35% of the Fund's
average daily net assets in excess of $8 billion.                     

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(7) Effective April 1, 2004, the Board of Trustees approved a revised expense 
   allocation methodology for AIM Total Return Fund. Effective July 1, 2004,
    the Board of Trustees approved an amendment to the administrative services
  and transfer agency agreements for AIM Total Return Fund. Other Expenses
have been restated to reflect these changes.                          

(8) Other Expenses for AIM Total Return Fund's Class K shares and AIM Basic   
    Balanced Fund's Class R shares and Institutional Class shares are based on
estimated average net assets for the current fiscal year.             

(9) The advisor for AIM Total Return Fund has contractually agreed to waive   
  advisory fees and/or reimburse expenses to the extent necessary to limit
 Total Annual Fund Operating Expenses (excluding certain items discussed
   below) to 2.00%, 2.65%, 2.65%, 1.90% and 1.65% on Class A, Class B, Class
C, Investor Class and Institutional Class shares, respectively. In    
determining the advisor's obligation to waive advisory fees and/or    
    reimburse expenses, the following expenses are not taken into account, and
    could cause the Total Annual Fund Operating Expenses to exceed the limits:
(i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) 
   extraordinary items (these are expenses that are not anticipated to arise
    from the Fund's day-to-day operations), or items designated as such by the
Fund's Board of Trustees; (v) expenses related to a merger or         
reorganization, as approved by the Fund's Board of Trustees; and (vi) 
    expenses that the Fund has incurred but did not actually pay because of an
expense offset arrangement. Currently, in addition to the expense     
 reimbursement arrangement with AMVESCAP described more fully below, the
  only expense offset arrangements from which the Fund benefits are in the
 form of credits that the Fund receives from banks where the Fund or its
transfer agent has deposit accounts in which it holds uninvested cash.
   Those credits are used to pay certain expenses incurred by the Fund. This
expense limitation agreement is in effect through August 31, 2005.    

(10) The advisor for AIM Basic Balanced Fund has voluntarily agreed to waive    
  advisory fees and/or reimburse expenses to the extent necessary to limit
 Total Annual Fund Operating Expenses (excluding certain items discussed
    below) for the Fund's Class A shares to 1.50% (e.g., if the advisor waives
     0.04% of Class A share expenses, the advisor will also waive 0.04% of Class
   B, Class C, Class R and Institutional Class share expenses). Total Annual
 Fund Operating Expenses restated for this agreement for the fiscal year
 ended December 31, 2004 for Class A, Class B, Class C and Institutional
    Class shares are 1.50%, 2.15%, 2.15% and 1.15%, respectively, and restated
  for Class R shares are 1.65%. In determining the advisor's obligation to
   waive advisory fees and/or reimburse expenses, the following expenses are
 not taken into account, and could cause the Total Annual Fund Operating
Expenses to exceed the limits: (i) interest; (ii) taxes; (iii)        
   extraordinary items (these are expenses that are not anticipated to arise
from the Fund's day-to-day operations), as defined in the Financial   
   Accounting Standard's Board's Generally Accepted Accounting Principles or
 as approved by the Fund's Board of Trustees; (iv) expenses related to a
    merger or reorganization, as approved by the Fund's Board of Trustees; and
     (v) expenses that the Fund has incurred but did not actually pay because of
an expense offset arrangement. Currently, in addition to the expense  
 reimbursement arrangement with AMVESCAP described more fully below, the
  only expense offset arrangements from which the Fund benefits are in the
 form of credits that the Fund receives from banks where the Fund or its
transfer agent has deposit accounts in which it holds uninvested cash.
   Those credits are used to pay certain expenses incurred by the Fund. Upon
  the closing of the Reorganization, the advisor has agreed to voluntarily
 limit the Total Annual Fund Operating Expenses (excluding certain items
discussed above) of AIM Basic Balanced Fund Class A, Class B, Class C,
 Class R, Investor Class and Institutional Class to 1.35%, 2.00%, 2.00%,
   1.50%, 1.25% and 1.00%, respectively. These expense limitation agreements
may be modified or discontinued without further notice to investors.  

(11) The Fund's advisor has voluntarily agreed to waive advisory fees and/or    
reimburse expenses to the extent necessary to limit Total Annual Fund 
   Operating Expenses (excluding certain items discussed above) of AIM Total
   Return Fund's Class A, Class B, Class C, Investor Class and Institutional
     Class shares to 1.34%, 1.99%, 1.99%, 1.24% and 0.99% of average net assets,
respectively. These expense limitation agreements may be modified or  
   discontinued upon consultation with the Board of Trustees without further
notice to investors.                                                  

(12) The transfer agent has contractually agreed to reimburse class specific    
     transfer agent fees to the extent necessary to limit transfer agent fees to
0.10% of average net assets of the Institutional Class. The expense   
     limitation agreement is in effect through December 31, 2005. The Fee Waiver
reflects this agreement.                                              

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(13) Effective January 1, 2005 through June 30, 2006, the advisor for AIM Total 
 Return Fund has contractually agreed to waive a portion of its advisory
    fees to the extent necessary so that the advisory fees payable by the Fund
 (based on the Fund's average daily net assets) do not exceed the annual
   uniform fee schedule rate of 0.62% of the first $250 million, plus 0.605%
    of the next $250 million, plus 0.59% of the next $500 million, plus 0.575%
    of the next $1.5 billion, plus 0.56% of the next $2.5 billion, plus 0.545%
    of the next $2.5 billion, plus 0.53% of the next $2.5 billion, plus 0.515%
  of the Fund's average daily net assets in excess of $10 billion. The Fee
Waiver reflects this agreement.                                       

(14) Effective January 1, 2005 through December 31, 2009, the advisor for AIM   
Basic Balanced Fund has contractually agreed to waive a portion of its
    advisory fees to the extent necessary so that the advisory fees payable by
   the Fund (based on the Fund's average daily net assets) do not exceed the
   annual uniform fee schedule rate of 0.62% of the first $250 million, plus
    0.605% of the next $250 million, plus 0.59% of the next $500 million, plus
    0.575% of the next $1.5 billion, plus 0.56% of the next $2.5 billion, plus
    0.545% of the next $2.5 billion, plus 0.53% of the next $2.5 billion, plus
     0.515% of the Fund's average daily net assets in excess of $10 billion. The
Fee Waiver reflects this agreement.                                   

(15) At the request of the Trustees of AIM Funds Group, AMVESCAP has agreed to  
 reimburse the Trust for fund expenses related to market timing matters.

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EXPENSE EXAMPLE                                                                 

This Example is intended to help you compare the costs of investing in
different classes of Selling Fund and Buying Fund with the cost of investing in 
other mutual funds. Pro Forma Combined costs of investing in different classes  
of Buying Fund giving effect to the reorganization of Selling Fund into Buying  
Fund are also provided. All costs are based upon the information set forth in   
the Fee Table above.                                                            

    The Example assumes that you invest $10,000 for the time periods indicated
and shows the expenses that you would pay both if you redeem all of your shares 
at the end of those periods and if you do not redeem your shares. The Example   
also assumes that your investment has a 5% return each year and that the        
operating expenses remain the same. The Example reflects fee waivers and/or     
expense reimbursements that are contractual, if any, but does not reflect       
voluntary fee waivers and/or expense reimbursements. To the extent fees are     
waived and/or expenses are reimbursed on a voluntary basis, your expenses will  
be lower. Although your actual returns and costs may be higher or lower, based  
on these assumptions your costs would be:                                       

                                                                [Download Table]

                                                       ONE   THREE   FIVE    TEN  
                                                       YEAR  YEARS  YEARS   YEARS 
                                                       ----  -----  ------  ------
                                                                                  
AIM TOTAL RETURN FUND (SELLING FUND)                                              
Class A............................................... $680  $976   $1,294  $2,191
Class B...............................................  703   950    1,324   2,267
Class C...............................................  303   650    1,124   2,433
Class K...............................................  148   482      840   1,847
Investor Class........................................  127   420      734   1,626
Institutional Class...................................  105   351      617   1,376
AIM BASIC BALANCED FUND (BUYING FUND)                                             
Class A............................................... $617  $915   $1,235  $2,156
Class B...............................................  714   961    1,334   2,294
Class C...............................................  314   661    1,134   2,459
Class R...............................................  164   508      876   1,930
Investor Class........................................  138   431      745   1,654
Institutional Class...................................   94   293      509   1,151
AIM BASIC BALANCED FUND (BUYING FUND) --                                          
  PRO FORMA COMBINED                                                              
Class A............................................... $610  $904   $1,220  $2,113
Class B...............................................  707   950    1,319   2,251
Class C...............................................  307   650    1,119   2,417
Class R...............................................  157   497      861   1,885
Investor Class........................................  131   420      729   1,608
Institutional Class...................................   81   263      461   1,033

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 You would pay the following expenses if you did not redeem your shares:

                                                                [Download Table]

                                                       ONE   THREE   FIVE    TEN  
                                                       YEAR  YEARS  YEARS   YEARS 
                                                       ----  -----  ------  ------
                                                                                  
AIM TOTAL RETURN FUND (SELLING FUND)                                              
Class A............................................... $680  $976   $1,294  $2,191
Class B...............................................  203   650    1,124   2,267
Class C...............................................  203   650    1,124   2,433
Class K...............................................  148   482      840   1,847
Investor Class........................................  127   420      734   1,626
Institutional Class...................................  105   351      617   1,376
AIM BASIC BALANCED FUND (BUYING FUND)                                             
Class A............................................... $617  $915   $1,235  $2,156
Class B...............................................  214   661    1,134   2,294
Class C...............................................  214   661    1,134   2,459
Class R...............................................  164   508      876   1,930
Investor Class........................................  138   431      745   1,654
Institutional Class...................................   94   293      509   1,151
AIM BASIC BALANCED FUND (BUYING FUND) --                                          
  PRO FORMA COMBINED                                                              
Class A............................................... $610  $904   $1,220  $2,113
Class B...............................................  207   650    1,119   2,251
Class C...............................................  207   650    1,119   2,417
Class R...............................................  157   497      861   1,885
Investor Class........................................  131   420      729   1,608
Institutional Class...................................   81   263      461   1,033

 THE EXAMPLE IS NOT A REPRESENTATION OF PAST OR FUTURE EXPENSES. SELLING
FUND'S AND BUYING FUND'S ACTUAL EXPENSES, AND AN INVESTOR'S DIRECT AND INDIRECT 
EXPENSES, MAY BE MORE OR LESS THAN THOSE SHOWN. THE TABLE AND THE ASSUMPTION IN 
THE EXAMPLE OF A 5% ANNUAL RETURN ARE REQUIRED BY REGULATIONS OF THE SEC        
APPLICABLE TO ALL MUTUAL FUNDS. THE 5% ANNUAL RETURN IS NOT A PREDICTION OF AND 
DOES NOT REPRESENT SELLING FUND'S OR BUYING FUND'S PROJECTED OR ACTUAL          
PERFORMANCE.                                                                    

THE ACTUAL EXPENSES ATTRIBUTABLE TO EACH CLASS OF A FUND'S SHARES WILL
DEPEND UPON, AMONG OTHER THINGS, THE LEVEL OF AVERAGE NET ASSETS AND THE EXTENT 
TO WHICH A FUND INCURS VARIABLE EXPENSES, SUCH AS TRANSFER AGENCY COSTS.        

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EXHIBIT D 

SHARES OUTSTANDING OF EACH CLASS OF EACH SELLING FUND ON RECORD DATE

     As of April 22, 2005, there were the following number of shares outstanding
of each class of each Selling Fund:                                             

AIM BALANCED FUND                                                               

                                                                [Download Table]
                                                               
Class A Shares:............................... 38,337,939.164  
Class B Shares:............................... 21,900,559.527  
Class C Shares:...............................  7,674,438.550  
Class R Shares:...............................    239,291.173  
Institutional Class Shares:...................        416.551  

AIM TOTAL RETURN FUND                                                           

                                                                [Download Table]
                                                               
Class A Shares:...............................    167,541.479  
Class B Shares:...............................    106,434.176  
Class C Shares:...............................     97,158.174  
Class K Shares:...............................            -0-  
Institutional Class Shares:...................        469.280  
Investor Class Shares:........................ 21,308,323.801  

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EXHIBIT E 

OWNERSHIP OF SHARES OF EACH SELLING FUND

SIGNIFICANT HOLDERS                                                             

     Listed below is the name, address and percent ownership of each person who,
as of April 22, 2005, to the best knowledge of AFG and ACSBF owned 5% or more of
any class of the outstanding shares of each Selling Fund. A shareholder who owns
beneficially 25% or more of the outstanding securities of a Selling Fund is     
presumed to "control" the fund as defined in the 1940 Act. Such control may     
affect the voting rights of other shareholders.                                 

AIM BALANCED FUND                                                               

                                                        [Enlarge/Download Table]

                                                 CLASS OF   NUMBER OF    PERCENT OWNED
NAME AND ADDRESS                                  SHARES   SHARES OWNED   OF RECORD*  
----------------                                 --------  ------------  -------------
                                                                                      
Merrill Lynch Pierce Fenner & Smith.............  Class A  2,443,104.81       6.37%   
  FBO The Sole Benefit of Customers                                                   
  Attn: Fund Administration                                                           
  4800 Deer Lake Drive East 2nd Floor                                                 
  Jacksonville, FL 32246-6484                                                         
AMVESCAP Natl. Tr. Co. as Agent.................  Class A  2,120,879.57       5.53%   
  For Fleet National Bank FBO                                                         
  Fleet Boston Financial Savings Plus                                                 
  P.O. Box 105779                                                                     
  Atlanta, GA 30348-5779                                                              
Merrill Lynch Pierce Fenner & Smith.............  Class B  1,308,466.64       5.97%   
  FBO The Sole Benefit of Customers                                                   
  Attn: Fund Administration                                                           
  4800 Deer Lake Drive East 2nd Floor                                                 
  Jacksonville, FL 32246-6484                                                         
Merrill Lynch Pierce Fenner & Smith.............  Class C    919,028.91      11.98%   
  FBO The Sole Benefit of Customers                                                   
  Attn: Fund Administration                                                           
  4800 Deer Lake Drive East 2nd Floor                                                 
  Jacksonville, FL 32246-6484                                                         
Symetra Investment Services Inc. ...............  Class R     47,184.41      19.72%   
  P.O. Box 34443                                                                      
  Seattle, WA 98124-1443                                                              
Paula Beh, Rebecca Johnson & Rosella Singleton                                        
  TTEES.........................................  Class R     18,648.68       7.79%   
  FBO Crittenden Hlth. Sys.                                                           
  Hwy 60                                                                              
  Marion, KY 42064                                                                    
Reliance Trust Co Cust FBO......................  Class R     17,898.53       7.48%   
  Tahoe Regional Planning Agency                                                      
  P.O. Box 48529                                                                      
  Atlanta, GA 30362-1529                                                              
Scudder Trust Company TTEE......................  Class R     17,082.36       7.14%   
  FBO Loos & Company Inc. 401K Plan                                                   
  P.O. Box 1757                                                                       
  Salem, NH 03079-1143                                                                

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                                                      CLASS OF         NUMBER OF    PERCENT OWNED
NAME AND ADDRESS                                       SHARES         SHARES OWNED   OF RECORD*  
----------------                                      --------        ------------  -------------
                                                                                                 
MCB Trust Services Cust FBO.....................       Class R           15,465.35       6.46%   
  Fresh Meadow Mechanical Corp.                                                                  
  700 17th St. Ste. 300                                                                          
  Denver, CO 80202-3531                                                                          
Branch Banking & Trust TTEE FBO W E.............       Class R           12,964.95       5.42%   
  Stanley & Co. Inc. Omnibus Daily 401K                                                          
  FBO We Stanley & Co.                                                                           
  300 E. Wendover Ave. Ste. 100                                                                  
  Greensboro, NC 27401-1221                                                                      
A I M Advisors Inc.............................. Institutional Class        416.55     100.00%   
  Attn: Corporate Controller                                                                     
  11 E. Greenway Plz. Ste. 1919                                                                  
  Houston, TX 77046-1103                                                                         

---------------                                                                 

* AFG has no knowledge of whether all or any portion of the shares owned of     
record are also owned beneficially.                                         

SECURITY OWNERSHIP OF MANAGEMENT AND TRUSTEES                                   

To the best of the knowledge of AFG, the ownership of shares of AIM   
Balanced Fund by executive officers and trustees of AFG as a group constituted  
less than 1% of the outstanding shares of each class of such fund as of April   
22, 2005.                                                                       

AIM TOTAL RETURN FUND                                                           

                                                        [Enlarge/Download Table]

                                                     CLASS OF      NUMBER OF    PERCENT OWNED
NAME AND ADDRESS                                      SHARES      SHARES OWNED   OF RECORD*  
----------------                                     --------     ------------  -------------
                                                                                             
Charles Schwab & Co Inc.........................  Investor Class  2,845,897.74      13.36%   
  Special Custody Acct for the Exclusive Benefit                                             
  of Customers                                                                               
  Attn: Mutual Funds                                                                         
  101 Montgomery St.                                                                         
  San Francisco, CA 94104-4122                                                               
American Express Trust Tr. .....................  Investor Class  2,106,542.74       9.89%   
  American Express Trust                                                                     
  Retirement Services Plans                                                                  
  Attn: Chris High                                                                           
  996 AXP Financial Ctr.                                                                     
  Minneapolis, MN 55474-0009                                                                 
FIIOC Agent.....................................  Investor Class  1,633,045.09       7.66%   
  Employee Benefit Plans                                                                     
  100 Magellan Way KW1C                                                                      
  Covington, KY 41015-1987                                                                   
Saxon & CO. ....................................      Class A        38,874.36      23.20%   
  P.O. Box 7780-1888                                                                         
  Philadelphia, PA 19182-0001                                                                
Charles Schwab & Co. Inc. ......................      Class A        12,947.22       7.73%   
  Special Custody Acct. for the Exclusive                                                    
  Benefit of Customers                                                                       
  Attn: Mutual Funds                                                                         
  101 Montgomery St.                                                                         
  San Francisco, CA 94104-4122                                                               

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                                                      CLASS OF         NUMBER OF    PERCENT OWNED
NAME AND ADDRESS                                       SHARES         SHARES OWNED   OF RECORD*  
----------------                                      --------        ------------  -------------
                                                                                                 
AMVESCAP Natl. Tr. Co. Cust. TTEE FBO...........       Class A            9,599.07       5.73%   
  Honda Car Company Employees                                                                    
  401(k) Savings Plan                                                                            
  P.O. Box 105779                                                                                
  Atlanta, GA 30348-5779                                                                         
Morgan Stanley DW...............................       Class B            9,641.18       9.06%   
  Attn: Mutual Fund Operations                                                                   
  3 Harborside Pl. Fl. 6                                                                         
  Jersey City, NJ 07311-3907                                                                     
Merrill Lynch...................................       Class B            8,082.31       7.59%   
  4800 Deer Lake Dr. E                                                                           
  Jacksonville, FL 32246-6484                                                                    
MCB Trust Services Cust. 401K...................       Class C            7,763.92       7.99%   
  FBO Kaplan Telephone Co.                                                                       
  700 17th St. Ste. 300                                                                          
  Denver, CO 80202-3531                                                                          
INVESCO Funds Group Inc. ....................... Institutional Class        469.28     100.00%   
  Attn: Corporate Controller                                                                     
  11 E. Greenway Plz. Ste. 1919                                                                  
  Houston, TX 77046-1103                                                                         

---------------                                                                 

* ACSBF has no knowledge of whether all or any portion of the shares owned of   
record are also owned beneficially.                                         

SECURITY OWNERSHIP OF MANAGEMENT AND TRUSTEES                                   

     To the best of the knowledge of ACSBF, the ownership of shares of AIM Total
Return Fund by executive officers and trustees of ACSBF as a group constituted  
less than 1% of the outstanding shares of each class of such fund as of April   
22, 2005.                                                                       

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EXHIBIT F 

OWNERSHIP OF SHARES OF BUYING FUND

SIGNIFICANT HOLDERS                                                             

     Listed below is the name, address and percent ownership of each person who,
as of April 22, 2005, to the best knowledge of AFG owned 5% or more of any class
of the outstanding shares of Buying Fund. A shareholder who owns beneficially   
25% or more of the outstanding securities of Buying Fund is presumed to         
"control" Buying Fund as defined in the 1940 Act. Such control may affect the   
voting rights of other shareholders.                                            

AIM BASIC BALANCED FUND                                                         

                                                        [Enlarge/Download Table]

                                                 CLASS OF   NUMBER OF    PERCENT OWNED
NAME AND ADDRESS                                  SHARES   SHARES OWNED   OF RECORD*  
----------------                                 --------  ------------  -------------
                                                                                      
Merrill Lynch Pierce Fenner & Smith.............  Class B   374,156.13        5.33%   
  FBO The Sole Benefit of Customers                                                   
  Attn: Fund Administration                                                           
  4800 Deer Lake Dr. East 2nd Floor                                                   
  Jacksonville, FL 32246-6484                                                         

Merrill Lynch Pierce Fenner & Smith.............  Class C   162,738.69        7.16%   
  FBO The Sole Benefit of Customers                                                   
  Attn: Fund Administration                                                           
  4800 Deer Lake Dr. East 2nd Floor                                                   
  Jacksonville, FL 32246-6484                                                         

---------------                                                                 

* AFG has no knowledge of whether all or any portion of the shares owned of     
record are also owned beneficially.                                         

SECURITY OWNERSHIP OF MANAGEMENT AND TRUSTEES                                   

   To the best of the knowledge of AFG, the ownership of shares of AIM Basic
Balanced Fund by executive officers and trustees of AFG as a group constituted  
less than 1% of the outstanding shares of each class of such fund as of April   
22, 2005.                                                                       

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                                                                      APPENDIX I

PLAN OF REORGANIZATION

 FOR

AIM BALANCED FUND,

 A SEPARATE PORTFOLIO OF

 AIM FUNDS GROUP

MARCH 22, 2005

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                                                                                                                 Page
                                                                                                                 ----
                                                                                                                     
ARTICLE 1 DEFINITIONS...........................................................................................   1 
         SECTION 1.1.    Definitions............................................................................   1 

Article 2 TRANSFER OF ASSETS....................................................................................   4 
         SECTION 2.1.    Reorganization of Selling Fund.........................................................   4 
         SECTION 2.2.    Computation of Net Asset Value.........................................................   5 
         SECTION 2.3.    Valuation Date.........................................................................   5 
         SECTION 2.4.    Delivery...............................................................................   5 
         SECTION 2.5.    Termination of Series and Redemption of Selling Fund Shares............................   6 
         SECTION 2.6.    Issuance of Buying Fund Shares.........................................................   6 
         SECTION 2.7.    Investment Securities..................................................................   6 
         SECTION 2.8.    Liabilities............................................................................   6 

Article 3 REPRESENTATIONS AND WARRANTIES OF SELLING FUND........................................................   6 
         SECTION 3.1.    Registration and Regulation of Selling Fund............................................   6 
         SECTION 3.2.    Selling Fund Financial Statements......................................................   7 
         SECTION 3.3.    No Material Adverse Changes; Contingent Liabilities....................................   7 
         SECTION 3.4.    Selling Fund Shares; Business Operations...............................................   7 
         SECTION 3.5.    Accountants............................................................................   8 
         SECTION 3.6.    Binding Obligation.....................................................................   8 
         SECTION 3.7.    No Breaches or Defaults................................................................   8 
         SECTION 3.8.    Permits................................................................................   9 
         SECTION 3.9.    No Actions, Suits or Proceedings.......................................................   9 
         SECTION 3.10.   Contracts..............................................................................   9 
         SECTION 3.11.   Properties and Assets..................................................................   9 
         SECTION 3.12.   Taxes..................................................................................   9 
         SECTION 3.13.   Benefit and Employment Obligations.....................................................  10 
         SECTION 3.14.   Voting Requirements....................................................................  10 
         SECTION 3.15.   State Takeover Statutes................................................................  10 
         SECTION 3.16.   Books and Records......................................................................  10 
         SECTION 3.17.   Prospectus and Statement of Additional Information.....................................  10 
         SECTION 3.18.   No Distribution........................................................................  11 
         SECTION 3.19.   Liabilities of Selling Fund............................................................  11 
         SECTION 3.20.   Shareholder Expenses...................................................................  11 

Article 4 REPRESENTATIONS AND WARRANTIES OF BUYING FUND.........................................................  11 
         SECTION 4.1.    Registration and Regulation of Buying Fund.............................................  11 
         SECTION 4.2.    Buying Fund Financial Statements.......................................................  11 
         SECTION 4.3.    No Material Adverse Changes; Contingent Liabilities....................................  11 
         SECTION 4.4.    Registration of Buying Fund Shares.....................................................  12 
         SECTION 4.5.    Accountants............................................................................  12 
         SECTION 4.6.    Binding Obligation.....................................................................  13 
         SECTION 4.7.    No Breaches or Defaults................................................................  13 
         SECTION 4.8.    Permits................................................................................  13 

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         SECTION 4.9.    No Actions, Suits or Proceedings....................................................... 13
         SECTION 4.10.   Taxes.................................................................................. 14
         SECTION 4.11.   Representations Concerning the Reorganization.......................................... 14
         SECTION 4.12.   Prospectus and Statement of Additional Information..................................... 15

ARTICLE 4A CONDITIONS PRECEDENT WITH RESPECT TO EACH FUND....................................................... 15
         SECTION 4A.1    No Governmental Actions................................................................ 15
         SECTION 4A.2    No Brokers............................................................................. 15
         SECTION 4A.3    Value of Shares........................................................................ 15
         SECTION 4A.4    Intercompany Indebtedness; Consideration............................................... 15
         SECTION 4A.5    Authorizations or Consents............................................................. 16
         SECTION 4A.6    No Bankruptcy Proceedings.............................................................. 16

Article 5 COVENANTS............................................................................................. 16
         SECTION 5.1.    Conduct of Business.................................................................... 16
         SECTION 5.2.    Expenses............................................................................... 16
         SECTION 5.3.    Further Assurances..................................................................... 17
         SECTION 5.4.    Consents, Approvals and Filings........................................................ 17
         SECTION 5.5.    Submission of Plan to Shareholders..................................................... 17

Article 6 FURTHER CONDITIONS PRECEDENT TO THE REORGANIZATION.................................................... 17
         SECTION 6.1.    Further Conditions Precedent with respect to Both Funds................................ 17

Article 7 TERMINATION OF PLAN................................................................................... 19
         SECTION 7.1.    Termination............................................................................ 19
         SECTION 7.2.    Survival After Termination............................................................. 19

Article 8 MISCELLANEOUS......................................................................................... 19
         SECTION 8.1.    Survival of Representations, Warranties and Covenants.................................. 19
         SECTION 8.2.    Governing Law.......................................................................... 19
         SECTION 8.3.    Binding Effect, Persons Benefiting, No Assignment...................................... 19
         SECTION 8.4.    Obligations of Trust................................................................... 20
         SECTION 8.5.    Amendments............................................................................. 20
         SECTION 8.6.    Entire Plan; Exhibits and Schedules.................................................... 20
         SECTION 8.7.    Successors and Assigns; Assignment..................................................... 20

EXHIBIT A          Excluded Liabilities of Selling Fund                         
SCHEDULE 2.1       Classes of Shares of Selling Fund and Corresponding Classes  
of Shares of Buying Fund                  
SCHEDULE 3.3       Certain Contingent Liabilities of Selling Fund               
SCHEDULE 4.3       Certain Contingent Liabilities of Buying Fund                
SCHEDULE 4.4(a)    Classes of Shares of Buying Fund                             
SCHEDULE 4.11(b)   Permitted Reorganizations of Funds                           
SCHEDULE 6.2(j)    Tax Opinions                                                 

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PLAN OF REORGANIZATION

            PLAN OF REORGANIZATION, dated as of March 22, 2005 (this "Plan"), is
adopted by AIM Funds Group, a Delaware statutory trust ("Trust"), acting on     
behalf of AIM Balanced Fund ("Selling Fund") and AIM Basic Balanced Fund        
("Buying Fund"), each a separate series of Trust.                               

WITNESSETH

         WHEREAS, Trust is a management investment company registered with
the SEC (as defined below) under the Investment Company Act (as defined below)  
that offers separate series of its shares representing interests in its         
investment portfolios, including Selling Fund and Buying Fund, for sale to the  
public; and                                                                     

          WHEREAS, Investment Adviser (as defined below) provides investment
advisory services to Trust; and                                                 

       WHEREAS, the Trust desires to provide for the reorganization of
Selling Fund through the transfer of all of its assets to Buying Fund in        
exchange for the assumption by Buying Fund of all of the Liabilities (as defined
below) of Selling Fund and the issuance by Trust of shares of Buying Fund in the
manner set forth in this Plan; and                                              

        WHEREAS, the Investment Adviser (as defined below) serves as the
investment advisor to both Buying Fund and Selling Fund; and                    

         WHEREAS, this Plan is intended to be and is adopted by Trust as a
"plan of reorganization" within the meaning of the regulations under Section    
368(a) of the Code (as defined below); and                                      

      WHEREAS, Trust is duly organized, validly existing and in good
standing under Applicable Law (as defined below), with all requisite power and  
authority to adopt this Plan and perform its obligations hereunder.             

NOW, THEREFORE, Trust hereby adopts the following:      

 ARTICLE 1

 DEFINITIONS

  SECTION 1.1. Definitions. For all purposes in this Plan, the following
terms shall have the respective meanings set forth in this Section 1.1 (such    
definitions to be equally applicable to both the singular and plural forms of   
the terms herein defined):                                                      

     "Advisers Act" means the Investment Advisers Act of 1940, as amended, and
all rules and regulations of the SEC adopted pursuant thereto.                  

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"Affiliated Person" means an affiliated person as defined in Section
2(a)(3) of the Investment Company Act.                                          

"Applicable Law" means the applicable laws of the State of Delaware,
including the Delaware Statutory Trust Act.                                     

    "Benefit Plan" means any material "employee benefit plan" (as defined in
Section 3(3) of ERISA) and any material bonus, deferred compensation, incentive 
compensation, stock ownership, stock purchase, stock option, phantom stock,     
vacation, retirement, profit sharing, welfare plans or other plan, arrangement  
or understanding maintained or contributed to by Trust on behalf of Selling     
Fund, or otherwise providing benefits to any current or former employee, officer
or trustee of Trust.                                                            

    "Buying Fund" means AIM Basic Balanced Fund, a separate series of Trust.

     "Buying Fund Financial Statements" means the audited financial statements
of Buying Fund for the fiscal year ended December 31, 2004.                     

 "Buying Fund Shares" means shares of each class of Buying Fund issued
pursuant to Section 2.6 of this Plan.                                           

      "Closing" means the transfer of the assets of Selling Fund to Buying Fund,
the assumption of all of Selling Fund's Liabilities by Buying Fund and the      
issuance of Buying Fund Shares directly to Selling Fund Shareholders as         
described in Section 2.1 of this Plan.                                          

     "Closing Date" means July 18, 2005, or such other date as the parties may
mutually agree upon.                                                            

     "Code" means the Internal Revenue Code of 1986, as amended, and all rules
and regulations adopted pursuant thereto.                                       

 "corresponding" means, when used with respect to a class of shares of
Selling Fund or Buying Fund, the classes of their shares set forth opposite each
other on Schedule 2.1.                                                          

"Custodian" means State Street Bank and Trust Company acting in its 
capacity as custodian for the assets of each Fund.                              

"Effective Time" means 8:00 a.m. Eastern Time on the Closing Date.  

 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and all rules or regulations adopted pursuant thereto.                 

     "Exchange Act" means the Securities Exchange Act of 1934, as amended, and
all rules and regulations adopted pursuant thereto.                             

"Governing Documents" means the organic documents which govern the  
business and operations of Trust and shall include, as applicable, Amended and  
Restated Agreement and Declaration of Trust, Amended and Restated Bylaws and    
Bylaws.                                                                         

2 

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"Governmental Authority" means any foreign, United States or state  
government, government agency, department, board, commission (including the SEC)
or instrumentality, and any court, tribunal or arbitrator of competent          
jurisdiction, and any governmental or non-governmental self-regulatory          
organization, agency or authority (including the NASD Regulation, Inc., the     
Commodity Futures Trading Commission, the National Futures Association, the     
Investment Management Regulatory Organization Limited and the Office of Fair    
Trading).                                                                       

"Investment Adviser" means A I M Advisors, Inc.                     

 "Investment Company Act" means the Investment Company Act of 1940, as
amended, and all rules and regulations adopted pursuant thereto.                

   "Liabilities" means all of the liabilities of any kind of Selling Fund,
including without limitation all liabilities included in the calculation of the 
net asset value per share of each class of Selling Fund Shares on the Closing   
Date, but not including the excluded liabilities set forth on Exhibit A.        

"Lien" means any pledge, lien, security interest, charge, claim or  
encumbrance of any kind.                                                        

      "Material Adverse Effect" means an effect that would cause a change in the
condition (financial or otherwise), properties, assets or prospects of an entity
having an adverse monetary effect in an amount equal to or greater than $50,000.

"NYSE" means the New York Stock Exchange.                           

   "Permits" shall have the meaning set forth in Section 3.9 of this Plan.

      "Person" means an individual or a corporation, partnership, joint venture,
association, trust, unincorporated organization or other entity.                

    "Plan" means this Plan of Reorganization, together with all exhibits and
schedules attached hereto and all amendments hereto and thereof.                

     "Registration Statement" means the registration statement on Form N-1A of
Trust, as amended, 1940 Act Registration No. 811-1540.                          

   "Reorganization" means the acquisition of the assets of Selling Fund by
Buying Fund in consideration of the assumption by Buying Fund of all of the     
Liabilities of Selling Fund and the issuance by Trust of Buying Fund Shares     
directly to Selling Fund Shareholders as described in this Plan, and the        
termination of Selling Fund's status as a designated series of shares of Trust. 

      "Required Shareholder Vote" means, if a quorum is present, the affirmative
vote of a majority of the shares cast at the Shareholders Meeting.              

"Return" means any return, report or form or any attachment thereto 
required to be filed with any taxing authority.                                 

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"SEC" means the United States Securities and Exchange Commission.   

  "Securities Act" means the Securities Act of 1933, as amended, and all
rules and regulations adopted pursuant thereto.                                 

"Selling Fund" means AIM Balanced Fund, a separate series of Trust. 

      "Selling Fund Financial Statements" means the audited financial statements
of Selling Fund for the fiscal year ended December 31, 2004.                    

      "Selling Fund Shareholders" means the holders of record of the outstanding
shares of each class of Selling Fund as of the close of regular trading on the  
NYSE on the Valuation Date.                                                     

"Selling Fund Shares" means the outstanding shares of each class of 
Selling Fund.                                                                   

      "Shareholders Meeting" means a meeting of the shareholders of Selling Fund
convened in accordance with Applicable Law and the Governing Documents of Trust 
to consider and vote upon the approval of this Plan.                            

"Tax" means any tax or similar governmental charge, impost or levy  
(including income taxes (including alternative minimum tax and estimated tax),  
franchise taxes, transfer taxes or fees, sales taxes, use taxes, gross receipts 
taxes, value added taxes, employment taxes, excise taxes, ad valorem taxes,     
property taxes, withholding taxes, payroll taxes, minimum taxes, or windfall    
profit taxes), together with any related penalties, fines, additions to tax or  
interest, imposed by the United States or any state, county, local or foreign   
government or subdivision or agency thereof.                                    

  "Termination Date" means September 30, 2005, or such later date as the
parties may mutually agree upon.                                                

   "Treasury Regulations" means the Federal income tax regulations adopted
pursuant to the Code.                                                           

    "Valuation Date" shall have the meaning set forth in Section 2.2 of this
Plan.                                                                           

ARTICLE 2 
TRANSFER OF ASSETS

      SECTION 2.1. Reorganization of Selling Fund. At the Effective Time, all of
the assets of Selling Fund shall be delivered to Custodian for the account of   
Buying Fund in exchange for the assumption by Buying Fund of all of the         
Liabilities of Selling Fund and delivery by Trust directly to the holders of    
record as of the Effective Time of the issued and outstanding shares of each    
class of Selling Fund of a number of shares of each corresponding class of      
Buying Fund, as set forth on Schedule 2.1 (including, if applicable, fractional 
shares rounded to the nearest thousandth), having an aggregate net asset value  
equal to the value of the net assets of Selling Fund so transferred, assigned   
and delivered, all determined and adjusted as provided in Section               

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2.2 below. Upon delivery of such assets, Buying Fund will receive good and      
marketable title to such assets free and clear of all Liens.                    

SECTION 2.2. Computation of Net Asset Value.                        

      (a) The net asset value per share of each class of Buying Fund
Shares, and the value of the assets and the amount of the Liabilities of Selling
Fund, shall, in each case, be determined as of the close of regular trading on  
the NYSE on the business day next preceding the Closing Date (the "Valuation    
Date").                                                                         

      (b) The net asset value per share of each class of Buying Fund
Shares shall be computed in accordance with the policies and procedures of      
Buying Fund as described in the Registration Statement.                         

        (c) The value of the assets and the amount of the Liabilities of
Selling Fund to be transferred to Buying Fund pursuant to this Plan shall be    
computed in accordance with the policies and procedures of Selling Fund as      
described in the Registration Statement.                                        

         (d) Subject to Sections 2.2(b) and (c) above, all computations of
value regarding the assets and Liabilities of Selling Fund and the net asset    
value per share of each class of Buying Fund Shares to be issued pursuant to    
this Plan shall be made by Trust.                                               

      SECTION 2.3. Valuation Date. The share transfer books of Selling Fund will
be permanently closed as of the close of business on the Valuation Date and only
requests for the redemption of shares of Selling Fund received in proper form   
prior to the close of regular trading on the NYSE on the Valuation Date shall be
accepted by Selling Fund. Redemption requests thereafter received by Selling    
Fund shall be deemed to be redemption requests for Buying Fund Shares of the    
corresponding class (assuming that the transactions contemplated by this Plan   
have been consummated), to be distributed to Selling Fund Shareholders under    
this Plan.                                                                      

SECTION 2.4. Delivery.                                              

       (a) No later than three (3) business days preceding the Closing
Date, Trust shall instruct Custodian to transfer all assets held by Selling Fund
to the account of Buying Fund maintained at Custodian. Such assets shall be     
delivered by Trust to Custodian on the Closing Date. The assets so delivered    
shall be duly endorsed in proper form for transfer in such condition as to      
constitute a good delivery thereof, in accordance with the custom of brokers,   
and shall be accompanied by all necessary state stock transfer stamps, if any,  
or a check for the appropriate purchase price thereof. Cash held by Selling Fund
shall be delivered on the Closing Date and shall be in the form of currency or  
wire transfer in Federal funds, payable to the order of the account of Buying   
Fund at Custodian.                                                              

            (b) If, on the Closing Date, Selling Fund is unable to make delivery
in the manner contemplated by Section 2.4(a) of securities held by Selling Fund 
for the reason that any of such securities purchased prior to the Closing Date  
have not yet been delivered to Selling Fund or its broker, then Trust shall     
waive the delivery requirements of Section 2.4(a) with respect to said          
undelivered securities if Selling Fund has delivered to Custodian by or on the  
Closing Date, and with respect to said undelivered securities, executed copies  
of an agreement of                                                              

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assignment and escrow and due bills executed on behalf of said broker or        
brokers, together with such other documents as may be required by Custodian,    
including brokers' confirmation slips.                                          

     SECTION 2.5. Termination of Series and Redemption of Selling Fund Shares.
Following receipt of the Required Shareholder Vote and as soon as reasonably    
practicable after the Closing, the status of Selling Fund as a designated series
of Trust shall be terminated and Trust shall redeem the outstanding shares of   
Selling Fund from Selling Fund Shareholders in accordance with its Governing    
Documents and all issued and outstanding shares of Selling Fund shall thereupon 
be canceled on the books of Trust.                                              

SECTION 2.6. Issuance of Buying Fund Shares. At the Effective Time, 
Selling Fund Shareholders holding shares of a class of Selling Fund shall be    
issued that number of full and fractional shares of the corresponding class of  
Buying Fund having a net asset value equal to the net asset value of such shares
of such class of Selling Fund held by Selling Fund Shareholders on the Valuation
Date in accordance with Sections 2.1 and 2.2. Trust shall provide instructions  
to the transfer agent of Trust with respect to the shares of each class of      
Buying Fund to be issued to Selling Fund Shareholders. Trust shall record on its
books the ownership of the shares of each class of Buying Fund by Selling Fund  
Shareholders and shall forward a confirmation of such ownership to Selling Fund 
Shareholders. No redemption or repurchase of such shares credited to former     
Selling Fund Shareholders in respect of Selling Fund Shares represented by      
unsurrendered share certificates shall be permitted until such certificates have
been surrendered to Trust for cancellation, or if such certificates are lost or 
misplaced, until lost certificate affidavits have been executed and delivered to
Trust.                                                                          

  SECTION 2.7. Investment Securities. On or prior to the Valuation Date,
Trust shall prepare a list setting forth the securities Selling Fund then owned 
together with the respective Federal income tax bases thereof and holding       
periods therefor. Such records shall be prepared in accordance with the         
requirements for specific identification tax lot accounting and clearly reflect 
the bases used for determination of gain and loss realized on the sale of any   
security transferred to Buying Fund hereunder. Such records shall be made       
available by Trust prior to the Valuation Date for inspection by the Treasurer  
(or his or her designee) or Buying Fund Auditors upon reasonable request.       

    SECTION 2.8. Liabilities. Selling Fund shall use reasonable best efforts
to discharge all of its known liabilities, so far as may be possible, prior to  
the Closing Date.                                                               

ARTICLE 3 

REPRESENTATIONS AND WARRANTIES OF SELLING FUND

 Trust, on behalf of Selling Fund, represents and warrants as follows:

      SECTION 3.1. Registration and Regulation of Selling Fund. All Selling Fund
Shares which have been or are being offered for sale have been duly registered  
under the Securities Act and have been duly registered, qualified or are exempt 
from registration or qualification under the securities laws of each state or   
other jurisdiction in which such shares have been or are being offered for sale,
and no action has been taken by Trust to revoke or rescind any such registration

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or qualification. Selling Fund is in compliance in all material respects with   
all applicable laws, rules and regulations, including, without limitation, the  
Investment Company Act, the Securities Act, the Exchange Act and all applicable 
state securities laws. Selling Fund is in compliance in all material respects   
with the investment policies and restrictions applicable to it set forth in the 
Registration Statement. The value of the net assets of Selling Fund is          
determined using portfolio valuation methods that comply in all material        
respects with the requirements of the Investment Company Act and the policies of
Selling Fund and all purchases and redemptions of Selling Fund Shares have been 
effected at the net asset value per share calculated in such manner.            

    SECTION 3.2. Selling Fund Financial Statements. The books of account and
related records of Selling Fund fairly reflect in reasonable detail its assets, 
liabilities and transactions in accordance with generally accepted accounting   
principles applied on a consistent basis. The audited Selling Fund Financial    
Statements present fairly in all material respects the financial position of    
Selling Fund as of the date(s) indicated and the results of operations and      
changes in net assets for the period(s) then ended in accordance with generally 
accepted accounting principles applied on a consistent basis for the period(s)  
then ended.                                                                     

   SECTION 3.3. No Material Adverse Changes; Contingent Liabilities. Since
the date of the Selling Fund Financial Statements, no material adverse change   
has occurred in the financial condition, results of operations, business, assets
or liabilities of Selling Fund or the status of Selling Fund as a regulated     
investment company under the Code, other than changes resulting from any change 
in general conditions in the financial or securities markets or the performance 
of any investments made by Selling Fund or occurring in the ordinary course of  
business of Selling Fund. Except as set forth on Schedule 3.3, there are no     
contingent liabilities of Selling Fund not disclosed in the Selling Fund        
Financial Statements and no contingent liabilities of Selling Fund have arisen  
since the date of the Selling Fund Financial Statements.                        

SECTION 3.4. Selling Fund Shares; Business Operations.              

            (a) Selling Fund Shares have been duly authorized and validly issued
and are fully paid and non-assessable.                                          

 (b) During the five-year period ending on the date of the
Reorganization, neither Selling Fund nor any person related to Selling Fund (as 
defined in Section 1.368-1(e)(3) of the Treasury Regulations without regard to  
Section 1.368-1(e)(3)(i)(A)) will have directly or through any transaction,     
agreement, or arrangement with any other person, (i) acquired shares of Selling 
Fund for consideration other than shares of Selling Fund, except for shares     
redeemed in the ordinary course of Selling Fund's business as an open-end       
investment company as required by the Investment Company Act, or (ii) made      
distributions with respect to Selling Fund's shares, except for (a)             
distributions necessary to satisfy the requirements of Sections 852 and 4982 of 
the Code for qualification as a regulated investment company and avoidance of   
excise tax liability and (b) additional distributions, to the extent such       
additional distributions do not exceed 50 percent of the value (without giving  
effect to such distributions) of the proprietary interest in Selling Fund on the
Effective Date.                                                                 

          (c) At the time of its Reorganization, Selling Fund shall not have
outstanding any warrants, options, convertible securities or any other type of  
right pursuant to which any                                                     

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Person could acquire Selling Fund Shares, except for the right of investors to  
acquire Selling Fund Shares at net asset value in the normal course of its      
business as a series of an open-end management investment company operating     
under the Investment Company Act.                                               

           (d) From the date it commenced operations and ending on the Closing
Date, Selling Fund will have conducted its historic business within the meaning 
of Section 1.368-1(d)(2) of the Treasury Regulations in a substantially         
unchanged manner. In anticipation of its Reorganization, Selling Fund will not  
dispose of assets that, in the aggregate, will result in less than fifty percent
(50%) of its historic business assets (within the meaning of Section            
1.368-1(d)(3) of the Treasury Regulations) being transferred to Buying Fund.    

     (e) Except for the Senior Officer Trust is required to employ
pursuant to the Assurance of Discontinuance entered into by the Investment      
Adviser with the Attorney General of the State of New York on or about October  
7, 2004, Trust does not have, and has not had during the six (6) months prior to
the date of this Plan, any employees, and shall not hire any employees from and 
after the date of this Plan through the Closing Date.                           

     SECTION 3.5. Accountants. Selling Fund Auditors, which have reported upon
the Selling Fund Financial Statements for the fiscal year or period, as         
applicable, ended on the date of the most recent financial statements included  
in the Selling Fund Financial Statements are independent registered public      
accountants as required by the Securities Act and the Exchange Act.             

   SECTION 3.6. Binding Obligation. This Plan has been duly authorized and
delivered by Trust on behalf of Selling Fund and, assuming this Plan has been   
duly approved by the shareholders of Selling Fund, constitutes the legal, valid 
and binding obligation of Trust enforceable against Trust in accordance with its
terms from and with respect to the revenues and assets of Selling Fund, except  
as the enforceability hereof may be limited by bankruptcy, insolvency,          
reorganization or similar laws relating to or affecting creditors rights        
generally, or by general equity principles (whether applied in a court of law or
a court of equity and including limitations on the availability of specific     
performance or other equitable remedies).                                       

   SECTION 3.7. No Breaches or Defaults. The adoption and delivery of this
Plan by Trust on behalf of Selling Fund and performance by Trust of its         
obligations hereunder has been duly authorized by all necessary trust action on 
the part of Trust, other than approval by the shareholders of Selling Fund, and 
(i) do not, and on the Closing Date will not, result in any violation of the    
Governing Documents of Trust and (ii) do not, and on the Closing Date will not, 
result in a breach of any of the terms or provisions of, or constitute (with or 
without the giving of notice or the lapse of time or both) a default under, or  
give rise to a right of termination, cancellation or acceleration of any        
obligation or to the loss of a material benefit under, or result in the creation
or imposition of any Lien upon any property or assets of Selling Fund (except   
for such breaches or defaults or Liens that would not reasonably be expected,   
individually or in the aggregate, to have a Material Adverse Effect) under (A)  
any indenture, mortgage or loan agreement or any other material agreement or    
instrument to which Trust is a party or by which it may be bound and which      
relates to the assets of Selling Fund or to which any property of Selling Fund  
may be subject; (B) any Permit (as defined below); or (C) any existing          
applicable law, rule,                                                           

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regulation, judgment, order or decree of any Governmental Authority having      
jurisdiction over Trust or any property of Selling Fund.                        

   SECTION 3.8. Permits. Trust has in full force and effect all approvals,
consents, authorizations, certificates, filings, franchises, licenses, notices, 
permits and rights of Governmental Authorities (collectively, "Permits")        
necessary for it to conduct its business as presently conducted as it relates to
Selling Fund, and there has occurred no default under any Permit, except for the
absence of Permits and for defaults under Permits the absence or default of     
which would not reasonably be expected to have, individually or in the          
aggregate, a Material Adverse Effect. To the knowledge of Trust there are no    
proceedings relating to the suspension, revocation or modification of any       
Permit, except for such that would not reasonably be expected, individually or  
in the aggregate, to have a Material Adverse Effect.                            

 SECTION 3.9. No Actions, Suits or Proceedings. There are no judicial,
administrative or arbitration actions, suits, or proceedings instituted or      
pending or, to the knowledge of Trust, threatened in writing or, if probable of 
assertion, orally, against Trust affecting any property, asset, interest or     
right of Selling Fund, that could reasonably be expected to have, individually  
or in the aggregate, a Material Adverse Effect with respect to Selling Fund.    
There are not in existence on the date hereof any plea agreements, judgments,   
injunctions, consents, decrees, exceptions or orders that were entered by, filed
with or issued by any Governmental Authority relating to Trust's conduct of the 
business of Selling Fund affecting in any significant respect the conduct of    
such business. Trust is not, and has not been, to the knowledge of Trust, the   
target of any investigation by the SEC or any state securities administrator    
with respect to its conduct of the business of Selling Fund, other than as has  
been disclosed to Trust's Board of Trustees.                                    

SECTION 3.10. Contracts. Trust is not in default under any contract,
agreement, commitment, arrangement, lease, insurance policy or other instrument 
to which it is a party and which involves or affects the assets of Selling Fund,
by which the assets, business, or operations of Selling Fund may be bound or    
affected, or under which it or the assets, business or operations of Selling    
Fund receives benefits, and which default could reasonably be expected,         
individually or in the aggregate, to have a Material Adverse Effect, and, to the
knowledge of Trust there has not occurred any event that, with the lapse of time
or the giving of notice or both, would constitute such a default.               

     SECTION 3.11. Properties and Assets. Selling Fund has good and marketable
title to all properties and assets reflected in the Selling Fund Financial      
Statements as owned by it, free and clear of all Liens, except as described in  
the Selling Fund Financial Statements.                                          

SECTION 3.12. Taxes.                                                

         (a) Selling Fund has elected to be a regulated investment company
under Subchapter M of the Code and is a fund that is treated as a separate      
corporation under Section 851(g) of the Code. Selling Fund has qualified for    
treatment as a regulated investment company for each taxable year since         
inception that has ended prior to the Closing Date and will have satisfied the  
requirements of Part I of Subchapter M of the Code to maintain such             
qualification for the period beginning on the first day of its current taxable  
year and ending on the Closing Date. Selling Fund has no earnings and profits   
accumulated in any taxable year in which the                                    

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provisions of Subchapter M of the Code did not apply to it. In order to (i)     
ensure continued qualification of Selling Fund for treatment as a "regulated    
investment company" for tax purposes and (ii) eliminate any tax liability of    
Selling Fund arising by reason of undistributed investment company taxable      
income or net capital gain, Trust will declare on or prior to the Valuation Date
to the shareholders of Selling Fund a dividend or dividends that, together with 
all previous such dividends, shall have the effect of distributing (A) all of   
Selling Fund's investment company taxable income (determined without regard to  
any deductions for dividends paid) for the taxable year ended December 31, 2004 
and for the short taxable year beginning on January 1, 2005 and ending on the   
Closing Date and (B) all of Selling Fund's net capital gain recognized in its   
taxable year ended December 31, 2004 and in such short taxable year (after      
reduction for any capital loss carryover).                                      

          (b) Selling Fund has timely filed all Returns required to be filed
by it and all Taxes with respect thereto have been paid, except where the       
failure so to file or so to pay, would not reasonably be expected, individually 
or in the aggregate, to have a Material Adverse Effect. Adequate provision has  
been made in the Selling Fund Financial Statements for all Taxes in respect of  
all periods ended on or before the date of such financial statements, except    
where the failure to make such provisions would not reasonably be expected,     
individually or in the aggregate, to have a Material Adverse Effect. No         
deficiencies for any Taxes have been proposed, assessed or asserted in writing  
by any taxing authority against Selling Fund, and no deficiency has been        
proposed, assessed or asserted, in writing, where such deficiency would         
reasonably be expected, individually or in the aggregate, to have a Material    
Adverse Effect. No waivers of the time to assess any such Taxes are outstanding 
nor are any written requests for such waivers pending and no Return of Selling  
Fund is currently being or has been audited with respect to income taxes or     
other Taxes by any Federal, state, local or foreign Tax authority.              

     SECTION 3.13. Benefit and Employment Obligations. Except for the unfunded
trustee retirement plan and the trustee deferred compensation plan, Selling Fund
has no obligation to provide any post-retirement or post-employment benefit to  
any Person, including but not limited to under any Benefit Plan, and has no     
obligation to provide unfunded deferred compensation or other unfunded or       
self-funded benefits to any Person.                                             

   SECTION 3.14. Voting Requirements. The Required Shareholder Vote is the
only vote of the holders of any class of shares of Selling Fund necessary to    
approve this Plan.                                                              

SECTION 3.15. State Takeover Statutes. No state takeover statute or 
similar statute or regulation applies or purports to apply to this Plan or any  
of the transactions contemplated by this Plan.                                  

    SECTION 3.16. Books and Records. The books and records of Trust relating
to Selling Fund, reflecting, among other things, the purchase and sale of       
Selling Fund Shares, the number of issued and outstanding shares owned by each  
Selling Fund Shareholder and the state or other jurisdiction in which such      
shares were offered and sold, are complete and accurate in all material         
respects.                                                                       

 SECTION 3.17. Prospectus and Statement of Additional Information. The
current prospectus and statement of additional information for Selling Fund as  
of the date on which they                                                       

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were issued did not contain, and as supplemented by any supplement thereto dated
prior to or on the Closing Date do not contain, any untrue statement of a       
material fact or omit to state a material fact required to be stated therein or 
necessary to make the statements therein not misleading.                        

    SECTION 3.18. No Distribution. Buying Fund Shares are not being acquired
for the purpose of any distribution thereof, other than in accordance with the  
terms of this Plan.                                                             

      SECTION 3.19. Liabilities of Selling Fund. The Liabilities of Selling Fund
that are to be assumed by Buying Fund in connection with the Reorganization, or 
to which the assets of Selling Fund to be transferred in the Reorganization are 
subject, were incurred by Selling Fund in the ordinary course of its business.  
The fair market value of the assets of Selling Fund to be transferred to Buying 
Fund in the Reorganization will equal or exceed the sum of the Liabilities to be
assumed by Buying Fund, plus the amount of Liabilities, if any, to which such   
transferred assets will be subject.                                             

  SECTION 3.20. Shareholder Expenses. Selling Fund Shareholders will pay
their own expenses, if any, incurred in connection with the Reorganization.     

ARTICLE 4 

 REPRESENTATIONS AND WARRANTIES OF BUYING FUND

Trust, on behalf of Buying Fund, represents and warrants as follows:

      SECTION 4.1. Registration and Regulation of Buying Fund. Buying Fund is in
compliance in all material respects with all applicable laws, rules and         
regulations, including, without limitation, the Investment Company Act, the     
Securities Act, the Exchange Act and all applicable state securities laws.      
Buying Fund is in compliance in all material respects with the applicable       
investment policies and restrictions set forth in the Registration Statement.   
The value of the net assets of Buying Fund is determined using portfolio        
valuation methods that comply in all material respects with the requirements of 
the Investment Company Act and the policies of Buying Fund and all purchases and
redemptions of Buying Fund Shares have been effected at the net asset value per 
share calculated in such manner.                                                

   SECTION 4.2. Buying Fund Financial Statements. The books of account and
related records of Buying Fund fairly reflect in reasonable detail its assets,  
liabilities and transactions in accordance with generally accepted accounting   
principles applied on a consistent basis. The audited Buying Fund Financial     
Statements present fairly in all material respects the financial position of    
Buying Fund as of the date(s) indicated and the results of operations and       
changes in net assets for the period(s) then ended in accordance with generally 
accepted accounting principles applied on a consistent basis for the period(s)  
then ended.                                                                     

   SECTION 4.3. No Material Adverse Changes; Contingent Liabilities. Since
the date of the Buying Fund Financial Statements, no material adverse change has
occurred in the financial condition, results of operations, business, assets or 
liabilities of Buying Fund or the status of Buying Fund as a regulated          
investment company under the Code, other than changes resulting                 

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from any change in general conditions in the financial or securities markets or 
the performance of any investments made by Buying Fund or occurring in the      
ordinary course of business of Buying Fund or Trust. There are no contingent    
liabilities of Buying Fund not disclosed in the Buying Fund Financial Statements
which are required to be disclosed in accordance with generally accepted        
accounting principles. Except as set forth on Schedule 4.3, no contingent       
liabilities of Buying Fund have arisen since the date of the Buying Fund        
Financial Statements which are required to be disclosed in accordance with      
generally accepted accounting principles.                                       

SECTION 4.4. Registration of Buying Fund Shares.                    

          (a) Buying Fund currently has those classes of shares that are set
forth on Schedule 4.4(a). Under its Governing Documents, Trust is authorized to 
issue an unlimited number of shares of each such class.                         

            (b) Buying Fund Shares to be issued pursuant to Section 2.6 shall on
the Closing Date be duly registered under the Securities Act by a Registration  
Statement on Form N-14 of Trust then in effect.                                 

            (c) Buying Fund Shares to be issued pursuant to Section 2.6 are duly
authorized and on the Closing Date will be validly issued and fully paid and    
non-assessable and will conform to the description thereof contained in the     
Registration Statement on Form N-14 then in effect. At the time of its          
Reorganization, Buying Fund shall not have outstanding any warrants, options,   
convertible securities or any other type of right pursuant to which any Person  
could acquire shares of Buying Fund, except for the right of investors to       
acquire shares of Buying Fund at net asset value in the normal course of its    
business as a series of an open-end management investment company operating     
under the Investment Company Act.                                               

        (d) The combined proxy statement/prospectus (the "Combined Proxy
Statement/Prospectus"), which forms a part of Trust's Registration Statement on 
Form N-14, shall be furnished to the shareholders of Selling Fund entitled to   
vote at the Shareholders Meeting in accordance with normal market practice for  
such transactions. The Combined Proxy Statement/Prospectus and related Statement
of Additional Information of Buying Fund, when they become effective, shall     
conform in all material respects to the applicable requirements of the          
Securities Act and the Investment Company Act and shall not include any untrue  
statement of a material fact or omit to state any material fact required to be  
stated therein or necessary to make the statements therein, in light of the     
circumstances under which they were made, not materially misleading.            

          (e) The shares of Buying Fund which have been or are being offered
for sale (other than the Buying Fund Shares to be issued in connection with the 
Reorganization) have been duly registered under the Securities Act by the       
Registration Statement and have been duly registered, qualified or are exempt   
from registration or qualification under the securities laws of each state or   
other jurisdiction in which such shares have been or are being offered for sale,
and no action has been taken by Trust to revoke or rescind any such registration
or qualification.                                                               

    SECTION 4.5. Accountants. Buying Fund Auditors, which have reported upon
the Buying Fund Financial Statements for the fiscal year or period, as          
applicable, ended on the date                                                   

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of the most recent financial statements included in the Buying Fund Financial   
Statements are independent registered public accountants as required by the     
Securities Act and the Exchange Act.                                            

   SECTION 4.6. Binding Obligation. This Plan has been duly authorized and
delivered by Trust on behalf of Buying Fund and, assuming this Plan has been    
duly authorized and delivered by Trust, on behalf of Selling Fund, constitutes  
the legal, valid and binding obligation of Trust, enforceable against Trust in  
accordance with its terms from and with respect to the revenues and assets of   
Buying Fund, except as the enforceability hereof may be limited by bankruptcy,  
insolvency, reorganization or similar laws relating to or affecting creditors'  
rights generally, or by general equity principles (whether applied in a court of
law or a court of equity and including limitations on the availability of       
specific performance or other equitable remedies).                              

    SECTION 4.7. No Breaches or Defaults. The execution and delivery of this
Plan by Trust on behalf of Buying Fund and performance by Trust of its          
obligations hereunder have been duly authorized by all necessary trust action on
the part of Trust and (i) do not, and on the Closing Date will not, result in   
any violation of the Governing Documents and (ii) do not, and on the Closing    
Date will not, result in a breach of any of the terms or provisions of, or      
constitute (with or without the giving of notice or the lapse of time or both) a
default under, or give rise to a right of termination, cancellation or          
acceleration of any obligation or to the loss of a material benefit under, or   
result in the creation or imposition of any Lien upon any property or assets of 
Buying Fund (except for such breaches or defaults or Liens that would not       
reasonably be expected, individually or in the aggregate, to have a Material    
Adverse Effect) under (A) any indenture, mortgage or loan agreement or any other
material agreement or instrument to which Trust is a party or by which it may be
bound and which relates to the assets of Buying Fund or to which any properties 
of Buying Fund may be subject; (B) any Permit; or (C) any existing applicable   
law, rule, regulation, judgment, order or decree of any Governmental Authority  
having jurisdiction over Trust or any property of Buying Fund.                  

SECTION 4.8. Permits. Trust has in full force and effect all Permits
necessary for it to conduct its business as presently conducted as it relates to
Buying Fund, and there has occurred no default under any Permit, except for the 
absence of Permits and for defaults under Permits the absence or default of     
which would not reasonably be expected to have, individually or in the          
aggregate, a Material Adverse Effect. To the knowledge of Trust there are no    
proceedings relating to the suspension, revocation or modification of any       
Permit, except for such that would not reasonably be expected, individually or  
in the aggregate, to have a Material Adverse Effect.                            

 SECTION 4.9. No Actions, Suits or Proceedings. There are no judicial,
administrative or arbitration actions, suits, or proceedings instituted or      
pending or, to the knowledge of Trust, threatened in writing or, if probable of 
assertion, orally, against Trust, affecting any property, asset, interest or    
right of Buying Fund, that could reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect with respect to Buying Fund. There  
are not in existence on the date hereof any plea agreements, judgments,         
injunctions, consents, decrees, exceptions or orders that were entered by, filed
with or issued by any Governmental Authority relating to Trust's conduct of the 
business of Buying Fund affecting in any significant respect the conduct of such
business. Trust is not, and has not been, to the knowledge of Trust, the target 
of                                                                              

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any investigation by the SEC or any state securities administrator with respect 
to its conduct of the business of Buying Fund, other than as has been disclosed 
to Trust's Board of Trustees.                                                   

SECTION 4.10. Taxes.                                                

        (a) Buying Fund has elected to be a regulated investment company
under Subchapter M of the Code and is a fund that is treated as a separate      
corporation under Section 851(g) of the Code. Buying Fund has qualified for     
treatment as a regulated investment company for each taxable year since         
inception that has ended prior to the Closing Date and will satisfy the         
requirements of Part I of Subchapter M of the Code to maintain such             
qualification for its current taxable year. Buying Fund has no earnings or      
profits accumulated in any taxable year in which the provisions of Subchapter M 
of the Code did not apply to it.                                                

            (b) Buying Fund has timely filed all Returns required to be filed by
it and all Taxes with respect thereto have been paid, except where the failure  
so to file or so to pay, would not reasonably be expected, individually or in   
the aggregate, to have a Material Adverse Effect. Adequate provision has been   
made in the Buying Fund Financial Statements for all Taxes in respect of all    
periods ending on or before the date of such financial statements, except where 
the failure to make such provisions would not reasonably be expected,           
individually or in the aggregate, to have a Material Adverse Effect. No         
deficiencies for any Taxes have been proposed, assessed or asserted in writing  
by any taxing authority against Buying Fund, and no deficiency has been         
proposed, assessed or asserted, in writing, where such deficiency would         
reasonably be expected, individually or in the aggregate, to have a Material    
Adverse Effect. No waivers of the time to assess any such Taxes are outstanding 
nor are any written requests for such waivers pending and no Return of Buying   
Fund is currently being or has been audited with respect to income taxes or     
other Taxes by any Federal, state, local or foreign Tax authority.              

SECTION 4.11. Representations Concerning the Reorganization.        

           (a) There is no plan or intention by Trust or any person related to
Trust to acquire or redeem any of the Buying Fund Shares issues in the          
Reorganization either directly or through any transaction, agreement, or        
arrangement with any other person, other than redemptions in the ordinary course
of Buying Fund's business as an open-end investment company as required by the  
Investment Company Act.                                                         

     (b) Buying Fund has no plan or intention to sell or otherwise
dispose of any of the assets of Selling Fund acquired in the Reorganization,    
other than in the ordinary course of its business and to the extent necessary to
maintain its status as a "regulated investment company" under the Code;         
provided, however, that this Section 4.11(b) shall not preclude any of the      
reorganizations of funds set forth on Schedule 4.11(b).                         

      (c) Following the Reorganization, Buying Fund will continue an
"historic business" of Selling Fund or use a significant portion of Selling     
Fund's "historic business assets" in a business. For purposes of this           
representation, the terms "historic business" and "historic business assets"    
shall have the meanings ascribed to them in Section 1.368-1(d) of the Treasury  
Regulations; provided, however, that this Section 4.11(c) shall not preclude any
of the reorganizations of funds set forth on Schedule 4.11(b).                  

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          (d) Prior to or in the Reorganization, neither Buying Fund nor any
person related to Buying Fund (for purposes of this paragraph as defined in     
Section 1.368-1(e)(3) of the Treasury Regulations) will have acquired directly  
or through any transaction, agreement or arrangement with any other person,     
shares of Selling Fund with consideration other than shares of Buying Fund.     

 SECTION 4.12. Prospectus and Statement of Additional Information. The
current prospectus and statement of additional information for Buying Fund as of
the date on which it was issued does not contain, and as supplemented by any    
supplement thereto dated prior to or on the Closing Date does not contain, any  
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading.   

ARTICLE 4A

CONDITIONS PRECEDENT WITH RESPECT TO EACH FUND

        Trust's obligations to implement this Plan on each Fund's behalf
shall be subject to satisfaction of the following conditions on or before the   
Closing Date, any one or more of which Trust may waive:                         

     SECTION 4A.1 No Governmental Actions. There is no pending action, suit or
proceeding, nor, to the knowledge of Trust, has any litigation been overtly     
threatened in writing or, if probable of assertion, orally, against Trust before
any Governmental Authority which questions the validity or legality of this Plan
or of the transactions contemplated hereby or which seeks to prevent the        
consummation of the transactions contemplated hereby, including the             
Reorganization.                                                                 

  SECTION 4A.2 No Brokers. No broker, finder or similar intermediary has
acted for or on behalf of Trust in connection with this Plan or the transactions
contemplated hereby, and no broker, finder, agent or similar intermediary is    
entitled to any broker's, finder's or similar fee or other commission in        
connection therewith based on any agreement, arrangement or understanding with  
Trust or any action taken by it.                                                

     SECTION 4A.3 Value of Shares. The fair market value of the shares of each
class of Buying Fund received by Selling Fund Shareholders in the Reorganization
will be approximately equal, as of the Effective Time, to the fair market value 
of the shares of each corresponding class of Selling Fund to be constructively  
surrendered in exchange therefor. The fair market value of the assets of Buying 
Fund will exceed the amount of its liabilities immediately after the exchange.  

SECTION 4A.4 Intercompany Indebtedness; Consideration. There is no  
intercompany indebtedness between the Funds that was issued or acquired, or will
be settled, at a discount. No consideration other than Buying Fund Shares (and  
Buying Fund's assumption of Selling Fund's Liabilities, including for this      
purpose any liabilities to which the assets of Selling Fund are subject) will be
given in exchange for the assets of Selling Fund acquired by Buying Fund in     
connection with the Reorganization. The fair market value of the assets of      
Selling Fund                                                                    

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transferred to Buying Fund in the Reorganization will equal or exceed the sum of
the Liabilities assumed by Buying Fund, plus the amount of liabilities, if any, 
to which such transferred assets are subject.                                   

      SECTION 4A.5 Authorizations or Consents. Other than those which shall have
been obtained or made on or prior to the Closing Date and any that must be made 
after the Closing Date to comply with Section 2.5 of this Plan, no authorization
or approval or other action by, and no notice to or filing with, any            
Governmental Authority will be required to be obtained or made by Trust in      
connection with the due adoption by Trust of this Plan and the consummation by  
Trust of the transactions contemplated hereby.                                  

 SECTION 4A.6 No Bankruptcy Proceedings. Trust is not, with respect to
either Fund, under the jurisdiction of a court in a proceeding under Title 11 of
the United States Code or similar case within the meaning of Section            
368(a)(3)(A) of the Code.                                                       

ARTICLE 5 

COVENANTS 

SECTION 5.1. Conduct of Business.                                   

           (a) From the date of this Plan up to and including the Closing Date
(or, if earlier, the date upon which this Plan is terminated pursuant to Article
7), Trust shall conduct the business of Selling Fund only in the ordinary course
and substantially in accordance with past practices, and shall use its          
reasonable best efforts to preserve intact its business organization and        
material assets and maintain the rights, franchises and business and customer   
relations necessary to conduct the business operations of Selling Fund in the   
ordinary course in all material respects; provided, however, that this Section  
5.1(a) shall not preclude any of the reorganizations of funds set forth on      
Schedule 4.11(b).                                                               

           (b) From the date of this Plan up to and including the Closing Date
(or, if earlier, the date upon which this Plan is terminated pursuant to Article
7), Trust shall conduct the business of Buying Fund only in the ordinary course 
and substantially in accordance with past practices, and shall use its          
reasonable best efforts to preserve intact its business organization and        
material assets and maintain the rights, franchises and business and customer   
relations necessary to conduct the business operations of Buying Fund in the    
ordinary course in all material respects; provided, however, that this Section  
5.1(b) shall not preclude any of the reorganizations of funds set forth on      
Schedule 4.11(b).                                                               

  SECTION 5.2. Expenses. Prior to submission of the Plan to the Board of
Trustees of Trust for approval, the Investment Adviser, in the ordinary course  
of business as a registered investment advisor operating under the Advisers Act 
agreed to bear the costs and expenses incurred in connection with this Plan and 
the Reorganization and other transactions contemplated hereby; provided that any
such expenses incurred by or on behalf of Buying Fund or Selling Fund shall not 
be reimbursed or paid for by the Investment Advisor or any other Person unless  
those expenses are solely and directly related to the Reorganization.           

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     SECTION 5.3. Further Assurances. Each of the parties hereto shall execute
such documents and other papers and perform such further acts as may be         
reasonably required to carry out the provisions hereof and the transactions     
contemplated hereby. Each such party shall, on or prior to the Closing Date, use
its reasonable best efforts to fulfill or obtain the fulfillment of the         
conditions precedent to the consummation of the Reorganization, including the   
execution and delivery of any documents, certificates, instruments or other     
papers that are reasonably required for the consummation of the Reorganization. 

SECTION 5.4. Consents, Approvals and Filings. Trust shall make all  
necessary filings, as soon as reasonably practicable, including, without        
limitation, those required under the Securities Act, the Exchange Act, the      
Investment Company Act and the Advisers Act, in order to facilitate prompt      
consummation of the Reorganization and the other transactions contemplated by   
this Plan. In addition, Trust shall use its reasonable best efforts (i) to      
comply as promptly as reasonably practicable with all requirements of           
Governmental Authorities applicable to the Reorganization and the other         
transactions contemplated herein and (ii) to obtain as promptly as reasonably   
practicable all necessary permits, orders or other consents of Governmental     
Authorities and consents of all third parties necessary for the consummation of 
the Reorganization and the other transactions contemplated herein. Trust shall  
use reasonable efforts to provide such information and communications to        
Governmental Authorities as such Governmental Authorities may request.          

 SECTION 5.5. Submission of Plan to Shareholders. Trust shall take all
action necessary in accordance with applicable law and its Governing Documents  
to convene the Shareholders Meeting. Trust shall, through its Board of Trustees,
recommend to the shareholders of Selling Fund approval of this Plan. Trust shall
use its reasonable best efforts to hold a Shareholders Meeting as soon as       
practicable after the date hereof.                                              

ARTICLE 6 

FURTHER CONDITIONS PRECEDENT TO THE REORGANIZATION

     SECTION 6.1. Further Conditions Precedent with respect to Both Funds. The
obligation of Trust to consummate the Reorganization is subject to the          
satisfaction, at or prior to the Closing Date, of all of the following          
conditions, any one or more of which may be waived in writing by Trust.         

            (a) The representations and warranties of Trust on behalf of Selling
Fund and Buying Fund set forth in this Plan shall be true and correct in all    
material respects as of the date of this Plan and as of the Closing Date with   
the same effect as though all such representations and warranties had been made 
as of the Closing Date.                                                         

        (b) Trust shall have complied with and satisfied in all material
respects all agreements and conditions relating to Selling Fund and Buying Fund 
set forth herein to be performed or satisfied at or prior to the Closing Date.  

           (c) There shall be delivered at the Closing Date (i) a certificate,
dated as of the Closing Date, from an officer of Trust, in such individual's    
capacity as an officer of Trust                                                 

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and not as an individual, to the effect that the conditions specified in        
Sections 6.1(a) and (b) have been satisfied and (ii) a certificate, dated as of 
the Closing Date, from the Secretary or Assistant Secretary (in such capacity)  
of Trust certifying as to the accuracy and completeness of the attached         
Governing Documents of Trust, and resolutions, consents and authorizations of or
regarding Trust with respect to the execution and delivery of this Plan and the 
transactions contemplated hereby.                                               

       (d) The dividend or dividends described in the last sentence of
Section 3.13(a) shall have been declared.                                       

           (e) All filings required to be made prior to the Closing Date with,
and all consents, approvals, permits and authorizations required to be obtained 
on or prior to the Closing Date from Governmental Authorities in connection with
the execution and delivery of this Plan and the consummation of the transactions
contemplated herein by Trust shall have been made or obtained, as the case may  
be; provided, however, that such consents, approvals, permits and authorizations
may be subject to conditions that would not reasonably be expected, individually
or in the aggregate, to have a Material Adverse Effect.                         

     (f) This Plan, the Reorganization of Selling Fund and related
matters shall have been approved and adopted at the Shareholders Meeting by the 
shareholders of Selling Fund on the record date by the Required Shareholder     
Vote.                                                                           

          (g) The assets of Selling Fund to be acquired by Buying Fund shall
constitute at least 90% of the fair market value of the net assets and at least 
70% of the fair market value of the gross assets held by Selling Fund           
immediately prior to the Reorganization. For purposes of this Section 6.1(g),   
assets used by Selling Fund to pay the expenses it incurs in connection with    
this Plan and the Reorganization and to effect all shareholder redemptions and  
distributions (other than regular, normal dividends and regular, normal         
redemptions pursuant to the Investment Company Act, and not in excess of the    
requirements of Section 852 of the Code, occurring in the ordinary course of    
Selling Fund's business as a series of an open-end management investment        
company) after the date of this Plan shall be included as assets of Selling Fund
held immediately prior to the Reorganization.                                   

    (h) No temporary restraining order, preliminary or permanent
injunction or other order issued by any Governmental Authority preventing the   
consummation of the Reorganization on the Closing Date shall be in effect;      
provided, however, that the party or parties invoking this condition shall use  
reasonable efforts to have any such order or injunction vacated.                

       (i) The Registration Statement on Form N-14 filed by Trust with
respect to Buying Fund Shares to be issued to Selling Fund Shareholders in      
connection with the Reorganization shall have become effective under the        
Securities Act and shall include an undertaking therein to file the opinion     
referenced in Section 6.1(j) as a post-effective amendment to such Registration 
Statement after the Closing Date, and no stop order suspending the effectiveness
thereof shall have been issued and, to the best knowledge of the parties hereto,
no investigation or proceeding for that purpose shall have been instituted or be
pending, threatened or contemplated under the Securities Act.                   

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      (j) Trust shall have received on or before the Closing Date an
opinion of Counsel in form and substance reasonably acceptable to Trust, as to  
the matters set forth on Schedule 6.1(j). In rendering such opinion, Counsel may
request and rely upon representations contained in certificates of officers of  
Trust and others, and the officers of Trust shall use their best efforts to make
available such truthful certificates.                                           

 ARTICLE 7

 TERMINATION OF PLAN

      SECTION 7.1. Termination. This Plan may be terminated by Trust on or prior
to the Closing Date as follows:                                                 

           (a) if circumstances develop that, in its judgment, make proceeding
with the Reorganization inadvisable for either Fund;                            

         (b) if the Closing Date shall not be on or before the Termination
Date;                                                                           

    (c) if, upon a vote at the Shareholders Meeting or any final
adjournment thereof, the Required Shareholder Vote shall not have been obtained 
as contemplated by Section 5.5; or                                              

            (d) if any Governmental Authority shall have issued an order, decree
or ruling or taken any other action permanently enjoining, restraining or       
otherwise prohibiting the Reorganization and such order, decree, ruling or other
action shall have become final and nonappealable.                               

           SECTION 7.2. Survival After Termination. If this Plan is terminated
in accordance with Section 7.1 hereof and the Reorganization of Selling Fund is 
not consummated, this Plan shall become void and of no further force and effect 
with respect to the Reorganization and Selling Fund, except for the provisions  
of Section 5.2.                                                                 

ARTICLE 8 

MISCELLANEOUS 

   SECTION 8.1. Survival of Representations, Warranties and Covenants. The
representations and warranties in this Plan, and the covenants in this Plan that
are required to be performed at or prior to the Closing Date, shall terminate   
upon the consummation of the transactions contemplated hereunder. The covenants 
in this Plan that are required to be performed in whole or in part subsequent to
the Closing Date shall survive the consummation of the transactions contemplated
hereunder for a period of one (1) year following the Closing Date.              

    SECTION 8.2. Governing Law. This Plan shall be construed and interpreted
according to the laws of the State of Delaware applicable to contracts made and 
to be performed wholly within such state.                                       

     SECTION 8.3. Binding Effect, Persons Benefiting, No Assignment. This Plan
shall inure to the benefit of and be binding upon the parties hereto and the    
respective successors and                                                       

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assigns of the parties and such Persons. Nothing in this Plan is intended or    
shall be construed to confer upon any entity or Person other than the parties   
hereto and their respective successors and permitted assigns any right, remedy  
or claim under or by reason of this Plan or any part hereof. Without the prior  
written consent of the parties hereto, this Plan may not be assigned by any of  
the parties hereto.                                                             

   SECTION 8.4. Obligations of Trust. Trust hereby acknowledges and agrees
that each of Buying Fund and Selling Fund is a separate investment portfolio of 
Trust, that Trust is executing this Plan on behalf of each of Buying Fund and   
Selling Fund, and that any amounts payable by Trust under or in connection with 
this Plan shall be payable solely from the revenues and assets of Buying Fund or
Selling Fund, as applicable. Trust further acknowledges and agrees that this    
Plan has been executed by a duly authorized officer of Trust in his or her      
capacity as an officer of Trust intending to bind Trust as provided herein, and 
that no officer, trustee or shareholder of Trust shall be personally liable for 
the liabilities or obligation of Trust incurred hereunder. Finally, Trust       
acknowledges and agrees that the liabilities and obligations of Selling Fund    
pursuant to this Plan shall be enforceable against the assets of Buying Fund or 
Selling Fund, as applicable, only and not against the assets of Trust generally 
or assets belonging to any other series of Trust.                               

      SECTION 8.5. Amendments. This Plan may not be amended, altered or modified
except with the approval of Trust's Board of Trustees.                          

      SECTION 8.6. Entire Plan; Exhibits and Schedules. This Plan, including the
Exhibits, Schedules, certificates and lists referred to herein, and any         
documents executed by the parties simultaneously herewith or pursuant thereto,  
constitute the entire understanding and agreement of the parties hereto with    
respect to the subject matter hereof and supersedes all other prior agreements  
and understandings, written or oral, between the parties with respect to such   
subject matter.                                                                 

SECTION 8.7. Successors and Assigns; Assignment. This Plan shall be 
binding upon and inure to the benefit of Trust, on behalf of Selling Fund, and  
Trust, on behalf of Buying Fund, and their respective successors and permitted  
assigns.                                                                        

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 EXHIBIT A

EXCLUDED LIABILITIES OF SELLING FUND

None.                                                                           

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SCHEDULE 2.1

CLASSES OF SHARES OF SELLING FUND AND 
CORRESPONDING CLASSES OF SHARES OF BUYING FUND

                                      Corresponding Classes of
Classes of Shares of Selling Fund         Shares of Buying Fund   
---------------------------------         ---------------------   

      AIM Balanced Fund                AIM Basic Balanced Fund
   Class A Shares                     Class A Shares
   Class B Shares                     Class B Shares
   Class C Shares                     Class C Shares
   Class R Shares                     Class R Shares
   Institutional Class Shares         Institutional Class Shares

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SCHEDULE 3.3

CERTAIN CONTINGENT LIABILITIES OF SELLING FUND

None.                                                                           

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SCHEDULE 4.3

 CERTAIN CONTINGENT LIABILITIES OF BUYING FUND

None.                                                                           

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 SCHEDULE 4.4(A)

CLASSES OF SHARES OF BUYING FUND

Classes of Shares of Buying Fund
--------------------------------
 AIM Basic Balanced Fund
Class A Shares
Class B Shares
Class C Shares
Class R Shares
Institutional Class Shares
 Investor Class Shares

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SCHEDULE 4.11(B)

PERMITTED REORGANIZATIONS OF FUNDS

AIM Emerging Growth Fund into AIM Aggressive Growth Fund                        

AIM Libra Fund into AIM Aggressive Growth Fund                                  

AIM Health Sciences Fund into AIM Global Health Care Fund                       

AIM Total Return Fund into AIM Basic Balanced Fund                              

AIM Dent Demographics Trends Fund into AIM Weingarten Fund                      

AIM Mid-Cap Stock Fund into AIM Capital Development Fund                        

AIM Core Stock Fund into AIM Diversified Dividend Fund                          

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 SCHEDULE 6.1(J)

TAX OPINIONS

     (i) The transfer of the assets of Selling Fund to Buying Fund in exchange
solely for Buying Fund Shares distributed directly to Selling Fund Shareholders 
and Buying Fund's assumption of the Liabilities, as provided in the Plan, will  
constitute a "reorganization" within the meaning of Section 368(a) of the Code  
and Selling Fund and Buying Fund will be "a party to a reorganization" within   
the meaning of Section 368(b) of the Code.                                      

     (ii) In accordance with Section 361(a) and Section 361(c)(1) of the Code,
no gain or loss will be recognized by Selling Fund on the transfer of its assets
to Buying Fund solely in exchange for Buying Fund Shares and Buying Fund's      
assumption of the Liabilities or on the distribution of Buying Fund Shares to   
Selling Fund Shareholders.                                                      

      (iii) In accordance with Section 1032 of the Code, no gain or loss will be
recognized by Buying Fund upon the receipt of assets of Selling Fund in exchange
for Buying Fund Shares issued directly to Selling Fund Shareholders.            

  (iv) In accordance with Section 354(a)(1) of the Code, no gain or loss
will be recognized by Selling Fund Shareholders on the receipt of Buying Fund   
Shares in exchange for Selling Fund Shares.                                     

  (v) In accordance with Section 362(b) of the Code, the basis to Buying
Fund of the assets of Selling Fund will be the same as the basis of such assets 
in the hands of Selling Fund immediately prior to the Reorganization.           

(vi) In accordance with Section 358(a) of the Code, a Selling Fund  
Shareholder's basis for Buying Fund Shares received by the Selling Fund         
Shareholder will be the same as his or her basis for Selling Fund Shares        
exchanged therefor.                                                             

(vii) In accordance with Section 1223(1) of the Code, a Selling Fund
Shareholder's holding period for Buying Fund Shares will be determined by       
including such Selling Fund Shareholder's holding period for Selling Fund Shares
exchanged therefor, provided that such Selling Fund Shareholder held such       
Selling Fund Shares as a capital asset.                                         

     (viii) In accordance with Section 1223(2) of the Code, the holding period
with respect to the assets of Selling Fund transferred to Buying Fund in the    
Reorganization will include the holding period for such assets in the hands of  
Selling Fund.                                                                   

   (ix) In accordance with Section 381(a)(2) of the Code, Buying Fund will
succeed to and take into account the items of Selling Fund described in Section 
381(c) of the Code, subject to the conditions and limitations specified in      
Sections 381 through 384 of the Code and the Treasury Regulations thereunder.   

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                                                                     APPENDIX II

 AGREEMENT

 AND

PLAN OF REORGANIZATION

 FOR

AIM TOTAL RETURN FUND,

 A SEPARATE PORTFOLIO OF

AIM COMBINATION STOCK & BOND FUNDS

MARCH 22, 2005

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 TABLE OF CONTENTS

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ARTICLE 1 DEFINITIONS........................................................1 
      SECTION 1.1.    Definitions............................................1 

ARTICLE 2 TRANSFER OF ASSETS.................................................5 
      SECTION 2.1.    Reorganization of Selling Fund.........................5 
      SECTION 2.2.    Computation of Net Asset Value.........................5 
      SECTION 2.3.    Valuation Date.........................................5 
      SECTION 2.4.    Delivery...............................................6 
      SECTION 2.5.    Termination of Series and Redemption of Selling          
                      Fund Shares............................................6 
      SECTION 2.6.    Issuance of Buying Fund Shares.........................6 
      SECTION 2.7.    Investment Securities..................................6 
      SECTION 2.8.    Liabilities............................................7 

ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER...........................7 
      SECTION 3.1.    Organization; Authority................................7 
      SECTION 3.2.    Registration and Regulation of Seller..................7 
      SECTION 3.3.    Financial Statements...................................7 
      SECTION 3.4.    No Material Adverse Changes; Contingent Liabilities....8 
      SECTION 3.5.    Selling Fund Shares; Business Operations...............8 
      SECTION 3.6.    Accountants............................................8 
      SECTION 3.7.    Binding Obligation.....................................9 
      SECTION 3.8.    No Breaches or Defaults................................9 
      SECTION 3.9.    Authorizations or Consents.............................9 
      SECTION 3.10.    Permits...............................................9 
      SECTION 3.11.    No Actions, Suits or Proceedings.....................10 
      SECTION 3.12.    Contracts............................................10 
      SECTION 3.13.    Properties and Assets................................10 
      SECTION 3.14.    Taxes................................................10 
      SECTION 3.15.    Benefit and Employment Obligations...................11 
      SECTION 3.16.    Brokers..............................................11 
      SECTION 3.17.    Voting Requirements..................................11 
      SECTION 3.18.    State Takeover Statutes..............................11 
      SECTION 3.19.    Books and Records....................................11 
      SECTION 3.20.    Prospectus and Statement of Additional Information...12 
      SECTION 3.21.    No Distribution......................................12 
      SECTION 3.22.    Liabilities of Selling Fund..........................12 
      SECTION 3.23.    Value of Shares......................................12 
      SECTION 3.24.    Shareholder Expenses.................................12 
      SECTION 3.25.    Intercompany Indebtedness; Consideration.............12 

ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER...........................12 
      SECTION 4.1.    Organization; Authority...............................12 
      SECTION 4.2.    Registration and Regulation of Buyer..................12 
      SECTION 4.3.    Financial Statements..................................13 

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      SECTION 4.4.    No Material Adverse Changes; Contingent Liabilities...13 
      SECTION 4.5.    Registration of Buying Fund Shares....................13 
      SECTION 4.6.    Accountants...........................................14 
      SECTION 4.7.    Binding Obligation....................................14 
      SECTION 4.8.    No Breaches or Defaults...............................14 
      SECTION 4.9.    Authorizations or Consents............................15 
      SECTION 4.10.    Permits..............................................15 
      SECTION 4.11.    No Actions, Suits or Proceedings.....................15 
      SECTION 4.12.    Taxes................................................15 
      SECTION 4.13.    Brokers..............................................16 
      SECTION 4.14.    Representations Concerning the Reorganization........16 
      SECTION 4.15.    Prospectus and Statement of Additional Information...17 
      SECTION 4.16.    Value of Shares......................................17 
      SECTION 4.17.    Intercompany Indebtedness; Consideration.............17 

ARTICLE 5 COVENANTS.........................................................17 
      SECTION 5.1.    Conduct of Business...................................17 
      SECTION 5.2.    Expenses..............................................18 
      SECTION 5.3.    Further Assurances....................................18 
      SECTION 5.4.    Notice of Events......................................18 
      SECTION 5.5.    Consents, Approvals and Filings.......................18 
      SECTION 5.6.    Submission of Agreement to Shareholders...............19 

ARTICLE 6 CONDITIONS PRECEDENT TO THE REORGANIZATION........................19 
      SECTION 6.1.    Conditions Precedent of Buyer.........................19 
      SECTION 6.2.    Mutual Conditions.....................................19 
      SECTION 6.3.    Conditions Precedent of Seller........................21 

ARTICLE 7 TERMINATION OF AGREEMENT..........................................21 
      SECTION 7.1.    Termination...........................................21 
      SECTION 7.2.    Survival After Termination............................22 

ARTICLE 8 MISCELLANEOUS.....................................................22 
      SECTION 8.1.    Survival of Representations, Warranties and Covenants.22 
      SECTION 8.2.    Governing Law.........................................22 
      SECTION 8.3.    Binding Effect, Persons Benefiting, No Assignment.....22 
      SECTION 8.4.    Obligations of Buyer and Seller.......................22 
      SECTION 8.5.    Amendments............................................23 
      SECTION 8.6.    Enforcement...........................................23 
      SECTION 8.7.    Interpretation........................................23 
      SECTION 8.8.    Counterparts..........................................23 
      SECTION 8.9.    Entire Agreement; Exhibits and Schedules..............23 
      SECTION 8.10.    Notices..............................................23 
      SECTION 8.11.    Representations by Investment Adviser................24 
      SECTION 8.12.    Successors and Assigns; Assignment...................25 

EXHIBIT A         Excluded Liabilities of Selling Fund                         

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SCHEDULE 2.1      Classes of Shares of Selling Fund and Corresponding          
                  Classes of Shares of Buying Fund                             
SCHEDULE 3.4      Certain Contingent Liabilities of Selling Fund               
SCHEDULE 4.4      Certain Contingent Liabilities of Buying Fund                
SCHEDULE 4.5(a)   Classes of Shares of Buying Fund                             
SCHEDULE 4.14(b)  Permitted Reorganizations of Funds                           
SCHEDULE 6.2(f)   Tax Opinions                                                 

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AGREEMENT AND PLAN OF REORGANIZATION

  AGREEMENT AND PLAN OF REORGANIZATION, dated as of March 22, 2005 (this
"Agreement"), by and among AIM Combination Stock & Bond Funds, a Delaware       
statutory trust ("Seller"), acting on behalf of AIM Total Return Fund ("Selling 
Fund"), a separate series of Seller, AIM Funds Group, a Delaware statutory trust
("Buyer"), acting on behalf of AIM Basic Balanced Fund ("Buying Fund"), a       
separate series of Buyer, and A I M Advisors, Inc., a Delaware corporation.     

WITNESSETH

      WHEREAS, Seller is a management investment company registered with the SEC
(as defined below) under the Investment Company Act (as defined below) that     
offers separate series of its shares representing interests in its investment   
portfolios, including Selling Fund, for sale to the public; and                 

     WHEREAS, Buyer is a management investment company registered with the SEC
under the Investment Company Act that offers separate series of its shares      
representing interests in investment portfolios, including Buying Fund, for sale
to the public; and                                                              

     WHEREAS, Seller desires to provide for the reorganization of Selling Fund
through the transfer of all of its assets to Buying Fund in exchange for the    
assumption by Buying Fund of all of the Liabilities (as defined below) of       
Selling Fund and the issuance by Buyer of shares of Buying Fund in the manner   
set forth in this Agreement; and                                                

WHEREAS, the Investment Adviser (as defined below) serves as the    
investment advisor to both Buying Fund and Selling Fund and is making certain   
representations, warranties and agreements set forth in this Agreement;         

   WHEREAS, this Agreement is intended to be and is adopted by the parties
hereto as a Plan of Reorganization within the meaning of the regulations under  
Section 368(a) of the Code (as defined below).                                  

NOW, THEREFORE, in consideration of the foregoing premises and the  
agreements and undertakings contained in this Agreement, Seller and Buyer agree 
as follows:                                                                     

ARTICLE 1 

 DEFINITIONS

SECTION 1.1. Definitions. For all purposes in this Agreement, the   
following terms shall have the respective meanings set forth in this Section 1.1
(such definitions to be equally applicable to both the singular and plural forms
of the terms herein defined):                                                   

     "Advisers Act" means the Investment Advisers Act of 1940, as amended, and
all rules and regulations of the SEC adopted pursuant thereto.                  

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"Affiliated Person" means an affiliated person as defined in Section
2(a)(3) of the Investment Company Act.                                          

      "Agreement" means this Agreement and Plan of Reorganization, together with
all exhibits and schedules attached hereto and all amendments hereto and        
thereof.                                                                        

   "Applicable Law" means the applicable laws of the state of Delaware and
shall include the Delaware Statutory Trust Act.                                 

    "Benefit Plan" means any material "employee benefit plan" (as defined in
Section 3(3) of ERISA) and any material bonus, deferred compensation, incentive 
compensation, stock ownership, stock purchase, stock option, phantom stock,     
vacation, retirement, profit sharing, welfare plans or other plan, arrangement  
or understanding maintained or contributed to by Seller on behalf of Selling    
Fund, or otherwise providing benefits to any current or former employee, officer
or director/trustee of Seller.                                                  

"Buyer" means AIM Funds Group, a Delaware statutory trust.          

"Buyer Counsel" means Ballard Spahr Andrews & Ingersoll, LLP.       

     "Buyer Custodian" means State Street Bank and Trust Company acting in its
capacity as custodian for the assets of Buying Fund.                            

   "Buyer Registration Statement" means the registration statement on Form
N-1A of Buyer, as amended, 1940 Act Registration No. 811-1540.                  

    "Buying Fund" means AIM Basic Balanced Fund, a separate series of Buyer.

"Buying Fund Auditors" means PricewaterhouseCoopers LLP.            

     "Buying Fund Financial Statements" means the audited financial statements
of Buying Fund for the fiscal year ended December 31, 2004.                     

 "Buying Fund Shares" means shares of each class of Buying Fund issued
pursuant to Section 2.6 of this Agreement.                                      

      "Closing" means the transfer of the assets of Selling Fund to Buying Fund,
the assumption of all of Selling Fund's Liabilities by Buying Fund and the      
issuance of Buying Fund Shares directly to Selling Fund Shareholders as         
described in Section 2.1 of this Agreement.                                     

     "Closing Date" means July 18, 2005, or such other date as the parties may
mutually agree upon.                                                            

     "Code" means the Internal Revenue Code of 1986, as amended, and all rules
and regulations adopted pursuant thereto.                                       

 "corresponding" means, when used with respect to a class of shares of
Selling Fund or Buying Fund, the classes of their shares set forth opposite each
other on Schedule 2.1.                                                          

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"Effective Time" means 8:00 a.m. Eastern Time on the Closing Date.  

 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and all rules or regulations adopted pursuant thereto.                 

     "Exchange Act" means the Securities Exchange Act of 1934, as amended, and
all rules and regulations adopted pursuant thereto.                             

"Governing Documents" means the organic documents which govern the  
business and operations of each of Buyer and Seller and shall include, as       
applicable, Amended and Restated Agreement and Declaration of Trust, Amended and
Restated Bylaws and Bylaws.                                                     

"Governmental Authority" means any foreign, United States or state  
government, government agency, department, board, commission (including the SEC)
or instrumentality, and any court, tribunal or arbitrator of competent          
jurisdiction, and any governmental or non-governmental self-regulatory          
organization, agency or authority (including the NASD Regulation, Inc., the     
Commodity Futures Trading Commission, the National Futures Association, the     
Investment Management Regulatory Organization Limited and the Office of Fair    
Trading).                                                                       

"Investment Adviser" means A I M Advisors, Inc.                     

 "Investment Company Act" means the Investment Company Act of 1940, as
amended, and all rules and regulations adopted pursuant thereto.                

   "Liabilities" means all of the liabilities of any kind of Selling Fund,
including without limitation all liabilities included in the calculation of the 
net asset value per share of each class of Selling Fund Shares on the Closing   
Date, but not including the excluded liabilities set forth on Exhibit A.        

"Lien" means any pledge, lien, security interest, charge, claim or  
encumbrance of any kind.                                                        

      "Material Adverse Effect" means an effect that would cause a change in the
condition (financial or otherwise), properties, assets or prospects of an entity
having an adverse monetary effect in an amount equal to or greater than $50,000.

"NYSE" means the New York Stock Exchange.                           

"Permits" shall have the meaning set forth in Section 3.10 of this  
Agreement.                                                                      

      "Person" means an individual or a corporation, partnership, joint venture,
association, trust, unincorporated organization or other entity.                

   "Reorganization" means the acquisition of the assets of Selling Fund by
Buying Fund in consideration of the assumption by Buying Fund of all of the     
Liabilities of Selling Fund and the issuance by Buyer of Buying Fund Shares     
directly to Selling Fund Shareholders as described in this Agreement, and the   
termination of Selling Fund's status as a designated series of shares of Seller.

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      "Required Shareholder Vote" means, if a quorum is present, the affirmative
vote of a majority of the shares cast at the Shareholders Meeting.              

"Return" means any return, report or form or any attachment thereto 
required to be filed with any taxing authority.                                 

"SEC" means the United States Securities and Exchange Commission.   

  "Securities Act" means the Securities Act of 1933, as amended, and all
rules and regulations adopted pursuant thereto.                                 

   "Seller" means AIM Combination Stock & Bond Funds, a Delaware statutory
trust.                                                                          

"Seller Custodian" means State Street Bank and Trust acting in its  
capacity as custodian for the assets of Selling Fund.                           

    "Seller Registration Statement" means the registration statement on Form
N-1A of Seller, as amended, 1940 Act Registration No. 811-8066.                 

    "Selling Fund" means AIM Total Return Fund, a separate series of Seller.

"Selling Fund Auditors" means PricewaterhouseCoopers LLP.           

      "Selling Fund Financial Statements" means the audited financial statements
of Selling Fund for the fiscal year ended August 31, 2004.                      

      "Selling Fund Shareholders" means the holders of record of the outstanding
shares of each class of Selling Fund as of the close of regular trading on the  
NYSE on the Valuation Date.                                                     

"Selling Fund Shares" means the outstanding shares of each class of 
Selling Fund.                                                                   

      "Shareholders Meeting" means a meeting of the shareholders of Selling Fund
convened in accordance with Applicable Law and the Governing Documents of Seller
to consider and vote upon the approval of this Agreement.                       

"Tax" means any tax or similar governmental charge, impost or levy  
(including income taxes (including alternative minimum tax and estimated tax),  
franchise taxes, transfer taxes or fees, sales taxes, use taxes, gross receipts 
taxes, value added taxes, employment taxes, excise taxes, ad valorem taxes,     
property taxes, withholding taxes, payroll taxes, minimum taxes, or windfall    
profit taxes), together with any related penalties, fines, additions to tax or  
interest, imposed by the United States or any state, county, local or foreign   
government or subdivision or agency thereof.                                    

  "Termination Date" means September 30, 2005, or such later date as the
parties may mutually agree upon.                                                

   "Treasury Regulations" means the Federal income tax regulations adopted
pursuant to the Code.                                                           

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    "Valuation Date" shall have the meaning set forth in Section 2.2 of this
Agreement.                                                                      

ARTICLE 2 

TRANSFER OF ASSETS

      SECTION 2.1. Reorganization of Selling Fund. At the Effective Time, all of
the assets of Selling Fund shall be delivered to Buyer Custodian for the account
of Buying Fund in exchange for the assumption by Buying Fund of all of the      
Liabilities of Selling Fund and delivery by Buyer directly to the holders of    
record as of the Effective Time of the issued and outstanding shares of each    
class of Selling Fund of a number of shares of each corresponding class of      
Buying Fund, as set forth on Schedule 2.1 (including, if applicable, fractional 
shares rounded to the nearest thousandth), having an aggregate net asset value  
equal to the value of the net assets of Selling Fund so transferred, assigned   
and delivered, all determined and adjusted as provided in Section 2.2 below.    
Upon delivery of such assets, Buying Fund will receive good and marketable title
to such assets free and clear of all Liens.                                     

SECTION 2.2. Computation of Net Asset Value.                                    

      (a) The net asset value per share of each class of Buying Fund
Shares, and the value of the assets and the amount of the Liabilities of Selling
Fund, shall, in each case, be determined as of the close of regular trading on  
the NYSE on the business day next preceding the Closing Date (the "Valuation    
Date").                                                                         

      (b) The net asset value per share of each class of Buying Fund
Shares shall be computed in accordance with the policies and procedures of      
Buying Fund as described in the Buyer Registration Statement.                   

        (c) The value of the assets and the amount of the Liabilities of
Selling Fund to be transferred to Buying Fund pursuant to this Agreement shall  
be computed in accordance with the policies and procedures of Selling Fund as   
described in the Seller Registration Statement.                                 

         (d) Subject to Sections 2.2(b) and (c) above, all computations of
value regarding the assets and Liabilities of Selling Fund and the net asset    
value per share of each class of Buying Fund Shares to be issued pursuant to    
this Agreement shall be made by agreement of Seller and Buyer. The parties agree
to use commercially reasonable efforts to resolve any material pricing          
differences between the prices of portfolio securities determined in accordance 
with their respective pricing policies and procedures.                          

      SECTION 2.3. Valuation Date. The share transfer books of Selling Fund will
be permanently closed as of the close of business on the Valuation Date and only
requests for the redemption of shares of Selling Fund received in proper form   
prior to the close of regular trading on the NYSE on the Valuation Date shall be
accepted by Selling Fund. Redemption requests thereafter received by Selling    
Fund shall be deemed to be redemption requests for Buying Fund Shares of the    
corresponding class (assuming that the transactions contemplated by this        
Agreement have been consummated), to be distributed to Selling Fund Shareholders
under this Agreement.                                                           

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SECTION 2.4. Delivery.                                              

       (a) No later than three (3) business days preceding the Closing
Date, Seller shall instruct Seller Custodian to transfer all assets held by     
Selling Fund to the account of Buying Fund maintained at Buyer Custodian. Such  
assets shall be delivered by Seller to Buyer Custodian on the Closing Date. The 
assets so delivered shall be duly endorsed in proper form for transfer in such  
condition as to constitute a good delivery thereof, in accordance with the      
custom of brokers, and shall be accompanied by all necessary state stock        
transfer stamps, if any, or a check for the appropriate purchase price thereof. 
Cash held by Selling Fund shall be delivered on the Closing Date and shall be in
the form of currency or wire transfer in Federal funds, payable to the order of 
the account of Buying Fund at Buyer Custodian.                                  

            (b) If, on the Closing Date, Selling Fund is unable to make delivery
in the manner contemplated by Section 2.4(a) of securities held by Selling Fund 
for the reason that any of such securities purchased prior to the Closing Date  
have not yet been delivered to Selling Fund or its broker, then Buyer shall     
waive the delivery requirements of Section 2.4(a) with respect to said          
undelivered securities if Selling Fund has delivered to Buyer Custodian by or on
the Closing Date, and with respect to said undelivered securities, executed     
copies of an agreement of assignment and escrow and due bills executed on behalf
of said broker or brokers, together with such other documents as may be required
by Buyer or Buyer Custodian, including brokers' confirmation slips.             

     SECTION 2.5. Termination of Series and Redemption of Selling Fund Shares.
Following receipt of the Required Shareholder Vote and as soon as reasonably    
practicable after the Closing, the status of Selling Fund as a designated series
of Seller shall be terminated and Seller shall redeem the outstanding shares of 
Selling Fund from Selling Fund Shareholders in accordance with its Governing    
Documents and all issued and outstanding shares of Selling Fund shall thereupon 
be canceled on the books of Seller.                                             

SECTION 2.6. Issuance of Buying Fund Shares. At the Effective Time, 
Selling Fund Shareholders holding shares of a class of Selling Fund shall be    
issued that number of full and fractional shares of the corresponding class of  
Buying Fund having a net asset value equal to the net asset value of such shares
of such class of Selling Fund held by Selling Fund Shareholders on the Valuation
Date in accordance with Sections 2.1 and 2.2. Seller shall provide instructions 
to the transfer agent of Buyer with respect to the shares of each class of      
Buying Fund to be issued to Selling Fund Shareholders. Buyer shall have no      
obligation to inquire as to the validity, propriety or correctness of any such  
instruction, but shall, in each case, assume that such instruction is valid,    
proper and correct. Buyer shall record on its books the ownership of the shares 
of each class of Buying Fund by Selling Fund Shareholders and shall forward a   
confirmation of such ownership to Selling Fund Shareholders. No redemption or   
repurchase of such shares credited to former Selling Fund Shareholders in       
respect of Selling Fund Shares represented by unsurrendered share certificates  
shall be permitted until such certificates have been surrendered to Buyer for   
cancellation, or if such certificates are lost or misplaced, until lost         
certificate affidavits have been executed and delivered to Buyer.               

  SECTION 2.7. Investment Securities. On or prior to the Valuation Date,
Seller shall deliver a list setting forth the securities Selling Fund then owned
together with the respective                                                    

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Federal income tax bases thereof and holding periods therefor. Seller shall     
provide to Buyer on or before the Valuation Date detailed tax basis accounting  
records for each security to be transferred to it pursuant to this Agreement.   
Such records shall be prepared in accordance with the requirements for specific 
identification tax lot accounting and clearly reflect the bases used for        
determination of gain and loss realized on the sale of any security transferred 
to Buying Fund hereunder. Such records shall be made available by Seller prior  
to the Valuation Date for inspection by the Treasurer (or his or her designee)  
or Buying Fund Auditors upon reasonable request.                                

    SECTION 2.8. Liabilities. Selling Fund shall use reasonable best efforts
to discharge all of its known liabilities, so far as may be possible, prior to  
the Closing Date.                                                               

ARTICLE 3 
REPRESENTATIONS AND WARRANTIES OF SELLER

  Seller, on behalf of Selling Fund, represents and warrants to Buyer as
follows:                                                                        

   SECTION 3.1. Organization; Authority. Seller is duly organized, validly
existing and in good standing under Applicable Law, with all requisite trust    
power and authority to enter into this Agreement and perform its obligations    
hereunder.                                                                      

SECTION 3.2. Registration and Regulation of Seller. Seller is duly  
registered with the SEC as an investment company under the Investment Company   
Act and all Selling Fund Shares which have been or are being offered for sale   
have been duly registered under the Securities Act and have been duly           
registered, qualified or are exempt from registration or qualification under the
securities laws of each state or other jurisdiction in which such shares have   
been or are being offered for sale, and no action has been taken by Seller to   
revoke or rescind any such registration or qualification. Selling Fund is in    
compliance in all material respects with all applicable laws, rules and         
regulations, including, without limitation, the Investment Company Act, the     
Securities Act, the Exchange Act and all applicable state securities laws.      
Selling Fund is in compliance in all material respects with the investment      
policies and restrictions applicable to it set forth in the Seller Registration 
Statement. The value of the net assets of Selling Fund is determined using      
portfolio valuation methods that comply in all material respects with the       
requirements of the Investment Company Act and the policies of Selling Fund and 
all purchases and redemptions of Selling Fund Shares have been effected at the  
net asset value per share calculated in such manner.                            

SECTION 3.3. Financial Statements. The books of account and related 
records of Selling Fund fairly reflect in reasonable detail its assets,         
liabilities and transactions in accordance with generally accepted accounting   
principles applied on a consistent basis. The audited Selling Fund Financial    
Statements previously delivered to Buyer present fairly in all material respects
the financial position of Selling Fund as of the date(s) indicated and the      
results of operations and changes in net assets for the period(s) then ended in 
accordance with generally accepted accounting principles applied on a consistent
basis for the period(s) then ended.                                             

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   SECTION 3.4. No Material Adverse Changes; Contingent Liabilities. Since
the date of the Selling Fund Financial Statements, no material adverse change   
has occurred in the financial condition, results of operations, business, assets
or liabilities of Selling Fund or the status of Selling Fund as a regulated     
investment company under the Code, other than changes resulting from any change 
in general conditions in the financial or securities markets or the performance 
of any investments made by Selling Fund or occurring in the ordinary course of  
business of Selling Fund or Seller. Except as set forth on Schedule 3.4, there  
are no contingent liabilities of Selling Fund not disclosed in the Selling Fund 
Financial Statements and no contingent liabilities of Selling Fund have arisen  
since the date of the most recent financial statements included in the Selling  
Fund Financial Statements.                                                      

SECTION 3.5. Selling Fund Shares; Business Operations.              

            (a) Selling Fund Shares have been duly authorized and validly issued
and are fully paid and non-assessable.                                          

 (b) During the five-year period ending on the date of the
Reorganization, neither Selling Fund nor any person related to Selling Fund (as 
defined in Section 1.368-1(e)(3) of the Treasury Regulations without regard to  
Section 1.368-1(e)(3)(i)(A)) will have directly or through any transaction,     
agreement, or arrangement with any other person, (i) acquired shares of Selling 
Fund for consideration other than shares of Selling Fund, except for shares     
redeemed in the ordinary course of Selling Fund's business as an open-end       
investment company as required by the Investment Company Act, or (ii) made      
distributions with respect to Selling Fund's shares, except for (a)             
distributions necessary to satisfy the requirements of Sections 852 and 4982 of 
the Code for qualification as a regulated investment company and avoidance of   
excise tax liability and (b) additional distributions, to the extent such       
additional distributions do not exceed 50 percent of the value (without giving  
effect to such distributions) of the proprietary interest in Selling Fund on the
Effective Date.                                                                 

          (c) At the time of its Reorganization, Selling Fund shall not have
outstanding any warrants, options, convertible securities or any other type of  
right pursuant to which any Person could acquire Selling Fund Shares, except for
the right of investors to acquire Selling Fund Shares at net asset value in the 
normal course of its business as a series of an open-end management investment  
company operating under the Investment Company Act.                             

      (d) Except for the Senior Officer Seller is required to employ
pursuant to the Assurance of Discontinuance entered into by the Investment      
Adviser with the Attorney General of the State of New York on or about October  
7, 2004, Seller does not have, and has not had during the six (6) months prior  
to the date of this Agreement, any employees, and shall not hire any employees  
from and after the date of this Agreement through the Closing Date.             

     SECTION 3.6. Accountants. Selling Fund Auditors, which have reported upon
the Selling Fund Financial Statements for the fiscal year or period, as         
applicable, ended on the date of the most recent financial statements included  
in the Selling Fund Financial Statements are independent registered public      
accountants as required by the Securities Act and the Exchange Act.             

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     SECTION 3.7. Binding Obligation. This Agreement has been duly authorized,
executed and delivered by Seller on behalf of Selling Fund and, assuming this   
Agreement has been duly executed and delivered by Buyer and approved by the     
shareholders of Selling Fund, constitutes the legal, valid and binding          
obligation of Seller enforceable against Seller in accordance with its terms    
from and with respect to the revenues and assets of Selling Fund, except as the 
enforceability hereof may be limited by bankruptcy, insolvency, reorganization  
or similar laws relating to or affecting creditors rights generally, or by      
general equity principles (whether applied in a court of law or a court of      
equity and including limitations on the availability of specific performance or 
other equitable remedies).                                                      

    SECTION 3.8. No Breaches or Defaults. The execution and delivery of this
Agreement by Seller on behalf of Selling Fund and performance by Seller of its  
obligations hereunder has been duly authorized by all necessary trust action on 
the part of Seller, other than approval by the shareholders of Selling Fund, and
(i) do not, and on the Closing Date will not, result in any violation of the    
Governing Documents of Seller and (ii) do not, and on the Closing Date will not,
result in a breach of any of the terms or provisions of, or constitute (with or 
without the giving of notice or the lapse of time or both) a default under, or  
give rise to a right of termination, cancellation or acceleration of any        
obligation or to the loss of a material benefit under, or result in the creation
or imposition of any Lien upon any property or assets of Selling Fund (except   
for such breaches or defaults or Liens that would not reasonably be expected,   
individually or in the aggregate, to have a Material Adverse Effect) under (A)  
any indenture, mortgage or loan agreement or any other material agreement or    
instrument to which Seller is a party or by which it may be bound and which     
relates to the assets of Selling Fund or to which any property of Selling Fund  
may be subject; (B) any Permit (as defined below); or (C) any existing          
applicable law, rule, regulation, judgment, order or decree of any Governmental 
Authority having jurisdiction over Seller or any property of Selling Fund.      
Seller is not under the jurisdiction of a court in a proceeding under Title 11  
of the United States Code or similar case within the meaning of Section         
368(a)(3)(A) of the Code.                                                       

      SECTION 3.9. Authorizations or Consents. Other than those which shall have
been obtained or made on or prior to the Closing Date and those that must be    
made after the Closing Date to comply with Section 2.5 of this Agreement, no    
authorization or approval or other action by, and no notice to or filing with,  
any Governmental Authority will be required to be obtained or made by Seller in 
connection with the due execution and delivery by Seller of this Agreement and  
the consummation by Seller of the transactions contemplated hereby.             

     SECTION 3.10. Permits. Seller has in full force and effect all approvals,
consents, authorizations, certificates, filings, franchises, licenses, notices, 
permits and rights of Governmental Authorities (collectively, "Permits")        
necessary for it to conduct its business as presently conducted as it relates to
Selling Fund, and there has occurred no default under any Permit, except for the
absence of Permits and for defaults under Permits the absence or default of     
which would not reasonably be expected to have, individually or in the          
aggregate, a Material Adverse Effect. To the knowledge of Seller there are no   
proceedings relating to the suspension, revocation or modification of any       
Permit, except for such that would not reasonably be expected, individually or  
in the aggregate, to have a Material Adverse Effect.                            

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SECTION 3.11. No Actions, Suits or Proceedings.                     

       (a) There is no pending action, suit or proceeding, nor, to the
knowledge of Seller, has any litigation been overtly threatened in writing or,  
if probable of assertion, orally, against Seller before any Governmental        
Authority which questions the validity or legality of this Agreement or of the  
actions contemplated hereby or which seeks to prevent the consummation of the   
transactions contemplated hereby, including the Reorganization.                 

         (b) There are no judicial, administrative or arbitration actions,
suits, or proceedings instituted or pending or, to the knowledge of Seller,     
threatened in writing or, if probable of assertion, orally, against Seller      
affecting any property, asset, interest or right of Selling Fund, that could    
reasonably be expected to have, individually or in the aggregate, a Material    
Adverse Effect with respect to Selling Fund. There are not in existence on the  
date hereof any plea agreements, judgments, injunctions, consents, decrees,     
exceptions or orders that were entered by, filed with or issued by any          
Governmental Authority relating to Seller's conduct of the business of Selling  
Fund affecting in any significant respect the conduct of such business. Seller  
is not, and has not been, to the knowledge of Seller, the target of any         
investigation by the SEC or any state securities administrator with respect to  
its conduct of the business of Selling Fund, other than as has been disclosed to
Seller's Board of Trustees.                                                     

 SECTION 3.12. Contracts. Seller is not in default under any contract,
agreement, commitment, arrangement, lease, insurance policy or other instrument 
to which it is a party and which involves or affects the assets of Selling Fund,
by which the assets, business, or operations of Selling Fund may be bound or    
affected, or under which it or the assets, business or operations of Selling    
Fund receives benefits, and which default could reasonably be expected,         
individually or in the aggregate, to have a Material Adverse Effect, and, to the
knowledge of Seller there has not occurred any event that, with the lapse of    
time or the giving of notice or both, would constitute such a default.          

     SECTION 3.13. Properties and Assets. Selling Fund has good and marketable
title to all properties and assets reflected in the Selling Fund Financial      
Statements as owned by it, free and clear of all Liens, except as described in  
the Selling Fund Financial Statements.                                          

SECTION 3.14. Taxes.                                                

         (a) Selling Fund has elected to be a regulated investment company
under Subchapter M of the Code and is a fund that is treated as a separate      
corporation under Section 851(g) of the Code. Selling Fund has qualified for    
treatment as a regulated investment company for each taxable year since         
inception that has ended prior to the Closing Date and will have satisfied the  
requirements of Part I of Subchapter M of the Code to maintain such             
qualification for the period beginning on the first day of its current taxable  
year and ending on the Closing Date. Selling Fund has no earnings and profits   
accumulated in any taxable year in which the provisions of Subchapter M of the  
Code did not apply to it. In order to (i) ensure continued qualification of     
Selling Fund for treatment as a "regulated investment company" for tax purposes 
and (ii) eliminate any tax liability of Selling Fund arising by reason of       
undistributed investment company taxable income or net capital gain, Seller will
declare on or prior to the Valuation Date to the shareholders of Selling Fund a 
dividend or dividends that, together with all previous such                     

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dividends, shall have the effect of distributing (A) all of Selling Fund's      
investment company taxable income (determined without regard to any deductions  
for dividends paid) for the taxable year ended August 31, 2004 and for the short
taxable year beginning on September 1, 2004 and ending on the Closing Date and  
(B) all of Selling Fund's net capital gain recognized in its taxable year ended 
August 31, 2004 and in such short taxable year (after reduction for any capital 
loss carryover).                                                                

          (b) Selling Fund has timely filed all Returns required to be filed
by it and all Taxes with respect thereto have been paid, except where the       
failure so to file or so to pay, would not reasonably be expected, individually 
or in the aggregate, to have a Material Adverse Effect. Adequate provision has  
been made in the Selling Fund Financial Statements for all Taxes in respect of  
all periods ended on or before the date of such financial statements, except    
where the failure to make such provisions would not reasonably be expected,     
individually or in the aggregate, to have a Material Adverse Effect. No         
deficiencies for any Taxes have been proposed, assessed or asserted in writing  
by any taxing authority against Selling Fund, and no deficiency has been        
proposed, assessed or asserted, in writing, where such deficiency would         
reasonably be expected, individually or in the aggregate, to have a Material    
Adverse Effect. No waivers of the time to assess any such Taxes are outstanding 
nor are any written requests for such waivers pending and no Return of Selling  
Fund is currently being or has been audited with respect to income taxes or     
other Taxes by any Federal, state, local or foreign Tax authority.              

     SECTION 3.15. Benefit and Employment Obligations. Except for the unfunded
trustee retirement plan and the trustee deferred compensation plan, Selling Fund
has no obligation to provide any post-retirement or post-employment benefit to  
any Person, including but not limited to under any Benefit Plan, and has no     
obligation to provide unfunded deferred compensation or other unfunded or       
self-funded benefits to any Person.                                             

      SECTION 3.16. Brokers. No broker, finder or similar intermediary has acted
for or on behalf of Seller in connection with this Agreement or the transactions
contemplated hereby, and no broker, finder, agent or similar intermediary is    
entitled to any broker's, finder's or similar fee or other commission in        
connection therewith based on any agreement, arrangement or understanding with  
Seller or any action taken by it.                                               

   SECTION 3.17. Voting Requirements. The Required Shareholder Vote is the
only vote of the holders of any class of shares of Selling Fund necessary to    
approve this Agreement.                                                         

SECTION 3.18. State Takeover Statutes. No state takeover statute or 
similar statute or regulation applies or purports to apply to this Agreement or 
any of the transactions contemplated by this Agreement.                         

     SECTION 3.19. Books and Records. The books and records of Seller relating
to Selling Fund, reflecting, among other things, the purchase and sale of       
Selling Fund Shares, the number of issued and outstanding shares owned by each  
Selling Fund Shareholder and the state or other jurisdiction in which such      
shares were offered and sold, are complete and accurate in all material         
respects.                                                                       

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 SECTION 3.20. Prospectus and Statement of Additional Information. The
current prospectus and statement of additional information for Selling Fund as  
of the date on which they were issued did not contain, and as supplemented by   
any supplement thereto dated prior to or on the Closing Date do not contain, any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading.   

    SECTION 3.21. No Distribution. Buying Fund Shares are not being acquired
for the purpose of any distribution thereof, other than in accordance with the  
terms of this Agreement.                                                        

      SECTION 3.22. Liabilities of Selling Fund. The Liabilities of Selling Fund
that are to be assumed by Buying Fund in connection with the Reorganization, or 
to which the assets of Selling Fund to be transferred in the Reorganization are 
subject, were incurred by Selling Fund in the ordinary course of its business.  
The fair market value of the assets of Selling Fund to be transferred to Buying 
Fund in the Reorganization will equal or exceed the sum of the Liabilities to be
assumed by Buying Fund, plus the amount of Liabilities, if any, to which such   
transferred assets will be subject.                                             

      SECTION 3.23. Value of Shares. The fair market value of the shares of each
class of Buying Fund received by Selling Fund Shareholders in the Reorganization
will be approximately equal, as of the Effective Time, to the fair market value 
of the shares of each corresponding class of Selling Fund to be constructively  
surrendered in exchange therefor.                                               

  SECTION 3.24. Shareholder Expenses. Selling Fund Shareholders will pay
their own expenses, if any, incurred in connection with the Reorganization.     

SECTION 3.25. Intercompany Indebtedness; Consideration. There is no 
intercompany indebtedness between Seller and Buyer that was issued or acquired, 
or will be settled, at a discount. No consideration other than Buying Fund      
Shares (and Buying Fund's assumption of Selling Fund's Liabilities, including   
for this purpose any liabilities to which the assets of Selling Fund are        
subject) will be given in exchange for the assets of Selling Fund acquired by   
Buying Fund in connection with the Reorganization.                              

ARTICLE 4 
 REPRESENTATIONS AND WARRANTIES OF BUYER

 Buyer, on behalf of Buying Fund, represents and warrants to Seller as
follows:                                                                        

  SECTION 4.1. Organization; Authority. Buyer is duly organized, validly
existing and in good standing under Applicable Law, with all requisite corporate
or trust power, as applicable, and authority to enter into this Agreement and   
perform its obligations hereunder.                                              

SECTION 4.2. Registration and Regulation of Buyer. Buyer is duly    
registered with the SEC as an investment company under the Investment Company   
Act. Buying Fund is in compliance in all material respects with all applicable  
laws, rules and regulations, including, without limitation, the Investment      
Company Act, the Securities Act, the Exchange Act and all applicable state      
securities laws. Buying Fund is in compliance in all material respects with the 

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applicable investment policies and restrictions set forth in the Buyer          
Registration Statement. The value of the net assets of Buying Fund is determined
using portfolio valuation methods that comply in all material respects with the 
requirements of the Investment Company Act and the policies of Buying Fund and  
all purchases and redemptions of Buying Fund Shares have been effected at the   
net asset value per share calculated in such manner.                            

SECTION 4.3. Financial Statements. The books of account and related 
records of Buying Fund fairly reflect in reasonable detail its assets,          
liabilities and transactions in accordance with generally accepted accounting   
principles applied on a consistent basis. The audited Buying Fund Financial     
Statements previously delivered to Seller present fairly in all material        
respects the financial position of Buying Fund as of the date(s) indicated and  
the results of operations and changes in net assets for the period(s) then ended
in accordance with generally accepted accounting principles applied on a        
consistent basis for the period(s) then ended.                                  

   SECTION 4.4. No Material Adverse Changes; Contingent Liabilities. Since
the date of the Buying Fund Financial Statements, no material adverse change has
occurred in the financial condition, results of operations, business, assets or 
liabilities of Buying Fund or the status of Buying Fund as a regulated          
investment company under the Code, other than changes resulting from any change 
in general conditions in the financial or securities markets or the performance 
of any investments made by Buying Fund or occurring in the ordinary course of   
business of Buying Fund or Buyer. There are no contingent liabilities of Buying 
Fund not disclosed in the Buying Fund Financial Statements which are required to
be disclosed in accordance with generally accepted accounting principles. Except
as set forth on Schedule 4.4, no contingent liabilities of Buying Fund have     
arisen since the date of the most recent financial statements included in the   
Buying Fund Financial Statements which are required to be disclosed in          
accordance with generally accepted accounting principles.                       

SECTION 4.5. Registration of Buying Fund Shares.                    

          (a) Buying Fund currently has those classes of shares that are set
forth on Schedule 4.5(a). Under its Governing Documents, Buyer is authorized to 
issue an unlimited number of shares of each such class.                         

            (b) Buying Fund Shares to be issued pursuant to Section 2.6 shall on
the Closing Date be duly registered under the Securities Act by a Registration  
Statement on Form N-14 of Buyer then in effect.                                 

            (c) Buying Fund Shares to be issued pursuant to Section 2.6 are duly
authorized and on the Closing Date will be validly issued and fully paid and    
non-assessable and will conform to the description thereof contained in the     
Registration Statement on Form N-14 then in effect. At the time of its          
Reorganization, Buying Fund shall not have outstanding any warrants, options,   
convertible securities or any other type of right pursuant to which any Person  
could acquire shares of Buying Fund, except for the right of investors to       
acquire shares of Buying Fund at net asset value in the normal course of its    
business as a series of an open-end management investment company operating     
under the Investment Company Act.                                               

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        (d) The combined proxy statement/prospectus (the "Combined Proxy
Statement/Prospectus"), which forms a part of Buyer's Registration Statement on 
Form N-14, shall be furnished to the shareholders of Selling Fund entitled to   
vote at the Shareholders Meeting in accordance with normal market practice for  
such transactions. The Combined Proxy Statement/Prospectus and related Statement
of Additional Information of Buying Fund, when they become effective, shall     
conform in all material respects to the applicable requirements of the          
Securities Act and the Investment Company Act and shall not include any untrue  
statement of a material fact or omit to state any material fact required to be  
stated therein or necessary to make the statements therein, in light of the     
circumstances under which they were made, not materially misleading.            

          (e) The shares of Buying Fund which have been or are being offered
for sale (other than the Buying Fund Shares to be issued in connection with the 
Reorganization) have been duly registered under the Securities Act by the Buyer 
Registration Statement and have been duly registered, qualified or are exempt   
from registration or qualification under the securities laws of each state or   
other jurisdiction in which such shares have been or are being offered for sale,
and no action has been taken by Buyer to revoke or rescind any such registration
or qualification.                                                               

    SECTION 4.6. Accountants. Buying Fund Auditors, which have reported upon
the Buying Fund Financial Statements for the fiscal year or period, as          
applicable, ended on the date of the most recent financial statements included  
in the Buying Fund Financial Statements are independent registered public       
accountants as required by the Securities Act and the Exchange Act.             

     SECTION 4.7. Binding Obligation. This Agreement has been duly authorized,
executed and delivered by Buyer on behalf of Buying Fund and, assuming this     
Agreement has been duly executed and delivered by Seller, constitutes the legal,
valid and binding obligation of Buyer, enforceable against Buyer in accordance  
with its terms from and with respect to the revenues and assets of Buying Fund, 
except as the enforceability hereof may be limited by bankruptcy, insolvency,   
reorganization or similar laws relating to or affecting creditors' rights       
generally, or by general equity principles (whether applied in a court of law or
a court of equity and including limitations on the availability of specific     
performance or other equitable remedies).                                       

    SECTION 4.8. No Breaches or Defaults. The execution and delivery of this
Agreement by Buyer on behalf of Buying Fund and performance by Buyer of its     
obligations hereunder have been duly authorized by all necessary trust action on
the part of Buyer and (i) do not, and on the Closing Date will not, result in   
any violation of the Governing Documents of Buyer and (ii) do not, and on the   
Closing Date will not, result in a breach of any of the terms or provisions of, 
or constitute (with or without the giving of notice or the lapse of time or     
both) a default under, or give rise to a right of termination, cancellation or  
acceleration of any obligation or to the loss of a material benefit under, or   
result in the creation or imposition of any Lien upon any property or assets of 
Buying Fund (except for such breaches or defaults or Liens that would not       
reasonably be expected, individually or in the aggregate, to have a Material    
Adverse Effect) under (A) any indenture, mortgage or loan agreement or any other
material agreement or instrument to which Buyer is a party or by which it may be
bound and which relates to the assets of Buying Fund or to which any properties 
of Buying Fund may be subject; (B) any Permit; or (C) any existing              

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applicable law, rule, regulation, judgment, order or decree of any Governmental 
Authority having jurisdiction over Buyer or any property of Buying Fund. Buyer  
is not under the jurisdiction of a court in a proceeding under Title 11 of the  
United States Code or similar case within the meaning of Section 368(a)(3)(A) of
the Code.                                                                       

      SECTION 4.9. Authorizations or Consents. Other than those which shall have
been obtained or made on or prior to the Closing Date, no authorization or      
approval or other action by, and no notice to or filing with, any Governmental  
Authority will be required to be obtained or made by Buyer in connection with   
the due execution and delivery by Buyer of this Agreement and the consummation  
by Buyer of the transactions contemplated hereby.                               

 SECTION 4.10. Permits. Buyer has in full force and effect all Permits
necessary for it to conduct its business as presently conducted as it relates to
Buying Fund, and there has occurred no default under any Permit, except for the 
absence of Permits and for defaults under Permits the absence or default of     
which would not reasonably be expected to have, individually or in the          
aggregate, a Material Adverse Effect. To the knowledge of Buyer there are no    
proceedings relating to the suspension, revocation or modification of any       
Permit, except for such that would not reasonably be expected, individually or  
in the aggregate, to have a Material Adverse Effect.                            

SECTION 4.11. No Actions, Suits or Proceedings.                     

       (a) There is no pending action, suit or proceeding, nor, to the
knowledge of Buyer, has any litigation been overtly threatened in writing or, if
probable of assertion, orally, against Buyer before any Governmental Authority  
which questions the validity or legality of this Agreement or of the            
transactions contemplated hereby, or which seeks to prevent the consummation of 
the transactions contemplated hereby, including the Reorganization.             

         (b) There are no judicial, administrative or arbitration actions,
suits, or proceedings instituted or pending or, to the knowledge of Buyer,      
threatened in writing or, if probable of assertion, orally, against Buyer,      
affecting any property, asset, interest or right of Buying Fund, that could     
reasonably be expected to have, individually or in the aggregate, a Material    
Adverse Effect with respect to Buying Fund. There are not in existence on the   
date hereof any plea agreements, judgments, injunctions, consents, decrees,     
exceptions or orders that were entered by, filed with or issued by any          
Governmental Authority relating to Buyer's conduct of the business of Buying    
Fund affecting in any significant respect the conduct of such business. Buyer is
not, and has not been, to the knowledge of Buyer, the target of any             
investigation by the SEC or any state securities administrator with respect to  
its conduct of the business of Buying Fund, other than as has been disclosed to 
Buyer's Board of Trustees.                                                      

SECTION 4.12. Taxes.                                                

        (a) Buying Fund has elected to be a regulated investment company
under Subchapter M of the Code and is a fund that is treated as a separate      
corporation under Section 851(g) of the Code. Buying Fund has qualified for     
treatment as a regulated investment company for each taxable year since         
inception that has ended prior to the Closing Date and will satisfy the         
requirements of Part I of Subchapter M of the Code to maintain such             
qualification for its current                                                   

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taxable year. Buying Fund has no earnings or profits accumulated in any taxable 
year in which the provisions of Subchapter M of the Code did not apply to it.   

            (b) Buying Fund has timely filed all Returns required to be filed by
it and all Taxes with respect thereto have been paid, except where the failure  
so to file or so to pay, would not reasonably be expected, individually or in   
the aggregate, to have a Material Adverse Effect. Adequate provision has been   
made in the Buying Fund Financial Statements for all Taxes in respect of all    
periods ending on or before the date of such financial statements, except where 
the failure to make such provisions would not reasonably be expected,           
individually or in the aggregate, to have a Material Adverse Effect. No         
deficiencies for any Taxes have been proposed, assessed or asserted in writing  
by any taxing authority against Buying Fund, and no deficiency has been         
proposed, assessed or asserted, in writing, where such deficiency would         
reasonably be expected, individually or in the aggregate, to have a Material    
Adverse Effect. No waivers of the time to assess any such Taxes are outstanding 
nor are any written requests for such waivers pending and no Return of Buying   
Fund is currently being or has been audited with respect to income taxes or     
other Taxes by any Federal, state, local or foreign Tax authority.              

      SECTION 4.13. Brokers. No broker, finder or similar intermediary has acted
for or on behalf of Buyer in connection with this Agreement or the transactions 
contemplated hereby, and no broker, finder, agent or similar intermediary is    
entitled to any broker's, finder's or similar fee or other commission in        
connection therewith based on any agreement, arrangement or understanding with  
Buyer or any action taken by it.                                                

SECTION 4.14. Representations Concerning the Reorganization.        

           (a) There is no plan or intention by Buyer or any person related to
Buyer to acquire or redeem any Buying Fund Shares issued in the Reorganization, 
except to the extent that Buying Fund is required by the Investment Company Act 
to redeem any of its shares presented for redemption at net asset value in the  
ordinary course of its business as an open-end, management investment company.  

     (b) Buying Fund has no plan or intention to sell or otherwise
dispose of any of the assets of Selling Fund acquired in the Reorganization,    
other than in the ordinary course of its business and to the extent necessary to
maintain its status as a "regulated investment company" under the Code;         
provided, however, that this Section 4.14(b) shall not preclude any of the      
reorganizations of funds set forth on Schedule 4.14(b).                         

      (c) Following the Reorganization, Buying Fund will continue an
"historic business" of Selling Fund or use a significant portion of Selling     
Fund's "historic business assets" in a business. For purposes of this           
representation, the terms "historic business" and "historic business assets"    
shall have the meanings ascribed to them in Section 1.368-1(d) of the Treasury  
Regulations; provided, however, that this Section 4.14(c) shall not preclude any
of the reorganizations of funds set forth on Schedule 4.14(b).                  

          (d) Prior to or in the Reorganization, neither Buying Fund nor any
person related to Buying Fund (for purposes of this paragraph as defined in     
Section 1.368-1(e)(3) of the Treasury Regulations) will have acquired directly  
or through any transaction, agreement or                                        

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arrangement with any other person, shares of Selling Fund with consideration    
other than shares of Buying Fund. There is no plan or intention by Buying Fund  
to redeem, or by any person related to Buying Fund to acquire any of the Buying 
Fund Shares issued in the Reorganization either directly or through any         
transaction, agreement, or arrangement with any other person, other than        
redemptions in the ordinary course of Buying Fund's business as an open-end     
investment company as required by the Investment Company Act.                   

 SECTION 4.15. Prospectus and Statement of Additional Information. The
current prospectus and statement of additional information for Buying Fund as of
the date on which it was issued does not contain, and as supplemented by any    
supplement thereto dated prior to or on the Closing Date does not contain, any  
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading.   

      SECTION 4.16. Value of Shares. The fair market value of the shares of each
class of Buying Fund received by Selling Fund Shareholders in the Reorganization
will be approximately equal, as of the Effective Time, to the fair market value 
of the shares of each corresponding class of Selling Fund to be constructively  
surrendered in exchange therefor. The fair market value of the assets of Buying 
Fund will exceed the amount of its liabilities immediately after the exchange.  

SECTION 4.17. Intercompany Indebtedness; Consideration. There is no 
intercompany indebtedness between Seller and Buyer that was issued or acquired, 
or will be settled, at a discount. No consideration other than Buying Fund      
Shares (and Buying Fund's assumption of Selling Fund's Liabilities, including   
for this purpose any liabilities to which the assets of Selling Fund are        
subject) will be given in exchange for the assets of Selling Fund acquired by   
Buying Fund in connection with the Reorganization. The fair market value of the 
assets of Selling Fund transferred to Buying Fund in the Reorganization will    
equal or exceed the sum of the Liabilities assumed by Buying Fund, plus the     
amount of liabilities, if any, to which such transferred assets are subject.    

ARTICLE 5 

 COVENANTS

SECTION 5.1. Conduct of Business.                                   

           (a) From the date of this Agreement up to and including the Closing
Date (or, if earlier, the date upon which this Agreement is terminated pursuant 
to Article 7), Seller shall conduct the business of Selling Fund only in the    
ordinary course and substantially in accordance with past practices, and shall  
use its reasonable best efforts to preserve intact its business organization and
material assets and maintain the rights, franchises and business and customer   
relations necessary to conduct the business operations of Selling Fund in the   
ordinary course in all material respects; provided, however, that this Section  
5.1(a) shall not preclude any of the reorganizations of funds set forth on      
Schedule 4.14(b).                                                               

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           (b) From the date of this Agreement up to and including the Closing
Date (or, if earlier, the date upon which this Agreement is terminated pursuant 
to Article 7), Buyer shall conduct the business of Buying Fund only in the      
ordinary course and substantially in accordance with past practices, and shall  
use its reasonable best efforts to preserve intact its business organization and
material assets and maintain the rights, franchises and business and customer   
relations necessary to conduct the business operations of Buying Fund in the    
ordinary course in all material respects; provided, however, that this Section  
5.1(b) shall not preclude any of the reorganizations of funds set forth on      
Schedule 4.14(b).                                                               

SECTION 5.2. ExpensesThe Investment Adviser shall bear the costs and
expenses incurred in connection with this Agreement and the Reorganization and  
other transactions contemplated hereby; provided that any such expenses incurred
by or on behalf of Buying Fund or Selling Fund shall not be reimbursed or paid  
for by another Person unless those expenses are solely and directly related to  
the Reorganization.                                                             

     SECTION 5.3. Further Assurances. Each of the parties hereto shall execute
such documents and other papers and perform such further acts as may be         
reasonably required to carry out the provisions hereof and the transactions     
contemplated hereby. Each such party shall, on or prior to the Closing Date, use
its reasonable best efforts to fulfill or obtain the fulfillment of the         
conditions precedent to the consummation of the Reorganization, including the   
execution and delivery of any documents, certificates, instruments or other     
papers that are reasonably required for the consummation of the Reorganization. 

    SECTION 5.4. Notice of Events. Buyer shall give prompt notice to Seller,
and Seller shall give prompt notice to Buyer, of (a) the occurrence or          
non-occurrence of any event which to the knowledge of Buyer or to the knowledge 
of Seller would be likely to result in any of the conditions specified in (i) in
the case of Seller, Sections 6.1 and 6.2 or (ii) in the case of Buyer, Sections 
6.2 and 6.3, not being satisfied so as to permit the consummation of the        
Reorganization and (b) any material failure on its part, or on the part of the  
other party hereto of which it has knowledge, to comply with or satisfy any     
covenant, condition or agreement to be complied with or satisfied by it         
hereunder; provided, however, that the delivery of any notice pursuant to this  
Section 5.5 shall not limit or otherwise affect the remedies available hereunder
to any party.                                                                   

  SECTION 5.5. Consents, Approvals and Filings. Each of Seller and Buyer
shall make all necessary filings, as soon as reasonably practicable, including, 
without limitation, those required under the Securities Act, the Exchange Act,  
the Investment Company Act and the Advisers Act, in order to facilitate prompt  
consummation of the Reorganization and the other transactions contemplated by   
this Agreement. In addition, each of Seller and Buyer shall use its reasonable  
best efforts, and shall cooperate fully with each other (i) to comply as        
promptly as reasonably practicable with all requirements of Governmental        
Authorities applicable to the Reorganization and the other transactions         
contemplated herein and (ii) to obtain as promptly as reasonably practicable all
necessary permits, orders or other consents of Governmental Authorities and     
consents of all third parties necessary for the consummation of the             
Reorganization and the other transactions contemplated herein. Each of Seller   
and Buyer shall use reasonable efforts to provide such information and          
communications to Governmental Authorities as such Governmental Authorities may 
request.                                                                        

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   SECTION 5.6. Submission of Agreement to Shareholders. Seller shall take
all action necessary in accordance with applicable law and its Governing        
Documents to convene the Shareholders Meeting. Seller shall, through its Board  
of Trustees, recommend to the shareholders of Selling Fund approval of this     
Agreement. Seller shall use its reasonable best efforts to hold a Shareholders  
Meeting as soon as practicable and advisable after the date hereof.             

ARTICLE 6 

CONDITIONS PRECEDENT TO THE REORGANIZATION        

  SECTION 6.1. Conditions Precedent of Buyer. The obligation of Buyer to
consummate the Reorganization is subject to the satisfaction, at or prior to the
Closing Date, of all of the following conditions, any one or more of which may  
be waived in writing by Buyer.                                                  

     (a) The representations and warranties of Seller on behalf of
Selling Fund set forth in this Agreement shall be true and correct in all       
material respects as of the date of this Agreement and as of the Closing Date   
with the same effect as though all such representations and warranties had been 
made as of the Closing Date.                                                    

         (b) Seller shall have complied with and satisfied in all material
respects all agreements and conditions relating to Selling Fund set forth herein
on its part to be performed or satisfied at or prior to the Closing Date.       

            (c) Buyer shall have received at the Closing Date (i) a certificate,
dated as of the Closing Date, from an officer of Seller, in such individual's   
capacity as an officer of Seller and not as an individual, to the effect that   
the conditions specified in Sections 6.1(a) and (b) have been satisfied and (ii)
a certificate, dated as of the Closing Date, from the Secretary or Assistant    
Secretary (in such capacity) of Seller certifying as to the accuracy and        
completeness of the attached Governing Documents of Seller, and resolutions,    
consents and authorizations of or regarding Seller with respect to the execution
and delivery of this Agreement and the transactions contemplated hereby.        

       (d) The dividend or dividends described in the last sentence of
Section 3.14(a) shall have been declared.                                       

        (e) Buyer shall have received from Seller confirmations or other
adequate evidence as to the tax costs and holding periods of the assets and     
property of Selling Fund transferred to Buying Fund in accordance with the terms
of this Agreement.                                                              

       (f) To the extent applicable, the Investment Adviser shall have
terminated or waived, in either case in writing, any rights to reimbursement    
from Selling Fund to which it is entitled for fees and expenses absorbed by the 
Investment Adviser pursuant to voluntary and contractual fee waiver or expense  
limitation commitments between the Investment Adviser and Selling Fund.         

  SECTION 6.2. Mutual Conditions. The obligations of Seller and Buyer to
consummate the Reorganization are subject to the satisfaction, at or prior to   
the Closing Date, of all of the                                                 

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following further conditions, any one or more of which may be waived in writing 
by Seller and Buyer, but only if and to the extent that such waiver is mutual.  

           (a) All filings required to be made prior to the Closing Date with,
and all consents, approvals, permits and authorizations required to be obtained 
on or prior to the Closing Date from, Governmental Authorities in connection    
with the execution and delivery of this Agreement and the consummation of the   
transactions contemplated herein by Seller and Buyer shall have been made or    
obtained, as the case may be; provided, however, that such consents, approvals, 
permits and authorizations may be subject to conditions that would not          
reasonably be expected, individually or in the aggregate, to have a Material    
Adverse Effect.                                                                 

          (b) This Agreement, the Reorganization of Selling Fund and related
matters shall have been approved and adopted at the Shareholders Meeting by the 
shareholders of Selling Fund on the record date by the Required Shareholder     
Vote.                                                                           

          (c) The assets of Selling Fund to be acquired by Buying Fund shall
constitute at least 90% of the fair market value of the net assets and at least 
70% of the fair market value of the gross assets held by Selling Fund           
immediately prior to the Reorganization. For purposes of this Section 6.2(c),   
assets used by Selling Fund to pay the expenses it incurs in connection with    
this Agreement and the Reorganization and to effect all shareholder redemptions 
and distributions (other than regular, normal dividends and regular, normal     
redemptions pursuant to the Investment Company Act, and not in excess of the    
requirements of Section 852 of the Code, occurring in the ordinary course of    
Selling Fund's business as a series of an open-end management investment        
company) after the date of this Agreement shall be included as assets of Selling
Fund held immediately prior to the Reorganization.                              

    (d) No temporary restraining order, preliminary or permanent
injunction or other order issued by any Governmental Authority preventing the   
consummation of the Reorganization on the Closing Date shall be in effect;      
provided, however, that the party or parties invoking this condition shall use  
reasonable efforts to have any such order or injunction vacated.                

       (e) The Registration Statement on Form N-14 filed by Buyer with
respect to Buying Fund Shares to be issued to Selling Fund Shareholders in      
connection with the Reorganization shall have become effective under the        
Securities Act and shall include an undertaking therein to file the opinion     
referenced in Section 6.2(f) as a post-effective amendment to such Registration 
Statement after the Closing Date, and no stop order suspending the effectiveness
thereof shall have been issued and, to the best knowledge of the parties hereto,
no investigation or proceeding for that purpose shall have been instituted or be
pending, threatened or contemplated under the Securities Act.                   

         (f) Seller and Buyer shall have received on or before the Closing
Date an opinion of Buyer Counsel in form and substance reasonably acceptable to 
Seller and Buyer, as to the matters set forth on Schedule 6.2(f). In rendering  
such opinion, Buyer Counsel may request and rely upon representations contained 
in certificates of officers of Seller, Buyer and others, and the officers of    
Seller and Buyer shall use their best efforts to make available such truthful   
certificates.                                                                   

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    SECTION 6.3. Conditions Precedent of Seller. The obligation of Seller to
consummate the Reorganization is subject to the satisfaction, at or prior to the
Closing Date, of all of the following conditions, any one or more of which may  
be waived in writing by Seller.                                                 

           (a) The representations and warranties of Buyer on behalf of Buying
Fund set forth in this Agreement shall be true and correct in all material      
respects as of the date of this Agreement and as of the Closing Date with the   
same effect as though all such representations and warranties had been made as  
of the Closing Date.                                                            

        (b) Buyer shall have complied with and satisfied in all material
respects all agreements and conditions relating to Buying Fund set forth herein 
on its part to be performed or satisfied at or prior to the Closing Date.       

(c) Seller shall have received on the Closing Date (i) a
certificate, dated as of the Closing Date, from an officer of Buyer, in such    
individual's capacity as an officer of Buyer and not as an individual, to the   
effect that the conditions specified in Sections 6.3(a) and (b) have been       
satisfied and (ii) a certificate, dated as of the Closing Date, from the        
Secretary or Assistant Secretary of Buyer (in such capacity) certifying as to   
the accuracy and completeness of the attached Governing Documents of Buyer and  
resolutions, consents and authorizations of or regarding Buyer with respect to  
the execution and delivery of this Agreement and the transactions contemplated  
hereby.                                                                         

ARTICLE 7 

TERMINATION OF AGREEMENT

     SECTION 7.1. Termination. This Agreement may be terminated on or prior to
the Closing Date as follows:                                                    

(a) by mutual written consent of Seller and Buyer; or   

        (b) at the election of Seller or Buyer, to be effectuated by the
delivery by the terminating party to the other party of a written notice of such
termination:                                                                    

         (i) if the Closing Date shall not be on or before the
Termination Date, unless the failure to consummate the Reorganization is the    
result of a willful and material breach of this Agreement by the party seeking  
to terminate this Agreement;                                                    

                 (ii) if, upon a vote at the Shareholders Meeting or any final
adjournment thereof, the Required Shareholder Vote shall not have been obtained 
as contemplated by Section 5.8; or                                              

            (iii) if any Governmental Authority shall have issued an
order, decree or ruling or taken any other action permanently enjoining,        
restraining or otherwise prohibiting the Reorganization and such order, decree, 
ruling or other action shall have become final and nonappealable.               

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    SECTION 7.2. Survival After Termination. If this Agreement is terminated
in accordance with Section 7.1 hereof and the Reorganization of Selling Fund is 
not consummated, this Agreement shall become void and of no further force and   
effect with respect to the Reorganization and Selling Fund, except for the      
provisions of Section 5.3.                                                      

ARTICLE 8 

 MISCELLANEOUS

   SECTION 8.1. Survival of Representations, Warranties and Covenants. The
representations and warranties in this Agreement, and the covenants in this     
Agreement that are required to be performed at or prior to the Closing Date,    
shall terminate upon the consummation of the transactions contemplated          
hereunder. The covenants in this Agreement that are required to be performed in 
whole or in part subsequent to the Closing Date shall survive the consummation  
of the transactions contemplated hereunder for a period of one (1) year         
following the Closing Date.                                                     

SECTION 8.2. Governing Law. This Agreement shall be construed and   
interpreted according to the laws of the State of Delaware applicable to        
contracts made and to be performed wholly within such state.                    

SECTION 8.3. Binding Effect, Persons Benefiting, No Assignment. This
Agreement shall inure to the benefit of and be binding upon the parties hereto  
and the respective successors and assigns of the parties and such Persons.      
Nothing in this Agreement is intended or shall be construed to confer upon any  
entity or Person other than the parties hereto and their respective successors  
and permitted assigns any right, remedy or claim under or by reason of this     
Agreement or any part hereof. Without the prior written consent of the parties  
hereto, this Agreement may not be assigned by any of the parties hereto.        

SECTION 8.4. Obligations of Buyer and Seller.                       

          (a) Seller and Buyer hereby acknowledge and agree that Buying Fund
is a separate investment portfolio of Buyer, that Buyer is executing this       
Agreement on behalf of Buying Fund, and that any amounts payable by Buyer under 
or in connection with this Agreement shall be payable solely from the revenues  
and assets of Buying Fund. Seller further acknowledges and agrees that this     
Agreement has been executed by a duly authorized officer of Buyer in his or her 
capacity as an officer of Buyer intending to bind Buyer as provided herein, and 
that no officer, trustee or shareholder of Buyer shall be personally liable for 
the liabilities or obligations of Buyer incurred hereunder. Finally, Seller     
acknowledges and agrees that the liabilities and obligations of Buying Fund     
pursuant to this Agreement shall be enforceable against the assets of Buying    
Fund only and not against the assets of Buyer generally or assets belonging to  
any other series of Buyer.                                                      

           (b) Seller and Buyer hereby acknowledge and agree that Selling Fund
is a separate investment portfolio of Seller, that Seller is executing this     
Agreement on behalf of Selling Fund and that any amounts payable by Seller under
or in connection with this Agreement shall be payable solely from the revenues  
and assets of Selling Fund. Buyer further                                       

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acknowledges and agrees that this Agreement has been executed by a duly         
authorized officer of Seller in his or her capacity as an officer of Seller     
intending to bind Seller as provided herein, and that no officer, trustee or    
shareholder of Seller shall be personally liable for the liabilities or         
obligations of Seller incurred hereunder. Finally, Buyer acknowledges and agrees
that the liabilities and obligations of Selling Fund pursuant to this Agreement 
shall be enforceable against the assets of Selling Fund only and not against the
assets of Seller generally or assets belonging to any other series of Seller.   

  SECTION 8.5. Amendments. This Agreement may not be amended, altered or
modified except by a written instrument executed by Seller and Buyer.           

      SECTION 8.6. Enforcement. The parties agree irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed in 
accordance with their specific terms or were otherwise breached. It is          
accordingly agreed that the parties shall be entitled to an injunction or       
injunctions to prevent breaches of this Agreement and to enforce specifically   
the terms and provisions of this Agreement in any court of the United States or 
any state having jurisdiction, in addition to any other remedy to which they are
entitled at law or in equity.                                                   

      SECTION 8.7. Interpretation. When a reference is made in this Agreement to
a Section, Exhibit or Schedule, such reference shall be to a Section of, or an  
Exhibit or a Schedule to, this Agreement unless otherwise indicated. The table  
of contents and headings contained in this Agreement are for reference purposes 
only and shall not affect in any way the meaning or interpretation of this      
Agreement. Whenever the words "include," "includes" or "including" are used in  
this Agreement, they shall be deemed to be followed by the words "without       
limitation." Each representation and warranty contained in Article 3 or 4 that  
relates to a general category of a subject matter shall be deemed superseded by 
a specific representation and warranty relating to a subcategory thereof to the 
extent of such specific representation or warranty.                             

      SECTION 8.8. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original and each of which shall constitute one
and the same instrument.                                                        

  SECTION 8.9. Entire Agreement; Exhibits and Schedules. This Agreement,
including the Exhibits, Schedules, certificates and lists referred to herein,   
and any documents executed by the parties simultaneously herewith or pursuant   
thereto, constitute the entire understanding and agreement of the parties hereto
with respect to the subject matter hereof and supersedes all other prior        
agreements and understandings, written or oral, between the parties with respect
to such subject matter.                                                         

SECTION 8.10. Notices. All notices, requests, demands and other     
communications hereunder shall be in writing and shall be deemed to have been   
duly given when delivered by hand or by overnight courier, two days after being 
sent by registered mail, return receipt requested, or when sent by telecopier   
(with receipt confirmed), provided, in the case of a telecopied notice, a copy  
is also sent by registered mail, return receipt requested, or by courier,       
addressed as follows (or to such other address as a party may designate by      
notice to the other):                                                           

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(a)   If to Seller:                                     

AIM Combination Stock & Bond Funds          
11 Greenway Plaza, Suite 100                
Houston, TX  77046-1173                     
Attn:  Kevin M. Carome                      

with a copy to:                             

Ballard Spahr Andrews & Ingersoll, LLP      
1735 Market Street, 51st Floor              
Philadelphia, PA 19103-7599                 
Attn: Martha J. Hays                        

(b)   If to Buyer:                                      

AIM Funds Group                             
11 Greenway Plaza, Suite 100                
Houston, TX  77046-1173                     
Attn:  Kevin M. Carome                      

with a copy to:                             

Ballard Spahr Andrews & Ingersoll, LLP      
1735 Market Street, 51st Floor              
Philadelphia, PA  19103-7599                
Attn:  Martha J. Hays                       

SECTION 8.11. Representations by Investment Adviser.                

           (a) In its capacity as investment adviser to Seller, the Investment
Adviser represents to Buyer that to the best of its knowledge the               
representations and warranties of Seller and Selling Fund contained in this     
Agreement are true and correct as of the date of this Agreement. For purposes of
this Section 8.11(a), the best knowledge standard shall be deemed to mean that  
the officers of the Investment Adviser who have substantive responsibility for  
the provision of investment advisory services to Seller do not have actual      
knowledge to the contrary after due inquiry.                                    

          (b) In its capacity as investment adviser to Buyer, the Investment
Adviser represents to Seller that to the best of its knowledge the              
representations and warranties of Buyer and Buying Fund contained in this       
Agreement are true and correct as of the date of this Agreement. For purposes of
this Section 8.11(b), the best knowledge standard shall be deemed to mean that  
the officers of the Investment Adviser who have substantive responsibility for  
the provision of investment advisory services to Buyer do not have actual       
knowledge to the contrary after due inquiry.                                    

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SECTION 8.12. Successors and Assigns; Assignment. This Agreement shall be       
binding upon and inure to the benefit of Seller, on behalf of Selling Fund, and 
Buyer, on behalf of Buying Fund, and their respective successors and permitted  
assigns. The parties hereto expressly acknowledge and agree that this Agreement 
shall be binding upon and inure to the benefit of those Delaware statutory      
trusts that are the resulting entities in the permitted reorganizations of funds
set forth on Schedule 4.14(b).                                                  

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   IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.                       

                 AIM COMBINATION STOCK & BOND FUNDS,
                        acting on behalf of  AIM TOTAL RETURN FUND

      By: /s/ ROBERT H. GRAHAM
                                ------------------------------------------
     Name:  Robert H. Graham
                                  ----------------------------------------
Title: President  
                                  ----------------------------------------

                      AIM FUNDS GROUP, acting on behalf of AIM
 BASIC BALANCED FUND

      By: /s/ ROBERT H. GRAHAM
                                ------------------------------------------
     Name:  Robert H. Graham
                                  ----------------------------------------
Title: President  
                                  ----------------------------------------

  A I M ADVISORS, INC.

        By: /s/ MARK H. WILLIAMSON
                                ------------------------------------------
       Name:  Mark H. Williamson
                                  ----------------------------------------
Title: President  
                                  ----------------------------------------

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 EXHIBIT A

EXCLUDED LIABILITIES OF SELLING FUND

None.                                                                           

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SCHEDULE 2.1

 CLASSES OF SHARES OF SELLING FUND AND CORRESPONDING CLASSES OF SHARES OF BUYING
FUND

                                                                [Download Table]

                                      Corresponding Classes of  
Classes of Shares of Selling Fund       Shares of Buying Fund   
---------------------------------     ------------------------  
                                                                
      AIM Total Return Fund            AIM Basic Balanced Fund  
          Class A Shares                   Class A Shares       
          Class B Shares                   Class B Shares       
          Class C Shares                   Class C Shares       
          Class K Shares                   Class A Shares       
      Investor Class Shares             Investor Class Shares   
    Institutional Class Shares        Institutional Class Shares

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SCHEDULE 3.4

CERTAIN CONTINGENT LIABILITIES OF SELLING FUND  

None.                                                                           

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SCHEDULE 4.4

CERTAIN CONTINGENT LIABILITIES OF BUYING FUND   

None.                                                                           

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 SCHEDULE 4.5(B)

CLASSES OF SHARES OF BUYING FUND

Classes of Shares of Buying Fund
 AIM Basic Balanced Fund
Class A Shares
Class B Shares
Class C Shares
Class R Shares
Institutional Shares

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SCHEDULE 4.14(B)

PERMITTED REORGANIZATIONS OF FUNDS

AIM Balanced Fund into AIM Basic Balanced Fund                                  

AIM Emerging Growth Fund into AIM Aggressive Growth Fund                        

AIM Libra Fund into AIM Aggressive Growth Fund                                  

AIM Health Sciences Fund into AIM Global Health Care Fund                       

AIM Dent Demographic Trends Fund into AIM Weingarten Fund                       

AIM Mid-Cap Stock Fund into AIM Capital Development Fund                        

AIM Core Stock Fund into AIM Diversified Dividend Fund                          

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 SCHEDULE 6.2(F)

TAX OPINIONS

     (i) The transfer of the assets of Selling Fund to Buying Fund in exchange
solely for Buying Fund Shares distributed directly to Selling Fund Shareholders 
and Buying Fund's assumption of the Liabilities, as provided in the Agreement,  
will constitute a "reorganization" within the meaning of Section 368(a) of the  
Code and Selling Fund and Buying Fund will be "a party to a reorganization"     
within the meaning of Section 368(b) of the Code.                               

     (ii) In accordance with Section 361(a) and Section 361(c)(1) of the Code,
no gain or loss will be recognized by Selling Fund on the transfer of its assets
to Buying Fund solely in exchange for Buying Fund Shares and Buying Fund's      
assumption of the Liabilities or on the distribution of Buying Fund Shares to   
Selling Fund Shareholders.                                                      

      (iii) In accordance with Section 1032 of the Code, no gain or loss will be
recognized by Buying Fund upon the receipt of assets of Selling Fund in exchange
for Buying Fund Shares issued directly to Selling Fund Shareholders.            

  (iv) In accordance with Section 354(a)(1) of the Code, no gain or loss
will be recognized by Selling Fund Shareholders on the receipt of Buying Fund   
Shares in exchange for Selling Fund Shares.                                     

  (v) In accordance with Section 362(b) of the Code, the basis to Buying
Fund of the assets of Selling Fund will be the same as the basis of such assets 
in the hands of Selling Fund immediately prior to the Reorganization.           

(vi) In accordance with Section 358(a) of the Code, a Selling Fund  
Shareholder's basis for Buying Fund Shares received by the Selling Fund         
Shareholder will be the same as his or her basis for Selling Fund Shares        
exchanged therefor.                                                             

(vii) In accordance with Section 1223(1) of the Code, a Selling Fund
Shareholder's holding period for Buying Fund Shares will be determined by       
including such Selling Fund Shareholder's holding period for Selling Fund Shares
exchanged therefor, provided that such Selling Fund Shareholder held such       
Selling Fund Shares as a capital asset.                                         

     (viii) In accordance with Section 1223(2) of the Code, the holding period
with respect to the assets of Selling Fund transferred to Buying Fund in the    
Reorganization will include the holding period for such assets in the hands of  
Selling Fund.                                                                   

   (ix) In accordance with Section 381(a)(2) of the Code, Buying Fund will
succeed to and take into account the items of Selling Fund described in Section 
381(c) of the Code, subject to the conditions and limitations specified in      
Sections 381 through 384 of the Code and the Treasury Regulations thereunder.   

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                                                                    APPENDIX III
                                                         AIM BASIC BALANCED FUND

                                                                    PROSPECTUS
                                                               APRIL 29, 2005,
                                                       AS REVISED MAY 16, 2005

AIM Basic Balanced Fund seeks to achieve long-term growth of capital and current
income.                                                                         

--------------------------------------------------------------------------------

This prospectus contains important information about the Class A, B, C, R and   
Investor Class shares of the fund. Please read it before investing and keep it  
for future reference.                                                           

Investor Class shares offered by this prospectus are offered only to            
grandfathered investors. Please see the section of the prospectus entitled      
"Purchasing Shares--Grandfathered Investors."                                   

As with all other mutual fund securities, the Securities and Exchange Commission
has not approved or disapproved these securities or determined whether the      
information in this prospectus is adequate or accurate. Anyone who tells you    
otherwise is committing a crime.                                                

Investments in the fund:                                                        
- are not FDIC insured;                                                         
- may lose value; and                                                           
- are not guaranteed by a bank.                                                 

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----------------------- 
AIM BASIC BALANCED FUND 
----------------------- 

TABLE OF CONTENTS                                                               
--------------------------------------------------------------------------------

                                                                [Download Table]
                                                      
INVESTMENT OBJECTIVE AND STRATEGIES                  1
------------------------------------------------------
PRINCIPAL RISKS OF INVESTING IN THE FUND             1
------------------------------------------------------
DISCLOSURE OF PORTFOLIO HOLDINGS                     1
------------------------------------------------------
PERFORMANCE INFORMATION                              2
------------------------------------------------------
Annual Total Returns                                 2
Performance Table                                    3
FEE TABLE AND EXPENSE EXAMPLE                        4
------------------------------------------------------
Fee Table                                            4
Expense Example                                      4
Hypothetical Investment and Expense                   
  Information                                        5
FUND MANAGEMENT                                      6
------------------------------------------------------
The Advisor                                          6
Advisor Compensation                                 7
Portfolio Managers                                   7
OTHER INFORMATION                                    7
------------------------------------------------------
Sales Charges                                        7
Dividends and Distributions                          7
FINANCIAL HIGHLIGHTS                                 8
------------------------------------------------------
SHAREHOLDER INFORMATION                            A-1
------------------------------------------------------
Choosing a Share Class                             A-1
Excessive Short-Term Trading Activity                 
  Disclosures                                      A-5
Purchasing Shares                                  A-7
Redeeming Shares                                   A-9
Exchanging Shares                                 A-11
Pricing of Shares                                 A-14
Taxes                                             A-15
OBTAINING ADDITIONAL INFORMATION            Back Cover
------------------------------------------------------

The AIM Family of Funds, AIM and Design, AIM, AIM Funds, AIM Funds and Design,  
AIM Investments, AIM Investor, AIM Lifetime America, AIM LINK, AIM Institutional
Funds, aimfunds.com, La Familia AIM de Fondos, La Familia AIM de Fondos and     
Design, Invierta con DISCIPLINA and Invest with DISCIPLINE, The AIM College     
Savings Plan, AIM Solo 401(k), AIM Investments and Design and Your goals. Our   
solutions. are registered service marks and AIM Bank Connection, AIM Internet   
Connect, AIM Private Asset Management, AIM Private Asset Management and Design, 
AIM Stylized and/or Design, AIM Alternative Assets and Design and myaim.com are 
service marks of A I M Management Group Inc. AIM Trimark is a service mark of   
A I M Management Group Inc. and AIM Funds Management Inc.                       

No dealer, salesperson or any other person has been authorized to give any      
information or to make any representations other than those contained in this   
prospectus, and you should not rely on such other information or                
representations.                                                                

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INVESTMENT OBJECTIVE AND STRATEGIES                                             
--------------------------------------------------------------------------------

The fund's investment objective is long-term growth of capital and current      
income. The investment objective of the fund may be changed by the Board of     
Trustees without shareholder approval.                                          

  The fund seeks to meet its objective by investing in a broadly diversified
portfolio of common stocks, preferred stocks, convertible securities and bonds. 
The fund invests without regard to market capitalization. The fund normally     
invests a minimum of 30% and a maximum of 70% of its total assets in equity     
securities. The fund will invest at least 25% and a maximum of 70% of its total 
assets in investment-grade non-convertible debt securities. The fund may also   
invest up to 25% of its total assets in convertible securities and up to 25% of 
its total assets in foreign securities. For cash management purposes, the fund  
may also hold a portion of its assets in cash or cash equivalents, including    
shares of affiliated money market funds. Any percentage limitations with respect
to assets of the fund are applied at the time of purchase.                      

In selecting the percentages of assets to be invested in equity or debt 
securities, the portfolio managers consider such factors as general market and  
economic conditions, as well as trends, yields, interest rates and changes in   
fiscal and monetary policies. In selecting equity investments, the portfolio    
managers seek to identify those companies whose stock prices are undervalued by 
investors due to temporary factors and that provide the potential for attractive
returns. The portfolio managers will purchase debt securities for both capital  
appreciation and income, and to provide portfolio diversification. The portfolio
managers consider whether to sell a particular security when they believe that  
security no longer has that potential.                                          

   In anticipation of or in response to adverse market or other conditions, or
atypical circumstances such as unusually large cash inflows or redemptions, the 
fund may temporarily hold all or a portion of its assets in cash, cash          
equivalents or high-quality debt instruments. As a result, the fund may not     
achieve its investment objective.                                               

PRINCIPAL RISKS OF INVESTING IN THE FUND                                        
--------------------------------------------------------------------------------

There is a risk that you could lose all or a portion of your investment in the  
fund and that the income you may receive from the fund may vary. The value of   
your investment in the fund will go up and down with the prices of the          
securities in which the fund invests. The prices of equity securities change in 
response to many factors, including the historical and prospective earnings of  
the issuer, the value of its assets, general economic conditions, interest      
rates, investor perceptions and market liquidity. Interest rate increases may   
cause the price of a debt security to decrease; the longer a debt security's    
duration, the more sensitive it is to this risk. The issuer of a security may   
default or otherwise be unable to honor a financial obligation.                 

  The values of convertible securities in which the fund invests may also be
affected by market interest rates, the risk that the issuer may default on      
interest or principal payments and the value of the underlying stock into which 
these securities may be converted. Specifically, since these types of           
convertible securities pay fixed interest or dividends, their values may fall if
interest rates rise and rise if market interest rates fall. Additionally, an    
issuer may have the right to buy back certain of the convertible securities at a
time and at a price that is unfavorable to the fund.                            

  Foreign securities have additional risks, including exchange rate changes,
political and economic upheaval, the relative lack of information about these   
companies, relatively low market liquidity and the potential lack of strict     
financial and accounting controls and standards.                                

  An investment in the fund is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government 
agency.                                                                         

DISCLOSURE OF PORTFOLIO HOLDINGS                                                
--------------------------------------------------------------------------------

A description of the fund's policies and procedures with respect to the         
disclosure of the fund's portfolio holdings is available in the fund's Statement
of Additional Information.                                                      

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PERFORMANCE INFORMATION                                                         
--------------------------------------------------------------------------------

The bar chart and table shown below provide an indication of the risks of       
investing in the fund. The fund's past performance (before and after taxes) is  
not necessarily an indication of its future performance.                        

ANNUAL TOTAL RETURNS                                                            
--------------------------------------------------------------------------------

The following bar chart shows changes in the performance of the fund's Class A  
shares from year to year. The bar chart does not reflect sales loads. If it did,
the annual total returns shown would be lower.                                  

                                                                [Download Table]

                                                                         ANNUAL 
YEAR ENDED                                                                TOTAL 
DECEMBER 31                                                              RETURNS
-----------                                                              -------
                                                                                
2002...................................................................  -10.97%
2003...................................................................   22.35%
2004...................................................................    6.89%

The Class A shares' year-to-date total return as of March 31, 2005 was  
- -1.05%.                                                                       

  During the period shown in the bar chart, the highest quarterly return was
14.54% (quarter ended June 30, 2003) and the lowest quarterly return was -11.63%
(quarter ended September 30, 2002).                                             

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PERFORMANCE INFORMATION (CONTINUED)                                             
--------------------------------------------------------------------------------

PERFORMANCE TABLE                                                               

The following performance table compares the fund's performance to that of a    
broad-based securities market index, a style specific index and a peer group    
index. The fund's performance reflects payment of sales loads, if applicable.   
The indices may not reflect payment of fees, expenses or taxes. The fund is not 
managed to track the performance of any particular index, including the indices 
shown below, and consequently, the performance of the fund may deviate          
significantly from the performance of the indices shown below.                  

                                                                [Download Table]

AVERAGE ANNUAL TOTAL RETURNS                                                      
----------------------------------------------------------------------------------
(for the periods ended                               SINCE           INCEPTION    
December 31, 2004)                        1 YEAR    INCEPTION           DATE      
----------------------------------------------------------------------------------
                                                                                  
Class A                                                                09/28/01   
  Return Before Taxes                      1.84%        5.67%                     
  Return After Taxes on Distributions      1.30         5.27                      
  Return After Taxes on Distributions                                             
     and Sale of Fund Shares               1.90         4.72                      
Class B                                                                09/28/01   
  Return Before Taxes                      1.12         5.76                      
Class C                                                                09/28/01   
  Return Before Taxes                      5.21         6.59                      
Class R(1)                                                             09/28/01(1)
  Return Before Taxes                      6.80         7.12                      
Investor Class(2)                            --           --                 --   
----------------------------------------------------------------------------------
S&P 500 Index(3)                          10.87         6.58(6)        09/30/01(6)
Custom Basic Balanced Index(4)            11.54         8.78(6)        09/30/01(6)
Lipper Balanced Fund Index(5)              8.99         6.93(6)        09/30/01(6)
----------------------------------------------------------------------------------

After-tax returns are calculated using the historical highest individual federal
marginal income tax rates and do not reflect the impact of state and local      
taxes. Actual after-tax returns depend on an investor's tax situation and may   
differ from those shown, and after-tax returns shown are not relevant to        
investors who hold their fund shares through tax-deferred arrangements, such as 
401(k) plans or individual retirement accounts. After-tax returns are shown for 
Class A only and after-tax returns for Class B, C, R and Investor Class will    
vary.                                                                           

(1) The returns shown for these periods are the blended returns of the          
 historical performance of the fund's Class R shares since their inception
and restated historical performance of the fund's Class A shares (for   
periods prior to inception of the Class R shares) at net asset value,   
adjusted to reflect the higher Rule 12b-1 fees applicable to the Class R
   shares. The inception date shown in the table is that of the fund's Class A
  shares. The inception date of the fund's Class R shares is April 30, 2004.
(2) The expected inception date of the fund's Investor Class shares is July 18, 
2005.                                                                   
(3) The Standard & Poor's 500 Index measures the performance of the 500 most    
 widely held common stocks and is considered one of the best indicators of
  U.S. stock market performance. The fund has also included the Custom Basic
Balanced Index, which the fund believes more closely reflects the       
performance of the types of securities in which the fund invests. In    
  addition, the Lipper Balanced Fund Index (which may or may not include the
fund) is included for comparison to a peer group.                       
(4) The Custom Basic Balanced Index is an index created by A I M Advisors, Inc. 
to benchmark the fund. This index consists of the following indices: 60%
Russell 1000--Registered Trademark-- Value and 40% Lehman Brothers U.S. 
Aggregate Bond. The Russell 1000--Registered Trademark-- Value Index    
    measures the performance of those Russell 1000--Registered Trademark-- Index
companies with lower price-to-book ratios and lower forecasted growth   
values. The Lehman Brothers U.S. Aggregate Bond Index measures the      
 performance of U.S. investment-grade fixed rate bonds with components for
    government and corporate securities, mortgage pass throughs and asset backed
securities of treasury issues, agency issues, corporate bond issues and 
mortgage-backed securities.                                             
(5) The Lipper Balanced Fund Index is an equally weighted representation of the 
30 largest funds in the Lipper Balanced category. These funds invest to 
conserve principal by maintaining at all times a balanced portfolio of  
stocks and bonds. Typically the stock/bond ratio is approximately 60/40.
(6) The average annual total return given is since the month end closest to the 
inception date of the class with the longest performance history.       

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FEE TABLE AND EXPENSE EXAMPLE                                                   
--------------------------------------------------------------------------------

FEE TABLE                                                                       
This table describes the fees and expenses that you may pay if you buy and hold 
shares of the fund.                                                             

                                                        [Enlarge/Download Table]

SHAREHOLDER FEES                                                                       
---------------------------------------------------------------------------------------
(fees paid directly                                                                    
from your                                                                     INVESTOR 
investment)                       CLASS A    CLASS B    CLASS C    CLASS R    CLASS    
---------------------------------------------------------------------------------------
                                                                                       
Maximum Sales Charge (Load)                                                            
Imposed on Purchases                                                                   
(as a percentage of                                                                    
offering price)                     4.75%      None       None       None       None   

Maximum Deferred                                                                       
Sales Charge (Load)                                                                    
(as a percentage of                                                                    
original purchase price                                                                
or redemption proceeds,                                                                
whichever is less)                  None(1,2)   5.00%     1.00%      None(3)    None   
---------------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

ANNUAL FUND OPERATING EXPENSES(4)                                                      
---------------------------------------------------------------------------------------
(expenses that are                                                                     
deducted from                                                                 INVESTOR 
fund assets)                      CLASS A    CLASS B    CLASS C    CLASS R    CLASS    
---------------------------------------------------------------------------------------
                                                                                       
Management Fees                     0.65%      0.65%      0.65%      0.65%      0.65%  

Distribution and/or                                                                    
Service (12b-1) Fees                0.35       1.00       1.00       0.50       0.25   

Other Expenses(5)                   0.49       0.49       0.49       0.49       0.49   

Total Annual Fund                                                                      
Operating Expenses                  1.49       2.14       2.14       1.64       1.39   
Fee Waiver(6)                       0.03       0.03       0.03       0.03       0.03   
Net Annual Fund Operating                                                              
Expenses(7,8)                       1.46       2.11       2.11       1.61       1.36   
---------------------------------------------------------------------------------------

(1) If you buy $1,000,000 or more of Class A shares and redeem these shares     
  within 18 months from the date of purchase, you may pay a 1.00% contingent
deferred sales charge (CDSC) at the time of redemption.                 
(2) If you are a retirement plan participant and you buy $1,000,000 or more of  
Class A shares, you may pay a 1.00% CDSC if a total redemption of the   
retirement plan assets occurs within 12 months from the date of the     
retirement plan's initial purchase.                                     
(3) If you are a retirement plan participant, you may pay a 0.75% CDSC if the   
    distributor paid a concession to the dealer of record and a total redemption
  of the retirement plan assets occurs within 12 months from the date of the
retirement plan's initial purchase.                                     
(4) There is no guarantee that actual expenses will be the same as those shown  
in the table.                                                           
(5) Other Expenses for Investor Class shares are based on estimated average net 
assets for the current fiscal year.                                     
(6) Effective January 1, 2005 through December 31, 2009, the advisor has        
    contractually agreed to waive a portion of its advisory fees. The Fee Waiver
 reflects this agreement. (See "Fund Management -- Advisor Compensation").
(7) The fund's advisor has voluntarily agreed to waive advisory fees and/or     
reimburse expenses to the extent necessary to limit Net Annual Fund     
   Operating Expenses (excluding certain items discussed below) for the fund's
Class A, Class B, Class C, Class R and Investor Class shares to 1.50%,  
   2.15%, 2.15%, 1.65% and 1.40% of average daily net assets, respectively. In
    determining the advisor's obligation to waive advisory fees and/or reimburse
    expenses, the following expenses are not taken into account, and could cause
    the Total Annual Fund Operating Expenses to exceed the limits: (i) interest;
    (ii) taxes; (iii) dividend expenses on short sales, (iv) extraordinary items
(these are expenses that are not anticipated to arise from the Fund's   
 day-to-day operations), as defined in the Financial Accounting Standard's
Board's Generally Accepted Accounting Principles or as approved by the  
fund's Board of Trustees; (v) expenses related to a merger or           
reorganization, as approved by the fund's Board of Trustees; and (vi)   
  expenses that the fund has incurred but did not actually pay because of an
expense offset arrangement. Currently, in addition to the expense       
  reimbursement arrangement with AMVESCAP (as defined herein) described more
fully below, the only expense offset arrangements from which the fund   
   benefits are in the form of credits that the fund receives from banks where
the fund or its transfer agent has deposit accounts in which it holds   
   uninvested cash. Those credits are used to pay certain expenses incurred by
the fund. These expense limitation agreements may be modified or        
discontinued without further notice to investors.                       
(8) At the request of the Trustees of AIM Funds Group, AMVESCAP has agreed to   
   reimburse the Trust for fund expenses related to market timing matters. Net
    Annual Fund Operating Expenses restated for the item in Note 6 above and net
    of this arrangement were 1.44%, 2.09%, 2.09% and 1.59% for Class A, Class B,
 Class C and Class R shares, respectively, for the year ended December 31,
2004.                                                                   

If a financial institution is managing your account you may also be charged a   
transaction or other fee by such financial institution.                         

  As a result of 12b-1 fees, long-term shareholders in the fund may pay more
than the maximum permitted initial sales charge.                                

EXPENSE EXAMPLE                                                                 
This example is intended to help you compare the costs of investing in different
classes of the fund with the cost of investing in other mutual funds.           

    The example assumes that you invest $10,000 in the fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The   
example also assumes that your investment has a 5% return each year, that the   
fund's operating expenses remain the same and includes the effect of any        
contractual fee waivers and/or expense reimbursements. To the extent fees are   
waived and/or expenses are reimbursed voluntarily, your expenses will be lower. 
Although your actual returns and costs may be higher or lower, based on these   
assumptions your costs would be:                                                

                                                                [Download Table]

                                   1 YEAR    3 YEARS    5 YEARS    10 YEARS 
----------------------------------------------------------------------------
                                                                            
Class A                             $617       $915      $1,235     $2,156  
Class B                              714        961       1,334      2,294  
Class C                              314        661       1,134      2,459  
Class R                              164        508         876      1,930  
Investor Class                       138        431         745      1,654  
----------------------------------------------------------------------------

You would pay the following expenses if you did not redeem your shares:         

                                                                [Download Table]

                                   1 YEAR    3 YEARS    5 YEARS    10 YEARS 
----------------------------------------------------------------------------
                                                                            
Class A                             $617       $915      $1,235     $2,156  
Class B                              214        661       1,134      2,294  
Class C                              214        661       1,134      2,459  
Class R                              164        508         876      1,930  
Investor Class                       138        431         745      1,654  
----------------------------------------------------------------------------

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HYPOTHETICAL INVESTMENT AND EXPENSE INFORMATION                                 

The following supplemental hypothetical investment information provides         
additional information in a different format from the preceding Fee Table and   
Expense Example about the effect of a fund's expenses, including investment     
advisory fees and other fund costs, on the fund's return over a 10-year period. 
Because a fund's annual return when quoted is already reduced by the fund's fees
and expenses for that year, this hypothetical expense information is intended to
help you understand the annual and cumulative impact of a fund's fees and       
expenses on your investment. Assuming a hypothetical investment of $10,000 in   
each class of shares of the fund and a 5% return before expenses each year, the 
chart shows the cumulative return before expenses, the cumulative return after  
expenses, the ending balance and the estimated annual expenses for each year one
through ten. The chart also assumes that the annual expense ratio stays the same
throughout the 10-year period. The current annual expense ratio for each class, 
which is the same as stated in the Fee Table above, is reflected in the chart   
and is net of any contractual fee waiver or expense reimbursement. There is no  
assurance that the annual expense ratio will be the expense ratio for the fund  
class. To the extent that the advisor makes any waivers or reimbursements       
pursuant to a voluntary arrangement, your actual expenses may be less. The chart
does not take into account initial or contingent deferred sales charges, if any.
You should understand that this is only a hypothetical presentation made to     
illustrate what expenses and returns would be under the above scenarios; your   
actual returns and expenses are likely to differ (higher or lower) from those   
shown below.                                                                    

                                                        [Enlarge/Download Table]

CLASS A--ANNUAL EXPENSE                                                                     
RATIO 1.46%                     YEAR 1       YEAR 2       YEAR 3       YEAR 4       YEAR 5  
--------------------------------------------------------------------------------------------
                                                                                            
Cumulative Return Before                                                                    
  Expenses                         5.00%       10.25%       15.76%       21.55%       27.63%
Cumulative Return After                                                                     
  Expenses                         3.54%        7.21%       11.00%       14.93%       19.00%
End of Year Balance           $10,354.00   $10,720.53   $11,100.04   $11,492.98   $11,899.83
Estimated Annual Expenses     $   148.58   $   153.84   $   159.29   $   164.93   $   170.77
--------------------------------------------------------------------------------------------


CLASS A--ANNUAL EXPENSE                                                                     
RATIO 1.46%                     YEAR 6       YEAR 7       YEAR 8       YEAR 9      YEAR 10  
                                                                                            
Cumulative Return Before                                                                    
  Expenses                        34.01%       40.71%       47.75%       55.13%       62.89%
Cumulative Return After                                                                     
  Expenses                        23.21%       27.57%       32.09%       36.76%       41.61%
End of Year Balance           $12,321.09   $12,757.25   $13,208.86   $13,676.45   $14,160.60
Estimated Annual Expenses     $   176.81   $   183.07   $   189.55   $   196.26   $   203.21
--------------------------------------------------------------------------------------------
                                                        [Enlarge/Download Table]

CLASS B--ANNUAL EXPENSE                                                                     
RATIO 2.11%                     YEAR 1       YEAR 2       YEAR 3       YEAR 4       YEAR 5  
--------------------------------------------------------------------------------------------
                                                                                            
Cumulative Return Before                                                                    
  Expenses                         5.00%       10.25%       15.76%       21.55%       27.63%
Cumulative Return After                                                                     
  Expenses                         2.89%        5.86%        8.92%       12.07%       15.31%
End of Year Balance           $10,289.00   $10,586.35   $10,892.30   $11,207.09   $11,530.97
Estimated Annual Expenses     $   214.05   $   220.23   $   226.60   $   233.15   $   239.89
--------------------------------------------------------------------------------------------


CLASS B--ANNUAL EXPENSE                                                                     
RATIO 2.11%                     YEAR 6       YEAR 7       YEAR 8       YEAR 9      YEAR 10  
--------------------------------------------------------------------------------------------
                                                                                            
Cumulative Return Before                                                                    
  Expenses                        34.01%       40.71%       47.75%       55.13%       62.89%
Cumulative Return After                                                                     
  Expenses                        18.64%       22.07%       25.60%       30.04%       34.65%
End of Year Balance           $11,864.21   $12,207.09   $12,559.88   $13,004.50   $13,464.85
Estimated Annual Expenses     $   246.82   $   253.95   $   261.29   $   186.62   $   193.23
--------------------------------------------------------------------------------------------
                                                        [Enlarge/Download Table]

CLASS C--ANNUAL EXPENSE                                                                     
RATIO 2.11%                     YEAR 1       YEAR 2       YEAR 3       YEAR 4       YEAR 5  
--------------------------------------------------------------------------------------------
                                                                                            
Cumulative Return Before                                                                    
  Expenses                         5.00%       10.25%       15.76%       21.55%       27.63%
Cumulative Return After                                                                     
  Expenses                         2.89%        5.86%        8.92%       12.07%       15.31%
End of Year Balance           $10,289.00   $10,586.35   $10,892.30   $11,207.09   $11,530.97
Estimated Annual Expenses     $   214.05   $   220.23   $   226.60   $   233.15   $   239.89
--------------------------------------------------------------------------------------------


CLASS C--ANNUAL EXPENSE                                                                     
RATIO 2.11%                     YEAR 6       YEAR 7       YEAR 8       YEAR 9      YEAR 10  
--------------------------------------------------------------------------------------------
                                                                                            
Cumulative Return Before                                                                    
  Expenses                        34.01%       40.71%       47.75%       55.13%       62.89%
Cumulative Return After                                                                     
  Expenses                        18.64%       22.07%       25.60%       29.23%       32.96%
End of Year Balance           $11,864.21   $12,207.09   $12,559.88   $12,922.86   $13,296.33
Estimated Annual Expenses     $   246.82   $   253.95   $   261.29   $   268.84   $   276.61
--------------------------------------------------------------------------------------------
                                                        [Enlarge/Download Table]

CLASS R--ANNUAL EXPENSE                                                                     
RATIO 1.61%                     YEAR 1       YEAR 2       YEAR 3       YEAR 4       YEAR 5  
--------------------------------------------------------------------------------------------
                                                                                            
Cumulative Return Before                                                                    
  Expenses                         5.00%       10.25%       15.76%       21.55%       27.63%
Cumulative Return After                                                                     
  Expenses                         3.39%        6.89%       10.52%       14.27%       18.14%
End of Year Balance           $10,339.00   $10,689.49   $11,051.87   $11,426.52   $11,813.88
Estimated Annual Expenses     $   163.73   $   169.28   $   175.02   $   180.95   $   187.09
--------------------------------------------------------------------------------------------


CLASS R--ANNUAL EXPENSE                                                                     
RATIO 1.61%                     YEAR 6       YEAR 7       YEAR 8       YEAR 9      YEAR 10  
--------------------------------------------------------------------------------------------
                                                                                            
Cumulative Return Before                                                                    
  Expenses                        34.01%       40.71%       47.75%       55.13%       62.89%
Cumulative Return After                                                                     
  Expenses                        22.14%       26.28%       30.57%       34.99%       39.57%
End of Year Balance           $12,214.37   $12,628.44   $13,056.55   $13,499.16   $13,956.78
Estimated Annual Expenses     $   193.43   $   199.98   $   206.76   $   213.77   $   221.02
--------------------------------------------------------------------------------------------
                                                        [Enlarge/Download Table]

INVESTOR CLASS--ANNUAL                                                                      
EXPENSE RATIO 1.36%             YEAR 1       YEAR 2       YEAR 3       YEAR 4       YEAR 5  
--------------------------------------------------------------------------------------------
                                                                                            
Cumulative Return Before                                                                    
  Expenses                         5.00%       10.25%       15.76%       21.55%       27.63%
Cumulative Return After                                                                     
  Expenses                         3.64%        7.41%       11.32%       15.37%       19.57%
End of Year Balance           $10,364.00   $10,741.25   $11,132.23   $11,537.44   $11,957.41
Estimated Annual Expenses     $   138.48   $   143.52   $   148.74   $   154.15   $   159.76
--------------------------------------------------------------------------------------------


INVESTOR CLASS--ANNUAL                                                                      
EXPENSE RATIO 1.36%             YEAR 6       YEAR 7       YEAR 8       YEAR 9      YEAR 10  
--------------------------------------------------------------------------------------------
                                                                                            
Cumulative Return Before                                                                    
  Expenses                        34.01%       40.71%       47.75%       55.13%       62.89%
Cumulative Return After                                                                     
  Expenses                        23.93%       28.44%       33.11%       37.96%       42.98%
End of Year Balance           $12,392.66   $12,843.75   $13,311.26   $13,795.79   $14,297.96
Estimated Annual Expenses     $   165.58   $   171.61   $   177.85   $   184.33   $   191.04
--------------------------------------------------------------------------------------------

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FUND MANAGEMENT                                                                 
--------------------------------------------------------------------------------

THE ADVISOR                                                                     
A I M Advisors, Inc. (the advisor or AIM) serves as the fund's investment       
advisor and is responsible for its day-to-day management. The advisor is located
at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor         
supervises all aspects of the fund's operations and provides investment advisory
services to the fund, including obtaining and evaluating economic, statistical  
and financial information to formulate and implement investment programs for the
fund.                                                                           

The advisor has acted as an investment advisor since its organization in
1976. Today, the advisor, together with its subsidiaries, advises or manages    
over 200 investment portfolios, including the fund, encompassing a broad range  
of investment objectives.                                                       

  On October 8, 2004, INVESCO Funds Group, Inc. (IFG) (the former investment
advisor to certain AIM funds) and AIM reached final settlements with certain    
regulators, including without limitation the Securities and Exchange Commission 
(SEC), the New York Attorney General (NYAG) and the Colorado Attorney General   
(COAG), to resolve civil enforcement actions and investigations related to      
market timing activity and related issues in the AIM funds, including those     
formerly advised by IFG. These regulators alleged, in substance, that IFG and   
AIM failed to disclose in the prospectuses for the AIM funds that they advised  
and to the independent directors/trustees of such funds that they had entered   
into certain arrangements permitting market timing of such funds, thereby       
breaching their fiduciary duties to such funds. As a result of the foregoing,   
the regulators alleged that IFG and AIM breached various Federal and state      
securities, business and consumer protection laws. On the same date, A I M      
Distributors, Inc. (ADI) (the distributor of the retail AIM funds) reached a    
final settlement with the SEC to resolve an investigation relating to market    
timing activity and related issues in the AIM funds. The SEC also alleged that  
ADI violated various Federal securities laws. The SEC also has settled related  
market timing enforcement actions brought against certain former officers and   
employees of IFG.                                                               

   Under the settlements, $325 million will be made available for distribution
to the shareholders of those AIM funds that IFG formerly advised that were      
harmed by market timing activity, and $50 million will be made available for    
distribution to the shareholders of those AIM funds advised by AIM that were    
harmed by market timing activity. These settlement funds will be distributed in 
accordance with a methodology to be determined by an independent distribution   
consultant, in consultation with AIM and the independent trustees of the AIM    
funds and acceptable to the staff of the SEC. Under the settlements with the    
NYAG and the COAG, AIM has also agreed to reduce management fees on certain AIM 
equity and balanced funds by $15 million per year for the next five years, based
upon effective fee rates and assets under management as of July 1, 2004, and not
to increase certain management fees during this period. In addition, as required
by the settlements, AIM is undertaking certain governance and compliance reforms
and reviewing its policies and procedures.                                      

 At the request of the trustees of the AIM funds, AMVESCAP PLC (AMVESCAP),
the parent company of IFG and AIM, has agreed to reimburse expenses incurred by 
such funds related to market timing matters.                                    

 The independent trustees of the AIM funds have been assisted by their own
independent counsel and financial expert in their own investigation of market   
timing activity in the AIM funds. A special committee, consisting of four       
independent trustees, was formed to oversee this investigation. None of the     
costs of this investigation will be borne by the AIM funds or by fund           
shareholders.                                                                   

IFG, AIM, certain related entities, certain of their current and former 
officers and/or certain of the AIM funds have received regulatory inquiries in  
the form of subpoenas or other oral or written requests for information and/or  
documents related to one or more of the following issues: market timing         
activity, late trading, fair value pricing, excessive or improper advisory      
and/or distribution fees, mutual fund sales practices, including but not limited
to revenue sharing and directed-brokerage arrangements, investments in          
securities of other registered investment companies, contractual plans, issues  
related to Section 529 college savings plans and procedures for locating lost   
securityholders. Additional regulatory inquiries related to these or other      
issues may be received by the AIM funds, IFG, AIM and/or related entities and   
individuals in the future.                                                      

 A number of private civil lawsuits related to market timing, late trading
and related issues have been filed against (depending on the lawsuit) certain of
the AIM funds, IFG, AIM, AMVESCAP, certain related entities, certain of their   
current and former officers and/or certain unrelated third parties. All such    
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 for consolidated or coordinated pre-trial proceedings. Other private   
civil lawsuits have been filed against (depending on the lawsuit) IFG, AIM, ADI,
certain related entities, certain of their current and former officers and/or   
certain of the AIM funds and their trustees alleging the improper use of fair   
value pricing, excessive advisory and/or distribution fees, improper charging of
distribution fees on limited offerings funds or share classes and improper      
mutual fund sales practices and directed-brokerage arrangements and             
participation in class action settlements.                                      

   Additional civil lawsuits related to the above or other issues may be filed
by private litigants or by regulators against the AIM funds, IFG, AIM and/or    
related entities and individuals in the future.                                 

   You can find more detailed information concerning all of the above matters,
including the parties to the civil lawsuits and summaries of the various        
allegations and remedies sought in such lawsuits, in the fund's Statement of    
Additional Information and on AIM's Internet website under the heading "Settled 
Enforcement Actions and Investigations Related to Market Timing, Regulatory     
Inquiries and Pending Litigation" (http://www.aiminvestments.com/regulatory).   

    As a result of the matters discussed above, investors in the AIM funds might
react by redeeming their investments. This might require                        

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the funds to sell investments to provide for sufficient liquidity and could also
have an adverse effect on the investment performance of the funds.              

ADVISOR COMPENSATION                                                            

During the fiscal year ended December 31, 2004, the advisor received            
compensation of 0.65% of average daily net assets. The annual management fee    
payable to the advisor pursuant to the investment advisory agreement ranges from
0.65% to 0.55% of average daily net assets, based on net asset levels. The      
advisor has contractually agreed to advisory fee waivers for the period January 
1, 2005 to December 31, 2009 as part of its settlement with the Attorney General
of New York (NYAG). The advisor will waive advisory fees to the extent necessary
so that the advisory fee payable does not exceed the Advisory Fee Rates after   
January 1, 2005. Following are the advisory fee rates before and after January  
1, 2005.                                                                        

                                                                [Download Table]

      ADVISORY FEE RATES BEFORE                ADVISORY FEE RATES AFTER       
        JANUARY 1, 2005 WAIVER                  JANUARY 1, 2005 WAIVER        
------------------------------------------------------------------------------
                                                                              
         0.65% of the first $1 billion         0.62% of the first $250 million
          0.60% of the next $4 billion         0.605% of the next $250 million
       0.55% of amount over $5 billion          0.59% of the next $500 million
                                               0.575% of the next $1.5 billion
                                                0.56% of the next $2.5 billion
                                               0.545% of the next $2.5 billion
                                                0.53% of the next $2.5 billion
                                             0.515% of amount over $10 billion

PORTFOLIO MANAGERS                                                              

The following individuals are jointly and primarily responsible for the         
day-to-day management of the fund's portfolio:                                  

- Bret W. Stanley (lead manager), Senior Portfolio Manager, who has been        
responsible for the fund since 2001 and has been associated with the advisor
and/or its affiliates since 1998. As the lead manager, Mr. Stanley generally
has final authority over all aspects of the fund's investment portfolio,    
including but not limited to, purchases and sales of individual securities, 
portfolio construction techniques, portfolio risk assessment, and the       
management of daily cash flows in accordance with portfolio holdings. The   
degree to which Mr. Stanley may perform these functions, and the nature of  
these functions, may change from time to time.                              

- R. Canon Coleman II, Portfolio Manager, who has been responsible for the fund 
since 2003 and has been associated with the advisor and/or its affiliates   
since 1999.                                                                 

- Jan H. Friedli, Senior Portfolio Manager, who has been responsible for the    
  fund since 2001 and has been associated with the advisor and/or its affiliates
since 1999.                                                                 

- Scot W. Johnson, Senior Portfolio Manager, who has been responsible for the   
  fund since 2001 and has been associated with the advisor and/or its affiliates
since 1994.                                                                 

- Matthew W. Seinsheimer, Senior Portfolio Manager, who has been responsible for
the fund since 2001 and has been associated with the advisor and/or its     
affiliates since 1998.                                                      

- Michael J. Simon, Senior Portfolio Manager, who has been responsible for the  
  fund since 2002 and has been associated with the advisor and/or its affiliates
since 2001. From 1996 to 2001, he was equity analyst and portfolio manager  
with Luther King Capital Management.                                        

They are assisted by the advisor's Basic Value and Taxable Investment Grade Bond
Teams, which may be comprised of portfolio managers, research analysts and other
investment professionals of the advisor. Team members provide research support  
and make securities recommendations with respect to the fund's portfolio, but do
not have day-to-day management responsibilities with respect to the fund's      
portfolio. Members of the team may change from time to time. More information on
the team, including biographies of other members of the team, may be found on   
the advisor's website (http//www.aiminvestments.com). The website is not part of
this prospectus.                                                                

The fund's Statement of Additional Information provides additional      
information about the portfolio managers' investments in the fund, a description
of their compensation structure, and information regarding other accounts they  
manage.                                                                         

OTHER INFORMATION                                                               
--------------------------------------------------------------------------------

SALES CHARGES                                                                   

Purchases of Class A shares of AIM Basic Balanced Fund are subject to the       
maximum 4.75% initial sales charge as listed under the heading "CATEGORY II     
Initial Sales Charges" in the "Shareholder Information--Choosing a Share Class" 
section of this prospectus. Certain purchases of Class A shares at net asset    
value may be subject to the contingent deferred sales charge listed in that     
section. Purchases of Class B and Class C shares are subject to the contingent  
deferred sales charges listed in that section. Certain purchases of Class R     
shares may be subject to the contingent deferred sales charge listed in that    
section.                                                                        

DIVIDENDS AND DISTRIBUTIONS                                                     

The fund expects that its distributions, if any, will consist of both capital   
gains and ordinary income.                                                      

DIVIDENDS                                                                       

The fund generally declares and pays dividends, if any, quarterly.              

CAPITAL GAINS DISTRIBUTIONS                                                     

The fund generally distributes long-term and short-term capital gains, if any,  
annually.                                                                       

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FINANCIAL HIGHLIGHTS                                                            
--------------------------------------------------------------------------------

The financial highlights table is intended to help you understand the fund's    
financial performance. Certain information reflects financial results for a     
single fund share.                                                              

The total returns in the table represent the rate that an investor would
have earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).                                                   

This information has been audited by PricewaterhouseCoopers LLP, whose  
report, along with the fund's financial statements, is included in the fund's   
annual report, which is available upon request.                                 

                                                        [Enlarge/Download Table]

                                                                                     CLASS A                        
                                                              ------------------------------------------------------
                                                                                                  SEPTEMBER 28, 2001
                                                                                                   (DATE OPERATIONS 
                                                                  YEAR ENDED DECEMBER 31,           COMMENCED) TO   
                                                              --------------------------------       DECEMBER 31,   
                                                               2004          2003       2002             2001       
                                                              -------       -------    -------    ------------------
                                                                                                                    
Net asset value, beginning of period                          $ 11.50       $  9.46    $ 10.75         $ 10.00      
--------------------------------------------------------------------------------------------------------------------
Income from investment operations:                                                                                  
  Net investment income                                          0.08          0.05       0.11(a)         0.03(a)   
--------------------------------------------------------------------------------------------------------------------
  Net gains (losses) on securities (both realized and                                                               
    unrealized)                                                  0.71          2.05      (1.28)           0.76      
====================================================================================================================
    Total from investment operations                             0.79          2.10      (1.17)           0.79      
====================================================================================================================
Less distributions:                                                                                                 
  Dividends from net investment income                          (0.10)        (0.06)     (0.12)          (0.04)     
--------------------------------------------------------------------------------------------------------------------
  Distributions from net realized gains                         (0.33)           --         --              --      
====================================================================================================================
    Total distributions                                         (0.43)        (0.06)     (0.12)          (0.04)     
====================================================================================================================
Net asset value, end of period                                $ 11.86       $ 11.50    $  9.46         $ 10.75      
____________________________________________________________________________________________________________________
====================================================================================================================
Total return(b)                                                  6.89%        22.35%    (10.97)%          7.94%     
____________________________________________________________________________________________________________________
====================================================================================================================
Ratios/supplemental data:                                                                                           
Net assets, end of period (000s omitted)                      $68,951       $53,675    $32,414         $10,753      
____________________________________________________________________________________________________________________
====================================================================================================================
Ratio of expenses to average net assets:                                                                            
  With fee waivers and/or expense reimbursements                 1.47%(c)      1.50%      1.48%           1.43%(d)  
--------------------------------------------------------------------------------------------------------------------
  Without fee waivers and/or expense reimbursements              1.49%(c)      1.57%      1.67%           2.89%(d)  
====================================================================================================================
Ratio of net investment income to average net assets             0.73%(c)      0.46%      1.15%           1.16%(d)  
____________________________________________________________________________________________________________________
====================================================================================================================
Portfolio turnover rate(e)                                         64%           51%        42%              7%     
____________________________________________________________________________________________________________________
====================================================================================================================

(a) Calculated using average shares outstanding.                                
(b) Includes adjustments in accordance with accounting principles generally     
 accepted in the United States of America and as such, the net asset value
   for financial reporting purposes and the returns based upon those net asset
values may differ from the net asset value and returns for shareholder  
transactions. Does not include sales charges and is not annualized for  
periods less than one year.                                             
(c) Ratios are based on average daily net assets of $62,199,733.                
(d) Annualized.                                                                 
(e) Not annualized for periods less than one year.                              

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FINANCIAL HIGHLIGHTS (CONTINUED)                                                
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                                                                     CLASS B                        
                                                              ------------------------------------------------------
                                                                                                  SEPTEMBER 28, 2001
                                                                                                   (DATE OPERATIONS 
                                                                  YEAR ENDED DECEMBER 31,           COMMENCED) TO   
                                                              --------------------------------       DECEMBER 31,   
                                                               2004          2003       2002             2001       
                                                              -------       -------    -------    ------------------
                                                                                                                    
Net asset value, beginning of period                          $ 11.49       $  9.46    $ 10.75         $ 10.00      
--------------------------------------------------------------------------------------------------------------------
Income from investment operations:                                                                                  
  Net investment income (loss)                                   0.01         (0.02)      0.05(a)         0.01(a)   
--------------------------------------------------------------------------------------------------------------------
  Net gains (losses) on securities (both realized and                                                               
    unrealized)                                                  0.69          2.06      (1.29)           0.77      
====================================================================================================================
    Total from investment operations                             0.70          2.04      (1.24)           0.78      
====================================================================================================================
Less distributions:                                                                                                 
  Dividends from net investment income                          (0.02)        (0.01)     (0.05)          (0.03)     
--------------------------------------------------------------------------------------------------------------------
  Distributions from net realized gains                         (0.33)           --         --              --      
====================================================================================================================
    Total distributions                                         (0.35)        (0.01)     (0.05)          (0.03)     
====================================================================================================================
Net asset value, end of period                                $ 11.84       $ 11.49    $  9.46         $ 10.75      
____________________________________________________________________________________________________________________
====================================================================================================================
Total return(b)                                                  6.12%        21.64%    (11.56)%          7.76%     
____________________________________________________________________________________________________________________
====================================================================================================================
Ratios/supplemental data:                                                                                           
Net assets, end of period (000s omitted)                      $79,968       $76,304    $47,597         $16,067      
____________________________________________________________________________________________________________________
====================================================================================================================
Ratio of expenses to average net assets:                                                                            
  With fee waivers and/or expense reimbursements                 2.12%(c)      2.15%      2.13%           2.08%(d)  
--------------------------------------------------------------------------------------------------------------------
  Without fee waivers and/or expense reimbursements              2.14%(c)      2.22%      2.32%           3.54%(d)  
====================================================================================================================
Ratio of net investment income (loss) to average net assets      0.08%(c)     (0.19)%     0.50%           0.52%(d)  
____________________________________________________________________________________________________________________
====================================================================================================================
Portfolio turnover rate(e)                                         64%           51%        42%              7%     
____________________________________________________________________________________________________________________
====================================================================================================================

(a) Calculated using average shares outstanding.                                
(b) Includes adjustments in accordance with accounting principles generally     
 accepted in the United States of America and as such, the net asset value
   for financial reporting purposes and the returns based upon those net asset
values may differ from the net asset value and returns for shareholder  
transactions. Does not include sales charges and is not annualized for  
periods less than one year.                                             
(c) Ratios are based on average net assets of $79,694,417.                      
(d) Annualized.                                                                 
(e) Not annualized for periods less than one year.                              

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FINANCIAL HIGHLIGHTS (CONTINUED)                                                
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                                                                     CLASS C                        
                                                              ------------------------------------------------------
                                                                                                  SEPTEMBER 28, 2001
                                                                                                   (DATE OPERATIONS 
                                                                  YEAR ENDED DECEMBER 31,           COMMENCED) TO   
                                                              --------------------------------       DECEMBER 31,   
                                                               2004          2003       2002             2001       
                                                              -------       -------    -------    ------------------
                                                                                                                    
Net asset value, beginning of period                          $ 11.49       $  9.46    $ 10.75          $10.00      
--------------------------------------------------------------------------------------------------------------------
Income from investment operations:                                                                                  
  Net investment income (loss)                                   0.01         (0.02)      0.05(a)         0.01(a)   
--------------------------------------------------------------------------------------------------------------------
  Net gains (losses) on securities (both realized and                                                               
    unrealized)                                                  0.70          2.06      (1.29)           0.77      
====================================================================================================================
    Total from investment operations                             0.71          2.04      (1.24)           0.78      
====================================================================================================================
Less distributions:                                                                                                 
  Dividends from net investment income                          (0.02)        (0.01)     (0.05)          (0.03)     
--------------------------------------------------------------------------------------------------------------------
  Distributions from net realized gains                         (0.33)           --         --              --      
====================================================================================================================
    Total distributions                                         (0.35)        (0.01)     (0.05)          (0.03)     
====================================================================================================================
Net asset value, end of period                                $ 11.85       $ 11.49    $  9.46          $10.75      
____________________________________________________________________________________________________________________
====================================================================================================================
Total return(b)                                                  6.21%        21.64%    (11.57)%          7.76%     
____________________________________________________________________________________________________________________
====================================================================================================================
Ratios/supplemental data:                                                                                           
Net assets, end of period (000s omitted)                      $27,729       $24,790    $15,727          $5,168      
____________________________________________________________________________________________________________________
====================================================================================================================
Ratio of expenses to average net assets:                                                                            
  With fee waivers and/or expense reimbursements                 2.12%(c)      2.15%      2.13%           2.08%(d)  
--------------------------------------------------------------------------------------------------------------------
  Without fee waivers and/or expense reimbursements              2.14%(c)      2.22%      2.32%           3.54%(d)  
====================================================================================================================
Ratio of net investment income (loss) to average net assets      0.08%(c)     (0.19)%     0.50%           0.52%(d)  
____________________________________________________________________________________________________________________
====================================================================================================================
Portfolio turnover rate(e)                                         64%           51%        42%              7%     
____________________________________________________________________________________________________________________
====================================================================================================================

(a) Calculated using average shares outstanding.                                
(b) Includes adjustments in accordance with accounting principles generally     
 accepted in the United States of America and as such, the net asset value
   for financial reporting purposes and the returns based upon those net asset
values may differ from the net asset value and returns for shareholder  
transactions. Does not include sales charges and is not annualized for  
periods less than one year.                                             
(c) Ratios are based on average net assets of $26,527,387.                      
(d) Annualized.                                                                 
(e) Not annualized for periods less than one year.                              

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FINANCIAL HIGHLIGHTS (CONTINUED)                                                
--------------------------------------------------------------------------------

                                                                [Download Table]

                                                                   CLASS R    
                                                                --------------
                                                                APRIL 30, 2004
                                                                 (DATE SALES  
                                                                COMMENCED) TO 
                                                                 DECEMBER 31, 
                                                                     2004     
                                                                --------------
                                                                              
Net asset value, beginning of period                                $11.61    
------------------------------------------------------------------------------
Income from investment operations:                                            
  Net investment income                                               0.05(a) 
------------------------------------------------------------------------------
  Net gains on securities (both realized and unrealized)              0.60    
==============================================================================
    Total from investment operations                                  0.65    
==============================================================================
Less distributions:                                                           
  Dividends from net investment income                               (0.06)   
------------------------------------------------------------------------------
  Distributions from net realized gains                              (0.33)   
==============================================================================
    Total distributions                                              (0.39)   
==============================================================================
Net asset value, end of period                                      $11.87    
______________________________________________________________________________
==============================================================================
Total return(b)                                                       5.68%   
______________________________________________________________________________
==============================================================================
Ratios/supplemental data:                                                     
Net assets, end of period (000s omitted)                            $   19    
______________________________________________________________________________
==============================================================================
Ratio of expenses to average net assets:                                      
  With fee waivers and/or expense reimbursements                      1.62%(c)
------------------------------------------------------------------------------
  Without fee waivers and/or expense reimbursements                   1.64%(c)
==============================================================================
Ratio of net investment income to average net assets                  0.58%(c)
______________________________________________________________________________
==============================================================================
Portfolio turnover rate(d)                                              64%   
______________________________________________________________________________
==============================================================================

(a) Calculated using average shares outstanding.                                
(b) Includes adjustments in accordance with accounting principles generally     
 accepted in the United States of America and as such, the net asset value
 for financial reporting purposes and the return based upon that net asset
value may differ from the net asset value and return for shareholder    
transactions. Not annualized for periods less than one year.            
(c) Ratios are annualized and based on average daily net assets of $10,434.     
(d) Not annualized for periods less than one year.                              

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THE AIM FUNDS 
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SHAREHOLDER INFORMATION                                                         
--------------------------------------------------------------------------------

In addition to the fund, AIM serves as investment advisor to many other mutual  
funds (the funds). The following information is about all the funds.            

CHOOSING A SHARE CLASS                                                          

Most of the funds have multiple classes of shares, each class representing an   
interest in the same portfolio of investments. Certain classes have higher      
expenses than other classes which may lower the return on your investment       
relative to a less expensive class. In deciding which class of shares to        
purchase, you should consider, among other things, (i) the length of time you   
expect to hold your shares, (ii) the provisions of the distribution plan, if    
any, applicable to the class (iii) the eligibility requirements that apply to   
purchases of a particular class, and (iv) any services you may receive in making
your investment determination. In addition, you should consider the other       
factors described below. Please contact your financial advisor to assist you in 
making your decision.                                                           

                                                        [Enlarge/Download Table]

CLASS A(1)           CLASS A3          CLASS B(4)        CLASS C           CLASS K           CLASS R           INVESTOR CLASS  
-------------------------------------------------------------------------------------------------------------------------------
                                                                                                                               
- Initial sales      - No initial      - No initial      - No initial      - No initial      - No initial      - No initial    
  charge               sales charge      sales charge      sales charge      sales charge      sales charge      sales charge  

- Reduced or waived  - No contingent   - Contingent      - Contingent      - Generally, no   - Generally, no   - No contingent 
  initial sales        deferred sales    deferred sales  deferred sales      contingent        contingent        deferred sales
  charge for           charge            charge on         charge on         deferred sales    deferred sales    charge        
  certain                                redemptions       redemptions       charge(2)         charge(2)                       
  purchases(2)                           within six        within one                                                          
                                         years             year(7)                                                             

- Generally, lower   - 12b-1 fee of    - 12b-1 fee of    - 12b-1 fee of    - 12b-1 fee of    - 12b-1 fee of    - 12b-1 fee of  
  distribution and     0.35%             1.00%           1.00%               0.45%             0.50%             0.25%(3)      
  service (12b-1)                                                                                                              
  fee than Class B,                                                                                                            
  Class C, Class K                                                                                                             
  or Class R shares                                                                                                            
  (See "Fee Table                                                                                                              
  and Expense                                                                                                                  
  Example")(3)                                                                                                                 

                     - Does not        - Converts to     - Does not        - Does not        - Does not        - Does not      
                       convert to        Class A shares  convert to Class    convert to        convert to        convert to    
                       Class A shares    at the end of     A shares          Class A shares    Class A shares    Class A shares
                                         the month                                                                             
                                         which is eight                                                                        
                                         years after                                                                           
                                         the date on                                                                           
                                         which shares                                                                          
                                         were purchased                                                                        
                                         along with a                                                                          
                                         pro rata                                                                              
                                         portion of its                                                                        
                                         reinvested                                                                            
                                         dividends and                                                                         
                                       distributions(5)                                                                        

- Generally more     - Available only  - Purchase        - Generally more  - Generally,      - Generally,      - Closed to new 
  appropriate for      for a limited     orders limited    appropriate       only available    only available    investors,    
  long-term            number of         to amount less    for short-        to retirement     to employee       except as     
  investors            funds             than              term investors    plans,            benefit           described in  
                                         $100,000(6)                         educational       plans(9)          the           
                                                         - Purchase          savings                             "Purchasing   
                                                         orders limited      programs and                        Shares --     
                                                           to amount less    wrap programs                       Grandfathered 
                                                           than                                                  Investors"    
                                                           $1,000,000(8)                                         section of    
                                                                                                                 your          
                                                                                                                 prospectus    
-------------------------------------------------------------------------------------------------------------------------------

Certain funds also offer Institutional Class shares to certain eligible         
institutional investors; consult the fund's Statement of Additional Information 
for details.                                                                    

(1) As of the close of business on October 30, 2002, Class A shares of AIM      
Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund were  
closed to new investors.                                                

(2) A contingent deferred sales charge may apply in some cases.                 

(3) Class A shares of AIM Tax-Free Intermediate Fund and Investor Class shares  
of AIM Money Market Fund, AIM Tax-Exempt Cash Fund, Premier Portfolio,  
   Premier Tax-Exempt Portfolio and Premier U.S. Government Money Portfolio do
not have a 12b-1 fee.                                                   

(4) Class B shares are not available as an investment for retirement plans      
    maintained pursuant to Section 401 of the Internal Revenue Code. These plans
include 401(k) plans (including AIM Solo 401(k) plans), money purchase  
 pension plans and profit sharing plans. Plans that have existing accounts
 invested in Class B shares will continue to be allowed to make additional
purchases.                                                              

(5) AIM Money Market Fund: Class B shares convert to AIM Cash Reserve Shares.   
AIM Global Equity Fund: If you held Class B shares on May 29, 1998 and  
  continue to hold them, those shares will convert to Class A shares of that
 fund at the end of the month which is seven years after the date on which
 shares were purchased. If you exchange those shares for Class B shares of
   another fund, the shares into which you exchanged will not convert to Class
  A shares until the end of the month which is eight years after the date on
which you purchased your original shares.                               

(6) Any purchase order for Class B shares in an amount equal to or in excess of 
  $100,000 will be rejected. Although our ability to monitor or enforce this
limitation for underlying shareholders of omnibus accounts is severely  
  limited, we have advised the administrators of omnibus accounts maintained
by brokers, retirement plans and approved fee-based programs of this    
limitation.                                                             

(7) A contingent deferred sales charge (CDSC) does not apply to redemption of   
Class C shares of AIM Short Term Bond Fund unless you exchange Class C  
  shares of another fund that are subject to a CDSC into AIM Short Term Bond
Fund.                                                                   

MCF--04/05                                                                      

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(8) Any purchase order for Class C shares in an amount equal to or in excess of 
    $1,000,000 will be rejected. Although our ability to monitor or enforce this
limitation for underlying shareholders of omnibus accounts is severely  
  limited, we have advised the administrators of omnibus accounts maintained
by brokers, retirement plans and approved fee-based programs of this    
limitation.                                                             

(9) Generally, Class R shares are only available to employee benefit plans.     
  These may include, for example, retirement and deferred compensation plans
   maintained pursuant to Sections 401, 403, 457 of the Internal Revenue Code;
    nonqualified deferred compensation plans; health savings accounts maintained
pursuant to Section 223 of the Internal Revenue Code, respectively; and 
    voluntary employees' beneficiary arrangements maintained pursuant to Section
    501(c)(9) of the Internal Revenue Code. Retirement plans maintained pursuant
  to Section 401 generally include 401(k) plans, profit sharing plans, money
purchase pension plans, and defined benefit plans. Retirement plans     
maintained pursuant to Section 403 must be established and maintained by
non-profit organizations operating pursuant to Section 501(c)(3) of the 
 Internal Revenue Code in order to purchase Class R shares. Class R shares
are generally not available for individual retirement accounts such as  
traditional, Roth, SEP, SAR-SEP and SIMPLE IRAs.                        
  ------------------------------------------------------------------------------

DISTRIBUTION AND SERVICE (12b-1) FEES                                           

Each fund (except AIM Tax-Free Intermediate Fund with respect to its Class A    
shares and AIM Money Market Fund, AIM Tax-Exempt Cash Fund, Premier Portfolio,  
Premier Tax-Exempt Portfolio and Premier U.S. Government Money Portfolio with   
respect to their Investor Class shares) has adopted 12b-1 plans that allow the  
fund to pay distribution fees to A I M Distributors, Inc. (ADI) for the sale and
distribution of its shares and fees for services provided to shareholders, all  
or a substantial portion of which are paid to the dealer of record. Because the 
fund pays these fees out of its assets on an ongoing basis, over time these fees
will increase the cost of your investment and may cost you more than paying     
other types of sales charges.                                                   

SALES CHARGES                                                                   

Sales charges on the funds and classes of those funds are detailed below. As    
used below, the term "offering price" with respect to all categories of Class A 
shares includes the initial sales charge.                                       

 Certain categories of persons are permitted to purchase Class A shares of
the funds without paying an initial sales charge because their transactions     
involve little expense, such as persons who have a relationship with the funds  
or with AIM and certain programs for purchase. For more detailed information    
regarding eligibility to purchase or redeem shares at reduced or without sales  
charges, please consult the fund's website at www.aiminvestments.com and click  
on the links "My Account", Service Center, or consult the fund's Statement of   
Additional Information, which is available upon request free of charge.         

INITIAL SALES CHARGES                                                           
The funds (except AIM Short Term Bond Fund) are grouped into three categories   
with respect to initial sales charges. The "Other Information" section of your  
prospectus will tell you in what category your particular fund is classified.   

CATEGORY I INITIAL SALES CHARGES                                                
-------------------------------------------------------------                   

                                                                [Download Table]

                                                           INVESTOR'S         
                                                          SALES CHARGE        
                                                   ---------------------------
AMOUNT OF INVESTMENT                                 AS A % OF      AS A % OF 
IN SINGLE TRANSACTION                              OFFERING PRICE   INVESTMENT
------------------------------------------------------------------------------
                                                                              
                              Less than $   25,000      5.50%          5.82%  
                 $ 25,000 but less than $   50,000      5.25           5.54   
                 $ 50,000 but less than $  100,000      4.75           4.99   
                 $100,000 but less than $  250,000      3.75           3.90   
                 $250,000 but less than $  500,000      3.00           3.09   
                 $500,000 but less than $1,000,000      2.00           2.04   
------------------------------------------------------------------------------

CATEGORY II INITIAL SALES CHARGES                                               
-------------------------------------------------------------                   

                                                                [Download Table]

                                                           INVESTOR'S         
                                                          SALES CHARGE        
                                                   ---------------------------
AMOUNT OF INVESTMENT                                 AS A % OF      AS A % OF 
IN SINGLE TRANSACTION                              OFFERING PRICE   INVESTMENT
------------------------------------------------------------------------------
                                                                              
                              Less than $   50,000      4.75%          4.99%  
                 $ 50,000 but less than $  100,000      4.00           4.17   
                 $100,000 but less than $  250,000      3.75           3.90   
                 $250,000 but less than $  500,000      2.50           2.56   
                 $500,000 but less than $1,000,000      2.00           2.04   
------------------------------------------------------------------------------

CATEGORY III INITIAL SALES CHARGES                                              
-------------------------------------------------------------                   

                                                                [Download Table]

                                                           INVESTOR'S         
                                                          SALES CHARGE        
                                                   ---------------------------
AMOUNT OF INVESTMENT                                 AS A % OF      AS A % OF 
IN SINGLE TRANSACTION                              OFFERING PRICE   INVESTMENT
------------------------------------------------------------------------------
                                                                              
                              Less than $  100,000      1.00%          1.01%  
                 $100,000 but less than $  250,000      0.75           0.76   
                 $250,000 but less than $1,000,000      0.50           0.50   
------------------------------------------------------------------------------

AIM SHORT TERM BOND FUND INITIAL SALES CHARGES                                  
-------------------------------------------------------------                   

                                                                [Download Table]

                                                           INVESTOR'S         
                                                          SALES CHARGE        
                                                   ---------------------------
AMOUNT OF INVESTMENT                                 AS A % OF      AS A % OF 
IN SINGLE TRANSACTION                              OFFERING PRICE   INVESTMENT
------------------------------------------------------------------------------
                                                                              
                              Less than $  100,000      2.50%          2.56%  
                 $100,000 but less than $  250,000      2.00           2.04   
                 $250,000 but less than $  500,000      1.50           1.52   
                 $500,000 but less than $1,000,000      1.25           1.27   
------------------------------------------------------------------------------

SHARES SOLD WITHOUT A SALES CHARGE                                              
You will not pay an initial sales charge on purchases of Class A shares of AIM  
Tax-Exempt Cash Fund or AIM Cash Reserve Shares of AIM Money Market Fund.       

You will not pay an initial sales charge or a contingent deferred sales 
charge (CDSC) on Class A3 shares of AIM Limited Maturity Treasury Fund and AIM  
Tax-Free Intermediate Fund.                                                     

   You will not pay an initial sales charge or a CDSC on Investor Class shares
of any fund.                                                                    

CONTINGENT DEFERRED SALES CHARGES FOR CLASS A SHARES AND AIM CASH RESERVE SHARES
OF AIM MONEY MARKET FUND                                                        
You can purchase $1,000,000 or more (a Large Purchase) of Class A shares of     
Category I and II funds and AIM Short Term Bond Fund at net asset value.        
However, if you redeem these shares prior to 18 months after the date of        
purchase, they will be subject to a CDSC of 1%.                                 

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   If you currently own Class A shares of a Category I or II fund or AIM Short
Term Bond Fund and make additional purchases at net asset value that result in  
account balances of $1,000,000 or more, the additional shares purchased will be 
subject to an 18-month, 1% CDSC.                                                

  Some retirement plans can purchase Class A shares at their net asset value
per share. If ADI paid a concession to the dealer of record in connection with a
Large Purchase of Class A shares by a retirement plan, the Class A shares may be
subject to a 1% CDSC at the time of redemption if all retirement plan assets are
redeemed within one year from the date of the plan's initial purchase.          

You may be charged a CDSC when you redeem AIM Cash Reserve Shares of AIM
Money Market Fund or Class A shares of AIM Tax-Exempt Cash Fund if you acquired 
those shares through an exchange, and the shares originally purchased were      
subject to a CDSC.                                                              

    ADI may pay a dealer concession and/or a service fee for Large Purchases and
purchases by certain retirement plans.                                          

CONTINGENT DEFERRED SALES CHARGES FOR CLASS B AND CLASS C SHARES                
You can purchase Class B and Class C shares at their net asset value per share. 
However, when you redeem them, they are subject to a CDSC in the following      
percentages:                                                                    

                                                                [Download Table]

YEAR SINCE                                                                      
PURCHASE MADE                                                  CLASS B   CLASS C
--------------------------------------------------------------------------------
                                                                                
First                                                            5%       1%    
Second                                                           4       None   
Third                                                            3       None   
Fourth                                                           3       None   
Fifth                                                            2       None   
Sixth                                                            1       None   
Seventh and following                                          None      None   
--------------------------------------------------------------------------------

You can purchase Class C shares of AIM Short Term Bond Fund at their net asset  
value and not subject to a CDSC. However, you may be charged a CDSC when you    
redeem Class C shares of AIM Short Term Bond Fund if you acquired those shares  
through an exchange, and the shares originally purchased were subject to a CDSC.

CONTINGENT DEFERRED SALES CHARGES FOR CLASS K AND CLASS R SHARES                
You can purchase Class K and Class R shares at their net asset value per share. 
If ADI pays a concession to the dealer of record, however, the Class K shares   
are subject to a 0.70% CDSC and the Class R shares are subject to a 0.75% CDSC  
at the time of redemption if all retirement plan assets are redeemed within 12  
months from the date of the retirement plan's initial purchase.                 

COMPUTING A CDSC                                                                
The CDSC on redemptions of shares is computed based on the lower of their       
original purchase price or current market value, net of reinvested dividends and
capital gains distributions. In determining whether to charge a CDSC, we will   
assume that you are redeeming shares on which there is no CDSC first and, then, 
shares in the order of purchase.                                                

REDUCED SALES CHARGES AND SALES CHARGE EXCEPTIONS                               

You may qualify for reduced sales charges or sales charge exceptions. To qualify
for these reductions or exceptions, you or your financial advisor must notify   
the transfer agent at the time of purchase that your purchase qualifies for such
treatment. Certain individuals and employer-sponsored retirement plans may link 
accounts for the purpose of qualifying for lower initial sales charges. You or  
your financial consultant must provide other account numbers to be considered   
for Rights of Accumulation, or mark the Letter of Intent section on the account 
application, or provide other relevant documentation, so that the transfer agent
can verify your eligibility for the reduction or exception. Consult the fund's  
Statement of Additional Information for details.                                

REDUCED SALES CHARGES                                                           
You may be eligible to buy Class A shares at reduced initial sales charge rates 
under Rights of Accumulation or Letters of Intent under certain circumstances.  

   Purchases of Class A shares of AIM Tax-Exempt Cash Fund, Class A3 shares of
AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund, AIM Cash 
Reserve Shares of AIM Money Market Fund and Class B and Class C shares of AIM   
Floating Rate Fund and Investor Class shares of any fund will not be taken into 
account in determining whether a purchase qualifies for a reduction in initial  
sales charges pursuant to Rights of Accumulation or Letters of Intent.          

RIGHTS OF ACCUMULATION                                                          
You may combine your new purchases of Class A shares of a fund with fund shares 
currently owned (Class A, B, C, K or R) and investments in the AIM College      
Savings Plan(SM) for the purpose of qualifying for the lower initial sales      
charge rates that apply to larger purchases. The applicable initial sales charge
for the new purchase is based on the total of your current purchase and the     
public offering price of all other shares you own. The transfer agent may       
automatically link certain accounts registered in the same name, with the same  
taxpayer identification number, for the purpose of qualifying you for lower     
initial sales charge rates.                                                     

LETTERS OF INTENT                                                               
Under a Letter of Intent (LOI), you commit to purchase a specified dollar amount
of Class A shares of the funds during a 13-month period. The amount you agree to
purchase determines the initial sales charge you pay. If the full face amount of
the LOI is not invested by the end of the 13-month period, your account will be 
adjusted to the higher initial sales charge level for the amount actually       
invested.                                                                       

INITIAL SALES CHARGE EXCEPTIONS                                                 
You will not pay initial sales charges                                          

- on shares purchased by reinvesting dividends and distributions;               

- when exchanging shares among certain funds; and                               

- when a merger, consolidation, or acquisition of assets of a fund occurs.      

MCF--04/05                                                                      

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CONTINGENT DEFERRED SALES CHARGE (CDSC) EXCEPTIONS                              
You will not pay a CDSC                                                         

- if you redeem Class B shares you held for more than six years;                

- if you redeem Class C shares you held for more than one year;                 

- if you redeem Class C shares of a fund other than AIM Short Term Bond Fund and
you received such Class C shares by exchanging Class C shares of AIM Short  
Term Bond Fund;                                                             

- if you redeem Class C shares of AIM Short Term Bond Fund unless you received  
such Class C shares by exchanging Class C shares of another fund and the    
original purchase was subject to a CDSC;                                    

- if you are a participant in a retirement plan and your plan redeems, at any   
time, less than all of the Class A, C, K or Class R shares held through such
plan that would otherwise be subject to a CDSC;                             

- if you are a participant in a retirement plan and your plan redeems, after    
having held them for more than one year from the date of the plan's initial 
purchase, all of the Class A, C, K or Class R shares held through such plan 
that would otherwise be subject to a CDSC;                                  

- if you are a participant in a qualified retirement plan and redeem Class A,   
Class C, Class K or Class R shares in order to fund a distribution;         

- if you participate in the Systematic Redemption Plan and withdraw up to 12% of
the value of your shares that are subject to a CDSC in any twelve-month     
period;                                                                     

- if you redeem shares to pay account fees;                                     

- for redemptions following the death or post-purchase disability of a          
shareholder or beneficial owner;                                            

- if you redeem shares acquired through reinvestment of dividends and           
distributions; and                                                          

- on increases in the net asset value of your shares.                           

There may be other situations when you may be able to purchase or redeem shares 
at reduced or without sales charges. Consult the fund's Statement of Additional 
Information for details.                                                        

ADDITIONAL PAYMENTS TO FINANCIAL ADVISORS                                       

The financial advisor through which you purchase your shares may receive all or 
a portion of the sales charges and Rule 12b-1 distribution fees discussed above.
In addition to those payments, ADI or one or more of its corporate affiliates   
(collectively, ADI Affiliates) may make additional cash payments to financial   
advisors in connection with the promotion and sale of shares of the funds. These
additional cash payments may include cash revenue sharing payments and other    
payments for certain administrative services, transaction processing services   
and certain other marketing support services. ADI Affiliates make these payments
from their own resources, from ADI's retention of underwriting concessions and  
from payments to ADI under Rule 12b-1 plans. In this context, "financial        
advisors" include any broker, dealer, bank (including bank trust departments),  
registered investment advisor, financial planner, retirement plan administrator 
and any other financial intermediary having a selling, administration or similar
agreement with ADI Affiliates.                                                  

ADI Affiliates make revenue sharing payments as incentives to certain   
financial advisors to promote and sell shares of the funds. The benefits ADI    
Affiliates receive when they make these payments include, among other things,   
placing the funds on the financial advisor's funds sales system, placing the    
funds on the financial advisor's preferred or recommended fund list, and access 
(in some cases on a preferential basis over other competitors) to individual    
members of the financial advisor's sales force or to the financial advisor's    
management. Revenue sharing payments are sometimes referred to as "shelf space" 
payments because the payments compensate the financial advisor for including the
funds in its fund sales system (on its "sales shelf"). ADI Affiliates compensate
financial advisors differently depending typically on the level and/or type of  
considerations provided by the financial advisor. The revenue sharing payments  
ADI Affiliates make may be calculated on sales of shares of the funds           
(Sales-Based Payments), in which case the total amount of such payments shall   
not exceed 0.25% of the public offering price of all shares sold by the         
financial advisor during the particular period. Such payments also may be       
calculated on the average daily net assets of the applicable AIM funds          
attributable to that particular financial advisor (Asset-Based Payments), in    
which case the total amount of such cash payments shall not exceed 0.25% per    
annum of those assets during a defined period. Sales-Based Payments primarily   
create incentives to make new sales of shares of the funds and Asset-Based      
Payments primarily create incentives to retain previously sold shares of the    
funds in investor accounts. ADI Affiliates may pay a financial advisor either or
both Sales-Based Payments and Asset-Based Payments.                             

 ADI Affiliates also may make other payments to certain financial advisors
for processing certain transactions or account maintenance activities (such as  
processing purchases, redemptions or exchanges or producing customer account    
statements) or for providing certain other marketing support services (such as  
financial assistance for conferences, seminars or sales or training programs at 
which ADI Affiliates personnel may make presentations on the funds to the       
financial advisor's sales force). Financial advisors may earn profits on these  
payments for these services, since the amount of the payment may exceed the cost
of providing the service. Certain of these payments are subject to limitations  
under applicable law.                                                           

    ADI Affiliates are motivated to make the payments described above since they
promote the sale of fund shares and the retention of those investments by       
clients of financial advisors. To the extent financial advisors sell more shares
of the funds or retain shares of the funds in their clients' accounts, ADI      
Affiliates benefit from the incremental management and other fees paid to ADI   
Affiliates by the funds with respect to those assets.                           

You can find further details in the fund's Statement of Additional      
Information about these payments and the services provided by financial         
advisors. In certain cases these payments could be significant to the financial 
advisor. Your financial advisor may charge you                                  

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additional fees or commissions other than those disclosed in this prospectus.   
You can ask your financial advisor about any payments it receives from ADI      
Affiliates or the funds, as well as about fees and/or commissions it charges.   

EXCESSIVE SHORT-TERM TRADING ACTIVITY DISCLOSURES                               

While the funds provide their shareholders with daily liquidity, their          
investment programs are designed to serve long-term investors and are not       
designed to accommodate excessive short-term trading activity in violation of   
our policies described below. Excessive short-term trading activity in the      
funds' shares (i.e., a purchase of fund shares followed shortly thereafter by a 
redemption of such shares, or vice versa) may hurt the long-term performance of 
certain funds by requiring them to maintain an excessive amount of cash or to   
liquidate portfolio holdings at a disadvantageous time, thus interfering with   
the efficient management of such funds by causing them to incur increased       
brokerage and administrative costs. Where excessive short-term trading activity 
seeks to take advantage of arbitrage opportunities from stale prices for        
portfolio securities, the value of fund shares held by long-term investors may  
be diluted. The Boards of Trustees have adopted policies and procedures designed
to discourage excessive or short-term trading of fund shares for all funds      
except the money market funds. However, there is the risk that these funds'     
policies and procedures will prove ineffective in whole or in part to detect or 
prevent excessive or short-term trading. These funds may alter their policies at
any time without prior notice to shareholders if the advisor believes the change
would be in the best interests of long-term shareholders.                       

AIM and its affiliates (collectively, AIM Affiliates) currently use the 
following tools designed to discourage excessive short-term trading in the      
retail funds:                                                                   

(1) trade activity monitoring;                                                  

(2) trading guidelines;                                                         

(3) redemption fee on trades in certain funds; and                              

(4) use of fair value pricing consistent with procedures approved by the Boards 
of Trustees of the funds.                                               

Each of these tools is described in more detail below. Although these tools are 
designed to discourage excessive short-term trading, you should understand that 
none of these tools alone nor all of them taken together eliminate the          
possibility that excessive short-term trading activity in the funds will occur. 
Moreover, each of these tools involves judgments that are inherently subjective.
The AIM Affiliates seek to make these judgments to the best of their abilities  
in a manner that they believe is consistent with long-term shareholder          
interests.                                                                      

  The Boards of Trustees of AIM Money Market Fund, AIM Tax-Exempt Cash Fund,
Premier Portfolio, Premier Tax-Exempt Portfolio and Premier U.S. Government     
Money Portfolio (the money market funds) have not adopted any policies and      
procedures that would limit frequent purchases and redemptions of such funds'   
shares. The Boards do not believe that it is appropriate to adopt any such      
policies and procedures for the money market funds for the following reasons:   

- The money market funds are offered to investors as cash management vehicles.  
  Investors must perceive an investment in such funds as an alternative to cash,
and must be able to purchase and redeem shares regularly and frequently.    

- One of the advantages of a money market fund as compared to other investment  
options is liquidity. Any policy that diminishes the liquidity of the money 
market funds will be detrimental to the continuing operations of such funds.

- The money market funds' portfolio securities are valued on the basis of       
amortized cost, and such funds seeks to maintain a constant net asset value.
As a result, there are no price arbitrage opportunities.                    

- Because the money market funds seek to maintain a constant net asset value,   
investors expect to receive upon redemption the amount they originally      
invested in such funds. Imposition of redemption fees would run contrary to 
investor expectations.                                                      

   The Boards considered the risks of not having a specific policy that limits
frequent purchases and redemptions, and it determined that those risks are      
minimal, especially in light of the reasons for not having such a policy as     
described above. Nonetheless, to the extent that the fund must maintain         
additional cash and/or securities with short-term durations than may otherwise  
be required, the fund's yield could be negatively impacted.                     

TRADE ACTIVITY MONITORING                                                       

The AIM Affiliates monitor selected trades on a daily basis in an effort to     
detect excessive short-term trading activities. If, as a result of this         
monitoring, the AIM Affiliates believe that a shareholder has engaged in        
excessive short-term trading, they will seek to act in a manner that they       
believe is consistent with the best interests of long-term investors, which may 
include taking steps such as (i) asking the shareholder to take action to stop  
such activities or (ii) refusing to process future purchases or exchanges       
related to such activities in the shareholder's accounts other than exchanges   
into a money market fund. AIM Affiliates will use reasonable efforts to apply   
the fund's policies uniformly given the practical limitations described above.  

  The ability of the AIM Affiliates to monitor trades that are placed by the
underlying shareholders of omnibus accounts maintained by brokers, retirement   
plan accounts and approved fee-based program accounts is severely limited or    
non-existent in those instances in which the broker, retirement plan            
administrator or fee-based program sponsor maintains the underlying shareholder 
accounts. This is one reason why this tool cannot eliminate the possibility of  
excessive short-term trading.                                                   

TRADING GUIDELINES                                                              

If you exceed four exchanges out of a fund (other than AIM Money Market Fund,   
AIM Tax-Exempt Cash Fund, AIM Limited Maturity Treasury Fund, Premier Portfolio,
Premier Tax-Exempt Portfolio and Premier U.S. Government Money Portfolio) per   
calendar year, or a                                                             

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fund or an AIM Affiliate determines, in its sole discretion, that your          
short-term trading activity is excessive (regardless of whether or not you      
exceed such guidelines), it may, in its discretion, reject any additional       
purchase and exchange orders. Each fund and the AIM Affiliates reserve the      
discretion to accept exchanges in excess of these guidelines on a case-by-case  
basis if they believe that granting such exceptions would be consistent with the
best interests of shareholders. An exchange is the purchase of shares in one    
fund which is paid for with the proceeds from a redemption of shares of another 
fund effectuated on the same day. The movement out of one fund (redemption) and 
into one or more other funds (purchase) on the same day shall be counted as one 
exchange. Exchanges effected as part of programs that have been determined by an
AIM Affiliate to be non-discretionary, such as dollar cost averaging, portfolio 
rebalancing, or other automatic non-discretionary programs that involve         
exchanges, generally will not be counted toward the trading guidelines          
limitation of four exchanges out of a fund per calendar year.                   

The ability of the AIM Affiliates to monitor exchanges made by the      
underlying shareholders of omnibus accounts maintained by brokers, retirement   
plan accounts and approved fee-based program accounts is severely limited or    
non-existent in those instances in which the broker, retirement plan            
administrator or fee-based program sponsor maintains the underlying shareholder 
accounts and is unwilling or unable to implement these trading guidelines and   
may be further limited by systems limitations applicable to those types of      
accounts.                                                                       

  Some investments in the funds are made indirectly through vehicles such as
qualified tuition plans, variable annuity and insurance contracts, and funds of 
funds which use the funds as underlying investments (each a conduit investment  
vehicle). If shares of the funds are held in the name of a conduit investment   
vehicle and not in the names of the individual investors who have invested in   
the funds through the conduit investment vehicle, the conduit investment vehicle
may be considered an individual shareholder of the funds. To the extent that a  
conduit investment vehicle is considered an individual shareholder of the funds,
the funds are likely to be limited in their ability to impose exchange          
limitations on individual transactions initiated by investors who have invested 
in the funds through the conduit investment vehicle.                            

REDEMPTION FEE                                                                  

You may be charged a 2% redemption fee if you redeem, including redeeming by    
exchange, shares of certain funds within 30 days of purchase. See "Redeeming    
Shares -- Redemption Fee" for more information.                                 

The ability of a fund to assess a redemption fee on the underlying      
shareholders of omnibus accounts maintained by brokers, retirement plan accounts
and approved fee-based program accounts is severely limited or non-existent in  
those instances in which the broker, retirement plan administrator or fee-based 
program sponsor maintains the underlying shareholder accounts and is unwilling  
or unable to assess such fees and may be further limited by systems limitations 
applicable to these types of accounts.                                          

   For additional discussion of the applicability of redemption fees on shares
of the fund held through omnibus accounts, retirement plan accounts, approved   
fee-based program accounts and conduit investment vehicles, see "Redeeming      
Shares -- Redemption Fee".                                                      

FAIR VALUE PRICING                                                              

Securities owned by a fund are to be valued at current market value if market   
quotations are readily available. All other securities and assets of a fund for 
which market quotations are not readily available are to be valued at fair value
determined in good faith using procedures approved by the Board of Trustees of  
the fund. Fair value pricing may reduce the ability of frequent traders to take 
advantage of arbitrage opportunities resulting from potentially "stale" prices  
of portfolio holdings. However, it cannot eliminate the possibility of frequent 
trading.                                                                        

See "Pricing of Shares -- Determination of Net Asset Value" for more    
information.                                                                    

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PURCHASING SHARES                                                               

If you hold your shares through a broker/dealer or other financial institution, 
your eligibility to purchase those shares, the conditions for purchase and sale,
and the minimum and maximum amounts allowed may differ depending on that        
institution's policies.                                                         

MINIMUM INVESTMENTS PER FUND ACCOUNT                                            

There are no minimum investments with respect to Class K or Class R shares for  
fund accounts. The minimum investments with respect to Class A, A3, B and C     
shares and Investor Class shares for fund accounts are as follows:              

                                                        [Enlarge/Download Table]

                                                                              INITIAL                       ADDITIONAL   
TYPE OF ACCOUNT                                                             INVESTMENTS                    INVESTMENTS   
-------------------------------------------------------------------------------------------------------------------------
                                                                                                                         
Employer-Sponsored Retirement Plans (includes section 401,     $   0 ($25 per fund investment for              $25       
403 and                                                                salary deferrals from                             
457 plans, and SEP, SARSEP and SIMPLE IRA plans)                       Employer-Sponsored Retirement                     
                                                                       Plans)                                            

Systematic Purchase Plan                                          50                                            50       

IRA, Roth IRA or Coverdell ESA                                   250                                            25       

All other accounts                                             1,000                                            50       

ADI has the discretion to accept orders for lesser amounts.                                                              
-------------------------------------------------------------------------------------------------------------------------

HOW TO PURCHASE SHARES                                                          

You may purchase shares using one of the options below. Purchase orders will not
be processed unless the account application and purchase payment are received in
good order. In accordance with the USA PATRIOT Act, if you fail to provide all  
the required information requested in the current account application, your     
purchase order will not be processed. Additionally, Federal law requires that   
the fund verify and record your identifying information.                        

PURCHASE OPTIONS                                                                
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                       OPENING AN ACCOUNT                         ADDING TO AN ACCOUNT                   
-------------------------------------------------------------------------------------------------------------------------
                                                                                                                         
Through a Financial Advisor            Contact your financial advisor.            Same                                   
By Mail                                Mail completed account application and     Mail your check and the remittance slip
                                       check to the transfer agent, AIM           from your confirmation statement to the
                                       Investment Services, Inc., P.O. Box        transfer agent.                        
                                       4739, Houston, TX 77210-4739.                                                     
By Wire                                Mail completed account application to      Call the transfer agent to receive a   
                                       the transfer agent. Call the transfer      reference number. Then, use the wire   
                                       agent at (800) 959-4246 to receive a       instructions at left.                  
                                       reference number. Then, use the                                                   
                                       following wire instructions:                                                      
                                       Beneficiary Bank ABA/Routing #:                                                   
                                       113000609                                                                         
                                       Beneficiary Account Number: 00100366807                                           
                                       Beneficiary Account Name: AIM                                                     
                                       Investment Services, Inc.                                                         
                                       RFB: Fund Name, Reference #                                                       
                                       OBI: Your Name, Account #                                                         

By Telephone                           Open your account using one of the         Select the AIM Bank                    
                                       methods described above.                   Connection--Servicemark-- option on    
                                                                                  your completed account application or  
                                                                                  complete an AIM Bank Connection form.  
                                                                                  Mail the application or form to the    
                                                                                  transfer agent. Once the transfer agent
                                                                                  has received the form, call the        
                                                                                  transfer agent to place your purchase  
                                                                                  order.                                 
                                                                                  Call the AIM 24-hour Automated Investor
                                                                                  Line at 1-800-246-5463. You may place  
                                                                                  your order after you have provided the 
                                                                                  bank instructions that will be         
                                                                                  requested.                             

By Internet                            Open your account using one of the         Access your account at                 
                                       methods described above.                   www.aiminvestments.com. The proper bank
                                                                                  instructions must have been provided on
                                                                                  your account. You may not purchase     
                                                                                  shares in retirement accounts on the   
                                                                                  internet.                              
-------------------------------------------------------------------------------------------------------------------------

MCF--04/05                                                                      

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GRANDFATHERED INVESTORS                                                         

Investor Class shares of a fund may be purchased only by: (1) persons or        
entities who had established an account, prior to April 1, 2002, in Investor    
Class shares of any of the funds currently distributed by ADI (the Grandfathered
Funds) and have continuously maintained such account in Investor Class shares   
since April 1, 2002; (2) any person or entity listed in the account registration
for any Grandfathered Funds, which account was established prior to April 1,    
2002 and continuously maintained since April 1, 2002, such as joint owners,     
trustees, custodians and designated beneficiaries; (3) customers of certain     
financial institutions, wrap accounts or other fee-based advisory programs, or  
insurance company separate accounts, which have had relationships with ADI      
and/or any of the Grandfathered Funds prior to April 1, 2002 and continuously   
maintained such relationships since April 1, 2002; and (4) fund trustees,       
employees of AMVESCAP PLC and its subsidiaries, AMVESCAP directors, and their   
immediate families.                                                             

SPECIAL PLANS                                                                   

SYSTEMATIC PURCHASE PLAN                                                        
You can arrange for periodic investments in any of the funds by authorizing the 
transfer agent to withdraw the amount of your investment from your bank account 
on a day or dates you specify and in an amount of at least $50. You may stop the
Systematic Purchase Plan at any time by giving the transfer agent notice ten    
days prior to your next scheduled withdrawal.                                   

DOLLAR COST AVERAGING                                                           
Dollar Cost Averaging allows you to make automatic monthly or quarterly         
exchanges, if permitted, from one fund account to one or more other fund        
accounts with the identical registration. The account from which exchanges are  
to be made must have a minimum balance of $5,000 before you can use this option.
Exchanges will occur on (or about) the day of the month you specify, in the     
amount you specify. Dollar Cost Averaging cannot be set up for the 29th through 
the 31st of the month. The minimum amount you can exchange to another fund is   
$50. You may participate in a dollar cost averaging program hosted by your      
dealer of record, your financial advisor or another financial intermediary. If  
such program is the same or similar to AIM's Dollar Cost Averaging program and  
is non-discretionary, both as determined by an AIM Affiliate, exchanges made    
pursuant to such program generally will not be counted toward the trading       
guideline limitation of four exchanges out of a fund per calendar year.         

AUTOMATIC DIVIDEND INVESTMENT                                                   
All of your dividends and distributions may be paid in cash or invested in any  
fund at net asset value. Unless you specify otherwise, your dividends and       
distributions will automatically be reinvested in the same fund. You may invest 
your dividends and distributions per the rules listed in the "Permitted         
Exchanges" section.                                                             

You must comply with the following requirements to be eligible to invest
your dividends and distributions in shares of another fund:                     

(1) Your account balance (a) in the fund paying the dividend must be at least   
 $5,000; and (b) in the fund receiving the dividend must be at least $500;
and                                                                     

(2) Both accounts must have identical registration information.                 

PORTFOLIO REBALANCING PROGRAM                                                   
If you have at least $5,000 in your account, you may participate in the         
Portfolio Rebalancing Program. Under this Program, you can designate how the    
total value of your fund holdings should be rebalanced, on a percentage basis,  
between two and ten of your funds on a quarterly, semiannual or annual basis.   
Your portfolio will be rebalanced through the exchange of shares in one or more 
of your funds for shares of the same class of one or more other funds in your   
portfolio. Rebalancing will NOT occur if your portfolio is within 2% of your    
stated allocation. If you wish to participate in the Program, make changes or   
cancel the Program, the transfer agent must receive your request to participate,
changes, or cancellation in good order at least five business days prior to the 
next rebalancing date, which is normally the 28th day of the last month of the  
period you choose. You may realize taxable gains from these exchanges. We may   
modify, suspend or terminate the Program at any time on 60 days prior written   
notice. You may participate in a portfolio rebalancing program hosted by your   
dealer of record, your financial advisor or another financial intermediary. If  
such program is the same or similar to AIM's Portfolio Rebalancing Program and  
is non-discretionary, both as determined by an AIM Affiliate, exchanges made    
pursuant to such program generally will not be counted toward the trading       
guideline limitation of four exchanges out of a fund per calendar year.         

RETIREMENT PLANS                                                                
Shares of most of the funds can be purchased through tax-sheltered retirement   
plans made available to corporations, individuals and employees of non-profit   
organizations and public schools. A plan document must be adopted to establish a
retirement plan. You may use AIM sponsored retirement plans, which include IRAs,
Roth IRAs, SIMPLE IRA plans, SEP/SARSEP plans, 403(b) plans, Solo 401(k) plans  
and Money Purchase/Profit Sharing plans, or another sponsor's retirement plan.  
AIM Investment Services, Inc. assesses certain fees associated with the         
maintenance of certain types of retirement plan accounts and the provision of   
specialized recordkeeping services for those plan accounts. ADI assesses certain
fees associated with the maintenance of retirement plan documents for which it  
acts as the prototype sponsor. Contact your financial advisor for details.      

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REDEEMING SHARES                                                                

REDEMPTION FEE                                                                  

You may be charged a 2% redemption fee (on redemption proceeds) if you redeem,  
including redeeming by exchange, shares of the following funds within 30 days of
their purchase:                                                                 

                                                                [Download Table]
                                                                  
AIM Asia Pacific Growth Fund  AIM Global Value Fund               
AIM Developing Markets Fund   AIM High Yield Fund                 
AIM European Growth Fund      AIM International Core Equity Fund  
AIM European Small Company    AIM International Growth Fund       
Fund                          AIM International Small Company Fund
AIM Global Aggressive Growth  AIM S&P 500 Index Fund              
Fund                          AIM Trimark Fund                    
AIM Global Equity Fund                                            
AIM Global Growth Fund                                            
AIM Global Real Estate Fund                                       

The redemption fee will be retained by the fund from which you are redeeming    
shares (including redemptions by exchange), and is intended to offset the       
trading costs, market impact and other costs associated with short-term money   
movements in and out of the fund. The redemption fee is imposed to the extent   
that the number of fund shares you redeem exceeds the number of fund shares that
you have held for more than 30 days. In determining whether the minimum 30 day  
holding period has been met, only the period during which you have held shares  
of the fund from which you are redeeming is counted. For this purpose, shares   
held longest will be treated as being redeemed first and shares held shortest as
being redeemed last.                                                            

The 2% redemption fee generally will not be charged on transactions     
involving the following:                                                        

(1) total or partial redemptions of shares by omnibus accounts maintained by    
    brokers that do not have the systematic capability to process the redemption
fee;                                                                    

(2) total or partial redemptions of shares by approved fee-based programs that  
do not have the systematic capability to process the redemption fee;    

(3) total or partial redemptions of shares held through retirement plans        
   maintained pursuant to Sections 401, 403, 408, 408A and 457 of the Internal
Revenue Code (the Code) where the systematic capability to process the  
redemption fee does not exist;                                          

(4) total or partial redemptions effectuated by funds of funds, qualified       
   tuition plans maintained pursuant to Section 529 of the Code, and insurance
company separate accounts which use the funds as underlying investments;

(5) total or partial redemptions effectuated pursuant to an automatic           
non-discretionary rebalancing program or a systematic withdrawal plan   
established with the funds or a financial intermediary;                 

(6) total or partial redemptions requested within 30 days following the death or
   post-purchase disability of (i) any registered shareholder on an account or
    (ii) the settlor of a living trust which is the registered shareholder of an
account, of shares held in the account at the time of death or initial  
determination of post-purchase disability;                              

(7) total or partial redemption of shares acquired through investment of        
dividends and other distributions; or                                   

(8) redemptions initiated by a fund.                                            

The AIM Affiliates' goals are to apply the redemption fee on all classes of     
shares of the above funds regardless of the type of account in which such shares
are held. This goal is not immediately achievable because of systems limitations
and marketplace resistance. Brokers that maintain omnibus accounts, sponsors of 
fee-based program accounts and retirement plan administrators for accounts that 
are exempt from the redemption fee pursuant to (1) through (8) above may impose 
a redemption fee that has different characteristics, which may be more or less  
restrictive, than those set forth above.                                        

    Some investments in the funds are made indirectly through conduit investment
vehicles. If shares of the funds are held in the name of a conduit investment   
vehicle and not in the names of the individual investors who have invested in   
the funds through the conduit investment vehicle, the conduit investment vehicle
may be considered an individual shareholder of the funds. To the extent that a  
conduit investment vehicle is considered an individual shareholder of the funds,
the funds are likely to be limited in their ability to assess redemption fees on
individual transactions initiated by investors who have invested in the funds   
through the conduit investment vehicle. In these cases, the applicability of    
redemption fees will be determined based on the aggregate holdings and          
redemptions of the conduit investment vehicle in a fund.                        

    The funds have the discretion to waive the 2% redemption fee if a fund is in
jeopardy of losing its registered investment company qualification for tax      
purposes.                                                                       

Your broker or financial advisor may charge service fees for handling   
redemption transactions. Your shares also may be subject to a contingent        
deferred sales charge (CDSC) in addition to the redemption fee.                 

REDEMPTION OF CLASS A SHARES AND AIM CASH RESERVE SHARES ACQUIRED BY EXCHANGE   

If you purchase $1,000,000 or more of Class A shares of any fund, or if you make
additional purchases of Class A shares on and after                             

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October 31, 2002 at net asset value, your shares may be subject to a CDSC upon  
redemption as described below.                                                  

                                                        [Enlarge/Download Table]

           SHARES                                                                              
         INITIALLY                      SHARES HELD                   CDSC APPLICABLE UPON     
         PURCHASED                   AFTER AN EXCHANGE                REDEMPTION OF SHARES     
         ---------                   -----------------                --------------------     
                                                                                               
- Class A shares of Category  - Class A shares of Category I    - 1% if shares are redeemed    
  I or II Fund or AIM Short     or II Fund or AIM Short Term      within 18 months of initial  
  Term Bond Fund                Bond Fund                         purchase of Category I or II 
                              - Class A shares of Category III    Fund or AIM Short Term Bond  
                                Fund(2)                           Fund shares                  
                              - AIM Cash Reserve Shares of AIM                                 
                                Money Market Fund                                              

- Class A shares of Category  - Class A shares of Category I    - 1% if shares are redeemed    
  III Fund(1)                   or II Fund or AIM Short Term      within 18 months of initial  
                                Bond Fund                         purchase of Category III Fund
                                                                  shares                       

- Class A shares of Category  - Class A shares of Category III  - No CDSC                      
  III Fund(1)                   Fund(2)                                                        
                              - Class A shares of AIM Tax-                                     
                                Exempt Cash Fund                                               
                              - AIM Cash Reserve Shares of AIM                                 
                                Money Market                                                   

(1) As of the close of business on October 30, 2002, only existing shareholders 
of Class A shares of a Category III Fund may purchase such shares.      
(2) Beginning on February 17, 2003, Class A shares of a Category I, II or III   
   Fund or AIM Short Term Bond Fund may not be exchanged for Class A shares of
Category III Fund.                                                      

REDEMPTION OF CLASS B SHARES ACQUIRED BY EXCHANGE FROM AIM FLOATING RATE FUND   

If you redeem Class B shares you acquired by exchange via a tender offer by AIM 
Floating Rate Fund, the early withdrawal charge applicable to shares of AIM     
Floating Rate Fund will be applied instead of the CDSC normally applicable to   
Class B shares.                                                                 

HOW TO REDEEM SHARES                                                            
--------------------------------------------------------------------------------

                                                                [Download Table]
                                                                               
Through a Financial Advisor        Contact your financial advisor, including   
                                   your retirement plan or program sponsor.    

By Mail                            Send a written request to the transfer      
                                   agent. Requests must include (1) original   
                                   signatures of all registered                
                                   owners/trustees; (2) the name of the fund   
                                   and your account number; (3) if the transfer
                                   agent does not hold your shares, endorsed   
                                   share certificates or share certificates    
                                   accompanied by an executed stock power; and 
                                   (4) signature guarantees, if necessary (see 
                                   below). The transfer agent may require that 
                                   you provide additional information, such as 
                                   corporate resolutions or powers of attorney,
                                   if applicable. If you are redeeming from an 
                                   IRA account, you must include a statement of
                                   whether or not you are at least 59 1/2 years
                                   old and whether you wish to have federal    
                                   income tax withheld from your proceeds. The 
                                   transfer agent may require certain other    
                                   information before you can redeem from an   
                                   employer-sponsored retirement plan. Contact 
                                   your employer for details.                  

By Telephone                       Call the transfer agent at 1-800-959-4246 or
                                   our AIM 24-hour Automated Investor Line at  
                                   1-800-246-5463. You will be allowed to      
                                   redeem by telephone if (1) the proceeds are 
                                   to be mailed to the address on record (if   
                                   there has been no change communicated to us 
                                   within the last 30 days) or transferred     
                                   electronically to a pre-authorized checking 
                                   account; (2) you do not hold physical share 
                                   certificates; (3) you can provide proper    
                                   identification information; (4) the proceeds
                                   of the redemption do not exceed $250,000;   
                                   and (5) you have not previously declined the
                                   telephone redemption privilege. Certain     
                                   retirement accounts and 403(b) plans, may   
                                   not be redeemed by telephone. For funds     
                                   other than Premier Portfolio, Premier       
                                   Tax-Exempt Portfolio and Premier U.S.       
                                   Government Money Portfolio, the transfer    
                                   agent must receive your call during the     
                                   hours of the customary trading session of   
                                   the New York Stock Exchange (NYSE) in order 
                                   to effect the redemption at that day's      
                                   closing price. For Premier Portfolio,       
                                   Premier Tax-Exempt Portfolio and Premier    
                                   U.S. Government Money Portfolio, the        
                                   transfer agent must receive your call before
                                   the last net asset value determination on a 
                                   business day in order to effect the         
                                   redemption at that day's closing price. You 
                                   may, with limited exceptions, redeem from an
                                   IRA account by telephone. Redemptions from  
                                   other types of retirement accounts may be   
                                   requested in writing.                       

By Internet                        Place your redemption request at            
                                   www.aiminvestments.com. You will be allowed 
                                   to redeem by internet if (1) you do not hold
                                   physical share certificates; (2) you can    
                                   provide proper identification information;  
                                   (3) the proceeds of the redemption do not   
                                   exceed $250,000; and (4) you have already   
                                   provided proper bank information. AIM       
                                   prototype retirement accounts may not be    
                                   redeemed on the internet. For funds other   
                                   than Premier Portfolio, Premier Tax-Exempt  
                                   Portfolio and Premier U.S. Government Money 
                                   Portfolio, the transfer agent must confirm  
                                   your transaction during the hours of the    
                                   customary trading session of the NYSE in    
                                   order to effect the redemption at that day's
                                   closing price. For Premier Portfolio,       
                                   Premier Tax-Exempt Portfolio and Premier    
                                   U.S. Government Money Portfolio, the        
                                   transfer agent must confirm your transaction
                                   before the last net asset value             
                                   determination on a business day in order to 
                                   effect the redemption at that day's closing 
                                   price.                                      

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TIMING AND METHOD OF PAYMENT                                                    

We normally will send out checks within one business day, and in any event no   
more than seven days, after we accept your request to redeem. If you redeem     
shares recently purchased by check, you will be required to wait up to ten      
business days before we will send your redemption proceeds. This delay is       
necessary to ensure that the purchase check has cleared. Payment may be         
postponed in cases where the SEC declares an emergency or normal trading is     
halted.                                                                         

REDEMPTION BY MAIL                                                              
If you mail us a request in good order to redeem your shares, we will mail you a
check in the amount of the redemption proceeds to the address on record with us.
If your request is not in good order, you may have to provide us with additional
documentation in order to redeem your shares.                                   

REDEMPTION BY TELEPHONE                                                         
If you redeem by telephone, we will mail you a check in the amount of the       
redemption proceeds to your address of record (if there has been no change      
communicated to the transfer agent within the previous 30 days) or transmit them
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by telephone are genuine, but we are  
not liable for telephone instructions that are reasonably believed to be        
genuine.                                                                        

REDEMPTION BY INTERNET                                                          
If you redeem by internet, we will transmit your redemption proceeds            
electronically to your pre-authorized bank account. We use reasonable procedures
to confirm that instructions communicated by internet are genuine, but we are   
not liable for internet instructions that are reasonably believed to be genuine.

PAYMENT FOR SYSTEMATIC REDEMPTIONS                                              
You may arrange for regular monthly or quarterly withdrawals from your account  
of at least $50. You also may make annual withdrawals if you own Class A shares.
We will redeem enough shares from your account to cover the amount withdrawn.   
You must have an account balance of at least $5,000 to establish a Systematic   
Redemption Plan. You can stop this plan at any time by giving ten days prior    
notice to the transfer agent.                                                   

EXPEDITED REDEMPTIONS                                                           
(AIM CASH RESERVE SHARES OF AIM MONEY MARKET FUND ONLY)                         
If we receive your redemption order before 11:30 a.m. Eastern Time, we will try 
to transmit payment of redemption proceeds on that same day. If we receive your 
redemption order after 11:30 a.m. Eastern Time and before the close of the      
customary trading session of the NYSE, we generally will transmit payment on the
next business day.                                                              

REDEMPTIONS BY CHECK                                                            
(CLASS A SHARES OF AIM TAX-EXEMPT CASH FUND, AIM CASH RESERVE SHARES OF AIM     
MONEY MARKET FUND AND INVESTOR CLASS SHARES OF AIM MONEY MARKET FUND, AIM       
TAX-EXEMPT CASH FUND, PREMIER PORTFOLIO, PREMIER TAX-EXEMPT PORTFOLIO AND       
PREMIER U.S. GOVERNMENT MONEY PORTFOLIO ONLY)                                   

You may redeem shares of these funds by writing checks in amounts of $250 or    
more if you have completed an authorization form. Redemption by check is not    
available for retirement accounts.                                              

SIGNATURE GUARANTEES                                                            

We require a signature guarantee when you redeem by mail and                    

(1) the amount is greater than $250,000;                                        

(2) you request that payment be made to someone other than the name registered  
on the account;                                                         

(3) you request that payment be sent somewhere other than the bank of record on 
the account; or                                                         

(4) you request that payment be sent to a new address or an address that changed
in the last 30 days.                                                    

The transfer agent will accept a guarantee of your signature by a number of     
financial institutions. Call the transfer agent for additional information. Some
institutions have transaction amount maximums for these guarantees. Please check
with the guarantor institution.                                                 

REDEMPTIONS IN KIND                                                             

Although the funds generally intend to pay redemption proceeds solely in cash,  
the funds reserve the right to determine, in their sole discretion, whether to  
satisfy redemption requests by making payment in securities or other property   
(known as a redemption in kind).                                                

REDEMPTIONS BY THE FUNDS                                                        

If your account (Class A, Class A3, Class B, Class C and Investor Class shares  
only) has been open at least one year, you have not made an additional purchase 
in the account during the past six calendar months, and the value of your       
account falls below $500 ($250 for Investor Class shares) for three consecutive 
months due to redemptions or exchanges (excluding retirement accounts), the     
funds have the right to redeem the account after giving you 60 days' prior      
written notice. You may avoid having your account redeemed during the notice    
period by bringing the account value up to $500 ($250 for Investor Class shares)
or by utilizing the Automatic Investment Plan.                                  

   If the fund determines that you have not provided a correct Social Security
or other tax ID number on your account application, or the fund is not able to  
verify your identity as required by law, the fund may, at its discretion, redeem
the account and distribute the proceeds to you.                                 

EXCHANGING SHARES                                                               

You may, under certain circumstances, exchange shares in one fund for those of  
another fund. An exchange is the purchase of shares in one fund which is paid   
for with the proceeds from a redemption of shares of another fund effectuated on
the same day. Before requesting an exchange, review the prospectus of the fund  
you wish to acquire. Exchange privileges also apply to holders of the           
Connecticut General Guaranteed Account, established for tax-qualified group     
annuities, for contracts purchased on or before June 30, 1992.                  

You may be charged a redemption fee on certain redemptions, including   
exchanges. See "Redeeming Shares -- Redemption Fee."                            

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PERMITTED EXCHANGES                                                             

Except as otherwise stated under "Exchanges Not Permitted," you generally may   
exchange your shares for shares of the same class of another fund.              

                                                        [Enlarge/Download Table]

------------------------------------------------------------------------------------------------------------------------------------
EXCHANGE FROM                                  EXCHANGE TO                                ALLOWED                  PROHIBITED       
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                    
Class A                  Class A, A3, Investor Class, or AIM Cash Reserve                                                           
                         Shares. Exceptions are:                                                                                    
                         - Class A Shares of AIM Limited   Maturity Treasury                                                        
                         Fund and AIM Tax-Free Intermediate Fund are currently                                                      
                           closed to new investors.                                                                                 
                         - Class A Shares of AIM Limited   Maturity Treasury                             X                          
                         Fund, AIM Tax-Exempt Cash Fund and AIM Tax-Free                                                            
                           Intermediate Fund cannot be exchanged for Class A3                                                       
                           Shares of those funds.                                                                                   
                         - Investor Class Shares of all   funds are currently                                                       
                         offered to new investors only on a limited basis.                                                          
------------------------------------------------------------------------------------------------------------------------------------
Class A                  Class B, C, K, R, Institutional Class Shares or Shares                                                     
                         of the AIM Summit Fund.                                                                                   X
------------------------------------------------------------------------------------------------------------------------------------
Class A3                 Class A, A3, Investor Class, or AIM Cash Reserve                                                           
                         Shares. Exceptions are:                                                                                    
                         - Class A3 Shares of AIM Limited   Maturity Treasury                                                       
                         Fund and AIM Tax-Free Intermediate Fund cannot be                               X                          
                           exchanged for Class A Shares of those funds.                                                             
                         - Investor Class Shares of all   funds are currently                                                       
                         offered to new investors only on a limited basis.                                                          
------------------------------------------------------------------------------------------------------------------------------------
Class A3                 Class B, C, K, R, Institutional Class Shares, or shares                                                    
                         of AIM Summit Fund.                                                                                       X
------------------------------------------------------------------------------------------------------------------------------------
Class B                  Class B. Exceptions are:                                                                                   
                         - Class B Shares of other funds   cannot be exchanged                           X                          
                         for Class B Shares of AIM Floating Rate Fund.                                                              
------------------------------------------------------------------------------------------------------------------------------------
Class B                  Class A, A3, C, K, R, AIM Cash Reserve Shares,                                                             
                         Institutional, Investor Class Shares, or shares of AIM                                                    X
                         Summit Fund.                                                                                               
------------------------------------------------------------------------------------------------------------------------------------
Class C                  Class C. Exceptions are:                                                                                   
                         - Class C shares of other funds   cannot be exchanged                           X                          
                         for Class C shares of AIM Floating Rate Fund.                                                              
------------------------------------------------------------------------------------------------------------------------------------
Class C                  Class A, A3, B, K, R, AIM Cash Reserve Shares,                                                             
                         Institutional, Investor Class shares or shares of AIM                                                     X
                         Summit Fund.                                                                                               
------------------------------------------------------------------------------------------------------------------------------------
Class K                  Class K                                                                         X                          
------------------------------------------------------------------------------------------------------------------------------------
Class K                  Class A, A3, B, C, R, AIM Cash Reserve Shares,                                                             
                         Institutional, Investor Class shares, or shares of AIM                                                    X
                         Summit Fund.                                                                                               
------------------------------------------------------------------------------------------------------------------------------------
Class R                  Class R                                                                         X                          
------------------------------------------------------------------------------------------------------------------------------------
Class R                  Class A, A3, B, C, K, AIM Cash Reserve Shares,                                                             
                         Institutional, Investor Class shares, or shares of AIM                                                    X
                         Summit Fund.                                                                                               
------------------------------------------------------------------------------------------------------------------------------------
AIM Cash Reserve Shares  Class A, A3, B, C, R, or Investor Class shares.                                                            
                         Exceptions are:                                                                                            
                         - Class A shares of AIM Limited   Maturity Treasury                                                        
                         Fund and AIM Tax-Free Intermediate Fund are currently                                                      
                           closed to new investors.                                                                                 
                         - Shares to be exchanged for   Class B, C or R shares                           X                          
                         must not have been acquired by exchange from Class A                                                       
                           shares of any fund.                                                                                      
                         - Investor Class Shares of all   funds are currently                                                       
                         offered to new investors only on a limited basis.                                                          
------------------------------------------------------------------------------------------------------------------------------------
AIM Cash Reserve Shares  Class K, Institutional Class shares, or shares of AIM                                                      
                         Summit Fund.                                                                                              X
------------------------------------------------------------------------------------------------------------------------------------
Institutional Class      Institutional Class                                                             X                          
------------------------------------------------------------------------------------------------------------------------------------
Institutional Class      Class A, A3, B, C, K, R, AIM Cash Reserve Shares,                                                          
                         Investor Class shares, or shares of AIM Summit Fund.                                                      X
------------------------------------------------------------------------------------------------------------------------------------
Investor Class           A, A3, or Investor Class. Exceptions are:                                                                  
                         - Investor Class shares cannot   be exchanged for Class                                                    
                         A shares of any fund which offers Investor Class                                                           
                           shares.                                                                       X                          
                         - Class A shares of AIM Limited   Maturity Treasury                                                        
                         Fund and AIM Tax-Free Intermediate Fund are currently                                                      
                           closed to new investors.                                                                                 
------------------------------------------------------------------------------------------------------------------------------------
Investor Class           Class B, C, K, R, AIM Cash Reserve Shares,                                                                 
                         Institutional Class shares, or shares of AIM Summit                                                       X
                         Fund.                                                                                                      
------------------------------------------------------------------------------------------------------------------------------------
AIM Summit Fund          Class A, A3, or AIM Cash Reserve Shares. Exceptions                                                        
                         are:                                                                                                       
                         - Class A shares of AIM Limited   Maturity Treasury                             X                          
                         Fund and AIM Tax-Free Intermediate Fund are currently                                                      
                           closed to new investors.                                                                                 
------------------------------------------------------------------------------------------------------------------------------------
AIM Summit Fund          Class B, C, K, R, Institutional or Investor Class                                                          
                         shares.                                                                                                   X
------------------------------------------------------------------------------------------------------------------------------------

 You may be required to pay an initial sales charge when exchanging from a
fund with a lower initial sales charge than the one into which you are          
exchanging. If you exchange into shares that are subject to a CDSC, we will     
begin the holding period for purposes of calculating the CDSC on the date you   
made your initial purchase.                                                     

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EXCHANGES NOT SUBJECT TO A SALES CHARGE                                         
You will not pay an initial sales charge when exchanging:                       
(1) Class A shares with an initial sales charge (excluding Class A shares of AIM
Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund) for  

(a) Class A shares of another fund;                                   

(b) AIM Cash Reserve Shares of AIM Money Market Fund; or              

   (c) Class A3 shares of AIM Limited Maturity Treasury Fund or AIM Tax-Free
Intermediate Fund.                                            
(2) Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free       
Intermediate Fund with an initial sales charge for                      

   (a) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of
AIM Tax-Exempt Cash Fund; or                                                

(b) Class A shares of another Fund, but only if                       

(i)  you acquired the original shares before May 1, 1994; or
         (ii) you acquired the original shares on or after May 1, 1994 by way of
         an exchange from shares with higher initial sales charges; or
(3) AIM Cash Reserve Shares of AIM Money Market Fund or Class A shares of AIM   
Tax-Exempt Cash Fund for                                                

    (a) Class A shares of a fund subject to an initial sales charge (excluding
       Class A shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free
  Intermediate Fund), but only if you acquired the original shares

         (i)  prior to May 1, 1994 by exchange from Class A shares subject to an
initial sales charge;                               

         (ii) on or after May 1, 1994 by exchange from Class A shares subject to
            an initial sales charge (excluding Class A shares of AIM Limited
          Maturity Treasury Fund and AIM Tax-Free Intermediate Fund); or
(4) Class A3 shares of AIM Limited Maturity Treasury Fund or AIM Tax-Free       
Intermediate Fund for                                                   

(a) AIM Cash Reserve Shares of AIM Money Market Fund; or              

(b) Class A shares of AIM Tax-Exempt Cash Fund.                       
You will not pay a CDSC or other sales charge when exchanging:                  
(1) Class A shares for other Class A shares;                                    
(2) Class B shares for other Class B shares;                                    
(3) Class C shares for other Class C shares;                                    
(4) Class K shares for other Class K shares;                                    
(5) Class R shares for other Class R shares.                                    
EXCHANGES NOT PERMITTED                                                         

For shares purchased prior to November 15, 2001, you may not exchange:          
(1) Class A shares of Category I or II funds (i) subject to an initial sales    
charge or (ii) purchased at net asset value and subject to a contingent 
    deferred sales charge (CDSC) for Class A shares of AIM Tax-Exempt Cash Fund;
(2) Class A shares of Category III funds purchased at net asset value for Class 
  A shares of a Category I or II fund, Class A shares of AIM Short Term Bond
Fund;                                                                   
(3) on or after January 15, 2002, AIM Cash Reserve Shares of AIM Money Market   
Fund or Class A shares of AIM Tax-Exempt Cash Fund for Class A shares of
Category III AIM Funds that are subject to a CDSC.                      
For shares purchased on or after November 15, 2001, you may not exchange:       
(1) Class A shares of Category I or II fund, Class A shares of AIM Short Term   
 Bond Fund (i) subject to an initial sales charge or (ii) purchased at net
   asset value and subject to a CDSC for Class A shares of AIM Tax-Exempt Cash
Fund;                                                                   
(2) Class A shares of AIM Tax-Exempt Cash Fund for Class A shares of any other  
  fund (i) subject to an initial sales charge or (ii) purchased at net asset
value and subject to a CDSC or for AIM Cash Reserve Shares of AIM Money 
Market Fund; or                                                         
(3) AIM Cash Reserve Shares of AIM Money Market Fund for Class B or Class C     
  shares of any fund or for Class A shares of any fund that are subject to a
    CDSC, however, if you originally purchased Class A shares of a Category I or
    II fund or AIM Short Term Bond Fund, and exchanged those shares for AIM Cash
 Reserve Shares of AIM Money Market Fund, you may further exchange the AIM
Cash Reserve Shares for Class A shares of a Category I or II fund or AIM
Short Term Bond Fund.                                                   
EXCHANGE CONDITIONS                                                             

The following conditions apply to all exchanges:                                

- Shares of the fund you wish to acquire must be available for sale in your     
state of residence;                                                         

- Exchanges must be made between accounts with identical registration           
information;                                                                

- The account you wish to exchange from must have a certified tax identification
number (or the Fund has received an appropriate Form W-8 or W-9);           

- Shares must have been held for at least one day prior to the exchange with the
exception of dividends that are reinvested; and                             

- If you have physical share certificates, you must return them to the transfer 
agent prior to the exchange.                                                

TERMS OF EXCHANGE                                                               

Under unusual market conditions, a fund may delay the purchase of shares being  
acquired in an exchange for up to five business days if it determines that it   
would be materially disadvantaged by the immediate transfer of exchange         
proceeds. The exchange privilege is not an option or right to purchase shares.  
Any of the participating funds or the distributor may modify or terminate this  
privilege at any time. The fund or the distributor will provide you with notice 
of such modification or termination whenever it is required to do so by         

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applicable law, but may impose changes at any time for emergency purposes.      

BY MAIL                                                                         

If you wish to make an exchange by mail, you must include original signatures of
each registered owner exactly as the shares are registered, the account         
registration and account number, the dollar amount or number of shares to be    
exchanged and the names of the funds from which and into which the exchange is  
to be made.                                                                     

BY TELEPHONE                                                                    

Conditions that apply to exchanges by telephone are the same as redemptions by  
telephone, including that the transfer agent must receive exchange requests     
during the hours of the customary trading session of the NYSE; however, you     
still will be allowed to exchange by telephone even if you have changed your    
address of record within the preceding 30 days.                                 

BY INTERNET                                                                     

You will be allowed to exchange by internet if you do not hold physical share   
certificates and you provide the proper identification information.             

EXCHANGING CLASS B, CLASS C AND CLASS R SHARES                                  

If you make an exchange involving Class B or Class C shares or Class R shares   
subject to a CDSC, the amount of time you held the original shares will be      
credited to the holding period of the Class B, Class C or Class R shares,       
respectively, into which you exchanged for the purpose of calculating contingent
deferred sales charges (CDSC) if you later redeem the exchanged shares. If you  
redeem Class B or Class C shares acquired by exchange via a tender offer by AIM 
Floating Rate Fund, you will be credited with the time period you held the Class
B or Class C shares of AIM Floating Rate Fund for the purpose of computing the  
early withdrawal charge applicable to those shares.                             
--------------------------------------------------------------------------------

EACH FUND AND ITS AGENTS RESERVE THE RIGHT AT ANY TIME TO:                    
- REJECT OR CANCEL ALL OR ANY PART OF ANY PURCHASE OR EXCHANGE ORDER;         
- MODIFY ANY TERMS OR CONDITIONS OF PURCHASE OF SHARES OF ANY FUND;           
- REJECT OR CANCEL ANY REQUEST TO ESTABLISH THE SYSTEMATIC PURCHASE PLAN AND  
SYSTEMATIC REDEMPTION PLAN OPTIONS ON THE SAME ACCOUNT; OR                
- SUSPEND, CHANGE OR WITHDRAW ALL OR ANY PART OF THE OFFERING MADE BY THIS    
PROSPECTUS.                                                               
--------------------------------------------------------------------------------

PRICING OF SHARES                                                               

DETERMINATION OF NET ASSET VALUE                                                

The price of each fund's shares is the fund's net asset value per share. The    
funds value portfolio securities for which market quotations are readily        
available at market value. The funds value all other securities and assets for  
which market quotations are not readily available at their fair value in good   
faith using procedures approved by the Boards of Trustees of the funds.         
Securities and other assets quoted in foreign currencies are valued in U.S.     
dollars based on the prevailing exchange rates on that day.                     

   Even when market quotations are available, they may be stale or they may be
unreliable because the security is not traded frequently, trading on the        
security ceased before the close of the trading market or issuer specific events
occurred after the security ceased trading or because of the passage of time    
between the close of the market on which the security trades and the close of   
the NYSE and when the fund calculates its net asset value. Issuer specific      
events may cause the last market quotation to be unreliable. Such events may    
include a merger or insolvency, events which affect a geographical area or an   
industry segment, such as political events or natural disasters, or market      
events, such as a significant movement in the U.S. market. Where market         
quotations are not readily available, including where AIM determines that the   
closing price of the security is unreliable, AIM will value the security at fair
value in good faith using procedures approved by the Boards of Trustees. Fair   
value pricing may reduce the ability of frequent traders to take advantage of   
arbitrage opportunities resulting from potentially "stale" prices of portfolio  
holdings. However, it cannot eliminate the possibility of frequent trading.     

   Fair value is that amount that the owner might reasonably expect to receive
for the security upon its current sale. Fair value requires consideration of all
appropriate factors, including indications of fair value available from pricing 
services. A fair value price is an estimated price and may vary from the prices 
used by other mutual funds to calculate their net asset values.                 

   AIM may use indications of fair value from pricing services approved by the
Boards of Trustees. In other circumstances, the AIM valuation committee may fair
value securities in good faith using procedures approved by the Boards of       
Trustees. As a means of evaluating its fair value process, AIM routinely        
compares closing market prices, the next day's opening prices for the security  
in its primary market if available, and indications of fair value from other    
sources. Fair value pricing methods and pricing services can change from time to
time as approved by the Boards of Trustees.                                     

Specific types of securities are valued as follows:                     

    Domestic Exchange Traded Equity Securities:  Market quotations are generally
available and reliable for domestic exchange traded equity securities. If market
quotations are not available or are unreliable, AIM will value the security at  
fair value in good faith using procedures approved by the Boards of Trustees.   

Foreign Securities:  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 an  
issuer specific event has occurred that AIM determines, in its judgment, is     
likely to have affected the closing price of a foreign security, it will price  
the security at fair value. AIM also relies on a screening process from a       
pricing vendor to indicate the degree of                                        

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certainty, based on historical data, that the closing price in the principal    
market where a foreign security trades is not the current market value as of the
close of the NYSE. For foreign securities where AIM believes, at the approved   
degree of certainty, that the price is not reflective of current market value,  
AIM will use the indication of fair value from the pricing service to determine 
the fair value of the security. The pricing vendor, pricing methodology or      
degree of certainty may change from time to time.                               

  Fund securities primarily traded on foreign markets may trade on days that
are not business days of the fund. Because the net asset value of fund shares is
determined only on business days of the fund, the value of the portfolio        
securities of a fund that invests in foreign securities may change on days when 
you will not be able to purchase or redeem shares of the fund.                  

   Fixed Income Securities:  Government, corporate, asset-backed and municipal
bonds and convertible securities, including high yield or junk bonds, are valued
on the basis of prices provided by independent pricing services. Prices provided
by the pricing services 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 special securities,       
dividend rate, maturity and other market data. Prices received from pricing     
services are fair value prices. In addition, if the price provided by the       
pricing service is unreliable, the AIM valuation committee may fair value the   
security using procedures approved by the Boards of Trustees.                   

Short-term Securities:  The funds' short-term investments are valued at 
amortized cost when the security has 60 days or less to maturity. AIM Money     
Market Fund, AIM Tax-Exempt Cash Fund, Premier Portfolio, Premier Tax-Exempt    
Portfolio and Premier U.S. Government Money Portfolio value all their securities
at amortized cost. AIM High Income Municipal Fund, AIM Municipal Bond Fund and  
AIM Tax-Free Intermediate Fund value variable rate securities that have an      
unconditional demand or put feature exercisable within seven days or less at    
par, which reflects the market value of such securities.                        

   Futures and Options:  Futures and options are valued on the basis of market
quotations, if available.                                                       

  Open-end Funds:  To the extent a fund invests in other open-end funds, the
investing fund will calculate its net asset value using the net asset value of  
the underlying fund in which it invests.                                        

   Each fund determines the net asset value of its shares on each day the NYSE
is open for business (a business day), as of the close of the customary trading 
session, or earlier NYSE closing time that day. AIM Money Market Fund also      
determines its net asset value as of 12:00 noon Eastern Time on each business   
day. Premier Portfolio, Premier Tax-Exempt Portfolio and Premier U.S. Government
Money Portfolio determine the net asset value of their shares every fifteen     
minutes on each business day, beginning at 8:00 a.m. Eastern Time. The last net 
asset value determination on any business day for Premier Portfolio and Premier 
U.S. Government Money Portfolio will generally occur at 5:30 p.m. Eastern Time, 
and the last net asset value determination on any business day for Premier      
Tax-Exempt Portfolio will generally occur at 4:30 p.m. Eastern Time. Premier    
Portfolio, Premier Tax-Exempt Portfolio and Premier U.S. Government Money       
Portfolio are authorized not to open for trading on a day that is otherwise a   
business day if the Bond Market Association recommends that government          
securities dealers not open for trading and any such day will not be considered 
a business day. Premier Portfolio, Premier Tax-Exempt Portfolio and Premier U.S.
Government Money Portfolio also may close early on a business day if the Bond   
Market Association recommends that government securities dealers close early. If
Premier Portfolio, Premier Tax-Exempt Portfolio or Premier U.S. Government Money
Portfolio uses its discretion to close early on a business day, the last net    
asset value calculation will occur as of the time of such closing.              

TIMING OF ORDERS                                                                

For funds other than Premier Portfolio, Premier Tax-Exempt Portfolio and Premier
U.S. Government Money Portfolio, you can purchase or redeem shares on each      
business day prior to the close of the customary trading session or any earlier 
NYSE closing time that day. For funds other than Premier Portfolio, Premier     
Tax-Exempt Portfolio and Premier U.S. Government Money Portfolio, purchase      
orders that are received and accepted before the close of the customary trading 
session or any earlier NYSE closing time on a business day generally are        
processed that day and settled on the next business day.                        

For Premier Portfolio, Premier Tax-Exempt Portfolio and Premier U.S.    
Government Money Portfolio, you can purchase or redeem shares on each business  
day, prior to the last net asset value determination on such business day;      
however, if your order is received and accepted after the close of the customary
trading session or any earlier NYSE closing time that day, your order generally 
will be processed on the next business day and settled on the second business   
day following the receipt and acceptance of your order.                         

 For all funds, you can exchange shares on each business day, prior to the
close of the customary trading session or any earlier NYSE closing time that    
day. Shareholders of Premier Portfolio, Premier Tax-Exempt Portfolio and Premier
U.S. Government Money Portfolio therefore cannot exchange their shares after the
close of the customary trading session or any earlier NYSE closing time on a    
particular day, even though these funds remain open after such closing time.    

The funds price purchase, exchange and redemption orders at the net asset   
value calculated after the transfer agent receives an order in good order. Any  
applicable sales charges are applied at the time an order is processed. A fund  
may postpone the right of redemption only under unusual circumstances, as       
allowed by the Securities and Exchange Commission, such as when the NYSE        
restricts or suspends trading.                                                  

TAXES                                                                       

In general, dividends and distributions you receive are taxable as ordinary     
income or long-term capital gains for federal income tax purposes, whether you  
reinvest them in additional shares or take them in cash. Distributions are      
generally taxable to you at different rates depending on the length of time the 
fund holds its assets and the                                                   

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type of income that the fund earns. Different tax rates apply to ordinary       
income, qualified dividend income, and long-term capital gain distributions.    
Every year, you will be sent information showing the amount of dividends and    
distributions you received from each fund during the prior year.                

   Any long-term or short-term capital gains realized from redemptions of fund
shares will be subject to federal income tax. Exchanges of shares for shares of 
another fund are treated as a sale, and any gain realized on the transaction    
will generally be subject to federal income tax.                                

   INVESTORS IN TAX-EXEMPT FUNDS SHOULD READ THE INFORMATION UNDER THE HEADING
"OTHER INFORMATION -- SPECIAL TAX INFORMATION REGARDING THE FUND" IN THEIR      
PROSPECTUS.                                                                     

 The foreign, state and local tax consequences of investing in fund shares
may differ materially from the federal income tax consequences described above. 
In addition, the preceding discussion concerning the taxability of fund         
dividends and distributions and of redemptions and exchanges of fund shares is  
inapplicable to investors that are generally exempt from federal income tax,    
such as retirement plans that are qualified under Section 401, 403, 408, 408A   
and 457 of the Internal Revenue Code, individual retirement accounts (IRAs) and 
Roth IRAs. You should consult your tax advisor before investing.                

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OBTAINING ADDITIONAL INFORMATION                                                
--------------------------------------------------------------------------------

More information may be obtained free of charge upon request. The Statement of  
Additional Information (SAI), a current version of which is on file with the    
Securities and Exchange Commission (SEC), contains more details about the fund  
and is incorporated by reference into the prospectus (is legally a part of this 
prospectus). Annual and semiannual reports to shareholders contain additional   
information about the fund's investments. The fund's annual report also         
discusses the market conditions and investment strategies that significantly    
affected the fund's performance during its last fiscal year. Beginning with     
fiscal periods ending after July 9, 2004, the fund also files its complete      
schedule of portfolio holdings with the SEC for the 1st and 3rd quarters of each
fiscal year on Form N-Q.                                                        

If you have questions about this fund, another fund in The AIM Family of        
Funds--Registered Trademark-- or your account, or wish to obtain free copies of 
the fund's current SAI or annual or semiannual reports, please contact us by    
mail at AIM Investment Services, Inc., P.O. Box 4739, Houston, TX 77210-4739 or 

                                                                [Download Table]
                                                    

BY TELEPHONE:          (800) 959-4246               

ON THE INTERNET:       You can send us a request by 
                       e-mail or download           
                       prospectuses, SAIs, annual or
                       semiannual reports via our   
                       website:                     
                       http://www.aiminvestments.com
THE FUND'S MOST RECENT PORTFOLIO HOLDINGS, AS FILED 
  ON FORM N-Q, ARE ALSO AVAILABLE AT                
  WWW.AIMINVESTMENTS.COM.                           

You also can review and obtain copies of the fund's SAI, financial reports, the 
fund's Forms N-Q and other information at the SEC's Public Reference Room in    
Washington, DC; on the EDGAR database on the SEC's Internet website             
(http://www.sec.gov); or, after paying a duplication fee, by sending a letter to
the SEC's Public Reference Room, Washington, DC 20549-0102 or by sending an     
electronic mail request to publicinfo@sec.gov. Please call the SEC at           
1-202-942-8090 for information about the Public Reference Room.                 

----------------------------------------                                        
AIM Basic Balanced Fund                                                   
SEC 1940 Act file number: 811-1540                                        
----------------------------------------                                        

AIMinvestments.com     BBA-PRO-1                                                
                YOUR GOALS. OUR SOLUTIONS.   [AIM INVESTMENTS LOGO APPEARS HERE]
            --Registered Trademark--          --Registered Trademark--

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                                                                   APPENDIX IV

AIM BASIC BALANCED FUND                                                         

                                                        [Enlarge/Download Table]
                                                                                                                               
MANAGEMENT'S DISCUSSION                                                                Decker, CIT Group, DuPont and SPX       
OF FUND PERFORMANCE                                                                    Corporation.                            

Following a strong fourth quarter in the   surprise that energy was the equity            Fixed-income holdings were managed   
equity markets, AIM Basic Balanced Fund    market's best-performing sector for the     with a bias toward higher interest rates
registered a positive return for 2004      year. Oil service and equipment             during the period. We maintained our    
but fell short of beating its              providers Transocean and Halliburton        average credit quality rating of AA in  
broad-market, style-specific and peer      were among the most significant             an effort to manage risk. The fund's    
group indexes.                             contributors to fund performance. The       duration remained shorter than that of  
                                           combination of attractive valuations at     the Lehman U.S. Aggregate Bond Index,   
========================================   the beginning of the year and favorable     which means the fund had less           
FUND VS. INDEXES                           supply and demand trends translated into    sensitivity to rising rates than its    
                                           returns of more than 50% for these          benchmark. As the year progressed, we   
TOTAL RETURNS, 12/31/03-12/31/04,          energy investments. Other significant       also reduced the fund's exposure to     
EXCLUDING APPLICABLE SALES CHARGES. IF     drivers of performance were Tyco            government agency, corporate and        
SALES CHARGES WERE INCLUDED, RETURNS       International, Target and Masco.            mortgage-backed securities. These risk  
WOULD BE LOWER.                                                                        sectors outperformed in 2004, with      
                                              Tyco was one the fund's                  corporate bonds being the               
Class A Shares                      6.89%  top-performing stocks for the second        best-performing sector for a second     
Class B Shares                      6.12   year in a row, validating the magnitude     consecutive year. By year-end, the fund 
Class C Shares                      6.21   of the investment opportunity created       was underweight all non-U.S. Treasury   
Class R Shares                      6.80   during the 2002 scandal. As we believed     assets, as we believed in aggregate that
S&P 500 Index (Broad Market Index) 10.87   at the time, the market position and        investors were not being appropriately  
60% Russell 1000 Value                     estimated intrinsic value of Tyco proved    compensated for their increasing risk.  
Index/40% Lehman U.S.                      far more durable than most investors                                                
Aggregate Bond Index                       believed in the midst of the malfeasance                                            
(Style-specific Index)             11.54   charges levied against the company's                Since our application of        
Lipper Balanced Fund Index                 former CEO. We continued to believe Tyco             this strategy is highly        
(Peer Group Index)                  8.99   was one of the better investment                         disciplined and            
                                           opportunities within the industrial                    relatively unique,           
SOURCE: LIPPER,INC.                        sector of the economy, although the                    it is important to           
                                           valuation was not as compelling after                understand the benefits        
========================================   rising more than 200% since 2002 lows.                   and limitations            
                                           Consequently we reduced our position in                  of our process.            
   We underperformed the S&P 500 Index     the company during the year, but it                                                 
because of single-digit returns in the     remained a top holding.                                                             
fund's investment-grade bond holdings,                                                 INVESTMENT PROCESS AND EVALUATION       
which failed to match the nearly 11%          Our largest detractors from                                                      
return of stocks as measured by the S&P    performance were Pfizer, Interpublic        In this section, we will provide greater
500 Index. The fund would not normally     Group and Ceridian. Pfizer was a new        insight into how we manage the fund's   
be expected to outperform the S&P 500      investment in 2004 and, as is often the     equity investments. As a reminder, our  
Index when stocks post positive            case, the stock declined initially as we    investment strategy is designed to      
double-digit returns, as bonds typically   continued to wait for the market to         create wealth by maintaining a long-term
lag stocks in such periods. Fund returns   recognize the long-term valuation           investment horizon and investing in     
also trailed those of the Lipper           opportunity we see in the world's           companies that are significantly        
Balanced Fund Index, due in large part     largest drug company. Pfizer faces          undervalued on an absolute basis or said
to the underperformance of the fund's      several challenges including patent         another way, selling at a significant   
equity holdings. The relative strength     expirations, generic substitution,          discount to their estimated intrinsic   
of both small-cap stocks and high-yield    diminished pricing power and more           value.                                  
debt also hurt performance in the period   recently, declining demand for its Cox-2                                            
given the fund's emphasis on large-cap     anti-inflammatory drugs, Celebrex and       The fund's equity philosophy is based on
stocks and investment-grade debt.          Bextra. We believe these challenges may     two concepts that we believe are        
                                           make it difficult for Pfizer to grow        supported by empirical evidence:        
CURRENT PERIOD ANALYSIS                    earnings in the near term. But we see a                                             
                                           long-term opportunity as we believe         o We believe companies have a measurable
The domestic economy continued to          these and other issues are already          estimated intrinsic value that is based 
recover throughout the fiscal year, with   discounted in the company's historically    on future cash flows generated by the   
the broader markets responding favorably   low valuation.                              business. Importantly, this estimated   
during the period. Higher commodity                                                    intrinsic value is independent of the   
prices, a more restrictive monetary           We made several changes to the           company's stock price.                  
policy and concerns about the              portfolio during 2004. Pfizer, General                                              
sustainability of economic growth were     Electric, Illinois Tool Works and Masco                                             
key issues during the period.              were among the list of new stocks                                                   
                                           purchased in the year. We also sold                                                 
   With the price of oil rising as much    several of our holdings, including Black &                                          
as 75% at its peak during the period, it                                                                                       
came as no                                                                                                                     

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o In our opinion, market prices are more  optimally constructed to preserve         PORTFOLIO ASSESSMENT                    
volatile than business values partly      capital and create wealth, even if they                                           
because investors regularly overreact to  are difficult to beat in certain market   When we assess our ability to grow your 
negative news.                            environments. In short, we believe their  capital, we believe the single most     
                                          composition has been more risky than our  important measure of AIM Basic Balanced 
   We believe a diversified portfolio     historical portfolios, largely because    Fund is not our historical investment   
with greater estimated intrinsic value    of lower value content and greater        results or popular statistical measures,
content versus the market provides the    concentration in certain sectors.         but rather the equity portfolio's       
opportunity for attractive long-term                                                estimated intrinsic value. Since we     
investment results. Since our                Our careful stock selection and        estimate the intrinsic value of each    
application of this strategy is highly    portfolio construction resulted in only   equity holding in the portfolio, we can 
disciplined and relatively unique, it is  about 10%-15% commonality with the S&P    also estimate the intrinsic value of the
important to understand the benefits and  500 Index or Russell 1000 Value Index.    equity portion of the fund. The fund's  
limitations of our process.               This low portfolio commonality is an      estimated intrinsic value is at about   
                                          important element of any strategy that    its average compared with the fund's    
   First, the goal of our investment      seeks to achieve significant long-term    history for the past several years.     
strategy is to preserve your capital      outperformance but is too low to expect   While there is no assurance that market 
while growing it at above-market rates    short-term results to be in line with     value will ever reflect our estimate of 
over the long term.                       the market for the simple reason that     intrinsic value, as managers we believe 
                                          your fund does not own exactly the same   this provides the best indicator of     
   Second, we have little portfolio       stocks as the indexes. Of course, this    achieving the fund's objective of       
commonality with popular benchmarks and   creates a diversification benefit but     long-term growth of capital.            
most of our peers. Commonality measures   also suggests more variability in                                                 
the similarity of holdings between two    short-term results versus the market      IN CLOSING                              
portfolios using the lowest common        averages.                                                                         
percentage method. This method compares                                             Market-relative results during this     
each security's percentage of total net   ========================================  period were unfavorable, but normal     
assets in both portfolios and adds the              The domestic economy            market volatility predominates in the   
lower percentages of the two portfolios             continued to recover            short run. As managers, we know a       
to determine commonality.                           throughout the fiscal           long-term investment horizon and        
                                                   year, with the broader           attractive portfolio estimated intrinsic
   Third, we believe this strategy                   markets responding             value content are critical to creating  
creates the potential for the fund to                 favorably during              wealth. We continued to work hard on    
outperform over the long-term but                        the period.                your behalf to protect and grow the     
realize that short-term results may lag   ========================================  fund's equity portfolio estimated       
the market.                                                                         intrinsic value. Thank you for your     
                                             Our fixed-income portfolio investment  investment and for sharing our long-term
   Our process is absolute in nature,     process is accomplished through the use   horizon.                                
which means that investment decisions     of top-down strategies involving                                                  
are predicated on a company's estimated   duration management, yield-curve          The views and opinions expressed in     
intrinsic value, not a target price       position and sector allocation.           Management's Discussion of Fund         
dependent on stock market valuation       (Duration is the measure of a debt        Performance are those of A I M Advisors,
levels. This is one of the key reasons    security's sensitivity to interest rate   Inc. These views and opinions are       
for our strong long-term results but has  changes, expressed in terms of years.     subject to change at any time based on  
important differences compared to         Longer durations usually are more         factors such as market and economic     
relative performance objectives. Funds    sensitive to interest rate movements.     conditions. These views and opinions may
with relative performance objectives do   The yield curve traces the yields on      not be relied upon as investment advice 
not emphasize capital preservation to     debt securities of the same quality but   or recommendations, or as an offer for a
the same degree and commonly are more     different maturities from the shortest    particular security. The information is 
closely tied to market benchmarks. We     to the longest available.) In addition,   not a complete analysis of every aspect 
emphasize capital preservation by         we use bottom-up strategies involving     of any market, country, industry,       
requiring a large cushion between price   credit analysis and selection of          security or the Fund. Statements of fact
and estimated intrinsic value. Although   specific securities. By combining         are from sources considered reliable,   
a large cushion between price and         perspectives from both the portfolio and  but A I M Advisors, Inc. makes no       
estimated intrinsic value does not        the security level, we seek to            representation or warranty as to their  
guarantee the portfolio won't experience  consistently add value over time while    completeness or accuracy. Although      
a decline in market price, it does        minimizing portfolio risk.                historical performance is no guarantee  
lessen the probability of a permanent                                               of future results, these insights may   
loss of capital. When market price                                                  help you understand our investment      
exceeds estimated intrinsic value, the                                              management philosophy.                  
absence of portfolio value content                                                                                          
places capital at risk of permanent                                                       See important fund and index      
loss, as was the case with many                                                         disclosures inside front cover.     
technology stocks in 1999-2000.                                                                                             

   It is our requirement for a large                                                                                        
margin between market price and our                                                                                         
estimated intrinsic value that has                                                                                          
resulted in little portfolio commonality                                                                                    
with market indexes. We believe popular                                                                                     
benchmarks are not                                                                                                          

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AIM BASIC BALANCED FUND                                                         

YOUR FUND'S LONG-TERM PERFORMANCE                                               

                                                        [Enlarge/Download Table]
                                                                                                                                    
====================================================================================================================================
Past performance cannot guarantee comparable   RESULTS OF A $10,000 INVESTMENT                                                      
future results.                                9/28/01-12/31/04  Index results from 9/30/01                                         

   Your fund's total return includes                                           [MOUNTAIN CHART]                                     
reinvested distributions, applicable                                                                                                
sales charges, fund expenses and                                                                      60% RUSSELL                   
management fees. Results for Class B                                                                  1000 VALUE                    
shares are calculated as if a                            AIM BASIC   AIM BASIC    AIM BASIC           INDEX/ 40%                    
hypothetical shareholder had liquidated                  BALANCED    BALANCED     BALANCED            LEHMAN U.S.     LIPPER        
his entire investment in the fund at the                FUND CLASS  FUND CLASS   FUND CLASS  S&P 500  AGGREGATE      BALANCED       
close of the reporting period and paid         DATE      A SHARES    B SHARES     C SHARES    INDEX   BOND INDEX    FUND INDEX      
the applicable contingent deferred sales                                                                                            
charges. Index results include                 9/28/01    $ 9525       $10000     $10000                                            
reinvested dividends, but they do not          9/01         9525        10000      10000      $10000    $10000        $10000        
reflect sales charges. Performance of an       10/01        9696        10180      10180       10191     10032         10167        
index of funds reflects fund expenses          11/01       10135        10630      10630       10972     10326         10572        
and management fees; performance of a          12/01       10281        10776      10776       11068     10446         10648        
market index does not. Performance shown       01/02       10214        10706      10706       10907     10432         10555        
in the chart does not reflect deduction        02/02       10137        10616      10616       10697     10482         10483        
of taxes a shareholder would pay on fund       03/02       10503        10992      10992       11099     10710         10713        
distributions or sale of fund shares.          04/02       10350        10822      10822       10426     10573         10455        
Performance of the indexes does not            05/02       10330        10802      10812       10350     10640         10451        
reflect the effects of taxes.                  06/02        9771        10219      10221        9613     10311         10005        
                                               07/02        9156         9566       9568        8864      9785          9492        
AVERAGE ANNUAL TOTAL RETURNS                   08/02        9290         9697       9708        8922      9896          9589        
                                               09/02        8635         9008       9008        7953      9300          9017        
As of 12/31/04, including applicable sales     10/02        8992         9380       9381        8652      9696          9393        
charges                                        11/02        9464         9862       9863        9161     10062          9774        
                                               12/02        9152         9531       9531        8623      9883          9510        
CLASS A SHARES                                 1/03         8987         9359       9360        8398      9743          9368        
Inception (9/28/2001)              5.67%       2/03         8813         9168       9178        8272      9641          9298        
   1 Year                          1.84        3/03         8740         9088       9097        8352      9647          9335        
                                               4/03         9263         9632       9642        9039     10189          9841        
CLASS B SHARES                                 5/03         9933        10318      10328        9515     10659         10276        
Inception (9/28/2001)              5.76%       6/03        10010        10392      10402        9637     10731         10354        
   1 Year                          1.12        7/03        10059        10443      10443        9807     10683         10378        
                                               8/03        10312        10696      10696        9997     10811         10553        
CLASS C SHARES                                 9/03        10269        10645      10645        9892     10862         10566        
Inception (9/28/2001)              6.59%       10/03       10542        10927      10938       10451     11220         10915        
   1 Year                          5.21        11/03       10726        11109      11120       10543     11323         11012        
                                               12/03       11195        11593      11593       11095     11787         11406        
CLASS R SHARES                                 1/04        11340        11735      11745       11299     11949         11577        
Inception                          7.12%       2/04        11525        11916      11927       11456     12154         11734        
   1 Year                          6.80        3/04        11523        11916      11916       11283     12127         11678        
                                               4/04        11318        11684      11695       11106     11823         11433        
Class R shares' inception date is              5/04        11308        11674      11684       11258     11877         11483        
4/30/04. Returns since that date are           6/04        11535        11908      11909       11477     12072         11663        
historical returns. All other returns          7/04        11095        11444      11455       11097     12017         11443        
are blended returns of historical Class        8/04        11115        11464      11465       11142     12212         11513        
R share performance and restated Class A       9/04        11184        11517      11528       11262     12338         11684        
share performance (for periods prior to        10/04       11263        11598      11609       11435     12503         11810        
the inception date of Class R shares) at       11/04       11644        11982      11992       11897     12842         12129        
net asset value, adjusted to reflect the       12/04      $11969       $12001     $12311      $12302    $13148        $12431        
higher Rule 12b-1 fees applicable to                                                                                                
Class R shares. Class A shares'                                                                          SOURCE: LIPPER, INC.       
inception date is 9/28/01.                                                                                                          

   The performance data quoted represent       deferred sales charge (CDSC) for the                                                 
past performance and cannot guarantee          period involved. The CDSC on Class B                                                 
comparable future results; current             shares declines from 5% beginning at the                                             
performance may be lower or higher.            time of purchase to 0% at the beginning                                              
Please visit AIMinvestments.com for the        of the seventh year. The CDSC on Class C                                             
most recent month-end performance.             shares is 1% for the first year after                                                
Performance figures reflect reinvested         purchase. Class R shares do not have a                                               
distributions, changes in net asset            front-end sales charge; returns shown                                                
value and the effect of the maximum            are at net asset value and do not                                                    
sales charge unless otherwise stated.          reflect a 0.75% CDSC that may be imposed                                             
Investment return and principal value          on a total redemption of retirement plan                                             
will fluctuate so that you may have a          assets within the first year.                                                        
gain or loss when you sell shares.                                                                                                  
                                                  The performance of the fund's share                                               
   Class A share performance reflects          classes will differ due to different                                                 
the maximum 4.75% sales charge, and            sales charge structures and class                                                    
Class B and Class C share performance          expenses.                                                                            
reflects the applicable contingent                                                                                                  

====================================================================================================================================

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AIM BASIC BALANCED FUND,
A PORTFOLIO OF AIM FUNDS GROUP
11 Greenway Plaza, Suite 100
 Houston, Texas 77046-1173
 Toll Free: (800) 959-4246

AIM BALANCED FUND,
A PORTFOLIO OF AIM FUNDS GROUP AND
AIM TOTAL RETURN FUND,
 A PORTFOLIO OF AIM COMBINATION STOCK & BOND FUNDS
11 Greenway Plaza, Suite 100
 Houston, Texas 77046-1173
 Toll Free: (800) 959-4246

 STATEMENT OF ADDITIONAL INFORMATION

(June 28, 2005 Special Meetings of Shareholders of AIM Balanced Fund and
AIM Total Return Fund)

         This Statement of Additional Information is not a prospectus but should
be read in conjunction with the Combined Proxy Statement and Prospectus dated   
May 23, 2005 of AIM Basic Balanced Fund for use in connection with the Special  
Meetings of Shareholders of AIM Balanced Fund and AIM Total Return Fund to be   
held on June 28, 2005. Copies of each Combined Proxy Statement and Prospectus   
may be obtained at no charge by writing A I M Distributors, Inc., 11 Greenway   
Plaza, Suite 100, Houston, Texas 77046-1173 or by calling 1 800-959-4246. Unless
otherwise indicated, capitalized terms used herein and not otherwise defined    
have the same meanings as are given to them in each Combined Proxy Statement and
Prospectus.                                                                     

       A Statement of Additional Information for AIM Funds Group dated April
29, 2005, has been filed with the Securities and Exchange Commission and is     
attached hereto as Appendix I which is incorporated herein by this reference.   

       The date of this Statement of Additional Information is May 23, 2005.

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                                                        [Enlarge/Download Table]
                                                                                                        
THE TRUST............................................................................................S-3

DESCRIPTION OF PERMITTED INVESTMENTS.................................................................S-3

TRUSTEES AND OFFICERS OF THE TRUST...................................................................S-3

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES..................................................S-3

ADVISORY AND MANAGEMENT RELATED SERVICES AGREEMENTS AND PLANS OF DISTRIBUTION........................S-3

PORTFOLIO TRANSACTIONS...............................................................................S-3

DESCRIPTION OF SHARES................................................................................S-3

DETERMINATION OF NET ASSET VALUE.....................................................................S-4

TAXES................................................................................................S-4

PERFORMANCE DATA.....................................................................................S-4

FINANCIAL INFORMATION................................................................................S-4

Appendix I              -       Statement of Additional Information of the Trust                        
Appendix II             -       Audited Financial Statements of AIM Balanced Fund (12/31/04)            
Appendix III            -       Audited Financial Statements of AIM Total Return Fund                   
                                (8/31/04)                                                               
Appendix IV             -       Pro Forma Financial Statements of AIM Basic Balanced Fund               

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THE TRUST                                                                       

This Statement of Additional Information relates to AIM Funds Group (the        
"Trust") and its investment portfolio, AIM Basic Balanced Fund (the "Fund"). The
Trust is registered as an open-end management investment company under the      
Investment Company Act of 1940, as amended (the "1940 Act"). The Fund is a      
separate series of shares of beneficial interest of the Trust. For additional   
information about the Trust, see heading "General Information About the Trust"  
in the Trust's Statement of Additional Information attached hereto as Appendix  
I.                                                                              

DESCRIPTION OF PERMITTED INVESTMENTS                                            

For a discussion of the fundamental and nonfundamental investment policies of   
the Fund adopted by the Trust's Board of Trustees, see heading "Description of  
the Funds and Their Investments and Risks" in the Trust's Statement of          
Additional Information attached hereto as Appendix I.                           

TRUSTEES AND OFFICERS OF THE TRUST                                              

For a disclosure of the names and a brief occupational biography of each of the 
Trust's trustees and executive officers identifying those who are interested    
persons of the Trust as well as stating their aggregate remuneration, see       
heading "Management of the Trust" in the Trust's Statement of Additional        
Information attached hereto as Appendix I.                                      

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES                             

For a disclosure of the control persons of the Fund, the principal holders of   
shares of the Fund and the ownership by officers and trustees of the Fund, see  
heading "Control Persons and Principal Holders of Securities" in the Trust's    
Statement of Additional Information attached hereto as Appendix I.              

ADVISORY AND MANAGEMENT RELATED SERVICES AGREEMENTS AND PLANS OF DISTRIBUTION   

For a discussion of the Trust's advisory and management-related services        
agreements and plans of distribution, see headings "Investment Advisory and     
Other Services" and "Distribution of Securities" in the Trust's Statement of    
Additional Information attached hereto as Appendix I.                           

PORTFOLIO TRANSACTIONS                                                          

For a discussion of the Trust's brokerage policy, see heading "Brokerage        
Allocation and Other Practices" in the Trust's Statement of Additional          
Information attached hereto as Appendix I.                                      

DESCRIPTION OF SHARES                                                           

For a discussion of the Trust's authorized securities and the characteristics of
the Trust's shares of beneficial interest, see heading "General Information     
About the Trust" in the Trust's Statement of Additional Information attached    
hereto as Appendix I.                                                           

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DETERMINATION OF NET ASSET VALUE                                                

For a discussion of the Trust's valuation and pricing procedures and a          
description of its purchase and redemption procedures, see heading "Purchase,   
Redemption and Pricing of Shares" in the Trust's Statement of Additional        
Information attached hereto as Appendix I.                                      

TAXES                                                                           

For a discussion of any tax information relating to ownership of the Trust's    
shares, see heading "Dividends, Distributions and Tax Matters" in the Trust's   
Statement of Additional information attached hereto as Appendix I.              

PERFORMANCE DATA                                                                

For a description and quotation of certain performance data used by the Trust,  
see heading "Calculation of Performance Data" in the Trust's Statement of       
Additional Information attached hereto as Appendix I.                           

FINANCIAL INFORMATION                                                           

The audited financial statements of AIM Basic Balanced Fund, and the report     
thereon by PricewaterhouseCoopers LLP, are set forth under the heading          
"Financial Statements" in the Trust's Statement of Additional Information       
attached hereto as Appendix I.                                                  

The audited financial statements of AIM Balanced Fund, and the report thereon by
PricewaterhouseCoopers LLP, are set forth as Appendix II.                       

The audited financial statements of AIM Total Return Fund, and the report       
thereon by PricewaterhouseCoopers LLP, are set forth as Appendix III.           

The pro forma financial statements of AIM Basic Balanced Fund are set forth as  
Appendix IV.                                                                    

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                                                                      APPENDIX I

STATEMENT OF
ADDITIONAL INFORMATION

 AIM FUNDS GROUP
 11 GREENWAY PLAZA
 SUITE 100
 HOUSTON, TEXAS 77046-1173
(713) 626-1919

----------

     THIS STATEMENT OF ADDITIONAL INFORMATION RELATES TO THE CLASS A, CLASS B,
CLASS C, CLASS R AND INVESTOR CLASS SHARES, AS APPLICABLE, OF EACH  
  PORTFOLIO (EACH A "FUND," COLLECTIVELY THE "FUNDS") OF AIM FUNDS GROUP
LISTED BELOW. THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A     
      PROSPECTUS, AND IT SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUSES FOR
THE CLASS A, CLASS B, CLASS C, CLASS R AND INVESTOR CLASS SHARES, AS
APPLICABLE, OF THE FUNDS LISTED BELOW. YOU MAY OBTAIN A COPY OF ANY 
PROSPECTUS FOR ANY FUND LISTED BELOW FROM AN AUTHORIZED DEALER OR BY
WRITING TO:                                                         

 AIM INVESTMENT SERVICES, INC.
 P.O. BOX 4739
 HOUSTON, TEXAS 77210-4739
OR BY CALLING (800) 959-4246

----------

THIS STATEMENT OF ADDITIONAL INFORMATION, DATED APRIL 29, 2005, RELATES TO THE  
CLASS A, CLASS B AND CLASS C SHARES OF THE FOLLOWING PROSPECTUSES:              

                                                                [Download Table]

                FUND                                         DATED    
                ----                                         -----    
                                                                      
   AIM EUROPEAN SMALL COMPANY FUND                      APRIL 29, 2005
        AIM GLOBAL VALUE FUND                           APRIL 29, 2005
AIM INTERNATIONAL SMALL COMPANY FUND                    APRIL 29, 2005
       AIM SELECT EQUITY FUND                           APRIL 29, 2005

THIS STATEMENT OF ADDITIONAL INFORMATION, DATED APRIL 29, 2005, ALSO RELATES TO 
THE CLASS A, CLASS B, CLASS C AND CLASS R SHARES OF THE FOLLOWING PROSPECTUSES: 

                                                                [Download Table]

            FUND                                         DATED    
            ----                                         -----    
                                                                  
      AIM BALANCED FUND                             APRIL 29, 2005
   AIM PREMIER EQUITY FUND                          APRIL 29, 2005
AIM MID CAP BASIC VALUE FUND                        APRIL 29, 2005
  AIM SMALL CAP EQUITY FUND                         APRIL 29, 2005

THIS STATEMENT OF ADDITIONAL INFORMATION, DATED APRIL 29, 2005, ALSO RELATES TO 
THE CLASS A, CLASS B, CLASS C, CLASS R AND INVESTOR CLASS SHARES OF THE         
FOLLOWING PROSPECTUS:                                                           

                                                                [Download Table]

         FUND                                         DATED    
         ----                                         -----    
                                                               
AIM BASIC BALANCED FUND                          APRIL 29, 2005

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 AIM FUNDS GROUP
 STATEMENT OF ADDITIONAL INFORMATION

 TABLE OF CONTENTS

                                                        [Enlarge/Download Table]

                                                                                             PAGE
                                                                                             ----
                                                                                                 
GENERAL INFORMATION ABOUT THE TRUST........................................................... 1 
         Fund History......................................................................... 1 
         Shares of Beneficial Interest........................................................ 1 
         Policies and Procedures for Disclosure of Fund Holdings.............................. 3 

DESCRIPTION OF THE FUNDS AND THEIR INVESTMENTS AND RISKS...................................... 6 
         Classification....................................................................... 6 
         Investment Strategies and Risks...................................................... 6 
                  Equity Investments......................................................... 10 
                  Foreign Investments........................................................ 10 
                  Debt Investments........................................................... 12 
                  Other Investments.......................................................... 15 
                  Investment Techniques...................................................... 16 
                  Derivatives................................................................ 20 
         Fund Policies....................................................................... 26 
         Temporary Defensive Positions....................................................... 29 
         Portfolio Turnover.................................................................. 29 

MANAGEMENT OF THE TRUST...................................................................... 30 
         Board of Trustees................................................................... 30 
         Management Information.............................................................. 30 
                  Trustee Ownership of Fund Shares........................................... 32 
                  Factors Considered in Approving the Investment Advisory Agreement.......... 32 
         Compensation........................................................................ 34 
                  Retirement Plan For Trustees............................................... 35 
                  Deferred Compensation Agreements........................................... 35 
                  Purchase of Class A Shares of the Funds at Net Asset Value................. 35 
         Codes of Ethics..................................................................... 36 
         Proxy Voting Policies............................................................... 36 

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.......................................... 36 

INVESTMENT ADVISORY AND OTHER SERVICES....................................................... 36 
         Investment Advisor.................................................................. 36 
                  Portfolio Managers......................................................... 39 
                  Securities Lending Arrangements............................................ 39 
         Service Agreements.................................................................. 40 
         Other Service Providers............................................................. 40 

BROKERAGE ALLOCATION AND OTHER PRACTICES..................................................... 41 
         Brokerage Transactions.............................................................. 41 
         Commissions......................................................................... 41 
         Brokerage Selection................................................................. 42 
         Directed Brokerage (Research Services).............................................. 43 
         Regular Brokers or Dealers.......................................................... 43 
         Allocation of Portfolio Transactions................................................ 43 
         Allocation of Initial Public Offering ("IPO") Transactions.......................... 43 

PURCHASE, REDEMPTION AND PRICING OF SHARES................................................... 44 
         Purchase and Redemption of Shares................................................... 44 

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                                                        [Enlarge/Download Table]
                                                                                                
         Offering Price...................................................................... 62
         Redemptions In Kind................................................................. 64
         Backup Withholding.................................................................. 64

DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS..................................................... 65
         Dividends and Distributions......................................................... 65
         Tax Matters......................................................................... 65

DISTRIBUTION OF SECURITIES................................................................... 73
         Distribution Plans.................................................................. 73
         Distributor......................................................................... 76

CALCULATION OF PERFORMANCE DATA.............................................................. 77

SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING...................... 83

REGULATORY INQUIRIES AND PENDING LITIGATION.................................................. 84

APPENDICES:                                                                                     

RATINGS OF DEBT SECURITIES.................................................................. A-1

TRUSTEES AND OFFICERS....................................................................... B-1

TRUSTEE COMPENSATION TABLE.................................................................. C-1

PROXY POLICIES AND PROCEDURES............................................................... D-1

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES......................................... E-1

MANAGEMENT FEES............................................................................. F-1

PORTFOLIO MANAGERS.......................................................................... G-1

ADMINISTRATIVE SERVICES FEES................................................................ H-1

BROKERAGE COMMISSIONS....................................................................... I-1

DIRECTED BROKERAGE (RESEARCH SERVICES) AND PURCHASES OF SECURITIES OF                           
REGULAR BROKERS OR DEALERS.................................................................. J-1

AMOUNTS PAID TO A I M DISTRIBUTORS, INC. PURSUANT TO DISTRIBUTION PLANS..................... K-1

ALLOCATION OF ACTUAL FEES PAID PURSUANT TO DISTRIBUTION PLANS............................... L-1

TOTAL SALES CHARGES......................................................................... M-1

PERFORMANCE DATA............................................................................ N-1

PENDING LITIGATION.......................................................................... O-1

FINANCIAL STATEMENTS......................................................................... FS

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 GENERAL INFORMATION ABOUT THE TRUST

FUND HISTORY                                                                    

AIM Funds Group (the "Trust") is a Delaware statutory trust which is
registered under the Investment Company Act of 1940, as amended (the "1940      
Act"), as an open-end series management investment company. The Trust currently 
consists of nine separate portfolios: AIM Balanced Fund, AIM Basic Balanced     
Fund, AIM European Small Company Fund, AIM Global Value Fund, AIM International 
Small Company Fund, AIM Mid Cap Basic Value Fund, AIM Premier Equity Fund, AIM  
Select Equity Fund and AIM Small Cap Equity Fund (each a "Fund" and             
collectively, the "Funds"). Under the Amended and Restated Agreement and        
Declaration of Trust, dated May 15, 2002, as amended (the "Trust Agreement"),   
the Board of Trustees of the Trust (the "Board") is authorized to create new    
series of shares without the necessity of a vote of shareholders of the Trust.  

     The Trust was originally organized on October 30, 1984 as a Massachusetts
business trust. The Trust reorganized as a Delaware business trust on October   
15, 1993. The following Funds were included in the reorganization: AIM Select   
Equity Fund and AIM Premier Equity Fund. In addition, on October 15, 1993, AIM  
Balanced Fund acquired all the assets and assumed all of the liabilities of AIM 
Convertible Securities Fund, Inc., a Maryland corporation. All historical       
financial and other information contained in this Statement of Additional       
Information for periods prior to October 15, 1993 relating to these Funds (or a 
class thereof) is that of the predecessor funds (or the corresponding class     
thereof). Prior to July 13, 2001, AIM Select Equity Fund was known as AIM Select
Growth Fund, and prior to May 1, 1998, such Fund was known as AIM Growth Fund.  
Each of the other Funds commenced operations as a series of the Trust. Prior to 
July 1, 2002, AIM Premier Equity Fund was known as AIM Value Fund. Prior to     
April 30, 2003, AIM Global Value Fund was known as AIM Worldwide Spectrum Fund. 
Prior to December 30, 2004, AIM International Small Company Fund was known as   
AIM International Emerging Growth Fund.                                         

SHARES OF BENEFICIAL INTEREST                                                   

  Shares of beneficial interest of the Trust are redeemable at their net
asset value (subject, in certain circumstances, to a contingent deferred sales  
charge or redemption fee) at the option of the shareholder or at the option of  
the Trust in certain circumstances.                                             

    The Trust allocates moneys and other property it receives from the issue
or sale of shares of each of its series of shares, and all income, earnings and 
profits from such issuance and sales, subject only to the rights of creditors,  
to the appropriate Fund. These assets constitute the underlying assets of each  
Fund, are segregated on the Trust's books of account, and are charged with the  
expenses of such Fund and its respective classes. The Trust allocates any       
general expenses of the Trust not readily identifiable as belonging to a        
particular Fund by or under the direction of the Board, primarily on the basis  
of relative net assets, or other relevant factors.                              

      Each share of each Fund represents an equal proportionate interest in that
Fund with each other share and is entitled to such dividends and distributions  
out of the income belonging to such Fund as are declared by the Board.          

Each Fund offers separate classes of shares as follows:             

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               FUND                   CLASS A  CLASS B  CLASS C  CLASS R  INSTITUTIONAL  INVESTOR
                                                                              CLASS       CLASS  
------------------------------------  -------  -------  -------  -------  -------------  --------
                                                                                                 
AIM Balanced Fund                        X        X        X        X           X                
AIM Basic Balanced Fund                  X        X        X        X           X           X    
AIM European Small Company Fund          X        X        X                                     
AIM Global Value Fund                    X        X        X                                     
AIM International Small Company Fund     X        X        X                                     
AIM Mid Cap Basic Value Fund             X        X        X        X           X                
AIM Premier Equity Fund                  X        X        X        X           X                
AIM Select Equity Fund                   X        X        X                                     
AIM Small Cap Equity                     X        X        X        X           X                

   This Statement of Additional Information relates solely to the Class A,
Class B, Class C, Class R and Investor Class shares, if applicable, of the      
Funds. The Institutional Class shares of the Funds are intended for use by      
certain eligible institutional investors, are discussed in a separate Statement 
of Additional Information and are available to the following:                   

        -     banks and trust companies acting in a fiduciary or similar
capacity;                                   

       -     bank and trust company common and collective trust funds;

        -     banks and trust companies investing for their own account;

      -     entities acting for the account of a public entity (e.g.
               Taft-Hartley funds, states, cities or government agencies);

-     retirement plans; and                             

         -     platform sponsors with which A I M Distributors, Inc. ("AIM
 Distributors") has entered into an agreement.

Each class of shares represents an interest in the same portfolio of
investments. Differing sales charges and expenses will result in differing net  
asset values and dividends and distributions. Upon any liquidation of the Trust,
shareholders of each class are entitled to share pro rata in the net assets     
belonging to the applicable Fund allocable to such class available for          
distribution after satisfaction of outstanding liabilities of the Fund allocable
to such class.                                                                  

     Each share of a Fund generally has the same voting, dividend, liquidation
and other rights; however, each class of shares of a Fund is subject to         
different sales loads, conversion features, exchange privileges and             
class-specific expenses. Only shareholders of a specific class may vote on      
matters relating to that class' distribution plan.                              

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Because Class B shares automatically convert to Class A shares at   
month-end eight years after the date of purchase, the Funds' distribution plan  
adopted pursuant to Rule 12b-1 under the 1940 Act requires that Class B         
shareholders must also approve any material increase in distribution fees       
submitted to Class A shareholders of that Fund. A pro rata portion of shares    
from reinvested dividends and distributions convert along with the Class B      
shares.                                                                         

      Except as specifically noted above, shareholders of each Fund are entitled
to one vote per share (with proportionate voting for fractional shares),        
irrespective of the relative net asset value of the shares of a Fund. However,  
on matters affecting an individual Fund or class of shares, a separate vote of  
shareholders of that Fund or class is required. Shareholders of a Fund or class 
are not entitled to vote on any matter which does not affect that Fund or class 
but that requires a separate vote of another Fund or class. An example of a     
matter that would be voted on separately by shareholders of each Fund is the    
approval of the advisory agreement with A I M Advisors, Inc. ("AIM"), and an    
example of a matter that would be voted on separately by shareholders of each   
class of shares is approval of the distribution plans. When issued, shares of   
each Fund are fully paid and nonassessable, have no preemptive or subscription  
rights, and are freely transferable. Other than the automatic conversion of     
Class B shares to Class A shares, there are no conversion rights. Shares do not 
have cumulative voting rights, which means that in situations in which          
shareholders elect trustees, holders of more than 50% of the shares voting for  
the election of trustees can elect all of the trustees of the Trust, and the    
holders of less than 50% of the shares voting for the election of trustees will 
not be able to elect any trustees.                                              

   Under Delaware law, shareholders of a Delaware statutory trust shall be
entitled to the same limitations of liability extended to shareholders of       
private for-profit corporations. There is a remote possibility, however, that   
shareholders could, under certain circumstances, be held liable for the         
obligations of the Trust to the extent the courts of another state which does   
not recognize such limited liability were to apply the laws of such state to a  
controversy involving such obligations. The Trust Agreement disclaims           
shareholder liability for acts or obligations of the Trust and requires that    
notice of such disclaimer be given in each agreement, obligation or instrument  
entered into or executed by the Trust or the trustees to all parties, and each  
party thereto must expressly waive all rights of action directly against        
shareholders of the Trust. The Trust Agreement provides for indemnification out 
of the property of a Fund for all losses and expenses of any shareholder of such
Fund held liable on account of being or having been a shareholder. Thus, the    
risk of a shareholder incurring financial loss due to shareholder liability is  
limited to circumstances in which a Fund is unable to meet its obligations and  
the complaining party is not held to be bound by the disclaimer.                

  The trustees and officers of the Trust will not be liable for any act,
omission or obligation of the Trust or any trustee or officer; however, a       
trustee or officer is not protected against any liability to the Trust or to the
shareholders to which a trustee or officer would otherwise be subject by reason 
of willful misfeasance, bad faith, gross negligence, or reckless disregard of   
the duties involved in the conduct of his or her office with the Trust          
("Disabling Conduct"). The Trust Agreement provides for indemnification by the  
Trust of the trustees, the officers and employees or agents of the Trust,       
provided that such persons have not engaged in Disabling Conduct. The Trust's   
Bylaws provide for the advancement of payments to current and former trustees,  
officers and employees or agents of the Trust, or anyone serving at their       
request, in connection with the preparation and presentation of a defense to any
claim, action, suit or proceeding, expenses for which such person would be      
entitled to indemnification; provided that any advancement of payments would be 
reimbursed if it is ultimately determined that such person is not entitled to   
indemnification for such expenses.                                              

  SHARE CERTIFICATES. Shareholders of the Funds do not have the right to
demand or require the Trust to issue share certificates.                        

POLICIES AND PROCEDURES FOR DISCLOSURE OF FUND HOLDINGS                         

The Board has adopted policies and procedures with respect to the   
disclosure of the Funds' portfolio holdings (the "Holdings Disclosure Policy"). 
AIM and the Board may amend the Holdings Disclosure Policy at any time without  
prior notice. Details of the Holdings Disclosure Policy and a                   

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description of the basis on which employees of AIM and its affiliates may       
release information about portfolio securities in certain contexts are provided 
below.                                                                          

  PUBLIC RELEASE OF PORTFOLIO HOLDINGS. The Funds disclose the following
portfolio holdings information on www.aiminvestments.com: - calendar quarter-end
portfolio holdings are posted by the 30th day after each calendar quarter-end; -
fiscal quarter-end portfolio holdings are posted by the 70th day after each     
fiscal quarter-end; and - the largest ten holdings are posted by the 15th day   
after each month-end.                                                           

These holdings are listed along with the percentage of the Fund's net assets    
they represent. The calendar and fiscal quarter-end portfolio holdings will     
remain on the website for one year. The top-ten list is replaced each month.    
Generally, employees of AIM and its affiliates may not disclose such portfolio  
holdings until one day after they have been posted on www.aiminvestments.com.   
The Funds also disclose select holdings as part of their quarterly Fund         
Performance Updates and quarterly Performance and Commentaries on               
www.aiminvestments.com by the 29th day after each calendar quarter. These       
quarterly Fund Performance Updates and quarterly Performance and Commentaries   
are replaced each quarter. You may also obtain the publicly available portfolio 
holdings information described above by contacting us at 1-800-959-4246.        

 SELECTIVE DISCLOSURE OF PORTFOLIO HOLDINGS PURSUANT TO NON-DISCLOSURE
AGREEMENT. Employees of AIM and its affiliates will disclose non-public full    
portfolio holdings on a selective basis only if the Executive Committee (the    
"Executive Committee") of A I M Management Group Inc. ("AIM Management")        
approves the parties to whom disclosure of non-public full portfolio holdings   
will be made. The Executive Committee must determine that the proposed selective
disclosure will be made for legitimate business purposes of the applicable Fund 
and address any perceived conflicts of interest between shareholders of such    
Fund and AIM or its affiliates as part of granting its approval. The Executive  
Committee may delegate its approval responsibilities to the Internal Compliance 
Controls Committee of AIM Management. Pursuant to the Holdings Disclosure       
Policy, the Board reviews the types of situations in which AIM provides such    
selective disclosure and approves situations involving perceived conflicts of   
interest between shareholders of the applicable Fund and AIM or its affiliates  
brought to the Board's attention by AIM.                                        

AIM discloses non-public full portfolio holdings information to the 
following persons in connection with the day-to-day operations and management of
the Funds:                                                                      

-     Attorneys and accountants;                        

-     Securities lending agents;                        

-     Lenders to the Funds;                             

-     Rating and rankings agencies;                     

-     Persons assisting in the voting of proxies;       

-     Fund custodians;                                  

            -     Fund transfer agent(s) (in the event of a redemption in kind);

           -     Pricing services, market makers, or other persons who provide
                  systems or software support in connection with Fund operations
          (to determine the price of securities held by a Fund);

-     Financial printers;                               

          -     Brokers identified by a Fund's portfolio management team who
            provide execution and research services to the team; and

           -     Analysts hired to perform research and analysis to the Fund's
portfolio management team.                  

In these situations, AIM has entered into non-disclosure agreements which       
provide that the recipient of the portfolio holdings will maintain the          
confidentiality of such portfolio holdings and will not trade on such           
information ("Non-disclosure Agreements"). In many cases, AIM will disclose     
current portfolio holdings on                                                   

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a daily basis to these persons. AIM will also disclose non-public portfolio     
holdings information in the event that such disclosure is required by applicable
laws, rules or regulations, or by regulatory authorities having jurisdiction    
over AIM and its affiliates or the Funds.                                       

AIM will not request, receive or accept any compensation (including 
compensation in the form of the maintenance of assets in any Fund or other      
mutual fund or account managed by AIM or one of its affiliates) for the         
selective disclosure of portfolio holdings information.                         

    DISCLOSURE OF CERTAIN PORTFOLIO HOLDINGS AND RELATED INFORMATION WITHOUT
NON-DISCLOSURE AGREEMENT. From time to time, employees of AIM and its affiliates
may express their views orally or in writing on one or more of the Funds'       
portfolio securities or may state that a Fund has recently purchased or sold, or
continues to own, one or more securities. The securities subject to these views 
and statements may be ones that were purchased or sold since a Fund's most      
recent quarter-end and therefore may not be reflected on the list of the Fund's 
most recent quarter-end portfolio holdings disclosed on the website. Such views 
and statements may be made to various persons, including members of the press,  
brokers and other financial intermediaries that sell shares of the Funds,       
shareholders in the applicable Fund, persons considering investing in the       
applicable Fund or representatives of such shareholders or potential            
shareholders, such as fiduciaries of a 401(k) plan or a trust and their         
advisers, and other entities for which AIM or its affiliates provides or may    
provide investment advisory services. The nature and content of the views and   
statements provided to each of these persons may differ.                        

   From time to time, employees of AIM and its affiliates also may provide
oral or written information ("portfolio commentary") about a Fund, including,   
but not limited to, how the Fund's investments are divided among various        
sectors, industries, countries, investment styles and capitalization sizes, and 
among stocks, bonds, currencies and cash, security types, bond maturities, bond 
coupons and bond credit quality ratings. This portfolio commentary may also     
include information on how these various weightings and factors contributed to  
Fund performance. AIM may also provide oral or written information ("statistical
information") about various financial characteristics of a Fund or its          
underlying portfolio securities including, but not limited to, alpha, beta,     
R-squared, coefficient of determination, duration, maturity, information ratio, 
sharpe ratio, earnings growth, payout ratio, price/book value, projected        
earnings growth, return on equity, standard deviation, tracking error, weighted 
average quality, market capitalization, percent debt to equity, price to cash   
flow, dividend yield or growth, default rate, portfolio turnover, and risk and  
style characteristics. This portfolio commentary and statistical information    
about a Fund may be based on the Fund's portfolio as of the most recent         
quarter-end or the end of some other interim period, such as month-end. The     
portfolio commentary and statistical information may be provided to various     
persons, including those described in the preceding paragraph. The nature and   
content of the information provided to each of these persons may differ.        

   DISCLOSURE OF PORTFOLIO HOLDINGS BY TRADERS. Additionally, employees of
AIM and its affiliates may disclose one or more of the portfolio securities of a
Fund when purchasing and selling securities through broker-dealers, requesting  
bids on securities, obtaining price quotations on securities, or in connection  
with litigation involving the Funds' portfolio securities. AIM does not enter   
into formal Non-disclosure Agreements in connection with these situations;      
however, the Funds would not continue to conduct business with a person who AIM 
believed was misusing the disclosed information.                                

   DISCLOSURE OF PORTFOLIO HOLDINGS OF OTHER AIM-MANAGED PRODUCTS. AIM and
its affiliates manage products sponsored by companies other than AIM, including 
investment companies, offshore funds, and separate accounts. In many cases,     
these other products are managed in a similar fashion to certain AIM Funds (as  
defined herein) and thus have similar portfolio holdings. The sponsors of these 
other products managed by AIM and its affiliates may disclose the portfolio     
holdings of their products at different times than AIM discloses portfolio      
holdings for the AIM Funds.                                                     

AIM provides portfolio holdings information for portfolios of AIM Variable      
Insurance Funds (the "Insurance Funds") to insurance companies whose variable   
annuity and variable life insurance accounts invest in the Insurance Funds      
("Insurance Companies"). AIM may disclose portfolio holdings information for the

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Insurance Funds to Insurance Companies with which AIM has entered into          
Non-disclosure Agreements up to five days prior to the scheduled dates for AIM's
disclosure of similar portfolio holdings information for other AIM Funds on     
www.aiminvestments.com. AIM provides portfolio holdings information for the     
Insurance Funds to such Insurance Companies to allow them to disclose this      
information on their websites at approximately the same time that AIM discloses 
portfolio holdings information for the other AIM Funds on its website. AIM      
manages the Insurance Funds in a similar fashion to certain other AIM Funds and 
thus the Insurance Funds and such other AIM Funds have similar portfolio        
holdings. AIM does not disclose the portfolio holdings information for the      
Insurance Funds on its website, and not all Insurance Companies disclose this   
information on their websites.                                                  

DESCRIPTION OF THE FUNDS AND THEIR INVESTMENTS AND RISKS

CLASSIFICATION                                                                  

     The Trust is an open-end management investment company. Each of the Funds
other than AIM European Small Company Fund and AIM International Small Company  
Fund is "diversified" for purposes of the 1940 Act.                             

INVESTMENT STRATEGIES AND RISKS                                                 

The table on the following pages identifies various securities and  
investment techniques used by AIM in managing The AIM Family of                 
Funds(--Registered Trademark--). The table has been marked to indicate those    
securities and investment techniques that AIM may use to manage a Fund. A Fund  
may not use all of these techniques at any one time. A Fund's transactions in a 
particular security or use of a particular technique is subject to limitations  
imposed by a Fund's investment objective, policies and restrictions described in
that Fund's Prospectus and/or this Statement of Additional Information, as well 
as federal securities laws. The Funds' investment objectives, policies,         
strategies and practices are non-fundamental unless otherwise indicated. A more 
detailed description of the securities and investment techniques, as well as the
risks associated with those securities and investment techniques that the Funds 
utilize, follows the table. The descriptions of the securities and investment   
techniques in this section supplement the discussion of principal investment    
strategies contained in each Fund's Prospectus; where a particular type of      
security or investment technique is not discussed in a Fund's Prospectus, that  
security or investment technique is not a principal investment strategy.        

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 AIM FUNDS GROUP

 SUMMARY OF SECURITIES AND INVESTMENT TECHNIQUES

                                                        [Enlarge/Download Table]

         FUND             AIM     AIM BASIC   AIM EUROPEAN   AIM         AIM       AIM MID CAP  AIM PREMIER  AIM SELECT    AIM SMALL
                        BALANCED  BALANCED   SMALL COMPANY  GLOBAL  INTERNATIONAL  BASIC VALUE  EQUITY FUND  EQUITY FUND  CAP EQUITY
SECURITY/                 FUND      FUND         FUND       VALUE       SMALL         FUND                                   FUND   
INVESTMENT                                                   FUND      COMPANY                                                      
TECHNIQUE                                                               FUND                                                        
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                    
                                                                    EQUITY INVESTMENTS                                              
------------------------------------------------------------------------------------------------------------------------------------
Common Stock                X        X             X           X          X             X            X            X            X    
------------------------------------------------------------------------------------------------------------------------------------
Preferred Stock             X        X             X           X          X             X            X            X            X    
------------------------------------------------------------------------------------------------------------------------------------
Convertible Securities      X        X             X           X          X             X            X            X            X    

------------------------------------------------------------------------------------------------------------------------------------
Alternative                 X        X             X           X          X             X            X            X            X    
Entity Securities                                                                                                                   
------------------------------------------------------------------------------------------------------------------------------------
                                                                    FOREIGN INVESTMENTS                                             
------------------------------------------------------------------------------------------------------------------------------------
Foreign Securities          X        X             X           X          X             X            X            X            X    
------------------------------------------------------------------------------------------------------------------------------------
Foreign Government          X        X             X           X          X             X            X            X            X    
Obligations                                                                                                                         
------------------------------------------------------------------------------------------------------------------------------------
Foreign Exchange            X        X             X           X          X             X            X            X            X    
Transactions                                                                                                                        
------------------------------------------------------------------------------------------------------------------------------------
                                                                     DEBT INVESTMENTS                                               
------------------------------------------------------------------------------------------------------------------------------------
U.S. Government             X        X             X           X          X             X            X            X            X    
Obligations                                                                                                                         
------------------------------------------------------------------------------------------------------------------------------------
Mortgage-Backed and         X        X                                                                                              
Asset-Backed                                                                                                                        
Securities                                                                                                                          
------------------------------------------------------------------------------------------------------------------------------------
Collateralized              X                                                                                                       
Mortgage Obligations                                                                                                                
------------------------------------------------------------------------------------------------------------------------------------
Investment Grade            X        X             X           X          X             X            X            X            X    
Corporate Debt                                                                                                                      
Obligations                                                                                                                         
------------------------------------------------------------------------------------------------------------------------------------
Junk Bonds                                                                                                                          
------------------------------------------------------------------------------------------------------------------------------------
Liquid Assets               X        X             X           X          X             X            X            X            X    
------------------------------------------------------------------------------------------------------------------------------------
                                                                     OTHER INVESTMENTS                                              
------------------------------------------------------------------------------------------------------------------------------------
REITs                       X        X             X           X          X             X            X            X            X    
------------------------------------------------------------------------------------------------------------------------------------
Other Investment            X        X             X           X          X             X            X            X            X    
Companies                                                                                                                           
------------------------------------------------------------------------------------------------------------------------------------
Defaulted Securities                                                                                                                
------------------------------------------------------------------------------------------------------------------------------------
Municipal Forward                                                                                                                   
Contracts                                                                                                                           
------------------------------------------------------------------------------------------------------------------------------------

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 AIM FUNDS GROUP

 SUMMARY OF SECURITIES AND INVESTMENT TECHNIQUES

                                                        [Enlarge/Download Table]

         FUND             AIM     AIM BASIC   AIM EUROPEAN   AIM         AIM       AIM MID CAP  AIM PREMIER  AIM SELECT    AIM SMALL
                        BALANCED  BALANCED   SMALL COMPANY  GLOBAL  INTERNATIONAL  BASIC VALUE  EQUITY FUND  EQUITY FUND  CAP EQUITY
SECURITY/                 FUND      FUND         FUND       VALUE       SMALL         FUND                                   FUND   
INVESTMENT                                                   FUND      COMPANY                                                      
TECHNIQUE                                                               FUND                                                        
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                    
Variable or Floating                                                                                                                
Rate Instruments                                                                                                                    
------------------------------------------------------------------------------------------------------------------------------------
Indexed Securities                                                                                                                  
------------------------------------------------------------------------------------------------------------------------------------
Zero-Coupon and                                                                                                                     
Pay-in-Kind Securities                                                                                                              
------------------------------------------------------------------------------------------------------------------------------------
Synthetic Municipal                                                                                                                 
Instruments                                                                                                                         
------------------------------------------------------------------------------------------------------------------------------------
                                                                   INVESTMENT TECHNIQUES                                            
------------------------------------------------------------------------------------------------------------------------------------
Delayed Delivery            X        X             X           X          X             X            X            X            X    
Transactions                                                                                                                        
------------------------------------------------------------------------------------------------------------------------------------
When-Issued Securities      X        X             X           X          X             X            X            X            X    
------------------------------------------------------------------------------------------------------------------------------------
Short Sales                 X        X             X           X          X             X            X            X            X    
------------------------------------------------------------------------------------------------------------------------------------
Margin Transactions                                                                                                                 
------------------------------------------------------------------------------------------------------------------------------------
Swap Agreements             X        X             X           X          X             X            X            X            X    
------------------------------------------------------------------------------------------------------------------------------------
Interfund Loans             X        X             X           X          X             X            X            X            X    
------------------------------------------------------------------------------------------------------------------------------------
Borrowing                   X        X             X           X          X             X            X            X            X    
------------------------------------------------------------------------------------------------------------------------------------
Lending Portfolio           X        X             X           X          X             X            X            X            X    
Securities                                                                                                                          
------------------------------------------------------------------------------------------------------------------------------------
Repurchase Agreements       X        X             X           X          X             X            X            X            X    
------------------------------------------------------------------------------------------------------------------------------------
Reverse Repurchase          X        X             X           X          X             X            X            X            X    
Agreements                                                                                                                          
------------------------------------------------------------------------------------------------------------------------------------
Dollar Rolls                X        X                                                                                              
------------------------------------------------------------------------------------------------------------------------------------
Illiquid Securities         X        X             X           X          X             X            X            X            X    
------------------------------------------------------------------------------------------------------------------------------------
Rule 144A Securities        X        X             X           X          X             X            X            X            X    
------------------------------------------------------------------------------------------------------------------------------------
Unseasoned Issuers          X        X             X           X          X             X            X            X            X    
------------------------------------------------------------------------------------------------------------------------------------
Portfolio Transactions                                                                                                              
------------------------------------------------------------------------------------------------------------------------------------
Sale of Money Market                                                                                                                
Securities                                                                                                                          
------------------------------------------------------------------------------------------------------------------------------------
Standby Commitments                                                                                                                 
------------------------------------------------------------------------------------------------------------------------------------

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 SUMMARY OF SECURITIES AND INVESTMENT TECHNIQUES

                                                        [Enlarge/Download Table]

         FUND             AIM     AIM BASIC   AIM EUROPEAN   AIM         AIM       AIM MID CAP  AIM PREMIER  AIM SELECT    AIM SMALL
                        BALANCED  BALANCED   SMALL COMPANY  GLOBAL  INTERNATIONAL  BASIC VALUE  EQUITY FUND  EQUITY FUND  CAP EQUITY
SECURITY/                 FUND      FUND         FUND       VALUE       SMALL         FUND                                   FUND   
INVESTMENT                                                   FUND      COMPANY                                                      
TECHNIQUE                                                               FUND                                                        
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                    
                                                                        DERIVATIVES                                                 
------------------------------------------------------------------------------------------------------------------------------------
Equity-Linked               X        X             X           X          X             X            X            X            X    
Derivatives                                                                                                                         
------------------------------------------------------------------------------------------------------------------------------------
Put Options                 X        X             X           X          X             X            X            X            X    
------------------------------------------------------------------------------------------------------------------------------------
Call Options                X        X             X           X          X             X            X            X            X    
------------------------------------------------------------------------------------------------------------------------------------
Straddles                   X        X             X           X          X             X            X            X            X    
------------------------------------------------------------------------------------------------------------------------------------
Warrants                    X        X             X           X          X             X            X            X            X    
------------------------------------------------------------------------------------------------------------------------------------
Futures Contracts and       X        X             X           X          X             X            X            X            X    
Options on Futures                                                                                                                  
Contracts                                                                                                                           
------------------------------------------------------------------------------------------------------------------------------------
Forward Currency            X        X             X           X          X             X            X            X            X    
Contracts                                                                                                                           
------------------------------------------------------------------------------------------------------------------------------------
Cover                       X        X             X           X          X             X            X            X            X    
------------------------------------------------------------------------------------------------------------------------------------

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Equity Investments                                                              

  COMMON STOCK. Common stock is issued by companies principally to raise
cash for business purposes and represents a residual interest in the issuing    
company. A Fund participates in the success or failure of any company in which  
it holds stock. The prices of equity securities change in response to many      
factors including the historical and prospective earnings of the issuer, the    
value of its assets, general economic conditions, interest rates, investor      
perceptions and market liquidity.                                               

 PREFERRED STOCK. Preferred stock, unlike common stock, often offers a
stated dividend rate payable from a corporation's earnings. If interest rates   
rise, the fixed dividend on preferred stocks may be less attractive, causing the
price of preferred stocks to decline. Preferred stock may have mandatory sinking
fund provisions, as well as call/redemption provisions prior to maturity, a     
negative feature when interest rates decline. Dividends on some preferred stock 
may be "cumulative," requiring all or a portion of prior unpaid dividends to be 
paid before dividends are paid on the issuer's common stock. Preferred stock    
also generally has a preference over common stock on the distribution of a      
corporation's assets in the event of liquidation of the corporation, and may be 
"participating," which means that it may be entitled to a dividend exceeding the
stated dividend in certain cases. In some cases an issuer may offer auction rate
preferred stock, which means that the interest to be paid is set by auction and 
will often be reset at stated intervals. The rights of preferred stocks on the  
distribution of a corporation's assets in the event of a liquidation are        
generally subordinate to the rights associated with a corporation's debt        
securities.                                                                     

     CONVERTIBLE SECURITIES. Convertible securities include bonds, debentures,
notes, preferred stocks and other securities that may be converted into a       
prescribed amount of common stock or other equity securities at a specified     
price and time. The holder of convertible securities is entitled to receive     
interest paid or accrued on debt, or dividends paid or accrued on preferred     
stock, until the security matures or is converted.                              

    The value of a convertible security depends on interest rates, the yield
of similar nonconvertible securities, the financial strength of the issuer and  
the seniority of the security in the issuer's capital structure. Convertible    
securities may be illiquid, and may be required to convert at a time and at a   
price that is unfavorable to a Fund.                                            

   The Funds will invest in a convertible debt security based primarily on
the characteristics of the equity security into which it converts, and without  
regard to the credit rating of the convertible security (even if the credit     
rating is below investment grade). To the extent that a Fund invests in         
convertible debt securities with credit ratings below investment grade, such    
securities may have a higher likelihood of default, although this may be        
somewhat offset by the convertibility feature.                                  

ALTERNATIVE ENTITY SECURITIES. Companies that are formed as limited 
partnerships, limited liability companies, business trusts or other             
non-corporate entities may issue equity securities that are similar to common or
preferred stock of corporations.                                                

Foreign Investments                                                             

FOREIGN SECURITIES. Foreign securities are equity or debt securities
issued by issuers outside the United States, and include securities in the form 
of American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs"),
or other securities representing underlying securities of foreign issuers.      
Depositary Receipts are typically issued by a bank or trust company and evidence
ownership of underlying securities issued by foreign corporations.              

     Each Fund may invest up to 25% of its total assets (at least 80% of total
assets for AIM International Small Company Fund, at least 80% of net assets for 
AIM European Small Company Fund and up to 80% of total assets for AIM Global    
Value Fund) in foreign securities.                                              

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    Investments by a Fund in foreign securities, whether denominated in U.S.
dollars or foreign currencies, may entail all of the risks set forth below.     
Investments by a Fund in ADRs, EDRs or similar securities also may entail some  
or all of the risks described below.                                            

Currency Risk. The value of the Funds' foreign investments will be  
affected by changes in currency exchange rates. The U.S. dollar value of a      
foreign security decreases when the value of the U.S. dollar rises against the  
foreign currency in which the security is denominated, and increases when the   
value of the U.S. dollar falls against such currency.                           

  Political and Economic Risk. The economies of many of the countries in
which the Funds may invest may not be as developed as the United States' economy
and may be subject to significantly different forces. Political or social       
instability, expropriation or confiscatory taxation, and limitations on the     
removal of funds or other assets could also adversely affect the value of the   
Funds' investments.                                                             

     Regulatory Risk. Foreign companies are not registered with the Securities
and Exchange Commission ("SEC") and are generally not subject to the regulatory 
controls imposed on United States issuers and, as a consequence, there is       
generally less publicly available information about foreign securities than is  
available about domestic securities. Foreign companies are not subject to       
uniform accounting, auditing and financial reporting standards, corporate       
governance practices and requirements comparable to those applicable to domestic
companies. Income from foreign securities owned by the Funds may be reduced by a
withholding tax at the source, which tax would reduce dividend income payable to
the Funds' shareholders.                                                        

     Market Risk. The securities markets in many of the countries in which the
Funds invest will have substantially less trading volume than the major United  
States markets. As a result, the securities of some foreign companies may be    
less liquid and experience more price volatility than comparable domestic       
securities. Increased custodian costs as well as administrative costs (such as  
the need to use foreign custodians) may be associated with the maintenance of   
assets in foreign jurisdictions. There is generally less government regulation  
and supervision of foreign stock exchanges, brokers and issuers which may make  
it difficult to enforce contractual obligations. In addition, transaction costs 
in foreign securities markets are likely to be higher, since brokerage          
commission rates in foreign countries are likely to be higher than in the United
States.                                                                         

  Risks of Developing Countries. AIM European Small Company Fund and AIM
International Small Company Fund may each invest up to 35%, AIM Global Value    
Fund may invest up to 20%, and AIM Balanced Fund, AIM Basic Balanced Fund, AIM  
Mid Cap Basic Value Fund, AIM Premier Equity Fund, AIM Select Equity Fund and   
AIM Small Cap Equity Fund may each invest up to 5% of their total assets in     
securities of companies located in developing countries. Developing countries   
are those countries which are not included in the MSCI World Index. The Funds   
consider various factors when determining whether a company is in a developing  
country, including whether (1) it is organized under the laws of a developing   
country; (2) it has a principal office in a developing country; (3) it derives  
50% or more of its total revenues from business in a developing country; or (4) 
its securities are traded principally on a stock exchange, or in an             
over-the-counter market, in a developing country. Investments in developing     
countries present risks greater than, and in addition to, those presented by    
investments in foreign issuers in general. A number of developing countries     
restrict, to varying degrees, foreign investment in stocks. Repatriation of     
investment income, capital, and the proceeds of sales by foreign investors may  
require governmental registration and/or approval in some developing countries. 
A number of the currencies of developing countries have experienced significant 
declines against the U.S. dollar in recent years, and devaluation may occur     
subsequent to investments in these currencies by a Fund. Inflation and rapid    
fluctuations in inflation rates have had and may continue to have negative      
effects on the economies and securities markets of certain emerging market      
countries. Many of the developing securities markets are relatively small or    
less diverse, have low trading volumes, suffer periods of relative illiquidity, 
and are characterized by significant price volatility. There is a risk in       
developing countries that a future economic or political crisis could lead to   
price controls, forced mergers of companies, expropriation or confiscatory      
taxation, seizure, nationalization, or creation of government monopolies, any of
which may have a detrimental effect on a Fund's investments.                    

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FOREIGN GOVERNMENT OBLIGATIONS. Debt securities issued by foreign   
governments are often, but not always, supported by the full faith and credit of
the foreign governments, or their subdivisions, agencies or instrumentalities,  
that issue them. These securities involve the risks discussed above with respect
to foreign securities. Additionally, the issuer of the debt or the governmental 
authorities that control repayment of the debt may be unwilling or unable to pay
interests or repay principal when due. Political or economic changes or the     
balance of trade may affect a country's willingness or ability to service its   
debt obligations. Periods of economic uncertainty may result in the volatility  
of market prices of sovereign debt obligations, especially debt obligations     
issued by the governments of developing countries. Foreign government           
obligations of developing countries, and some structures of emerging market debt
securities, both of which are generally below investment grade, are sometimes   
referred to as "Brady Bonds".                                                   

FOREIGN EXCHANGE TRANSACTIONS. Foreign exchange transactions include
direct purchases of futures contracts with respect to foreign currency, and     
contractual agreements to purchase or sell a specified currency at a specified  
future date (up to one year) at a price set at the time of the contract. Such   
contractual commitments may be forward contracts entered into directly with     
another party or exchange traded futures contracts.                             

     Each Fund has authority to deal in foreign exchange between currencies of
the different countries in which it will invest as a hedge against possible     
variations in the foreign exchange rates between those currencies. A Fund may   
commit the same percentage of its assets to foreign exchange hedges as it can   
invest in foreign securities.                                                   

      The Funds may utilize either specific transactions ("transaction hedging")
or portfolio positions ("position hedging") to hedge foreign currency exposure  
through foreign exchange transactions. Transaction hedging is the purchase or   
sale of foreign currency with respect to specific receivables or payables of a  
Fund accruing in connection with the purchase or sale of its portfolio          
securities, the sale and redemption of shares of the Fund, or the payment of    
dividends and distributions by the Fund. Position hedging is the purchase or    
sale of foreign currency with respect to portfolio security positions (or       
underlying portfolio security positions, such as in an ADR) denominated or      
quoted in a foreign currency. Additionally, foreign exchange transactions may   
involve some of the risks of investments in foreign securities.                 

Debt Investments                                                                

     U.S. GOVERNMENT OBLIGATIONS. Obligations issued or guaranteed by the U.S.
Government, its agencies and instrumentalities include bills, notes and bonds   
issued by the U.S. Treasury, as well as "stripped" or "zero coupon" U.S.        
Treasury obligations representing future interest or principal payments on U.S. 
Treasury notes or bonds. Stripped securities are sold at a discount to their    
"face value," and may exhibit greater price volatility than interest-bearing    
securities since investors receive no payment until maturity. Obligations of    
certain agencies and instrumentalities of the U.S. Government, such as the      
Government National Mortgage Association ("GNMA"), are supported by the full    
faith and credit of the U.S. Treasury; others, such as those of the Federal     
National Mortgage Association ("FNMA"), are supported by the right of the issuer
to borrow from the U.S. Treasury; others, such as those of the Student Loan     
Marketing Association ("SLMA"), are supported by the discretionary authority of 
the U.S. Government to purchase the agency's obligations; still others, though  
issued by an instrumentality chartered by the U.S. Government, like the Federal 
Farm Credit Bureau ("FFCB"), are supported only by the credit of the            
instrumentality. The U.S. Government may choose not to provide financial support
to U.S. Government-sponsored agencies or instrumentalities if it is not legally 
obligated to do so, in which case if the issuer were to default, the Funds      
holding securities of such issuer might not be able to recover their investments
from the U.S. Government.                                                       

    MORTGAGE-BACKED AND ASSET-BACKED SECURITIES - Mortgage-backed securities
are mortgage-related securities issued or guaranteed by the U.S. Government, its
agencies and instrumentalities, or issued by nongovernment entities.            
Mortgage-related securities represent pools of mortgage loans                   

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assembled for sale to investors by various government agencies such as GNMA and 
government-related organizations such as FNMA and the Federal Home Loan Mortgage
Corporation ("FHLMC"), as well as by nongovernment issuers such as commercial   
banks, savings and loan institutions, mortgage bankers and private mortgage     
insurance companies. Although certain mortgage-related securities are guaranteed
by a third party or otherwise similarly secured, the market value of the        
security, which may fluctuate, is not so secured.                               

There are a number of important differences among the agencies and  
instrumentalities of the U.S. Government that issue mortgage-related securities 
and among the securities they issue. Mortgage-related securities issued by GNMA 
include GNMA Mortgage Pass-Through Certificates (also known as "Ginnie Maes")   
which are guaranteed as to the timely payment of principal and interest. That   
guarantee is backed by the full faith and credit of the U.S. Treasury. GNMA is a
corporation wholly owned by the U.S. Government within the Department of Housing
and Urban Development. Mortgage-related securities issued by FNMA include FNMA  
Guaranteed Mortgage Pass-Through Certificates (also known as "Fannie Maes") and 
are guaranteed as to payment of principal and interest by FNMA itself and backed
by a line of credit with the U.S. Treasury. FNMA is a government-sponsored      
entity wholly owned by public stockholders. Mortgage-related securities issued  
by FHLMC include FHLMC Mortgage Participation Certificates (also known as       
"Freddie Macs") guaranteed as to payment of principal and interest by FHLMC     
itself and backed by a line of credit with the U.S. Treasury. FHLMC is a        
government-sponsored entity wholly owned by public stockholders.                

Other asset-backed securities are structured like mortgage-backed   
securities, but instead of mortgage loans or interests in mortgage loans, the   
underlying assets may include such items as motor vehicle installment sales or  
installment loan contracts, leases of various types of real and personal        
property, and receivables from credit card agreements. Regular payments received
in respect of such securities include both interest and principal. Asset-backed 
securities typically have no U.S. Government backing. Additionally, the ability 
of an issuer of asset-backed securities to enforce its security interest in the 
underlying assets may be limited.                                               

     If a Fund purchases a mortgage-backed or other asset-backed security at a
premium, that portion may be lost if there is a decline in the market value of  
the security whether resulting from changes in interest rates or prepayments in 
the underlying collateral. As with other interest-bearing securities, the prices
of such securities are inversely affected by changes in interest rates. However,
though the value of a mortgage-backed or other asset-backed security may decline
when interest rates rise, the converse is not necessarily true, since in periods
of declining interest rates the mortgages and loans underlying the securities   
are prone to prepayment, thereby shortening the average life of the security and
shortening the period of time over which income at the higher rate is received. 
When interest rates are rising, though, the rate of prepayment tends to         
decrease, thereby lengthening the period of time over which income at the lower 
rate is received. For these and other reasons, a mortgage-backed or other       
asset-backed security's average maturity may be shortened or lengthened as a    
result of interest rate fluctuations and, therefore, it is not possible to      
predict accurately the security's return.                                       

      COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS"). AIM Balanced Fund may invest
in CMOs. The Fund can also invest in mortgage-backed bonds and asset-backed     
securities. A CMO is a hybrid between a mortgage-backed bond and a mortgage     
pass-through security. Similar to a bond, interest and prepaid principal is     
paid, in most cases, semiannually. CMOs may be collateralized by whole mortgage 
loans, but are more typically collateralized by portfolios of mortgage          
pass-through securities guaranteed by GNMA, FHLMC, or FNMA, and their income    
streams.                                                                        

      CMOs are structured into multiple classes, each bearing a different stated
maturity. Actual maturity and average life will depend upon the prepayment      
experience of the collateral. CMOs provide for a modified form of call          
protection through a de facto breakdown of the underlying pool of mortgages     
according to how quickly the loans are repaid. Monthly payment of principal     
received from the pool of underlying mortgages, including prepayments, is first 
returned to investors holding the shortest maturity class. Investors holding the
longer maturity classes receive principal only after the first class has been   

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retired. An investor is partially guarded against a sooner than desired return  
of principal because of the sequential payments.                                

  In a typical CMO transaction, a corporation ("issuer") issues multiple
series (e.g., A, B, C, Z) of CMO bonds ("Bonds"). Proceeds of the Bond offering 
are used to purchase mortgages or mortgage pass-through certificates            
("Collateral"). The Collateral is pledged to a third party trustee as security  
for the Bonds. Principal and interest payments from the Collateral are used to  
pay principal on the Bonds in the order A, B, C, Z. The Series A, B, and C Bonds
all bear current interest. Interest on Series Z Bond is accrued and added to    
principal and a like amount is paid as principal on the Series A, B, or C Bond  
currently being paid off. When the Series A, B, and C Bonds are paid in full,   
interest and principal on the Series Z Bond begins to be paid currently. With   
some CMOs, the issuer serves as a conduit to allow loan originators (primarily  
builders or savings and loan associations) to borrow against their loan         
portfolios.                                                                     

      CMOs that are issued or guaranteed by the U.S. government or by any of its
agencies or instrumentalities will be considered U.S. government securities by  
the Fund, while other CMOs, even if collateralized by U.S. government           
securities, will have the same status as other privately issued securities for  
purposes of applying the Fund's diversification tests.                          

   FHLMC CMOs. FHLMC CMOs are debt obligations of FHLMC issued in multiple
classes having different maturity dates which are secured by the pledge of a    
pool of conventional mortgage loans purchased by FHLMC. Unlike FHLMC            
Participation Certificates ("PCs"), payments of principal and interest on the   
CMOs are made semiannually, as opposed to monthly. The amount of principal      
payable on each semiannual payment date is determined in accordance with FHLMC's
mandatory sinking fund schedule, which, in turn, is equal to approximately 100% 
of FHA prepayment experience applied to the mortgage collateral pool. All       
sinking fund payments in the CMOs are allocated to the retirement of the        
individual classes of bonds in the order of their stated maturities. Payment of 
principal on the mortgage loans in the collateral pool in excess of the amount  
of FHLMC's minimum sinking fund obligation for any payment date are paid to the 
holders of the CMOs as additional sinking fund payments. Because of the         
"pass-through" nature of all principal payments received on the collateral pool 
in excess of FHLMC's minimum sinking fund requirement, the rate at which        
principal of the CMOs is actually repaid is likely to be such that each class of
bonds will be retired in advance of its scheduled maturity date.                

    If collection of principal (including prepayments) on the mortgage loans
during any semiannual payment period is not sufficient to meet FHLMC's minimum  
sinking fund obligation on the next sinking fund payment date, FHLMC agrees to  
make up the deficiency from its general funds.                                  

Risks of Mortgage-Related Securities. Investment in mortgage-backed 
securities poses several risks, including prepayment, market, and credit risk.  
Prepayment risk reflects the risk that borrowers may prepay their mortgages     
faster than expected, thereby affecting the investment's average life and       
perhaps its yield. Whether or not a mortgage loan is prepaid is almost entirely 
controlled by the borrower. Borrowers are most likely to exercise prepayment    
options at the time when it is least advantageous to investors, generally       
prepaying mortgages as interest rates fall, and slowing payments as interest    
rates rise. Besides the effect of prevailing interest rates, the rate of        
prepayment and refinancing of mortgages may also be affected by home value      
appreciation, ease of the refinancing process and local economic conditions.    

      Market risk reflects the risk that the price of the security may fluctuate
over time. The price of mortgage-backed securities may be particularly sensitive
to prevailing interest rates, the length of time the security is expected to be 
outstanding, and the liquidity of the issue. In a period of unstable interest   
rates, there may be decreased demand for certain types of mortgage-backed       
securities, and a Fund invested in such securities wishing to sell them may find
it difficult to find a buyer, which may in turn decrease the price at which they
may be sold.                                                                    

      Credit risk reflects the risk that the Fund may not receive all or part of
its principal because the issuer or credit enhancer has defaulted on its        
obligations. Obligations issued by U.S. government-related entities are         
guaranteed as to the payment of principal and interest, but are not backed by   
the full faith and                                                              

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credit of the U.S. government. The performance of private label mortgage-backed 
securities, issued by private institutions, is based on the financial health of 
those institutions. With respect to GNMA certificates, although GNMA guarantees 
timely payment even if homeowners delay or default, tracking the "pass-through" 
payments may, at times, be difficult.                                           

     INVESTMENT GRADE CORPORATE DEBT OBLIGATIONS. Each Fund may invest in U.S.
dollar-denominated debt obligations issued or guaranteed by U.S. corporations or
U.S. commercial banks, U.S. dollar-denominated obligations of foreign issuers   
and debt obligations of foreign issuers denominated in foreign currencies. Such 
debt obligations include, among others, bonds, notes, debentures and variable   
rate demand notes. In choosing corporate debt securities on behalf of a Fund,   
its investment adviser may consider (i) general economic and financial          
conditions; (ii) the specific issuer's (a) business and management, (b) cash    
flow, (c) earnings coverage of interest and dividends, (d) ability to operate   
under adverse economic conditions, (e) fair market value of assets, and (f) in  
the case of foreign issuers, unique political, economic or social conditions    
applicable to such issuer's country; and, (iii) other considerations deemed     
appropriate.                                                                    

Description of debt securities ratings are found in Appendix A.     

     LIQUID ASSETS. Cash equivalents include money market instruments (such as
certificates of deposit, time deposits, bankers' acceptances from U.S. or       
foreign banks, and repurchase agreements), shares of affiliated money market    
funds or high-quality debt obligations (such as U.S. Government obligations,    
commercial paper, master notes and other short-term corporate instruments, and  
municipal obligations).                                                         

Other Investments                                                               

      REAL ESTATE INVESTMENT TRUSTS ("REITS"). REITs are trusts that sell equity
or debt securities to investors and use the proceeds to invest in real estate or
interests therein. A REIT may focus on particular projects, such as apartment   
complexes, or geographic regions, such as the southeastern United States, or    
both.                                                                           

    To the extent consistent with their respective investment objectives and
policies, each Fund may invest up to 15% of its total assets in equity and/or   
debt securities issued by REITs.                                                

  To the extent that a Fund has the ability to invest in REITs, the Fund
could conceivably own real estate directly as a result of a default on the      
securities it owns. A Fund, therefore, may be subject to certain risks          
associated with the direct ownership of real estate including difficulties in   
valuing and trading real estate, declines in the value of real estate, risks    
related to general and local economic conditions, adverse changes in the climate
for real estate, environmental liability risks, increases in property taxes and 
operating expenses, changes in zoning laws, casualty or condemnation losses,    
limitations on rents, changes in neighborhood values, the appeal of properties  
to tenants, and increases in interest rates.                                    

     In addition to the risks described above, equity REITs may be affected by
any changes in the value of the underlying property owned by the trusts, while  
mortgage REITs may be affected by the quality of any credit extended. Equity and
mortgage REITs are dependent upon management skill, are not diversified, and are
therefore subject to the risk of financing single or a limited number of        
projects. Such trusts are also subject to heavy cash flow dependency, defaults  
by borrowers, self-liquidation, and the possibility of failing to maintain an   
exemption from the 1940 Act. Changes in interest rates may also affect the value
of debt securities held by a Fund. By investing in REITs indirectly through a   
Fund, a shareholder will bear not only his/her proportionate share of the       
expenses of the Fund, but also, indirectly, similar expenses of the REITs.      

      OTHER INVESTMENT COMPANIES. With respect to a Fund's purchase of shares of
another investment company, including Affiliated Money Market Funds (defined    
below), the Fund will indirectly bear its proportionate share of the advisory   
fees and other operating expenses of such investment company. The Funds have    
obtained an exemptive order from the SEC allowing them to invest in money       

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market funds that have AIM or an affiliate of AIM as an investment advisor (the 
"Affiliated Money Market Funds"), provided that investments in Affiliated Money 
Market Funds do not exceed 25% of the total assets of the investing Fund.       

The following restrictions apply to investments in other investment 
companies other than Affiliated Money Market Funds: (i) a Fund may not purchase 
more than 3% of the total outstanding voting stock of another investment        
company; (ii) a Fund may not invest more than 5% of its total assets in         
securities issued by another investment company; and (iii) a Fund may not invest
more than 10% of its total assets in securities issued by other investment      
companies.                                                                      

Investment Techniques                                                           

DELAYED DELIVERY TRANSACTIONS. Delayed delivery transactions, also  
referred to as forward commitments, involve commitments by a Fund to dealers or 
issuers to acquire or sell securities at a specified future date beyond the     
customary settlement for such securities. These commitments may fix the payment 
price and interest rate to be received or paid on the investment. A Fund may    
purchase securities on a delayed delivery basis to the extent it can anticipate 
having available cash on settlement date. Delayed delivery agreements will not  
be used as a speculative or leverage technique.                                 

      Investment in securities on a delayed delivery basis may increase a Fund's
exposure to market fluctuation and may increase the possibility that the Fund   
will incur short-term gains subject to federal taxation or short-term losses if 
the Fund must engage in portfolio transactions in order to honor a delayed      
delivery commitment. Until the settlement date, a Fund will segregate liquid    
assets of a dollar value sufficient at all times to make payment for the delayed
delivery transactions. Such segregated liquid assets will be marked-to-market   
daily, and the amount segregated will be increased if necessary to maintain     
adequate coverage of the delayed delivery commitments. No additional delayed    
delivery agreements or when-issued commitments (as described below) will be made
by a Fund if, as a result, more than 25% of the Fund's total assets would become
so committed.                                                                   

    The delayed delivery securities, which will not begin to accrue interest
or dividends until the settlement date, will be recorded as an asset of a Fund  
and will be subject to the risk of market fluctuation. The purchase price of the
delayed delivery securities is a liability of a Fund until settlement. Absent   
extraordinary circumstances, a Fund will not sell or otherwise transfer the     
delayed delivery basis securities prior to settlement.                          

A Fund may enter into buy/sell back transactions (a form of delayed 
delivery agreement). In a buy/sell back transaction, a Fund enters a trade to   
sell securities at one price and simultaneously enters a trade to buy the same  
securities at another price for settlement at a future date.                    

  WHEN-ISSUED SECURITIES. Purchasing securities on a "when-issued" basis
means that the date for delivery of and payment for the securities is not fixed 
at the date of purchase, but is set after the securities are issued. The payment
obligation and, if applicable, the interest rate that will be received on the   
securities are fixed at the time the buyer enters into the commitment. A Fund   
will only make commitments to purchase such securities with the intention of    
actually acquiring such securities, but the Fund may sell these securities      
before the settlement date if it is deemed advisable.                           

    Securities purchased on a when-issued basis and the securities held in a
Fund's portfolio are subject to changes in market value based upon the public's 
perception of the creditworthiness of the issuer and, if applicable, changes in 
the level of interest rates. Therefore, if a Fund is to remain substantially    
fully invested at the same time that it has purchased securities on a           
when-issued basis, there will be a possibility that the market value of the     
Fund's assets will fluctuate to a greater degree. Furthermore, when the time    
comes for the Fund to meet its obligations under when-issued commitments, the   
Fund will do so by using then available cash flow, by sale of the segregated    
liquid assets, by sale of other securities or, although it would not normally   
expect to do so, by directing the sale of the when-issued securities themselves 
(which may have a market value greater or less than the Fund's payment          
obligation).                                                                    

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 Investment in securities on a when-issued basis may increase a Fund's
exposure to market fluctuation and may increase the possibility that the Fund   
will incur short-term gains subject to federal taxation or short-term losses if 
the Fund must sell another security in order to honor a when-issued commitment. 
If a Fund purchases a when-issued security, the Fund's will segregate liquid    
assets in an amount equal to the when-issued commitment. If the market value of 
such segregated assets declines, additional liquid assets will be segregated on 
a daily basis so that the market value of the segregated assets will equal the  
amount of the Fund's when-issued commitments. No additional delayed delivery    
agreements (as described above) or when-issued commitments will be made by a    
Fund if, as a result, more than 25% of the Fund's total assets would become so  
committed.                                                                      

 SHORT SALES. In a short sale, a Fund does not immediately deliver the
securities sold and does not receive the proceeds from the sale. A Fund is said 
to have a short position in the securities sold until it delivers the securities
sold, at which time it receives the proceeds of the sale. A Fund will make a    
short sale, as a hedge, when it believes that the price of a security may       
decline, causing a decline in the value of a security owned by the Fund or a    
security convertible into or exchangeable for such security, or when the Fund   
does not want to sell the security it owns, because it wishes to defer          
recognition of gain or loss for federal income tax purposes. In such case, any  
future losses in a Fund's long position should be reduced by a gain in the short
position. Conversely, any gain in the long position should be reduced by a loss 
in the short position. The extent to which such gains or losses are reduced will
depend upon the amount of the security sold short relative to the amount a Fund 
owns, either directly or indirectly, and, in the case where the Fund owns       
convertible securities, changes in the conversion premium. In determining the   
number of shares to be sold short against a Fund's position in a convertible    
security, the anticipated fluctuation in the conversion premium is considered. A
Fund may also make short sales to generate additional income from the investment
of the cash proceeds of short sales.                                            

    A Fund will only make short sales "against the box," meaning that at all
times when a short position is open, the Fund owns an equal amount of such      
securities or securities convertible into or exchangeable, without payment of   
any further consideration, for securities of the same issue as, and in an amount
equal to, the securities sold short. To secure its obligation to deliver the    
securities sold short, a Fund will segregate with its custodian an equal amount 
to the securities sold short or securities convertible into or exchangeable for 
such securities. A Fund may pledge no more than 10% of its total assets as      
collateral for short sales against the box.                                     

MARGIN TRANSACTIONS. None of the Funds will purchase any security on
margin, except that each Fund may obtain such short-term credits as may be      
necessary for the clearance of purchases and sales of portfolio securities. The 
payment by a Fund of initial or variation margin in connection with futures or  
related options transactions will not be considered the purchase of a security  
on margin.                                                                      

SWAP AGREEMENTS. Each Fund may enter into interest rate, index and  
currency exchange rate swap agreements for purposes of attempting to obtain a   
particular desired return at a lower cost to the Fund than if it had invested   
directly in an instrument that yielded that desired return. Swap agreements are 
two-party contracts entered into primarily by institutional investors for       
periods ranging from a few weeks to more than one year. In a standard "swap"    
transaction, two parties agree to exchange the returns (or differentials in     
rates of return) earned or realized on particular predetermined investments or  
instruments. The gross returns to be exchanged or "swapped" between the parties 
are calculated with respect to a "notional amount," i.e., the return on or      
increase in value of a particular dollar amount invested at a particular        
interest rate, in a particular foreign currency, or in a "basket" of securities 
representing a particular index. Commonly used swap agreements include: (i)     
interest rate caps, under which, in return for a premium, one party agrees to   
make payments to the other to the extent that interest rates exceed a specified 
rate, or "cap"; (ii) interest rate floors, under which, in return for a premium,
one party agrees to make payments to the other to the extent that interest rates
fall below a specified level, or "floor"; and (iii) interest rate collars, under
which a party sells a cap and purchases a floor or vice versa in an attempt to  
protect itself against interest rate movements exceeding given minimum or       
maximum levels.                                                                 

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     The "notional amount" of the swap agreement is only a fictitious basis on
which to calculate the obligations that the parties to a swap agreement have    
agreed to exchange. Most swap agreements entered into by a Fund would calculate 
the obligations on a "net basis." Consequently, a Fund's obligations (or rights)
under a swap agreement will generally be equal only to the net amount to be paid
or received under the agreement based on the relative values of the positions   
held by each party to the agreement (the "net amount"). Obligations under a swap
agreement will be accrued daily (offset against amounts owing to the Fund) and  
any accrued but unpaid net amounts owed to a swap counterparty will be covered  
by segregating liquid assets to avoid any potential leveraging of the Fund. A   
Fund will not enter into a swap agreement with any single party if the net      
amount owed to or to be received under existing contracts with that party would 
exceed 5% of the Fund's total assets. For a discussion of the tax considerations
relating to swap agreements, see "Dividends, Distributions and Tax Matters -    
Swap Agreements."                                                               

    INTERFUND LOANS. Each Fund may lend uninvested cash up to 15% of its net
assets to other funds advised by AIM (the "AIM Funds") and each Fund may borrow 
from other AIM Funds to the extent permitted under such Fund's investment       
restrictions. During temporary or emergency periods, the percentage of a Fund's 
net assets that may be loaned to other AIM Funds may be increased as permitted  
by the SEC. If any interfund borrowings are outstanding, a Fund cannot make any 
additional investments. If a Fund has borrowed from other AIM Funds and has     
aggregate borrowings from all sources that exceed 10% of such Fund's total      
assets, such Fund will secure all of its loans from other AIM Funds. The ability
of a Fund to lend its securities to other AIM Funds is subject to certain other 
terms and conditions.                                                           

      BORROWING. Each Fund may borrow money to a limited extent for temporary or
emergency purposes. If there are unusually heavy redemptions because of changes 
in interest rates or for any other reason, a Fund may have to sell a portion of 
its investment portfolio at a time when it may be disadvantageous to do so.     
Selling fund securities under these circumstances may result in a lower net     
asset value per share or decreased dividend income, or both. The Trust believes 
that, in the event of abnormally heavy redemption requests, a Fund's borrowing  
ability would help to mitigate any such effects and could make the forced sale  
of their portfolio securities less likely.                                      

 LENDING PORTFOLIO SECURITIES. The Funds may each lend their portfolio
securities (principally to broker-dealers) where such loans are callable at any 
time and are continuously secured by segregated collateral equal to no less than
the market value, determined daily, of the loaned securities. Such collateral   
will be cash, letters of credit, or debt securities issued or guaranteed by the 
U.S. Government or any of its agencies. Each Fund may lend portfolio securities 
to the extent of one-third of its total assets.                                 

  The Fund would continue to receive the income on loaned securities and
would, at the same time, earn interest on the loan collateral or on the         
investment of any cash collateral. A Fund will not have the right to vote       
securities while they are lent, but it can call a loan in anticipation of an    
important vote. Any cash collateral pursuant to these loans would be invested in
short-term money market instruments or Affiliated Money Market Funds. Lending   
securities entails a risk of loss to the Fund if and to the extent that the     
market value of the securities loaned increases and the collateral is not       
increased accordingly or in the event of default by the borrower. The Fund could
also experience delays and costs in gaining access to the collateral.           

     REPURCHASE AGREEMENTS. Repurchase agreements are agreements under which a
Fund acquires ownership of a security from a broker-dealer or bank that agrees  
to repurchase the security at a mutually agreed upon time and price (which is   
higher than the purchase price), thereby determining the yield during a Fund's  
holding period. A Fund may, however, enter into a "continuing contract" or      
"open" repurchase agreement under which the seller is under a continuing        
obligation to repurchase the underlying obligation from the Fund on demand and  
the effective interest rate is negotiated on a daily basis. Each of the Funds   
may engage in repurchase agreement transactions involving the types of          
securities in which it is permitted to invest.                                  

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    If the seller of a repurchase agreement fails to repurchase the security
in accordance with the terms of the agreement, a Fund might incur expenses in   
enforcing its rights, and could experience losses, including a decline in the   
value of the underlying security and loss of income. The securities underlying a
repurchase agreement will be marked-to-market every business day so that the    
value of such securities is at least equal to the investment value of the       
repurchase agreement, including any accrued interest thereon.                   

     The Funds may invest their cash balances in joint accounts with other AIM
Funds for the purpose of investing in repurchase agreements with maturities not 
to exceed 60 days, and in certain other money market instruments with remaining 
maturities not to exceed 90 days. Repurchase agreements are considered loans by 
a Fund under the 1940 Act.                                                      

REVERSE REPURCHASE AGREEMENTS. Reverse repurchase agreements are    
agreements that involve the sale of securities held by a Fund to financial      
institutions such as banks and broker-dealers, with an agreement that the Fund  
will repurchase the securities at an agreed upon price and date. A Fund may     
employ reverse repurchase agreements (i) for temporary emergency purposes, such 
as to meet unanticipated net redemptions so as to avoid liquidating other       
portfolio securities during unfavorable market conditions; (ii) to cover        
short-term cash requirements resulting from the timing of trade settlements; or 
(iii) to take advantage of market situations where the interest income to be    
earned from the investment of the proceeds of the transaction is greater than   
the interest expense of the transaction. At the time it enters into a reverse   
repurchase agreement, a Fund will segregate liquid assets having a dollar value 
equal to the repurchase price, and will subsequently continually monitor the    
account to ensure that such equivalent value is maintained at all times. Reverse
repurchase agreements involve the risk that the market value of securities to be
purchased by the Fund may decline below the price at which it is obligated to   
repurchase the securities, or that the other party may default on its           
obligation, so that the Fund is delayed or prevented from completing the        
transaction. Reverse repurchase agreements are considered borrowings by a Fund  
under the 1940 Act.                                                             

 DOLLAR ROLLS. A dollar roll involves the sale by a Fund of a mortgage
security to a financial institution such as a broker-dealer or a bank, with an  
agreement to repurchase a substantially similar (i.e., same type, coupon and    
maturity) security at an agreed upon price and date. The mortgage securities    
that are purchased will bear the same interest rate as those sold, but will     
generally be collateralized by different pools of mortgages with different      
prepayment histories. During the period between the sale and repurchase, the    
Fund will not be entitled to receive interest and principal payments on the     
securities sold. Proceeds of the sale will be invested in short-term            
instruments, and the income from these investments, together with any additional
fee income received on the sale, could generate income for a Fund exceeding the 
yield on the sold security.                                                     

  Dollar roll transactions involve the risk that the market value of the
securities retained by the Fund may decline below the price of the securities   
that the Fund has sold but is obligated to repurchase under the agreement. In   
the event the buyer of securities under a dollar roll transaction files for     
bankruptcy or becomes insolvent, the Fund's use of the proceeds from the sale of
the securities may be restricted pending a determination by the other party, or 
its trustee or receiver, whether to enforce the Fund's obligation to repurchase 
the securities. At the time the Fund enters into a dollar roll, it will         
segregate liquid assets having a dollar value equal to the repurchase price, and
will monitor the account to ensure that such equivalent value is maintained. The
Funds typically enters into dollar roll transactions to enhance their return    
either on an income or total return basis or to manage pre-payment risk. Dollar 
rolls are considered borrowings by a Fund under the 1940 Act.                   

  ILLIQUID SECURITIES. Illiquid securities are securities that cannot be
disposed of within seven days in the normal course of business at the price at  
which they are valued. Illiquid securities may include securities that are      
subject to restrictions on resale because they have not been registered under   
the Securities Act of 1933 (the "1933 Act"). Restricted securities may, in      
certain circumstances, be resold pursuant to Rule 144A under the 1933 Act, and  
thus may or may not constitute illiquid securities.                             

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   Each Fund may invest up to 15% of its net assets in securities that are
illiquid. Limitations on the resale of restricted securities may have an adverse
effect on their marketability, which may prevent a Fund from disposing of them  
promptly at reasonable prices. A Fund may have to bear the expense of           
registering such securities for resale, and the risk of substantial delays in   
effecting such registrations.                                                   

  RULE 144A SECURITIES. Rule 144A securities are securities which, while
privately placed, are eligible for purchase and resale pursuant to Rule 144A    
under the 1933 Act. This Rule permits certain qualified institutional buyers,   
such as the Funds, to trade in privately placed securities even though such     
securities are not registered under the 1933 Act. AIM, under the supervision of 
the Board, will consider whether securities purchased under Rule 144A are       
illiquid and thus subject to the Funds' restriction on investment in illiquid   
securities. Determination of whether a Rule 144A security is liquid or not is a 
question of fact. In making this determination AIM will consider the trading    
markets for the specific security taking into account the unregistered nature of
a Rule 144A security. In addition, AIM could consider the (i) frequency of      
trades and quotes, (ii) number of dealers and potential purchasers, (iii) dealer
undertakings to make a market, and (iv) nature of the security and of market    
place trades (for example, the time needed to dispose of the security, the      
method of soliciting offers and the mechanics of transfer). AIM will also       
monitor the liquidity of Rule 144A securities and, if as a result of changed    
conditions, AIM determines that a Rule 144A security is no longer liquid, AIM   
will review a Fund's holdings of illiquid securities to determine what, if any, 
action is required to assure that such Fund complies with its restriction on    
investment in illiquid securities. Investing in Rule 144A securities could      
increase the amount of each Fund's investments in illiquid securities if        
qualified institutional buyers are unwilling to purchase such securities.       

 UNSEASONED ISSUERS. Investments in the equity securities of companies
having less than three years' continuous operations (including operations of any
predecessor) involve more risk than investments in the securities of more       
established companies because unseasoned issuers have only a brief operating    
history and may have more limited markets and financial resources. As a result, 
securities of unseasoned issuers tend to be more volatile than securities of    
more established companies.                                                     

Derivatives                                                                     

The Funds may each invest in forward currency contracts, futures    
contracts, options on securities, options on indices, options on currencies, and
options on futures contracts to attempt to hedge against the overall level of   
investment and currency risk normally associated with each Fund's investments.  
The Funds may also invest in equity-linked derivative products designed to      
replicate the composition and performance of particular indices. These          
instruments are often referred to as "derivatives," which may be defined as     
financial instruments whose performance is derived, at least in part, from the  
performance of another asset (such as a security, currency or an index of       
securities).                                                                    

   EQUITY-LINKED DERIVATIVES. Equity-Linked Derivatives are interests in a
securities portfolio designed to replicate the composition and performance of a 
particular index. Equity-Linked Derivatives are exchange traded. The performance
results of Equity-Linked Derivatives will not replicate exactly the performance 
of the pertinent index due to transaction and other expenses, including fees to 
service providers, borne by the Equity-Linked Derivatives. Examples of such     
products include S&P Depositary Receipts ("SPDRs"), World Equity Benchmark      
Series ("WEBs"), NASDAQ 100 tracking shares ("QQQs"), Dow Jones Industrial      
Average Instruments ("DIAMONDS") and Optimised Portfolios As Listed Securities  
("OPALS"). Investments in Equity-Linked Derivatives involve the same risks      
associated with a direct investment in the types of securities included in the  
indices such products are designed to track. There can be no assurance that the 
trading price of the Equity-Linked Derivatives will equal the underlying value  
of the basket of securities purchased to replicate a particular index or that   
such basket will replicate the index. Investments in Equity-Linked Derivatives  
may constitute investments in other investment companies and, therefore, a Fund 
may be subject to the same investment restrictions with Equity-Linked           
Derivatives as with other investment companies. See "Other Investment           
Companies."                                                                     

    PUT AND CALL OPTIONS. A call option gives the purchaser the right to buy
the underlying security, contract or foreign currency at the stated exercise    
price at any time prior to the expiration of the option (or                     

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on a specified date if the option is a European style option), regardless of the
market price or exchange rate of the security, contract or foreign currency, as 
the case may be at the time of exercise. If the purchaser exercises the call    
option, the writer of a call option is obligated to sell the underlying         
security, contract or foreign currency. A put option gives the purchaser the    
right to sell the underlying security, contract or foreign currency at the      
stated exercise price at any time prior to the expiration date of the option (or
on a specified date if the option is a European style option), regardless of the
market price or exchange rate of the security, contract or foreign currency, as 
the case may be at the time of exercise. If the purchaser exercises the put     
option, the writer of a put option is obligated to buy the underlying security, 
contract or foreign currency. The premium paid to the writer is consideration   
for undertaking the obligations under the option contract. Until an option      
expires or is offset, the option is said to be "open." When an option expires or
is offset, the option is said to be "closed."                                   

     A Fund will not write (sell) options if, immediately after such sale, the
aggregate value of securities or obligations underlying the outstanding options 
exceeds 20% of the Fund's total assets. A Fund will not purchase options if, at 
the time of the investment, the aggregate premiums paid for the options will    
exceed 5% of the Fund's total assets.                                           

  Pursuant to federal securities rules and regulations, if a Fund writes
options it may be required to set aside assets to reduce the risks associated   
with writing those options. This process is described in more detail below in   
the section "Cover."                                                            

   Writing Options. A Fund may write put and call options in an attempt to
realize, through the receipt of premiums, a greater current return than would be
realized on the underlying security, contract, or foreign currency alone. A Fund
may only write a call option on a security if it owns an equal amount of such   
securities or securities convertible into, or exchangeable, without payment or  
any further consideration, for securities of the same issue as, and equal in    
amount to, the securities subject to the call option. In return for the premium 
received for writing a call option, the Fund foregoes the opportunity for profit
from a price increase in the underlying security, contract, or foreign currency 
above the exercise price so long as the option remains open, but retains the    
risk of loss should the price of the security, contract, or foreign currency    
decline.                                                                        

      A Fund may write a put option without owning the underlying security if it
covers the option as described below in the section "Cover." A Fund may only    
write a put option on a security as part of an investment strategy, and not for 
speculative purposes. In return for the premium received for writing a put      
option, the Fund assumes the risk that the price of the underlying security,    
contract, or foreign currency will decline below the exercise price, in which   
case the put would be exercised and the Fund would suffer a loss.               

   If an option that a Fund has written expires, it will realize a gain in
the amount of the premium; however, such gain may be offset by a decline in the 
market value of the underlying security, contract or currency during the option 
period. If the call option is exercised, a Fund will realize a gain or loss from
the sale of the underlying security, contract or currency, which will be        
increased or offset by the premium received. A Fund would write a put option at 
an exercise price that, reduced by the premium received on the option, reflects 
the price it is willing to pay for the underlying security, contract or         
currency. The obligation imposed upon the writer of an option is terminated upon
the expiration of the option, or such earlier time at which a Fund effects a    
closing purchase transaction by purchasing an option (put or call as the case   
may be) identical to that previously sold.                                      

     Writing call options can serve as a limited hedge because declines in the
value of the hedged investment would be offset to the extent of the premium     
received for writing the option. Closing transactions may be effected in order  
to realize a profit on an outstanding call option, to prevent an underlying     
security, contract or currency from being called or to permit the sale of the   
underlying security, contract or currency. Furthermore, effecting a closing     
transaction will permit a Fund to write another call option on the underlying   
security, contract or currency with either a different exercise price or        
expiration date, or both.                                                       

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    Purchasing Options. A Fund may purchase a call option for the purpose of
acquiring the underlying security, contract or currency for its portfolio. The  
Fund is not required to own the underlying security in order to purchase a call 
option, and may only cover this transaction with cash, liquid assets and/or     
short-term debt securities. Utilized in this fashion, the purchase of call      
options would enable a Fund to acquire the security, contract or currency at the
exercise price of the call option plus the premium paid. So long as it holds    
such a call option, rather than the underlying security or currency itself, the 
Fund is partially protected from any unexpected increase in the market price of 
the underlying security, contract or currency. If the market price does not     
exceed the exercise price, the Fund could purchase the security on the open     
market and could allow the call option to expire, incurring a loss only to the  
extent of the premium paid for the option. Each of the Funds may also purchase  
call options on underlying securities, contracts or currencies against which it 
has written other call options. For example, where a Fund has written a call    
option on an underlying security, rather than entering a closing transaction of 
the written option, it may purchase a call option with a different exercise     
strike and/or expiration date that would eliminate some or all of the risk      
associated with the written call. Used in combinations, these strategies are    
commonly referred to as "call spreads."                                         

     A Fund may only purchase a put option on an underlying security, contract
or currency ("protective put") owned by the Fund in order to protect against an 
anticipated decline in the value of the security, contract or currency. Such    
hedge protection is provided only during the life of the put option. The premium
paid for the put option and any transaction costs would reduce any profit       
realized when the security, contract or currency is delivered upon the exercise 
of the put option. Conversely, if the underlying security, contract or currency 
does not decline in value, the option may expire worthless and the premium paid 
for the protective put would be lost. A Fund may also purchase put options on   
underlying securities, contracts or currencies against which it has written     
other put options. For example, where a Fund has written a put option on an     
underlying security, rather than entering a closing transaction of the written  
option, it may purchase a put option with a different exercise price and/or     
expiration date that would eliminate some or all of the risk associated with the
written put. Used in combinations, these strategies are commonly referred to as 
"put spreads." Likewise, a Fund may write call options on underlying securities,
contracts or currencies against which it has purchased protective put options.  
This strategy is commonly referred to as a "collar."                            

    Over-The-Counter Options. Options may be either listed on an exchange or
traded in over-the-counter ("OTC") markets. Listed options are third-party      
contracts (i.e., performance of the obligations of the purchaser and seller is  
guaranteed by the exchange or clearing corporation) and have standardized strike
prices and expiration dates. OTC options are two-party contracts with negotiated
strike prices and expiration dates. A Fund will not purchase an OTC option      
unless it believes that daily valuations for such options are readily           
obtainable. OTC options differ from exchange-traded options in that OTC options 
are transacted with dealers directly and not through a clearing corporation     
(which guarantees performance). Consequently, there is a risk of non-performance
by the dealer. Since no exchange is involved, OTC options are valued on the     
basis of an average of the last bid prices obtained from dealers, unless a      
quotation from only one dealer is available, in which case only that dealer's   
price will be used. In the case of OTC options, there can be no assurance that a
liquid secondary market will exist for any particular option at any specific    
time. Because purchased OTC options in certain cases may be difficult to dispose
of in a timely manner, the Fund may be required to treat some or all of these   
options (i.e., the market value) as illiquid securities. Although a Fund will   
enter into OTC options only with dealers that are expected to be capable of     
entering into closing transactions with it, there is no assurance that the Fund 
will in fact be able to close out an OTC option position at a favorable price   
prior to expiration. In the event of insolvency of the dealer, a Fund might be  
unable to close out an OTC option position at any time prior to its expiration. 

Index Options. Index options (or options on securities indices) are 
similar in many respects to options on securities, except that an index option  
gives the holder the right to receive, upon exercise, cash instead of           
securities, if the closing level of the securities index upon which the option  
is based is greater than, in the case of a call, or less than, in the case of a 
put, the exercise price of the option. The amount of cash is equal to the       
difference between the closing price of the index and the exercise price of     

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the call or put times a specified multiple (the "multiplier"), which determines 
the total dollar value for each point of such difference.                       

   The risks of investment in index options may be greater than options on
securities. Because index options are settled in cash, when a Fund writes a call
on an index it cannot provide in advance for its potential settlement           
obligations by acquiring and holding the underlying securities. A Fund can      
offset some of the risk of writing a call index option position by holding a    
diversified portfolio of securities similar to those on which the underlying    
index is based. However, the Fund cannot, as a practical matter, acquire and    
hold a portfolio containing exactly the same securities as underlie the index   
and, as a result, bears a risk that the value of the securities held will not be
perfectly correlated with the value of the index.                               

  Pursuant to federal securities rules and regulations, if a Fund writes
index options it may be required to set aside assets to reduce the risks        
associated with writing those options. This process is described in more detail 
below in the section "Cover."                                                   

STRADDLES. The Funds, for hedging purposes, may write straddles     
(combinations of put and call options on the same underlying security) to adjust
the risk and return characteristics of the Fund's overall position. A possible  
combined position would involve writing a covered call option at one strike     
price and buying a call option at a lower price, in order to reduce the risk of 
the written covered call option in the event of a substantial price increase.   
Because combined options positions involve multiple trades, they result in      
higher transaction costs and may be more difficult to open and close out.       

      WARRANTS. Warrants are, in effect, longer-term call options. They give the
holder the right to purchase a given number of shares of a particular company at
specified prices within certain periods of time. The purchaser of a warrant     
expects that the market price of the security will exceed the purchase price of 
the warrant plus the exercise price of the warrant, thus giving him a profit.   
Since the market price may never exceed the exercise price before the expiration
date of the warrant, the purchaser of the warrant risks the loss of the entire  
purchase price of the warrant. Warrants generally trade in the open market and  
may be sold rather than exercised. Warrants are sometimes sold in unit form with
other securities of an issuer. Units of warrants and common stock may be        
employed in financing young, unseasoned companies. The purchase price of a      
warrant varies with the exercise price of the warrant, the current market value 
of the underlying security, the life of the warrant and various other investment
factors.                                                                        

     FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. A Futures Contract is
a two party agreement to buy or sell a specified amount of a specified security 
or currency (or delivery of a cash settlement price, in the case of an index    
future) for a specified price at a designated date, time and place              
(collectively, "Futures Contracts"). A stock index Futures Contract provides for
the delivery, at a designated date, time and place, of an amount of cash equal  
to a specified dollar amount times the difference between the stock index value 
at the close of trading on the contract and the price agreed upon in the Futures
Contract; no physical delivery of stocks comprising the index is made. Brokerage
fees are incurred when a Futures Contract is bought or sold, and margin deposits
must be maintained at all times when a Futures Contract is outstanding.         

    A Fund will enter into Futures Contracts for hedging purposes only; that
is, Futures Contracts will be sold to protect against a decline in the price of 
securities or currencies that the Fund owns, or Futures Contracts will be       
purchased to protect the Fund against an increase in the price of securities or 
currencies it has committed to purchase or expects to purchase. A Fund's hedging
may include sales of Futures Contracts as an offset against the effect of       
expected increases in interest rates, and decreases in currency exchange rates  
and stock prices, and purchases of Futures Contracts as an offset against the   
effect of expected declines in interest rates, and increases in currency        
exchange rates or stock prices.                                                 

 The Funds currently may not invest in any security (including futures
contracts or options thereon) that is secured by physical commodities.          

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    The Funds will only enter into Futures Contracts that are traded (either
domestically or internationally) on futures exchanges and are standardized as to
maturity date and underlying financial instrument. Futures exchanges and trading
thereon in the United States are regulated under the Commodity Exchange Act and 
by the Commodity Futures Trading Commission ("CFTC"). Foreign futures exchanges 
and trading thereon are not regulated by the CFTC and are not subject to the    
same regulatory controls. For a further discussion of the risks associated with 
investments in foreign securities, see "Foreign Investments" in this Statement  
of Additional Information.                                                      

Closing out an open Futures Contract is effected by entering into an
offsetting Futures Contract for the same aggregate amount of the identical      
financial instrument or currency and the same delivery date. There can be no    
assurance, however, that a Fund will be able to enter into an offsetting        
transaction with respect to a particular Futures Contract at a particular time. 
If a Fund is not able to enter into an offsetting transaction, it will continue 
to be required to maintain the margin deposits on the Futures Contract.         

  "Margin" with respect to Futures Contracts is the amount of funds that
must be deposited by a Fund in order to initiate Futures Contracts trading and  
maintain its open positions in Futures Contracts. A margin deposit made when the
Futures Contract is entered ("initial margin") is intended to ensure the Fund's 
performance under the Futures Contract. The margin required for a particular    
Futures Contract is set by the exchange on which the Futures Contract is traded 
and may be significantly modified from time to time by the exchange during the  
term of the Futures Contract.                                                   

   Subsequent payments, called "variation margin," from and to the futures
commission merchant through which a Fund entered into the Futures Contract will 
be made on a daily basis as the price of the underlying security, currency or   
index fluctuates making the Futures Contract more or less valuable, a process   
known as marking-to-market.                                                     

   If a Fund were unable to liquidate a Futures Contract or an option on a
Futures Contract position due to the absence of a liquid secondary market or the
imposition of price limits, it could incur substantial losses. The Fund would   
continue to be subject to market risk with respect to the position. In addition,
except in the case of purchased options, the Fund would continue to be required 
to make daily variation margin payments and might be required to maintain the   
position being hedged by the Futures Contract or option or to maintain cash or  
securities in a segregated account.                                             

     Options on Futures Contracts. Options on Futures Contracts are similar to
options on securities or currencies except that options on Futures Contracts    
give the purchaser the right, in return for the premium paid, to assume a       
position in a Futures Contract (a long position if the option is a call and a   
short position if the option is a put) at a specified exercise price at any time
during the period of the option. Upon exercise of the option, the delivery of   
the Futures Contract position by the writer of the option to the holder of the  
option will be accompanied by delivery of the accumulated balance in the        
writer's Futures Contract margin account. The Funds currently may not invest in 
any security (including futures contracts or options thereon) that is secured by
physical commodities.                                                           

    Limitations on Futures Contracts and Options on Futures Contracts and on
Certain Options on Currencies. To the extent that a Fund enters into Futures    
Contracts, options on Futures Contracts and options on foreign currencies traded
on a CFTC-regulated exchange, in each case other than for bona fide hedging     
purposes (as defined by the CFTC), the aggregate initial margin and premiums    
required to establish those positions (excluding the amount by which options are
"in-the-money") will not exceed 5% of the total assets of the Fund, after taking
into account unrealized profits and unrealized losses on any contracts it has   
entered into. This guideline may be modified by the Board, without a shareholder
vote. This limitation does not limit the percentage of the Fund's assets at risk
to 5%.                                                                          

 Pursuant to federal securities rules and regulations, a Fund's use of
Futures Contracts and options on Futures Contracts may require that Fund to set 
aside assets to reduce the risks associated with using Futures Contracts and    
options on Futures Contracts. This process is described in more detail below in 
the section "Cover."                                                            

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     FORWARD CURRENCY CONTRACTS. A forward currency contract is an obligation,
usually arranged with a commercial bank or other currency dealer, to purchase or
sell a currency against another currency at a future date and price as agreed   
upon by the parties. A Fund either may accept or make delivery of the currency  
at the maturity of the forward currency contract. A Fund may also, if its contra
party agrees prior to maturity, enter into a closing transaction involving the  
purchase or sale of an offsetting contract. Forward currency contracts are      
traded over-the-counter, and not on organized commodities or securities         
exchanges. As a result, it may be more difficult to value such contracts, and it
may be difficult to enter into closing transactions.                            

Each of the Funds may engage in forward currency transactions in    
anticipation of, or to protect itself against, fluctuations in exchange rates. A
Fund may enter into forward currency contracts with respect to a specific       
purchase or sale of a security, or with respect to its portfolio positions      
generally. When a Fund purchases a security denominated in a foreign currency   
for settlement in the near future, it may immediately purchase in the forward   
market the currency needed to pay for and settle the purchase. By entering into 
a forward currency contract with respect to the specific purchase or sale of a  
security denominated in a foreign currency, the Fund can secure an exchange rate
between the trade and settlement dates for that purchase or sale transaction.   
This practice is sometimes referred to as "transaction hedging." Position       
hedging is the purchase or sale of foreign currency with respect to portfolio   
security positions denominated or quoted in a foreign currency.                 

    The cost to a Fund of engaging in forward currency contracts varies with
factors such as the currencies involved, the length of the contract period and  
the market conditions then prevailing. Because forward currency contracts are   
usually entered into on a principal basis, no fees or commissions are involved. 
The use of forward currency contracts does not eliminate fluctuations in the    
prices of the underlying securities a Fund owns or intends to acquire, but it   
does establish a rate of exchange in advance. In addition, while forward        
currency contract sales limit the risk of loss due to a decline in the value of 
the hedged currencies, they also limit any potential gain that might result     
should the value of the currencies increase.                                    

 Pursuant to federal securities rules and regulations, a Fund's use of
forward currency contracts may require that Fund to set aside assets to reduce  
the risks associated with using forward currency contracts. This process is     
described in more detail below in the section "Cover."                          

   COVER. Transactions using forward currency contracts, futures contracts
and options (other than options purchased by a Fund) expose a Fund to an        
obligation to another party. A Fund will not enter into any such transactions   
unless, in addition to complying with all the restrictions noted in the         
disclosure above, it owns either (1) an offsetting ("covered") position in      
securities, currencies, or other options, forward currency contracts or futures 
contracts or (2) cash, liquid assets and/or short-term debt securities with a   
value sufficient at all times to cover its potential obligations not covered as 
provided in (1) above. Each Fund will comply with SEC guidelines regarding cover
for these instruments and, if the guidelines so require, set aside cash or      
liquid securities. To the extent that a futures contract, forward currency      
contract or option is deemed to be illiquid, the assets used to "cover" the     
Fund's obligation will also be treated as illiquid for purposes of determining  
the Fund's maximum allowable investment in illiquid securities.                 

    Even though options purchased by the Funds do not expose the Funds to an
obligation to another party, but rather provide the Funds with a right to       
exercise, the Funds intend to "cover" the cost of any such exercise. To the     
extent that a purchased option is deemed illiquid, the Fund will treat the      
market value of the option (i.e., the amount at risk to the Fund) as illiquid,  
but will not treat the assets used as cover on such transactions as illiquid.   

Assets used as cover cannot be sold while the position in the       
corresponding forward currency contract, futures contract or option is open,    
unless they are replaced with other appropriate assets. If a large portion of a 
Fund's assets is used for cover or otherwise set aside, it could affect         
portfolio management or the Fund's ability to meet redemption requests or other 
current obligations.                                                            

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     GENERAL RISKS OF OPTIONS, FUTURES AND CURRENCY STRATEGIES. The use by the
Funds of options, futures contracts and forward currency contracts involves     
special considerations and risks, as described below. Risks pertaining to       
particular strategies are described in the sections that follow.                

    (1) Successful use of hedging transactions depends upon AIM's ability to
correctly predict the direction of changes in the value of the applicable       
markets and securities, contracts and/or currencies. While AIM is experienced in
the use of these instruments, there can be no assurance that any particular     
hedging strategy will succeed.                                                  

     (2) There might be imperfect correlation, or even no correlation, between
the price movements of an instrument (such as an option contract) and the price 
movements of the investments being hedged. For example, if a "protective put" is
used to hedge a potential decline in a security and the security does decline in
price, the put option's increased value may not completely offset the loss in   
the underlying security. Such a lack of correlation might occur due to factors  
unrelated to the value of the investments being hedged, such as changing        
interest rates, market liquidity, and speculative or other pressures on the     
markets in which the hedging instrument is traded.                              

    (3) Hedging strategies, if successful, can reduce risk of loss by wholly
or partially offsetting the negative effect of unfavorable price movements in   
the investments being hedged. However, hedging strategies can also reduce       
opportunity for gain by offsetting the positive effect of favorable price       
movements in the hedged investments.                                            

   (4) There is no assurance that a liquid secondary market will exist for
any particular option, futures contract or option thereon or, forward currency  
contract at any particular time.                                                

  (5) As described above, a Fund might be required to maintain assets as
"cover," maintain segregated accounts or make margin payments when it takes     
positions in instruments involving obligations to third parties. If a Fund were 
unable to close out its positions in such instruments, it might be required to  
continue to maintain such assets or accounts or make such payments until the    
position expired or matured. The requirements might impair a Fund's ability to  
sell a portfolio security or make an investment at a time when it would         
otherwise be favorable to do so, or require that the Fund sell a portfolio      
security at a disadvantageous time.                                             

    (6) There is no assurance that a Fund will use hedging transactions. For
example, if a Fund determines that the cost of hedging will exceed the potential
benefit to the Fund, the Fund will not enter into such transaction.             

FUND POLICIES                                                                   

      FUNDAMENTAL RESTRICTIONS. Each Fund is subject to the following investment
restrictions, which may be changed only by a vote of such Fund's outstanding    
shares, except that AIM European Small Company Fund and AIM International Small 
Company Fund are not subject to restriction (1). Fundamental restrictions may be
changed only by a vote of the lesser of (i) 67% or more of the Fund's shares    
present at a meeting if the holders of more than 50% of the outstanding shares  
are present in person or represented by proxy, or (ii) more than 50% of the     
Fund's outstanding shares. Any investment restriction that involves a maximum or
minimum percentage of securities or assets (other than with respect to          
borrowing) shall not be considered to be violated unless an excess over or a    
deficiency under the percentage occurs immediately after, and is caused by, an  
acquisition or disposition of securities or utilization of assets by the Fund.  

   (1) The Fund is a "diversified company" as defined in the 1940 Act. The
Fund will not purchase the securities of any issuer if, as a result, the Fund   
would fail to be a diversified company within the meaning of the 1940 Act, and  
the rules and regulations promulgated thereunder, as such statute, rules and    
regulations are amended from time to time or are interpreted from time to time  
by the SEC staff (collectively, the "1940 Act Laws and Interpretations") or     
except to the extent that the Fund may be permitted to do so by exemptive order 
or similar relief (collectively, with the 1940 Act Laws and                     

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Interpretations, the "1940 Act Laws, Interpretations and Exemptions"). In       
complying with this restriction, however, the Fund may purchase securities of   
other investment companies to the extent permitted by the 1940 Act Laws,        
Interpretations and Exemptions.                                                 

   (2) The Fund may not borrow money or issue senior securities, except as
permitted by the 1940 Act Laws, Interpretations and Exemptions.                 

 (3) The Fund may not underwrite the securities of other issuers. This
restriction does not prevent the Fund from engaging in transactions involving   
the acquisition, disposition or resale of its portfolio securities, regardless  
of whether the Fund may be considered to be an underwriter under the 1933 Act.  

(4) The Fund will not make investments that will result in the      
concentration (as that term may be defined or interpreted by the 1940 Act Laws, 
Interpretations and Exemptions) of its investments in the securities of issuers 
primarily engaged in the same industry. This restriction does not limit the     
Fund's investments in (i) obligations issued or guaranteed by the U.S.          
Government, its agencies or instrumentalities, or (ii) tax-exempt obligations   
issued by governments or political subdivisions of governments. In complying    
with this restriction, the Fund will not consider a bank-issued guaranty or     
financial guaranty insurance as a separate security.                            

(5) The Fund may not purchase real estate or sell real estate unless
acquired as a result of ownership of securities or other instruments. This      
restriction does not prevent the Fund from investing in issuers that invest,    
deal, or otherwise engage in transactions in real estate or interests therein,  
or investing in securities that are secured by real estate or interests therein.

(6) The Fund may not purchase physical commodities or sell physical 
commodities unless acquired as a result of ownership of securities or other     
instruments. This restriction does not prevent the Fund from engaging in        
transactions involving futures contracts and options thereon or investing in    
securities that are secured by physical commodities.                            

      (7) The Fund may not make personal loans or loans of its assets to persons
who control or are under common control with the Fund, except to the extent     
permitted by 1940 Act Laws, Interpretations and Exemptions. This restriction    
does not prevent the Fund from, among other things, purchasing debt obligations,
entering into repurchase agreements, loaning its assets to broker-dealers or    
institutional investors, or investing in loans, including assignments and       
participation interests.                                                        

     (8) The Fund may, notwithstanding any other fundamental investment policy
or limitation, invest all of its assets in the securities of a single open-end  
management investment company with substantially the same fundamental investment
objectives, policies and restrictions as the Fund.                              

      The investment restrictions set forth above provide each of the Funds with
the ability to operate under new interpretations of the 1940 Act or pursuant to 
exemptive relief from the SEC without receiving prior shareholder approval of   
the change. Even though each of the Funds has this flexibility, the Board has   
adopted non-fundamental restrictions for each of the Funds relating to certain  
of these restrictions which AIM must follow in managing the Funds. Any changes  
to these non-fundamental restrictions, which are set forth below, require the   
approval of the Board.                                                          

  NON-FUNDAMENTAL RESTRICTIONS. The following non-fundamental investment
restrictions apply to each of the Funds, except AIM European Small Company Fund 
and AIM International Small Company Fund are not subject to restriction (1).    
They may be changed for any Fund without approval of that Fund's voting         
securities.                                                                     

(1) In complying with the fundamental restriction regarding issuer  
diversification, the Fund will not, with respect to 75% of its total assets,    
purchase the securities of any issuer (other than securities issued or          
guaranteed by the U.S. Government or any of its agencies or instrumentalities), 
if, as a result, (i) more than 5% of the Fund's total assets would be invested  
in the securities of that issuer, or (ii) the                                   

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Fund would hold more than 10% of the outstanding voting securities of that      
issuer. The Fund may (i) purchase securities of other investment companies as   
permitted by Section 12(d)(1) of the 1940 Act and (ii) invest its assets in     
securities of other money market funds and lend money to other AIM Funds,       
subject to the terms and conditions of any exemptive orders issued by the SEC.  

 (2) In complying with the fundamental restriction regarding borrowing
money and issuing senior securities, the Fund may borrow money in an amount not 
exceeding 33 1/3% of its total assets (including the amount borrowed) less      
liabilities (other than borrowings). The Fund may borrow from banks,            
broker-dealers or an AIM Fund. The Fund may not borrow for leveraging, but may  
borrow for temporary or emergency purposes, in anticipation of or in response to
adverse market conditions, or for cash management purposes. The Fund may not    
purchase additional securities when any borrowings from banks exceed 5% of the  
Fund's total assets or when any borrowings from an AIM Fund are outstanding.    

(3) In complying with the fundamental restriction regarding industry
concentration, the Fund may invest up to 25% of its total assets in the         
securities of issuers whose principal business activities are in the same       
industry.                                                                       

   (4) In complying with the fundamental restriction with regard to making
loans, the Fund may lend up to 33 1/3% of its total assets and may lend money to
an AIM Fund, on such terms and conditions as the SEC may require in an exemptive
order.                                                                          

    (5) Notwithstanding the fundamental restriction with regard to investing
all assets in an open-end fund, the Fund may not invest all of its assets in the
securities of a single open-end management investment company with the same     
fundamental investment objectives, policies and restrictions as the Fund.       

      (6) Notwithstanding the fundamental restriction with regard to engaging in
transactions involving futures contracts and options thereon or investing in    
securities that are secured by physical commodities, the Fund currently may not 
invest in any security (including futures contracts or options thereon) that is 
secured by physical commodities.                                                

(7) The Fund may not acquire any securities of registered open-end  
investment companies or registered unit investment trusts in reliance on        
Sections 12(d)(1)(F) or 12(d)(1)(G) of the 1940 Act.                            

ADDITIONAL NON-FUNDAMENTAL POLICIES. As non-fundamental policies:   

    (8) AIM European Small Company Fund normally invests at least 80% of its
assets in securities of European small companies. For purposes of the foregoing 
sentence, "assets" means net assets, plus the amount of any borrowings for      
investment purposes. The Fund will provide written notice to its shareholders   
prior to any change to this policy, as required by the 1940 Act Laws,           
Interpretations and Exemptions.                                                 

     (9) AIM Small Cap Equity Fund normally invests at least 80% of its assets
in equity securities, including convertible securities, of small-capitalization 
companies. For purposes of the foregoing sentence, "assets" means net assets,   
plus the amount of any borrowings for investment purposes. The Fund will provide
written notice to its shareholders prior to any change to this policy, as       
required by the 1940 Act Laws, Interpretations and Exemptions.                  

  (10) AIM Mid Cap Basic Value Fund normally invests at least 80% of its
assets in securities of mid-capitalization companies that offer potential for   
capital growth. For purposes of the foregoing sentence, "assets" means net      
assets, plus the amount of any borrowings for investment purposes. The Fund will
provide written notice to its shareholders prior to any change to this policy,  
as required by the 1940 Act Laws, Interpretations and Exemptions.               

      (11) AIM Select Equity Fund normally invests at least 80% of its assets in
equity securities, including convertible securities, with prospects for         
above-average market returns, without regard to                                 

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market capitalization. For purposes of the foregoing sentence, "assets" means   
net assets, plus the amount of any borrowings for investment purposes. The Fund 
will provide written notice to its shareholders prior to any change to this     
policy, as required by the 1940 Act Laws, Interpretations and Exemptions.       

    (12) AIM Premier Equity Fund normally invests at least 80% of its assets
in equity securities, including convertible securities. For purposes of the     
foregoing sentence, "assets" means net assets, plus the amount of any borrowings
for investment purposes. The Fund will provide written notice to its            
shareholders prior to any change to this policy, as required by the 1940 Act    
Laws, Interpretations and Exemptions.                                           

      (13) AIM International Small Company Fund normally invests at least 80% of
its assets in securities of small international companies. For purposes of the  
foregoing sentence, "assets" means net assets, plus the amount of any borrowings
for investment purposes. The Fund will provide written notice to its            
shareholders prior to any change to this policy, as required by the 1940 Act    
Laws, Interpretations and Exemptions.                                           

TEMPORARY DEFENSIVE POSITIONS                                                   

    In anticipation of or in response to adverse market or other conditions,
or atypical circumstances such as unusually large cash inflows or redemptions,  
the Funds may temporarily hold all or a portion of their assets in cash, cash   
equivalents or high-quality debt instruments. Each of the funds may also invest 
up to 25% of its total assets in Affiliated Money Market Funds for these        
purposes.                                                                       

PORTFOLIO TURNOVER                                                              

      AIM Balanced Fund's portfolio turnover rate decreased from 114% in 2003 to
39% in 2004. This variation can be attributed to the realignment of the Fund's  
portfolio to fit the investment process of the current management team that     
assumed management of the Fund in December of 2003.                             

    AIM European Small Company Fund's portfolio turnover rate decreased from
130% in 2003 to 71% in 2004. This variation can be attributed to the Fund's high
fluctuation in flows during the 2003 period. Since then flows have steadied and 
the fund is now at its normal level.                                            

  AIM Global Value Fund's portfolio turnover rate decreased from 372% in
2003 to 129% in 2004. This variation can be attributed to the realignment of the
Fund's portfolio to fit the investment process of the current management team of
the Fund in early 2002. This would have increased the turnover for 2003; since  
then the fund's portfolio turnover level has returned to its normal level.      

   AIM Premier Equity Fund's portfolio turnover rate increased from 37% in
2003 to 86% in 2004. This variation can be attributed to the realignment of the 
Fund's portfolio to fit the investment process of the current management team   
that assumed management of the Fund in April of 2004.                           

  AIM Select Equity Fund's portfolio turnover rate decreased from 69% in
2003 to 38% in 2004. This variation can be attributed to the realignment of the 
Fund's portfolio in 2003 by the Fund's current management team.                 

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 MANAGEMENT OF THE TRUST

BOARD OF TRUSTEES                                                               

   The overall management of the business and affairs of the Funds and the
Trust is vested in the Board. The Board approves all significant agreements     
between the Trust, on behalf of one or more of the Funds, and persons or        
companies furnishing services to the Funds. The day-to-day operations of each   
Fund are delegated to the officers of the Trust and to AIM, subject always to   
the objective(s), restrictions and policies of the applicable Fund and to the   
general supervision of the Board. Certain trustees and officers of the Trust are
affiliated with AIM and AIM Management, the parent corporation of AIM. All of   
the Trust's executive officers hold similar offices with some or all of the     
other AIM Funds.                                                                

MANAGEMENT INFORMATION                                                          

      The trustees and officers of the Trust, their principal occupations during
at least the last five years and certain other information concerning them are  
set forth in Appendix B.                                                        

The standing committees of the Board are the Audit Committee, the   
Compliance Committee, the Governance Committee, the Investments Committee, the  
Valuation Committee and the Special Market Timing Litigation Committee.         

The members of the Audit Committee are Bob R. Baker, James T. Bunch,
Edward K. Dunn, Jr. (Chair), Lewis F. Pennock, Dr. Larry Soll, Dr. Prema        
Mathai-Davis and Ruth H. Quigley (Vice Chair). The Audit Committee's primary    
purposes are to: (i) assist the Board in oversight of the independent auditor's 
qualifications, independence and performance; (ii) appoint independent auditors 
for the Funds; (iii) to the extent required by Section 10A(h) and (i) of the    
Exchange Act, to pre-approve all permissible non-audit services that are        
provided to Funds by their independent auditors; (iv) pre-approve, in accordance
with Rule 2-01(c)(7)(ii) of Regulation S-X, certain non-audit services provided 
by the Funds' independent auditors to the Funds' investment adviser and certain 
other affiliated entities; (v) to oversee the financial reporting process for   
the Funds; (vi) the extent required by Regulation 14A under the Exchange Act, to
prepare an audit committee report for inclusion in any proxy statement issued by
a Fund; (vii) assist the Board's oversight of the performance of the Funds'     
internal audit function to the extent an internal audit function exists; (viii) 
assist the Board's oversight of the integrity of the Funds' financial           
statements; and (ix) assist the Board's oversight of the Funds' compliance with 
legal and regulatory requirements. During the fiscal year ended December 31,    
2004, the Audit Committee held eight meetings.                                  

 The members of the Compliance Committee are Frank S. Bayley, Bruce L.
Crockett (Chair), Albert R. Dowden (Vice Chair) and Mr. Dunn. The Compliance    
Committee is responsible for: (i)recommending to the Board and the independent  
trustees the appointment, compensation and removal of the Funds' Chief          
Compliance Officer; (ii) recommending to the independent trustees the           
appointment, compensation and removal of the Funds' Senior Officer appointed    
pursuant to the terms of the Assurances of Discontinuance entered into by the   
New York Attorney General, AIM and INVESCO Funds Group, Inc. ("IFG"); (iii)     
recommending to the independent trustees the appointment and removal of AIM's   
independent Compliance Consultant (the "Compliance Consultant") and reviewing   
the report prepared by the Compliance Consultant upon its compliance review of  
AIM (the "Report") and any objections made by AIM with respect to the Report;   
(iv) reviewing any report prepared by a third party who is not an interested    
person of AIM, upon the conclusion by such third party of a compliance review of
AIM; (v) reviewing all reports on compliance matters from the Funds' Chief      
Compliance Officer, (vi) reviewing all recommendations made by the Senior       
Officer regarding AIM's compliance procedures, (vii) reviewing all reports from 
the Senior Officer of any violations of state and federal securities laws, the  
Colorado Consumer Protection Act, or breaches of AIM's fiduciary duties to Fund 
shareholders and of AIM's Code of Ethics; (viii) overseeing all of the          
compliance policies and procedures of the Funds and their service providers     
adopted pursuant to Rule 38a-1 of the 1940 Act; (ix) from time to time,         
reviewing certain matters related to redemption fee waivers and recommending to 
the Board whether or not to approve such matters; (x) receiving and reviewing   
quarterly reports on the activities of AIM's Internal Compliance Controls       
Committee; (xi) reviewing all reports made by AIM's Chief Compliance Officer;   
(xii) reviewing                                                                 

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and recommending to the independent trustees whether to approve procedures to   
investigate matters brought to the attention of AIM's ombudsman; (xiii) risk    
management oversight with respect to the Funds and, in connection therewith,    
receiving and overseeing risk management reports from AMVESCAP PLC that are     
applicable to the Funds or their service providers; and (xiv) overseeing        
potential conflicts of interest that are reported to the Compliance Committee by
the AIM, the Chief Compliance Officer, the Senior Officer and/or the Compliance 
Consultant. During the fiscal year ended December 31, 2004, the Compliance      
Committee held two meetings.                                                    

 The members of the Governance Committee are Messrs. Bayley, Crockett,
Dowden (Chair), Jack M. Fields (Vice Chair) and Gerald J. Lewis. The Governance 
Committee is responsible for: (i) nominating persons who will qualify as        
independent trustees for (a) election as trustees in connection with meetings of
shareholders of the Funds that are called to vote on the election of trustees,  
(b) appointment by the Board as trustees in connection with filling vacancies   
that arise in between meetings of shareholders; (ii) reviewing the size of the  
Board, and recommending to the Board whether the size of the Board shall be     
increased or decreased; (iii) nominating the Chair of the Board; (iv) monitoring
the composition of the Board and each committee of the Board, and monitoring the
qualifications of all trustees; (v) recommending persons to serve as members of 
each committee of the Board (other than the Compliance Committee), as well as   
persons who shall serve as the chair and vice chair of each such committee; (vi)
reviewing and recommending the amount of compensation payable to the independent
trustees; (vii) overseeing the selection of independent legal counsel to the    
independent trustees; (viii) reviewing and approving the compensation paid to   
independent legal counsel and other advisers, if any, to the Audit Committee of 
the Board; (ix) reviewing and approving the compensation paid to counsel and    
other advisers, if any, to the Audit Committee of the Board; and (x) reviewing  
as they deem appropriate administrative and/or logistical matters pertaining to 
the operations of the Board.                                                    

The Governance Committee will consider nominees recommended by a    
shareholder to serve as trustees, provided: (i) that such person is a           
shareholder of record at the time he or she submits such names and is entitled  
to vote at the meeting of shareholders at which trustees will be elected; and   
(ii) that the Governance Committee or the Board, as applicable, shall make the  
final determination of persons to be nominated. During the fiscal year ended    
December 31, 2004, the Governance Committee held seven meetings.                

Notice procedures set forth in the Trust's bylaws require that any  
shareholder of a Fund desiring to nominate a trustee for election at a          
shareholder meeting must submit to the Trust's Secretary the nomination in      
writing not later than the close of business on the later of the 90th day prior 
to such shareholder meeting or the tenth day following the day on which public  
announcement is made of the shareholder meeting and not earlier than the close  
of business on the 120th day prior to the shareholder meeting.                  

    The members of the Investments Committee are Messrs. Baker (Vice Chair),
Bayley (Chair), Bunch, Crockett, Dowden, Dunn, Fields, Lewis, Pennock and Soll, 
and Carl Frischling, and Dr. Mathai-Davis (Vice Chair) and Miss Quigley (Vice   
Chair). The Investments Committee's primary purposes are to:  (i) assist the    
Board in its oversight of the investment management services provided by AIM as 
well as any sub-advisers; and (ii) review and approve all proposed advisory,    
sub-advisory and distribution arrangements for the Funds, as well to review and 
approve the continuance of all such existing arrangements.  During the fiscal   
year ended December 31, 2004, the Investments Committee held eight meetings.    

The Investments Committee has established three Sub-Committees. The 
Sub-Committees are responsible for: (i) reviewing the performance, fees and     
expenses of the Funds that have been assigned to a particular Sub-Committee (for
each Sub-Committee, the "Designated Funds"), unless the Investments Committee   
takes such action directly; (ii) reviewing with the applicable portfolio        
managers from time to time the investment objective(s), policies, strategies and
limitations of the Designated Funds; (iii) evaluating the investment advisory,  
sub-advisory and distribution arrangements in effect or proposed for the        
Designated Funds, unless the Investments Committee takes such action directly;  
(iv) being familiar with the registration statements and periodic shareholder   
reports applicable to their Designated Funds; and (v) such other                
investment-related matters as the Investments Committee may delegate to the     
Sub-Committee from time to time.                                                

    The members of the Valuation Committee are Messrs. Dunn, Pennock (Chair)
and Soll, and Miss Quigley (Vice Chair). The Valuation Committee is responsible 
for addressing issues requiring action by the Board in the valuation of the     
Funds' portfolio securities that arise during periods between meetings of       

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the Board. During periods between meetings of the Board, the Valuation          
Committee: (i) receives the reports of AIM's internal valuation committee       
requesting pre-approval or approval of any changes to pricing vendors or pricing
methodologies as required by AIM's Procedures for Valuing Securities (Pricing   
Procedures) (the "Procedures"), and approves changes to pricing vendors and     
pricing methodologies as provided in the Procedures; (ii) upon request of AIM,  
assists AIM's internal valuation committee in resolving particular fair         
valuation issues; and (iii) receives reports on non-standard price changes on   
private equities. During the fiscal year ended December 31, 2004, the Valuation 
Committee held one meeting.                                                     

   The members of the Special Market Timing Litigation Committee are Messrs.
Crockett, Dowden, Dunn and Lewis (Chair). The Special Market Timing Litigation  
Committee is responsible: (i) for receiving reports from time to time from      
management, counsel for management, counsel for the Funds and special counsel   
for the independent trustees, as applicable, related to (a) the civil lawsuits, 
including purported class action and shareholder derivative suits, that have    
been filed against the Funds concerning alleged excessive short term trading in 
shares of the Funds ("market timing") and (b) the civil enforcement actions and 
investigations related to market timing activity in the Funds that were settled 
with certain regulators, including without limitation the SEC, the New York     
Attorney General and the Colorado Attorney General, and for recommending to the 
independent trustees what actions, if any, should be taken by the Funds in light
of all such reports; (ii) for overseeing the investigation(s) on behalf of the  
independent trustees by special counsel for the independent trustees and the    
independent trustees' financial expert of market timing activity in the Funds,  
and for recommending to the independent trustees what actions, if any, should be
taken by the Funds in light of the results of such investigation(s); (iii) for  
(a) reviewing the methodology developed by AIM's Independent Distribution       
Consultant (the "Distribution Consultant") for the monies ordered to be paid    
under the settlement order with the SEC, and making recommendations to the      
independent trustees as to the acceptability of such methodology and (b)        
recommending to the independent trustees whether to consent to any firm with    
which the Distribution Consultant is affiliated entering into any employment,   
consultant, attorney-client, auditing or other professional relationship with   
AIM, or any of its present or former affiliates, directors, officers, employees 
or agents acting in their capacity as such for the period of the Distribution   
Consultant's engagement and for a period of two years after the engagement; and 
(iv) for taking reasonable steps to ensure that any Fund which the Special      
Market Timing Litigation Committee determines was harmed by improper market     
timing activity receives what the Special Market Timing Litigation Committee    
deems to be full restitution. During the fiscal year ended December 31, 2004,   
the Special Market Timing Litigation Committee held eight meetings.             

Trustee Ownership of Fund Shares                                                

    The dollar range of equity securities beneficially owned by each trustee
(i) in the Funds and (ii) on an aggregate basis, in all registered investment   
companies overseen by the trustee within the AIM Funds complex, is set forth in 
Appendix B.                                                                     

Factors Considered in Approving the Investment Advisory Agreement               

      The advisory agreement with AIM (the "Advisory Agreement") was re-approved
for each Fund by the Board at a meeting held on June 8, 2004. In evaluating the 
fairness and reasonableness of each Advisory Agreement, the Board considered a  
variety of factors for each Fund, as applicable, including the following:       

  -  The nature and extent of the advisory services to be provided by AIM. The
 Board reviewed the services to be provided by AIM under each Advisory
  Agreement. Based on such review, the Board concluded that the range of
services to be provided by AIM under each Advisory Agreement was    
  appropriate and that AIM currently is providing services in accordance
with the terms of each Advisory Agreement.                          

-  The quality of services to be provided by AIM. The Board reviewed the  
    credentials and experience of the officers and employees of AIM who will
provide investment advisory services to each Fund. In reviewing the 
    qualifications of AIM to provide investment advisory services, the Board
    reviewed the qualifications of AIM's investment personnel and considered
      such issues as AIM's portfolio and product review process, AIM's legal and
compliance function, AIM's use of technology, AIM's portfolio       
 administration function, the quality of AIM's investment research and
    AIM's equity and fixed income trading operations. Based on the review of
  these and other factors, the Board concluded that AIM was qualified to
      continue to provide investment advisory services to each Fund and that AIM
     currently is providing satisfactory services in accordance with the terms
of the Advisory Agreement.                                          

-  The performance of each Fund relative to comparable funds. The Board   
  reviewed the performance of each Fund against the performance of funds
    advised by other advisors with investment strategies comparable to those
      of such Fund and concluded that no changes to the Funds or their portfolio
management teams should be made at this time.                       

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 -  The performance of each Fund relative to indices. The Board reviewed the
      performance of each Fund against the performance of applicable indices and
      concluded that no changes to the Funds or their portfolio management teams
should be made at this time.                                        

-  Meetings with each Fund's portfolio managers and investment personnel. 
  With respect to each Fund, the Board is meeting periodically with such
    Fund's portfolio managers and/or other investment personnel and believes
 that such individuals are competent and able to continue to carry out
their responsibilities under the Advisory Agreement.                

 -  Overall performance of AIM. The Board considered the overall performance
of AIM in providing investment advisory and portfolio administrative
services to each Fund and concluded that such performance was       
satisfactory.                                                       

-  Fees relative to those of clients of AIM with comparable investment    
      strategies. The Board reviewed the advisory fee rate for each Fund against
 (i) the advisory fee rates for other mutual funds, variable insurance
funds offered to insurance company separate accounts, offshore funds
and/or private accounts advised by AIM with investment strategies   
   comparable to those of such Fund, if any, and (ii) the sub-advisory fee
  rates for unaffiliated mutual funds sub-advised by AIM with investment
    strategies comparable to those of such Fund, if any. The Board concluded
    that the current advisory fee rate of each Fund was fair and reasonable.

  -  Fees relative to those of comparable funds with other advisors. The Board
 reviewed the advisory fee rate for each Fund against the advisory fee
rates for mutual funds advised by other advisors with investment    
     strategies comparable to those of such Fund. The Board concluded that the
current advisory fee rate of each Fund was fair and reasonable.     

-  Expense limitations and fee waivers. The Board reviewed the fee waivers
     and/or expense limitations, if any, currently in effect for each Fund and
     the effect they had on each Fund's expenses. The Board concluded that the
      current levels of fee waivers and/or expense limitations, if any, for each
Fund were fair and reasonable.                                      

-  Breakpoints and economies of scale. The Board reviewed the structure of
each Fund's advisory fee under the Advisory Agreement and whether it
includes any breakpoints. The Board considered whether it would be  
     appropriate to add advisory fee breakpoints for each Fund or whether, due
 to the nature of such Fund and the advisory fee structures of similar
funds, it was reasonable to leave the structure of the advisory fee 
unchanged. Based on such review, the Board concluded that it was not
      necessary to change the structure of the advisory fee for any of the Funds
to add advisory fee breakpoints.                                    

-  Investments in affiliated money market funds. The Board also took into 
     account the fact that uninvested cash and cash collateral from securities
    lending arrangements (collectively, "cash balances") of each Fund may be
     invested in money market funds advised by AIM pursuant to the terms of an
   SEC exemptive order. The Board found that each Fund may realize certain
    benefits upon investing cash balances in AIM advised money market funds,
including a higher net return, increased liquidity, increased       
     diversification or decreased transaction costs. The Board also found that
each Fund will not receive reduced services if it invests its cash  
      balances in such money market funds. The Board further determined that the
      proposed securities lending program and related procedures with respect to
   each of the lending Funds is in the best interests of each lending Fund
   and its respective shareholders. The Board therefore concluded that the
    investment of cash collateral received in connection with the securities
    lending program in the money market funds according to the procedures is
in the best interests of each lending Fund and its respective       
shareholders.                                                       

-  Profitability of AIM and its affiliates. The Board reviewed information
  concerning the profitability of AIM's (and its affiliates') investment
advisory and other activities and its financial condition.          

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 The Board considered the overall profitability of AIM, as well as the
 profitability of AIM in connection with managing each Fund. The Board
      noted that AIM's operations remain profitable, although increased expenses
    in recent years have reduced AIM's profitability. Based on the review of
  the profitability of AIM's and its affiliates' investment advisory and
      other activities and its financial condition, the Board concluded that the
    compensation to be paid by each Fund to AIM under its Advisory Agreement
was not excessive.                                                  

-  Benefits of soft dollars to AIM. The Board considered the benefits     
  realized by AIM as a result of brokerage transactions executed through
"soft dollar" arrangements. Under these arrangements, brokerage     
    commissions paid by the Funds and/or other funds advised by AIM are used
    to pay for research and execution services. This research is used by AIM
in making investment decisions for each Fund. Because such research 
     ultimately benefits each Fund, the Board concluded that such arrangements
were appropriate.                                                   

-  AIM's financial soundness in light of each Fund's needs. The Board     
considered whether AIM is financially sound and has the resources   
   necessary to perform its obligations under each Advisory Agreement, and
   concluded that AIM has the financial resources necessary to fulfill its
obligations under each Advisory Agreement.                          

  -  Historical relationship between each Fund and AIM. In determining whether
to continue the Advisory Agreement for each Fund, the Board also    
   considered the prior relationship between AIM and each Fund, as well as
the Board's knowledge of AIM's operations, and concluded that it was
     beneficial to maintain the current relationship, in part, because of such
knowledge. The Board also reviewed the general nature of the        
non-investment advisory services currently performed by AIM and its 
affiliates, such as administrative, transfer agency and distribution
    services, and the fees received by AIM and its affiliates for performing
    such services. In addition to reviewing such services, the trustees also
      considered the organizational structure employed by AIM and its affiliates
      to provide those services. Based on the review of these and other factors,
      the Board concluded that AIM and its affiliates were qualified to continue
to provide non-investment advisory services to the Funds, including 
   administrative, transfer agency and distribution services, and that AIM
  and its affiliates currently are providing satisfactory non-investment
advisory services.                                                  

 -  Other factors and current trends. In determining whether to continue the
 Advisory Agreement for each Fund, the Board considered regulatory and
     legal actions pending against AIM. The Board also considered the internal
  compliance reviews being undertaken by AIM and its affiliates, and the
additional controls and procedures being implemented by AIM and its 
     affiliates. The Board concluded that these actions indicated a good faith
     effort on the part of AIM to adhere to the highest ethical standards, and
   determined that the regulatory and legal actions should not prevent the
Board from continuing the Advisory Agreement for each Fund.         

      After consideration of all of the above factors, the Board found that with
respect to each Fund: (i) the services provided to such Fund and its            
shareholders were adequate; (ii) such Fund's Advisory Agreement was fair and    
reasonable under the circumstances; and (iii) the fees payable under such Fund's
Advisory Agreement would have been obtained through arm's length negotiations.  
The Board therefore concluded that each Fund's Advisory Agreement was in the    
best interests of such Fund and its shareholders and continued each such        
Advisory Agreement for another year.                                            

COMPENSATION                                                                    

     Each trustee who is not affiliated with AIM is compensated for his or her
services according to a fee schedule which recognizes the fact that such trustee
also serves as a trustee of other AIM Funds. Each such trustee receives a fee,  
allocated among the AIM Funds for which he or she serves as a trustee, which    
consists of an annual retainer component and a meeting fee component. The Chair 
of the                                                                          

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Board and Chairs and Vice Chairs of certain committees receive additional       
compensation from their services.                                               

      Information regarding compensation paid or accrued for each trustee of the
Trust who was not affiliated with AIM during the year ended December 31, 2004 is
found in Appendix C.                                                            

Retirement Plan For Trustees                                                    

     The trustees have adopted a retirement plan for the trustees of the Trust
who are not affiliated with AIM. The retirement plan includes a retirement      
policy as well as retirement benefits for the non-AIM-affiliated trustees.      

  The retirement policy permits each non-AIM-affiliated trustee to serve
until December 31 of the year in which the trustee turns 72. A majority of the  
trustees may extend from time to time the retirement date of a trustee.         

Annual retirement benefits are available to each non-AIM-affiliated 
trustee of the Trust and/or the other AIM Funds (each, a "Covered Fund") who has
at least five years of credited service as a trustee (including service to a    
predecessor fund) for a Covered Fund. The retirement benefit will equal 75% of  
the trustee's annual retainer paid or accrued by any Covered Fund to such       
trustee during the twelve-month period prior to retirement, including the amount
of any retainer deferred under a separate deferred compensation agreement       
between the Covered Fund and the trustee. Notwithstanding the foregoing, the    
amount of benefits will exclude any additional compensation paid to the Chair of
the Board and the Chairs and Vice Chairs of certain committees, whether such    
amounts are paid directly to the Trustee or deferred. The annual retirement     
benefits are payable in quarterly installments for a number of years equal to   
the lesser of (i) ten or (ii) the number of such trustee's credited years of    
service. A death benefit is also available under the plan that provides a       
surviving spouse with a quarterly installment of 50% of a deceased trustee's    
retirement benefits for the same length of time that the trustee would have     
received based on his or her service. A trustee must have attained the age of 65
(55 in the event of death or disability) to receive any retirement benefit.     

Deferred Compensation Agreements                                                

      Messrs. Crockett, Dunn, Fields,Frischling, Sklar and Drs. Mathai-Davis and
Soll (for purposes of this paragraph only, the "Deferring Trustees") have each  
executed a Deferred Compensation Agreement (collectively, the "Compensation     
Agreements"). Pursuant to the Compensation Agreements, the Deferring Trustees   
have the option to elect to defer receipt of up to 100% of their compensation   
payable by the Trust, and such amounts are placed into a deferral account and   
deemed to be invested in one or more AIM Funds selected by the Deferring        
Trustees. Distributions from the Deferring Trustees' deferral accounts will be  
paid in cash, generally in equal quarterly installments over a period of up to  
ten (10) years (depending on the Compensation Agreement) beginning on the date  
selected under the Compensation Agreement. The Board, in its sole discretion,   
may accelerate or extend the distribution of such deferral accounts after the   
Deferring Trustee's retirement benefits commence under the Plan. The Board, in  
its sole discretion, also may accelerate or extend the distribution of such     
deferral accounts after the Deferring Trustee's termination of service as a     
trustee of the Trust. If a Deferring Trustee dies prior to the distribution of  
amounts in his or her deferral account, the balance of the deferral account will
be distributed to his or her designated beneficiary. With respect to the        
payments of amounts held in the deferral accounts, the Deferring Trustees have  
the status of unsecured creditors of the Trust and of each other AIM Fund from  
which they are deferring compensation.                                          

Purchase of Class A Shares of the Funds at Net Asset Value                      

     The trustees and other affiliated persons of the Trust may purchase Class
A shares of the AIM Funds without paying an initial sales charge. AIM           
Distributors permits such purchases because there is a reduced sales effort     
involved in sales to such purchasers, thereby resulting in relatively low       
expenses of distribution. For a complete description of the persons who will not
pay an initial sales charge on                                                  

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purchases of Class A shares of the AIM Funds, see "Purchase, Redemption and     
Pricing of Shares - Purchase and Redemption of Shares - Purchases of Class A    
Shares, Class A3 Shares of AIM Limited Maturity Treasury Fund and AIM Tax-Free  
Intermediate Fund and AIM Cash Reserve Shares of AIM Money Market Fund -        
Purchases of Class A Shares at Net Asset Value."                                

CODES OF ETHICS                                                                 

  AIM, the Trust and AIM Distributors have each adopted a Code of Ethics
governing, as applicable, personal trading activities of all trustees, officers 
of the Trust, persons who, in connection with their regular functions, play a   
role in the recommendation of any purchase or sale of a security by any of the  
Funds or obtain information pertaining to such purchase or sale, and certain    
other employees. The Codes of Ethics are intended to prohibit conflicts of      
interest with the Trust that may arise from personal trading, including personal
trading in most of the Funds within the AIM Family of Funds(--Registered        
Trademark--) ("affiliated funds"). Personal trading, including personal trading 
involving securities that may be purchased or held by a Fund and in affiliated  
funds, is permitted by persons covered under the relevant Codes subject to      
certain restrictions; however those persons are generally required to pre-clear 
all security transactions with the Compliance Officer or her designee and to    
report all transactions on a regular basis.                                     

PROXY VOTING POLICIES                                                           

The Board has delegated responsibility for decisions regarding proxy
voting for securities held by each Fund to AIM, the Fund's investment advisor.  
AIM will vote such proxies in accordance with its proxy policies and procedures,
which have been reviewed and approved by the Board, and which are found in      
Appendix D.                                                                     

Any material changes to the proxy policies and procedures will be   
submitted to the Board for approval. The Board will be supplied with a summary  
quarterly report of each Fund's proxy voting record.                            

Information regarding how the Funds voted proxies related to their  
portfolio securities during the 12 months ended June 30, 2004 is available at   
our web site, HTTP://WWW.AIMINVESTMENTS.COM. This information is also available 
at the SEC web site, http://www.sec.gov.                                        

 CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES

  Information about the ownership of each class of each Fund's shares by
beneficial or record owners of such Fund and by trustees and officers as a group
is found in Appendix E. A shareholder who owns beneficially 25% or more of the  
outstanding shares of a Fund is presumed to "control" that Fund.                

INVESTMENT ADVISORY AND OTHER SERVICES

INVESTMENT ADVISOR                                                              

     AIM, the Funds' investment advisor, was organized in 1976, and along with
its subsidiaries, manages or advises over 200 investment portfolios encompassing
a broad range of investment objectives. AIM is a direct, wholly owned subsidiary
of AIM Management, a holding company that has been engaged in the financial     
services business since 1976. AIM Management is an indirect wholly owned        
subsidiary of AMVESCAP. AMVESCAP and its subsidiaries are an independent global 
investment management group. Certain of the directors and officers of AIM are   
also executive officers of the Trust and their affiliations are shown under     
"Management Information" herein.                                                

      As investment advisor, AIM supervises all aspects of the Funds' operations
and provides investment advisory services to the Funds. AIM obtains and         
evaluates economic, statistical and financial information to formulate and      
implement investment programs for the Funds.                                    

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      AIM is also responsible for furnishing to the Funds, at AIM's expense, the
services of persons believed to be competent to perform all supervisory and     
administrative services required by the Funds, in the judgment of the trustees, 
to conduct their respective businesses effectively, as well as the offices,     
equipment and other facilities necessary for their operations. Such functions   
include the maintenance of each Fund's accounts and records, and the preparation
of all requisite corporate documents such as tax returns and reports to the SEC 
and shareholders.                                                               

  The Advisory Agreement provides that each Fund will pay or cause to be
paid all expenses of such Fund not assumed by AIM, including, without           
limitation: brokerage commissions, taxes, legal, auditing or governmental fees, 
custodian, transfer and shareholder service agent costs, expenses of issue,     
sale, redemption, and repurchase of shares, expenses of registering and         
qualifying shares for sale, expenses relating to trustee and shareholder        
meetings, the cost of preparing and distributing reports and notices to         
shareholders, the fees and other expenses incurred by the Trust on behalf of    
each Fund in connection with membership in investment company organizations, and
the cost of printing copies of prospectuses and statements of additional        
information distributed to the Funds' shareholders.                             

AIM, at its own expense, furnishes to the Trust office space and    
facilities. AIM furnishes to the Trust all personnel for managing the affairs of
the Trust and each of its series of shares.                                     

     Pursuant to its Advisory Agreement with the Trust, AIM receives a monthly
fee from each Fund calculated at the following annual rates, indicated in the   
second column below, based on the average daily net assets of each Fund during  
the year.                                                                       

    Effective January 1, 2005, the advisor has contractually agreed to waive
advisory fees to the extent necessary so that the advisory fees payable by each 
Fund do not exceed the maximum advisory fee rate set forth in the third column  
below. The maximum advisory fee rates are effective through the Committed Until 
Date set forth in the fourth column.                                            

                                                        [Enlarge/Download Table]

                                                                                                                      MAXIMUM       
               FUND NAME                    ANNUAL RATE/NET ASSETS               MAXIMUM ADVISORY FEE              ADVISORY FEE     
                                            PER ADVISORY AGREEMENT            RATE AFTER JANUARY 1, 2005          RATES COMMITTED   
                                                                                                                    UNTIL DATE      
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                    
                                                                          0.62% of the first $250 million                           
AIM Balanced Fund                     0.75% of the first $150 million     0.605% of the next $250 million          June 30, 2006    
                                      0.50% of amount over $150           0.59% of the next $500 million                            
                                      million (1)                         0.575% of the next $1.5 billion                           
                                                                          0.56% of the next $2.5 billion                            
                                                                          0.545% of the next $2.5 billion                           
                                                                          0.53% of the next $2.5 billion                            
                                                                          0.515% of amount over $10 billion                         
------------------------------------------------------------------------------------------------------------------------------------
                                                                          0.62% of the first $250 million                           
AIM Basic Balanced Fund               0.65% of the first $1 billion       0.605% of the next $250 million        December 31, 2009  
                                      0.60% of the next $4 billion        0.59% of the next $500 million                            
                                      0.55% of amount over $5 billion     0.575% of the next $1.5 billion                           
                                                                          0.56% of the next $2.5 billion                            
                                                                          0.545% of the next $2.5 billion                           
                                                                          0.53% of the next $2.5 billion                            
                                                                          0.515% of amount over $10 billion                         
------------------------------------------------------------------------------------------------------------------------------------
                                                                          0.935% of the first $250 million                          
AIM European Small Company Fund       0.95% of all assets                 0.91% of the next $250 million           June 30, 2006    
                                                                          0.885% of the next $500 million                           
                                                                          0.86% of the next $1.5 billion                            
                                                                          0.835% of the next $2.5 billion                           
                                                                          0.81% of the next $2.5 billion                            
                                                                          0.785% of the next $2.5 billion                           
                                                                          0.76% of amount over $10 billion                          
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                                                        [Enlarge/Download Table]
                                                                                                                                    
                                                                                                                      MAXIMUM       
                                                                                                                    ADVISORY FEE    
                                      ANNUAL RATE/NET ASSETS                MAXIMUM ADVISORY FEE                  RATES COMMITTED   
FUND NAME                             PER ADVISORY AGREEMENT              RATE AFTER JANUARY 1, 2003                 UNTIL DATE     
------------------------------------------------------------------------------------------------------------------------------------
                                                                          0.80% of the first $250 million                           
AIM Global Value Fund                 0.85% of the first $1 billion       0.78% of the next $250 million           June 30, 2006    
                                      0.80% of amount over $1 billion     0.76% of the next $500 million                            
                                                                          0.74% of the next $1.5 billion                            
                                                                          0.72% of the next $2.5 billion                            
                                                                          0.70% of the next $2.5 billion                            
                                                                          0.68% of the next $2.5 billion                            
                                                                          0.66% of amount over $10 billion                          
------------------------------------------------------------------------------------------------------------------------------------
                                                                          0.935% of the first $250 million                          
AIM International Small Company Fund  0.95% of all assets                 0.91% of the next $250 million         December 31, 2009  
                                                                          0.885% of the next $500 million                           
                                                                          0.86% of the next $1.5 billion                            
                                                                          0.835% of the next $2.5 billion                           
                                                                          0.81% of the next $2.5 billion                            
                                                                          0.785% of the next $2.5 billion                           
                                                                          0.76% of amount over $10 billion                          
------------------------------------------------------------------------------------------------------------------------------------
                                                                          0.745% of the first $250 million                          
AIM Mid Cap Basic Value Fund          0.80% of the first $1 billion       0.73% of the next $250 million         December 31, 2009  
                                      0.75% of the next $4 billion        0.715% of the next $500 million                           
                                      0.70% of amount over $5 billion     0.70% of the next $1.5 billion                            
                                                                          0.685% of the next $2.5 billion                           
                                                                          0.67% of the next $2.5 billion                            
                                                                          0.655% of the next $2.5 billion                           
                                                                          0.64% of amount over $10 billion                          
------------------------------------------------------------------------------------------------------------------------------------
                                                                          0.75% of the first $150 million                           
AIM Premier Equity Fund               0.80% of the first $150 million     0.615% of the next $4.85 billion       December 31, 2009  
                                      0.625% of amount over $150          0.57% of the next $2.5 billion                            
                                      million (1)                         0.545% of the next $2.5 billion                           
                                                                          0.52% of amount over $10 billion                          
------------------------------------------------------------------------------------------------------------------------------------
                                                                          0.695% of the first $250 million                          
AIM Select Equity Fund                0.80% of the first $150 million     0.67% of the next $250 million           June 30, 2006    
                                      0.625% of amount over $150          0.645% of the next $500 million                           
                                      million (1)                         0.62% of the next $1.5 billion                            
                                                                          0.595% of the next $2.5 billion                           
                                                                          0.57% of the next $2.5 billion                            
                                                                          0.545% of the next $2.5 billion                           
                                                                          0.52% of amount over $10 billion                          
------------------------------------------------------------------------------------------------------------------------------------
                                                                          0.745% of the first $250 million       December 31, 2009  
AIM Small Cap Equity Fund             0.85% of all assets                 0.73% of the next $250 million                            
                                                                          0.715% of the next $500 million                           
                                                                          0.70% of the next $1.5 billion                            
                                                                          0.685% of the next $2.5 billion                           
                                                                          0.67% of the next $2.5 billion                            
                                                                          0.655% of the next $2.5 billion                           
                                                                          0.64% of amount over $10 billion                          
------------------------------------------------------------------------------------------------------------------------------------

(1)   AIM has voluntarily agreed to waive advisory fees payable by the Fund in  
      an amount equal to 0.025% for each $5 billion increment in net assets over
   $5 billion, up to a maximum waiver of 0.175% on net assets in excess of
$35 billion.                                                        

    AIM may from time to time waive or reduce its fee. Voluntary fee waivers
or reductions may be rescinded at any time without further notice to investors. 
During periods of voluntary fee waivers or reductions, AIM will retain its      
ability to be reimbursed for such fee prior to the end of each fiscal year.     
Contractual fee waivers or reductions set forth in the Fee Table in a Prospectus
may not be terminated or amended to the Funds' detriment during the period      
stated in the agreement between AIM and the Fund.                               

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     AIM has voluntarily agreed to waive a portion of advisory fees payable by
each Fund. The amount of the waiver will equal 25% of the advisory fee AIM      
receives from the Affiliated Money Market Funds as a result of each Fund's      
investment of uninvested cash in an Affiliated Money Market Fund. Termination of
this agreement requires approval by the Board. See "Description of the Funds and
Their Investments and Risks - Investment Strategies and Risks - Other           
Investments - Other Investment Companies."                                      

 AIM has contractually agreed through December 31, 2005 to limit total
annual fund operating expenses (excluding (i) interest; (ii) taxes; (iii)       
dividend expenses on short sales; (iv) extraordinary items (these are expenses  
that are not anticipated to arise from each Fund's day-to-day operations), or   
items designated as such by each Fund's Board; (v) expenses related to a merger 
or reorganization as approved by each Fund's Board; (vi) expenses that each Fund
has incurred but did not actually pay because of an expense offset arrangement);
and (vii) excluding Rule 12b-1 fees, if applicable) for AIM European Small      
Company Fund, AIM Global Value Fund and AIM International Small Company Fund's  
Class A, Class B and Class C shares to the extent necessary to limit the total  
operating expenses of Class A, Class B and Class C shares to 2.00%, 2.65% and   
2.65%, respectively. Such contractual fees waivers or reductions are set forth  
in the Fee Table to each Fund's Prospectus and may not be terminated or amended 
to the Fund's detriment during the period stated in the agreement between AIM   
and the Fund.                                                                   

   The management fees payable by each Fund, the amounts waived by AIM and
the net fees paid by each Fund for the last three fiscal years ended December 31
are found in Appendix F.                                                        

Portfolio Managers                                                              

 Appendix G contains the following information regarding the portfolio
managers identified in each Fund's prospectus:                                  

-     The dollar range of the manager's investments in each Fund.   

-     A description of the manager's compensation structure.        

 -     Information regarding other accounts managed by the manager and
            potential conflicts of interest that might arise from the management
of multiple accounts.                                   

Securities Lending Arrangements                                                 

If a Fund engages in securities lending, AIM will provide the Fund  
investment advisory services and related administrative services. The Advisory  
Agreement describes the administrative services to be rendered by AIM if a Fund 
engages in securities lending activities, as well as the compensation AIM may   
receive for such administrative services. Services to be provided include: (a)  
overseeing participation in the securities lending program to ensure compliance 
with all applicable regulatory and investment guidelines; (b) assisting the     
securities lending agent or principal (the agent) in determining which specific 
securities are available for loan; (c) monitoring the agent to ensure that      
securities loans are effected in accordance with AIM's instructions and with    
procedures adopted by the Board; (d) preparing appropriate periodic reports for,
and seeking appropriate approvals from, the Board with respect to securities    
lending activities; (e) responding to agent inquiries; and (f) performing such  
other duties as may be necessary.                                               

AIM's compensation for advisory services rendered in connection with
securities lending is included in the advisory fee schedule. As compensation for
the related administrative services AIM will provide, a lending Fund will pay   
AIM a fee equal to 25% of the net monthly interest or fee income retained or    
paid to the Fund from such activities. AIM currently intends to waive such fee, 
and has agreed to seek Board approval prior to its receipt of all or a portion  
of such fee.                                                                    

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SERVICE AGREEMENTS                                                              

    ADMINISTRATIVE SERVICES AGREEMENT. AIM and the Trust have entered into a
Master Administrative Services Agreement ("Administrative Services Agreement")  
pursuant to which AIM may perform or arrange for the provision of certain       
accounting and other administrative services to each Fund which are not required
to be performed by AIM under the Advisory Agreement. The Administrative Services
Agreement provides that it will remain in effect and continue from year to year 
only if such continuance is specifically approved at least annually by the      
Trust's Board of Trustees, including the independent trustees, by votes cast in 
person at a meeting called for such purpose. Under the Administrative Services  
Agreement, AIM is entitled to receive from the Funds reimbursement of its costs 
or such reasonable compensation as may be approved by the Board of Trustees.    
Currently, AIM is reimbursed for the services of the Trust's principal financial
officer and her staff, and any expenses related to fund accounting services.    

    Administrative services fees paid to AIM by each Fund for the last three
fiscal years ended December 31 are found in Appendix H.                         

OTHER SERVICE PROVIDERS                                                         

     TRANSFER AGENT. AIM Investment Services, Inc. ("AIS"), 11 Greenway Plaza,
Suite 100, Houston, Texas 77046, a registered transfer agent and wholly owned   
subsidiary of AIM, acts as transfer and dividend disbursing agent for the Funds.

      The Transfer Agency and Service Agreement (the "TA Agreement") between the
Trust and AIS provides that AIS will perform certain shareholder services for   
the Funds. For servicing accounts holding Class A, A3, B, C, K, R, AIM Cash     
Reserve and Investor Class Shares, the TA Agreement provides that the Trust on  
behalf of the Funds will pay AIS at a rate of $17.08 per open shareholder       
account plus certain out of pocket expenses, whether such account is services   
directly by AIS or by a third party pursuant to a sub-transfer agency, omnibus  
account service, sub-accounting, or networking agreement. This fee is paid      
monthly at the rate of 1/12 of the annual fee and is based upon the number of   
open shareholder accounts during each month.                                    

In addition, Merrill Lynch, Pierce, Fenner & Smith Incorporated     
("MLPF&S"), 800 Scudders Mill Road, Plainsboro, New Jersey 08536, has entered   
into an agreement with the Trust (and certain other AIM Funds), PFPC Inc.       
(formerly known as First Data Investor Service Group) and Financial Data        
Services, Inc., pursuant to which MLPF&S is paid a per account fee to perform   
certain shareholder sub-accounting services for its customers who beneficially  
own shares of the Fund(s).                                                      

     Primerica Shareholder Services, Inc. ("PSS") 3120 Breckinridge Boulevard,
Duluth, Georgia 30099-0001 has also entered into an agreement with the Trust    
(and certain other AIM Funds) and AIS pursuant to which PSS is paid a per       
account fee to perform certain shareholder sub-accounting services for its      
customers who beneficially own shares of the Fund(s).                           

 CUSTODIAN. State Street Bank and Trust Company (the "Custodian"), 225
Franklin Street, Boston, Massachusetts 02110, is custodian of all securities and
cash of the Funds. Chase Bank of Texas, N.A., 712 Main, Houston, Texas 77002,   
serves as sub-custodian for purchases of shares of the Funds. The Bank of New   
York, 2 Hanson Place, Brooklyn, New York 11217-1431, also serves as             
sub-custodian to facilitate cash management.                                    

 The Custodian is authorized to establish separate accounts in foreign
countries and to cause foreign securities owned by the Funds to be held outside 
the United States in branches of U.S. banks and, to the extent permitted by     
applicable regulations, in certain foreign banks and securities depositories.   
AIM is responsible for selecting eligible foreign securities depositories and   
for assessing the risks associated with investing in foreign countries,         
including the risk of using eligible foreign securities depositories in a       
country. The Custodian is responsible for monitoring eligible foreign securities
depositories.                                                                   

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    Under its contract with the Trust, the Custodian maintains the portfolio
securities of the Funds, administers the purchases and sales of portfolio       
securities, collects interest and dividends and other distributions made on the 
securities held in the portfolios of the Funds and performs other ministerial   
duties. These services do not include any supervisory function over management  
or provide any protection against any possible depreciation of assets.          

AUDITORS. The Funds' independent registered public accountants are  
responsible for auditing the financial statements of the Funds. The Board has   
selected PricewaterhouseCoopers, LLP 1201 Louisiana Street, Suite 2900, Houston,
Texas 77002, as the independent registered public accountants to audit the      
financial statements of the Funds.                                              

      COUNSEL TO THE TRUST. Legal matters for the Trust have been passed upon by
Ballard Spahr Andrews & Ingersoll, LLP, 1735 Market Street, Philadelphia,       
Pennsylvania 19103-7599.                                                        

BROKERAGE ALLOCATION AND OTHER PRACTICES

BROKERAGE TRANSACTIONS                                                          

 AIM makes decisions to buy and sell securities for each Fund, selects
broker-dealers, effects the Funds' investment portfolio transactions, allocates 
brokerage fees in such transactions and, where applicable, negotiates           
commissions and spreads on transactions. AIM's primary consideration in         
effecting a security transaction is to obtain the most favorable execution of   
the order, which includes the best price on the security and a low commission   
rate. While AIM seeks reasonably competitive commission rates, the Funds may not
pay the lowest commission or spread available. See "Brokerage Selection" below. 

Some of the securities in which the Funds invest are traded in      
over-the-counter markets. Portfolio transactions placed in such markets may be  
effected at either net prices without commissions, but which include            
compensation to the broker-dealer in the form of a mark up or mark down, or on  
an agency basis, which involves the payment of negotiated brokerage commissions 
to the broker-dealer including electronic communication networks.               

     Traditionally, commission rates have not been negotiated on stock markets
outside the United States. Although in recent years many overseas stock markets 
have adopted a system of negotiated rates, a number of markets maintain an      
established schedule of minimum commission rates.                               

     Brokerage commissions paid by each of the Funds for the last three fiscal
years ended December 31 are found in Appendix I.                                

COMMISSIONS                                                                     

   During the last three fiscal years ended December 31, none of the Funds
paid brokerage commissions to brokers affiliated with the Funds, AIM, AIM       
Distributors, or any affiliates of such entities.                               

  The Funds may engage in certain principal and agency transactions with
banks and their affiliates that own 5% or more of the outstanding voting        
securities of an AIM Fund, provided the conditions of an exemptive order        
received by the AIM Funds from the SEC are met. In addition, a Fund may purchase
or sell a security from or to certain other AIM Funds or accounts (and may      
invest in Affiliated Money Market Funds) provided the Funds follow procedures   
adopted by the Boards of the various AIM Funds, including the Trust. These      
inter-fund transactions do not generate brokerage commissions but may result in 
custodial fees or taxes or other related expenses.                              

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BROKERAGE SELECTION                                                             

   Section 28(e) of the Securities Exchange Act of 1934 provides that AIM,
under certain circumstances, lawfully may cause an account to pay a higher      
commission than the lowest available. Under Section 28(e)(1), AIM must make a   
good faith determination that the commissions paid are "reasonable in relation  
to the value of the brokerage and research services provided ... viewed in terms
of either that particular transaction or [AIM's] overall responsibilities with  
respect to the accounts as to which [it] exercises investment discretion." The  
services provided by the broker also must lawfully and appropriately assist AIM 
in the performance of its investment decision-making responsibilities.          
Accordingly, in recognition of research services provided to it, a Fund may pay 
a broker higher commissions than those available from another broker.           

Research services received from broker-dealers supplement AIM's own 
research (and the research of its affiliates), and may include the following    
types of information: statistical and background information on the U.S. and    
foreign economies, industry groups and individual companies; forecasts and      
interpretations with respect to the U.S. and foreign economies, industry groups 
and individual companies; forecasts and interpretations with respect to the U.S.
and foreign economies, securities, markets, specific industry groups and        
individual companies; information on federal, state, local and foreign political
developments; portfolio management strategies; performance information on       
securities, indexes and investment accounts; information concerning prices of   
securities; and information supplied by specialized services to AIM and to the  
Trust's trustees with respect to the performance, investment activities, and    
fees and expenses of other mutual funds. Broker-dealers may communicate such    
information electronically, orally, in written form or on computer software.    
Research services may also include providing electronic communications of trade 
information, providing custody services, as well as providing equipment used to 
communicate research information and providing specialized consultations with   
AIM personnel with respect to computerized systems and data furnished to AIM as 
a component of other research services, arranging meetings with management of   
companies, and providing access to consultants who supply research information. 

     The outside research assistance is useful to AIM since the broker-dealers
used by AIM tend to provide a more in-depth analysis of follow a broader        
universe of securities and other matters than AIM's staff follows. In addition, 
the research provides AIM with a diverse perspective on financial markets.      
Research services provided to AIM by broker-dealers are available for the       
benefit of all accounts managed or advised by AIM or by its affiliates. Some    
broker-dealers may indicate that the provision of research services is dependent
upon the generation of certain specified levels of commissions and underwriting 
concessions by AIM's clients, including the Funds. However, the Funds are not   
under any obligation to deal with any broker-dealer in the execution of         
transactions in portfolio securities.                                           

In some cases, the research services are available only from the    
broker-dealer providing them. In other cases, the research services may be      
obtainable from alternative sources in return for cash payments. AIM believes   
that the research services are beneficial in supplementing AIM's research and   
analysis and that they improve the quality of AIM's investment advice. The      
advisory fee paid by the Funds is not reduced because AIM receives such         
services. However, to the extent that AIM would have purchased research services
had they not been provided by broker-dealers, the expenses to AIM could be      
considered to have been reduced accordingly.                                    

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AIM may determine target levels of commission business with various 
brokers on behalf of its clients (including the Funds) over a certain time      
period. The target levels will be based upon the following factors, among       
others: (1) the execution services provided by the broker; and (2) the research 
services provided by the broker. Portfolio transactions also may be effected    
through broker-dealers that recommend the Funds to their clients, or that act as
agent in the purchase of a Fund's shares for their clients. AIM will not enter  
into a binding commitment with brokers to place trades with such brokers        
involving brokerage commissions in precise amounts.                             

DIRECTED BROKERAGE (RESEARCH SERVICES)                                          

   Directed brokerage (research services) paid by each of the Funds during
the last fiscal year ended December 31, 2004 are found in Appendix J.           

REGULAR BROKERS OR DEALERS                                                      

Information concerning the Funds' acquisition of securities of their
regular brokers or dealers during the last fiscal year ended December 31, 2004  
is found in Appendix J.                                                         

ALLOCATION OF PORTFOLIO TRANSACTIONS                                            

     AIM and its affiliates manage numerous other investment accounts. Some of
these accounts may have investment objectives similar to the Funds.             
Occasionally, identical securities will be appropriate for investment by one of 
the Funds and by another Fund or one or more of these investment accounts.      
However, the position of each account in the same securities and the length of  
time that each account may hold its investment in the same securities may vary. 
The timing and amount of purchase by each account will also be determined by its
cash position. If the purchase or sale of securities is consistent with the     
investment policies of the Fund(s) and one or more of these accounts, and is    
considered at or about the same time, AIM will fairly allocate transactions in  
such securities among the Fund(s) and these accounts. AIM may combine such      
transactions, in accordance with applicable laws and regulations, to obtain the 
most favorable execution. Simultaneous transactions could, however, adversely   
affect a Fund's ability to obtain or dispose of the full amount of a security   
which it seeks to purchase or sell.                                             

   Sometimes the procedure for allocating portfolio transactions among the
various investment accounts advised by AIM results in transactions which could  
have an adverse effect on the price or amount of securities available to a Fund.
In making such allocations, AIM considers the investment objectives and policies
of its advisory clients, the relative size of portfolio holdings of the same or 
comparable securities, the availability of cash for investment, the size of     
investment commitments generally held, and the judgments of the persons         
responsible for recommending the investment. This procedure would apply to      
transactions in both equity and fixed income securities.                        

ALLOCATION OF INITIAL PUBLIC OFFERING ("IPO") TRANSACTIONS                      

Certain of the AIM Funds or other accounts managed by AIM may become
interested in participating in IPOs. Purchases of IPOs by one AIM fund or       
account may also be considered for purchase by one or more other AIM Funds or   
accounts. It shall be AIM's practice to specifically combine or otherwise bunch 
indications of interest for IPOs for all AIM Funds and accounts participating in
purchase transactions for that IPO, and when the full amount of all IPO orders  
for such AIM Funds and accounts cannot be filled completely, to allocate such   
transactions in accordance with the following procedures:                       

      AIM will determine the eligibility of each AIM Fund and account that seeks
to participate in a particular IPO by reviewing a number of factors, including  
market capital/liquidity suitability and sector/style suitability of the        
investment with the AIM Fund's or account's investment objective, policies and  
strategies and current holdings. The allocation of securities issued in IPOs    
will be made to eligible AIM Funds and accounts on a pro rata basis based on    
order size.                                                                     

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PURCHASE, REDEMPTION AND PRICING OF SHARES

PURCHASE AND REDEMPTION OF SHARES                                               

Purchases of Class A Shares, Class A3 Shares of AIM Limited Maturity Treasury   
Fund and AIM Tax-Free Intermediate Fund and AIM Cash Reserve Shares of AIM Money
Market Fund                                                                     

      INITIAL SALES CHARGES. Each AIM Fund (other than AIM Tax-Exempt Cash Fund)
is grouped into one of three categories to determine the applicable initial     
sales charge for its Class A shares. Additionally, Class A shares of AIM Short  
Term Bond Fund are subject to an initial sales charge of 2.50%. The sales charge
is used to compensate AIM Distributors and participating dealers for their      
expenses incurred in connection with the distribution of the Funds' shares. You 
may also be charged a transaction or other fee by the financial institution     
managing your account.                                                          

      Class A Shares of AIM Tax-Exempt Cash Fund, Class A3 Shares of AIM Limited
Maturity Treasury Fund and AIM Tax-Free Intermediate Fund and AIM Cash Reserve  
Shares of AIM Money Market Fund are sold without an initial sales charge.       

CATEGORY I FUNDS                                                                

AIM Advantage Health Science Fund                                               
AIM Aggressive Growth Fund                                                      
AIM Asia Pacific Growth Fund                                                    
AIM Basic Value Fund                                                            
AIM Blue Chip Fund                                                              
AIM Capital Development Fund                                                    
AIM Charter Fund                                                                
AIM Conservative Allocation Fund                                                
AIM Constellation Fund                                                          
AIM Core Stock Fund                                                             
AIM Dent Demographic Trends Fund                                                
AIM Diversified Dividend Fund                                                   
AIM Dynamics Fund                                                               
AIM Emerging Growth Fund                                                        
AIM Energy Fund                                                                 
AIM European Growth Fund                                                        
AIM European Small Company Fund                                                 
AIM Financial Services Fund                                                     
AIM Global Real Estate Fund                                                     
AIM Global Value Fund                                                           
AIM Gold & Precious Metals Fund                                                 
AIM Growth Allocation Fund                                                      
AIM Health Sciences Fund                                                        
AIM International Core Equity Fund                                              
AIM International Small Company Fund                                            
AIM International Growth Fund                                                   
AIM Large Cap Basic Value Fund                                                  
AIM Large Cap Growth Fund                                                       
AIM Leisure Fund                                                                
AIM Libra Fund                                                                  
AIM Mid Cap Basic Value Fund                                                    
AIM Mid Cap Core Equity Fund                                                    
AIM Mid Cap Growth Fund                                                         
AIM Mid Cap Stock Fund                                                          
AIM Moderate Allocation Fund                                                    
AIM Moderate Growth Allocation Fund                                             
AIM Moderately Conservative Allocation Fund                                     
AIM Multi-Sector Fund                                                           
AIM Opportunities I Fund                                                        
AIM Opportunities II Fund                                                       
AIM Opportunities III Fund                                                      
AIM Premier Equity Fund                                                         
AIM Select Equity Fund                                                          
AIM Small Cap Equity Fund                                                       
AIM Small Cap Growth Fund                                                       
AIM Small Company Growth Fund                                                   
AIM Technology Fund                                                             
AIM Total Return Fund                                                           
AIM Trimark Endeavor Fund                                                       
AIM Trimark Fund                                                                
AIM Trimark Small Companies Fund                                                
AIM Utilities Fund                                                              
AIM Weingarten Fund                                                             

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                                                                [Download Table]

                                                                         Dealer    
                                        Investor's Sales Charge        Concession  
                                        -----------------------        ----------  
                                       As a                  As a         As a     
                                   Percentage of          Percentage  Percentage of
                                    the Public            of the Net   the Public  
     Amount of Investment in         Offering               Amount      Offering   
      Single Transaction(1)            Price               Invested       Price    
      ---------------------            -----               --------       -----    
                                                                                   
             Less than $   25,000      5.50%                 5.82%        4.75%    
$ 25,000 but less than $   50,000      5.25                  5.54         4.50     
$ 50,000 but less than $  100,000      4.75                  4.99         4.00     
$100,000 but less than $  250,000      3.75                  3.90         3.00     
$250,000 but less than $  500,000      3.00                  3.09         2.50     
$500,000 but less than $1,000,000      2.00                  2.04         1.60     

(1)   AIM Opportunities Fund I will not accept any single purchase in excess of 
$250,000                                                            

CATEGORY II FUNDS                                                               

AIM Balanced Fund                                                               
AIM Basic Balanced Fund                                                         
AIM Developing Markets Fund                                                     
AIM Global Aggressive Growth Fund                                               
AIM Global Equity Fund                                                          
AIM Global Growth Fund                                                          
AIM Global Health Care Fund                                                     
AIM High Income Municipal Fund                                                  
AIM High Yield Fund                                                             
AIM Income Fund                                                                 
AIM Intermediate Government Fund                                                
AIM Municipal Bond Fund                                                         
AIM Real Estate Fund                                                            
AIM Total Return Bond Fund                                                      

                                                                [Download Table]

                                                                          Dealer    
                                       Investor's Sales Charge          Concession  
                                       -----------------------          ----------  
                                       As a                  As a          As a     
                                   Percentage of        Percentage of  Percentage of
                                    the Public             the Net      the Public  
      Amount of Investment in        Offering               Amount       Offering   
        Single Transaction             Price               Invested        Price    
        ------------------             -----               --------        -----    
                                                                                    
             Less than $   50,000      4.75%                 4.99%         4.00%    
$ 50,000 but less than $  100,000      4.00                  4.17          3.25     
$100,000 but less than $  250,000      3.75                  3.90          3.00     
$250,000 but less than $  500,000      2.50                  2.56          2.00     
$500,000 but less than $1,000,000      2.00                  2.04          1.60     

CATEGORY III FUNDS                                                              

AIM Limited Maturity Treasury Fund                                              
AIM Tax-Free Intermediate Fund                                                  

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                                                                [Download Table]

                                                                          Dealer    
                                       Investor's Sales Charge          Concession  
                                       -----------------------          ----------  
                                       As a                  As a          As a     
                                   Percentage of        Percentage of  Percentage of
                                    the Public             the Net      the Public  
      Amount of Investment in        Offering               Amount       Offering   
        Single Transaction             Price               Invested        Price    
        ------------------             -----               --------        -----    
                                                                                    
             Less than $  100,000      1.00%                 1.01%         0.75%    
$100,000 but less than $  250,000      0.75                  0.76          0.50     
$250,000 but less than $1,000,000      0.50                  0.50          0.40     

AIM SHORT TERM BOND FUND                                                        

                                                                [Download Table]

                                                                          Dealer    
                                       Investor's Sales Charge          Concession  
                                       -----------------------          ----------  
                                       As a                  As a          As a     
                                   Percentage of        Percentage of  Percentage of
                                    the Public             the Net      the Public  
      Amount of Investment in        Offering               Amount       Offering   
        Single Transaction             Price               Invested        Price    
        ------------------             -----               --------        -----    
                                                                                    
             Less than $  100,000      2.50%                 2.56%         2.00%    
$100,000 but less than $  250,000      2.00                  2.04          1.50     
$250,000 but less than $  500,000      1.50                  1.52          1.25     
$500,000 but less than $1,000,000      1.25                  1.27          1.00     

Beginning on October 31, 2002 Class A shares of AIM Limited Maturity
Treasury Fund and AIM Tax-Free Intermediate Fund were closed to new investors.  
Current investors must maintain a share balance in order to continue to make    
incremental purchases.                                                          

   LARGE PURCHASES OF CLASS A SHARES. Investors who purchase $1,000,000 or
more of Class A shares of Category I, II or III Funds and Class A shares of AIM 
Short Term Bond Fund do not pay an initial sales charge. In addition, investors 
who currently own Class A shares of Category I, II, or III Funds and Class A    
shares of AIM Short Term Bond Fund and make additional purchases that result in 
account balances of $1,000,000 or more do not pay an initial sales charge on the
additional purchases. The additional purchases, as well as initial purchases of 
$1,000,000 or more, are referred to as ("Large Purchases"). If an investor makes
a Large Purchase of Class A shares of a Category I or II Fund and Class A shares
of AIM Short Term Bond Fund, however, each share issued will generally be       
subject to a 1.00% contingent deferred sales charge ("CDSC") if the investor    
redeems those shares within 18 months after purchase.                           

     AIM Distributors may pay a dealer concession and/or advance a service fee
on Large Purchases, as set forth below. Exchanges between the AIM Funds may     
affect total compensation paid.                                                 

     AIM Distributors may make the following payments to dealers of record for
Large Purchases of Class A shares of Category I or II Funds or AIM Short Term   
Bond Fund by investors other than (i) retirement plans that are maintained      
pursuant to Sections 401 and 457 of the Internal Revenue Code of 1986, as       
amended (the Code), and (ii) retirement plans that are maintained pursuant to   
Section 403 of the Code if the employer or plan sponsor is a tax-exempt         
organization operated pursuant to Section 501(c)(3) of the Code:                

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 PERCENT OF PURCHASE

1% of the first $2 million    
   plus 0.80% of the next $1 million
    plus 0.50% of the next $17 million
                plus 0.25% of amounts in excess of $20 million

If (i) the amount of any single purchase order plus (ii) the public 
offering price of all other shares owned by the same customer submitting the    
purchase order on the day on which the purchase order is received equals or     
exceeds $1,000,000, the purchase will be considered a "jumbo accumulation       
purchase." With regard to any individual jumbo accumulation purchase, AIM       
Distributors may make payment to the dealer of record based on the cumulative   
total of jumbo accumulation purchases made by the same customer over the life of
his or her account(s).                                                          

    If an investor made a Large Purchase of Class A shares of a Category III
Fund or Short Term Bond Fund on and after November 15, 2001 and through October 
30, 2002 and exchanges those shares for Class A shares of a Category I or II    
Fund, AIM Distributors will pay an additional dealer concession of 0.75% upon   
exchange.                                                                       

      If an investor makes a Large Purchase of Class A shares of a Category I or
II Fund or AIM Short Term Bond Fund on or after November 15, 2001 and through   
October 31, 2002 and exchanges those shares for Class A shares of a Category III
Fund, AIM Distributors will not pay any additional dealer compensation upon the 
exchange. Beginning on February 17, 2003, Class A shares of a Category I or II  
Fund or AIM Short Term Bond Fund may not be exchanged for Class A shares of a   
Category III Fund.                                                              

      If an investor makes a Large Purchase of Class A3 shares of a Category III
Fund on and after October 31, 2002 and exchanges those shares for Class A shares
of a Category I or II Fund or AIM Short Term Bond Fund, AIM Distributors will   
pay 1.00% of such purchases as dealer compensation upon the exchange. The Class 
A shares of the Category I or II Fund or AIM Short Term Bond Fund received in   
exchange generally will be subject to a 1.00% CDSC if the investor redeems such 
shares within 18 months from the date of exchange.                              

     If an investor makes a Large Purchase of Class A shares of a Category III
Fund and exchanges those shares for Class A shares of another Category III Fund,
AIM Distributors will not pay any additional dealer concession upon the         
exchange. Beginning on February 17, 2003, Class A shares of a Category III Fund 
may not be exchanged for Class A shares of another Category III Fund.           

PURCHASES OF CLASS A SHARES BY CERTAIN RETIREMENT PLANS AT NAV. For 
purchases of Class A shares of Category I and II Funds and AIM Short Term Bond  
Fund, AIM Distributors may make the following payments to investment dealers or 
other financial service firms for sales of such shares at net asset value       
("NAV") to certain retirement plans provided that the applicable dealer of      
record is able to establish that the retirement plan's purchase of Class A      
shares is a new investment (as defined below):                                  

 PERCENT OF PURCHASE

0.50% of the first $20 million
                plus 0.25% of amounts in excess of $20 million

      This payment schedule will be applicable to purchases of Class A shares at
NAV by the following types of retirement plans: (i) all plans maintained        
pursuant to Sections 401 and 457 of the Code, and                               

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(ii) plans maintained pursuant to Section 403 of the Code if the employer or    
plan sponsor is a tax-exempt organization operated pursuant to Section 501(c)(3)
of the Code.                                                                    

 A "new investment" means a purchase paid for with money that does not
represent (i) the proceeds of one or more redemptions of AIM Fund shares, (ii)  
an exchange of AIM Fund shares, or (iii) the repayment of one or more retirement
plan loans that were funded through the redemption of AIM Fund shares, or (iv)  
money returned fom another fund family. If AIM Distributors pays a dealer       
concession in connection with a plan's purchase of Class A shares at NAV, such  
shares may be subject to a CDSC of 1.00% of net assets for 12 months, commencing
on the date the plan first invests in Class A shares of an AIM Fund. If the     
applicable dealer of record is unable to establish that a plan's purchase of    
Class A shares at NAV is a new investment, AIM Distributors will not pay a      
dealer concession in connection with such purchase and such shares will not be  
subject to a CDSC.                                                              

With regard to any individual jumbo accumulation purchase, AIM      
Distributors may make payment to the dealer of record based on the cumulative   
total of jumbo accumulation purchases made by the same plan over the life of the
plan's account(s).                                                              

      PURCHASERS QUALIFYING FOR REDUCTIONS IN INITIAL SALES CHARGES. As shown in
the tables above, purchases of certain amounts of AIM Fund shares may reduce the
initial sales charges. These reductions are available to purchasers that meet   
the qualifications listed below. We will refer to purchasers that meet these    
qualifications as "Qualified Purchasers."                                       

DEFINITIONS                                                                     

As used herein, the terms below shall be defined as follows:        

  -     "Individual" refers to a person, as well as his or her Spouse or
Domestic Partner and his or her Children;               

   -     "Spouse" is the person to whom one is legally married under state
law;                                                    

-     "Domestic Partner" is an adult with whom one shares a primary 
           residence for at least six-months, is in a relationship as a couple
           where one or each of them provides personal or financial welfare of
            the other without a fee, is not related by blood and is not married;

      -     "Child" or "Children" include a biological, adopted or foster son or
            daughter, a Step-child, a legal ward or a Child of a person standing
in loco parentis;                                       

 -     "Parent" is a person's biological or adoptive mother or father;

     -     "Step-child" is the child of one's Spouse by a previous marriage or
relationship;                                           

-     Step-parent" is the Spouse of a Child's Parent; and           

  -     "Immediate Family" includes an Individual (including, as defined
         above, a person, his or her Spouse or Domestic Partner and his or
         her Children) as well as his or her Parents, Step-parents and the
Parents of Spouse or Domestic Partner.                  

INDIVIDUALS                                                                     

     -     an individual (including his or her spouse or domestic partner, and
children);                                              

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 -     a retirement plan established exclusively for the benefit of an
 Individual, specifically including, but not limited to, a
          Traditional IRA, Roth IRA, SEP IRA, SIMPLE IRA, Solo 401(k), Keogh
 plan, or a tax-sheltered 403(b)(7) custodial account; and

      -     a qualified tuition plan account, maintained pursuant to Section 529
         of the Code, or a Coverdell Education Savings Account, maintained
        pursuant to Section 530 of the Code (in either case, the account
           must be established by an Individual or have an Individual named as
the beneficiary thereof).                               

EMPLOYER-SPONSORED RETIREMENT PLANS                                             

     -     a retirement plan maintained pursuant to Sections 401, 403 (only if
          the employer or plan sponsor is a tax-exempt organization operated
      pursuant to Section 501(c)(3) of the Code), 408 (includes SEP,
SARSEP and SIMPLE IRA plans) or 457 of the Code, if:    

            a.    the employer or plan sponsor submits all contributions for all
                participating employees in a single contribution transmittal
         (the AIM Funds will not accept separate contributions
       submitted with respect to individual participants);

       b.    each transmittal is accompanied by a single check or wire
transfer; and                               

         c.    if the AIM Funds are expected to carry separate accounts in
                the names of each of the plan participants, (i) the employer
                 or plan sponsor notifies AIM Distributors in writing that the
                separate accounts of all plan participants should be linked,
            and (ii) all new participant accounts are established by
              submitting an appropriate Account Application on behalf of
           each new participant with the contribution transmittal.

 HOW TO QUALIFY FOR REDUCTIONS IN INITIAL SALES CHARGES. The following
sections discuss different ways that a Qualified Purchaser can qualify for a    
reduction in the initial sales charges for purchases of Class A shares of the   
AIM Funds.                                                                      

LETTERS OF INTENT                                                               

A Qualified Purchaser may pay reduced initial sales charges by (i)  
indicating on the Account Application that he, she or it intends to provide a   
Letter of Intent ("LOI") and (ii) subsequently fulfilling the conditions of that
LOI.                                                                            

     The LOI confirms the total investment in shares of the AIM Funds that the
Qualified Purchaser intends to make within the next 13 months. By marking the   
LOI section on the account application and by signing the account application,  
the Qualified Purchaser indicates that he, she or it understands and agrees to  
the terms of the LOI and is bound by the provisions described below:            

Calculating the Initial Sales Charge                                

   -     Each purchase of fund shares normally subject to an initial sales
         charge made during the 13-month period will be made at the public
      offering price applicable to a single transaction of the total
            dollar amount indicated by the LOI (to determine what the applicable
       public offering price is, look at the sales charge table in the
section on "Initial Sales Charges" above).              

 -     It is the purchaser's responsibility at the time of purchase to
            specify the account numbers that should be considered in determining
the appropriate sales charge.                           

    -     The offering price may be further reduced as described below under
        "Rights of Accumulation" if the Transfer Agent is advised of all
other accounts at the time of the investment.           

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     -     Shares acquired through reinvestment of dividends and capital gains
distributions will not be applied to the LOI.           

Calculating the Number of Shares to be Purchased                    

     -     Purchases made within 90 days before signing an LOI will be applied
        toward completion of the LOI. The LOI effective date will be the
date of the first purchase within the 90-day period.    

-     Purchases made more than 90 days before signing an LOI will be
          applied toward the completion of the LOI based on the value of the
           shares purchased that is calculated at the public offering price on
the effective date of the LOI.                          

     -     If a purchaser meets the original obligation at any time during the
            13-month period, he or she may revise the intended investment amount
        upward by submitting a written and signed request. This revision
will not change the original expiration date.           

-     The Transfer Agent will process necessary adjustments upon the
expiration or completion date of the LOI.               

Fulfilling the Intended Investment                                  

      -     By signing an LOI, a purchaser is not making a binding commitment to
    purchase additional shares, but if purchases made within the
        13-month period do not total the amount specified, the purchaser
will have to pay the increased amount of sales charge.  

-     To assure compliance with the provisions of the 1940 Act, the 
       Transfer Agent will escrow in the form of shares an appropriate
     dollar amount (computed to the nearest full share) out of the
    initial purchase (or subsequent purchases if necessary). All
           dividends and any capital gain distributions on the escrowed shares
          will be credited to the purchaser. All shares purchased, including
          those escrowed, will be registered in the purchaser's name. If the
         total investment specified under this LOI is completed within the
       13-month period, the escrowed shares will be promptly released.

     -     If the intended investment is not completed, the purchaser will pay
         the Transfer Agent the difference between the sales charge on the
    specified amount and the sales charge on the amount actually
          purchased. If the purchaser does not pay such difference within 20
          days of the expiration date, he or she irrevocably constitutes and
    appoints the Transfer Agent as his attorney to surrender for
          redemption any or all shares, to make up such difference within 60
days of the expiration date.                            

Canceling the LOI                                                   

 -     If at any time before completing the LOI Program, the purchaser
          wishes to cancel the agreement, he or she must give written notice
to AIM Distributors.                                    

-     If at any time before completing the LOI Program the purchaser
       requests the Transfer Agent to liquidate or transfer beneficial
    ownership of his total shares, the LOI will be automatically
       canceled. If the total amount purchased is less than the amount
           specified in the LOI, the Transfer Agent will redeem an appropriate
           number of escrowed shares equal to the difference between the sales
           charge actually paid and the sales charge that would have been paid
if the total purchases had been made at a single time.  

Other Persons Eligible for the LOI Privilege                        

     The LOI privilege is also available to holders of the Connecticut General
Guaranteed Account, established for tax qualified group annuities, for contracts
purchased on or before June 30, 1992.                                           

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LOIs and Contingent Deferred Sales Charges                          

      If an investor entered into an LOI to purchase $1,000,000 or more of Class
A shares of a Category III Fund on and after November 15, 2001 and through      
October 30, 2002, such shares will be subject to a 12-month, 0.25% CDSC.        
Purchases of Class A shares of a Category III Fund made pursuant to an LOI to   
purchase $1,000,000 or more of shares entered into prior to November 15, 2001 or
after October 30, 2002 will not be subject to this CDSC. All LOIs to purchase   
$1,000,000 or more of Class A shares of Category I and II Funds and AIM Short   
Term Bond Fund are subject to an 18-month, 1.00% CDSC.                          

RIGHTS OF ACCUMULATION                                                          

    A Qualified Purchaser may also qualify for reduced initial sales charges
based upon his, her or its existing investment in shares of any of the AIM Funds
at the time of the proposed purchase. To determine whether or not a reduced     
initial sales charge applies to a proposed purchase, AIM Distributors takes into
account not only the money which is invested upon such proposed purchase, but   
also the value of all shares of the AIM Funds owned by such purchaser,          
calculated at their then current public offering price.                         

  If a purchaser qualifies for a reduced sales charge, the reduced sales
charge applies to the total amount of money being invested, even if only a      
portion of that amount exceeds the breakpoint for the reduced sales charge. For 
example, if a purchaser already owns qualifying shares of any Fund with a value 
of $20,000 and wishes to invest an additional $20,000 in a fund with a maximum  
initial sales charge of 5.50%, the reduced initial sales charge of 5.25% will   
apply to the full $20,000 purchase and not just to the $15,000 in excess of the 
$25,000 breakpoint.                                                             

      To qualify for obtaining the discount applicable to a particular purchase,
the purchaser or dealer must furnish the Transfer Agent with a list of the      
account numbers and the names in which such accounts of the purchaser are       
registered at the time the purchase is made.                                    

   Rights of Accumulation are also available to holders of the Connecticut
General Guaranteed Account, established for tax-qualified group annuities, for  
contract purchased on or before June 30, 1992.                                  

      If an investor's new purchase of Class A shares of a Category I or II Fund
or AIM Short Term Bond Fund is at net asset value, the newly purchased shares   
will be subject to a CDSC if the investor redeems them prior to the end of the  
18 month holding period (12 months for Category III Funds shares). For new      
purchases of Class A shares of Category III Funds at net asset value made on and
after November 15, 2001 and through October 30, 2002, the newly purchased shares
will be subject to a CDSC if the investor redeems them prior to the end of the  
12 month holding period.                                                        

    OTHER REQUIREMENTS FOR REDUCTIONS IN INITIAL SALES CHARGES. As discussed
above, investors or dealers seeking to qualify orders for a reduced initial     
sales charge must identify such orders and, if necessary, support their         
qualification for the reduced charge. AIM Distributors reserves the right to    
determine whether any purchaser is entitled to the reduced sales charge based on
the definition of a Qualified Purchaser listed above. No person or entity may   
distribute shares of the AIM Funds without payment of the applicable sales      
charge other than to Qualified Purchasers.                                      

    Purchases of Class A shares of AIM Tax-Exempt Cash Fund, Class A3 shares
of AIM Limited Maturity Treasury Fund and AIM Tax-Free Intermediate Fund, AIM   
Cash Reserve Shares of AIM Money Market Fund, Class B and Class C shares of AIM 
Floating Rate Fund and Investor Class shares of any fund will not be taken into 
account in determining whether a purchase qualifies for a reduction in initial  
sales charges.                                                                  

    PURCHASES OF CLASS A SHARES AT NET ASSET VALUE. AIM Distributors permits
certain categories of persons to purchase Class A shares of AIM Funds without   
paying an initial sales charge. These are                                       

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typically categories of persons whose transactions involve little expense, such 
as persons who have a relationship with the funds or with AIM and certain       
programs for purchase.                                                          

   AIM Distributors believes that it is appropriate and in the Funds' best
interests that such persons, and certain other persons whose purchases result in
relatively low expenses of distribution, be permitted to purchase shares through
AIM Distributors without payment of a sales charge.                             

    Accordingly, the following purchasers will not pay initial sales charges
on purchases of Class A shares because there is a reduced sales effort involved 
in sales to these purchasers:                                                   

-     AIM Management and its affiliates, or their clients;          

      -     Any current or retired officer, director or employee (and members of
            their immediate family) of AIM Management, its affiliates or The AIM
          Family of Funds--Registered Trademark--, and any foundation, trust
            or employee benefit plan established exclusively for the benefit of,
or by, such persons;                                    

    -     Any current or retired officer, director, or employee (and members
       of their immediate family), of DST Systems, Inc. or Personix, a
division of Fiserv Solutions, Inc.;                     

     -     Sales representatives and employees (and members of their immediate
            family) of selling group members of financial institutions that have
arrangements with such selling group members;           

-     Purchases through approved fee-based programs;                

    -     Employer-sponsored retirement plans that are Qualified Purchasers,
as defined above, provided that:                        

 a.    a plan's initial investment is at least $1 million;

         b.    there are at least 100 employees eligible to participate in
the plan;                                   

         c.    all plan transactions are executed through a single omnibus
                 account per AIM Fund and the financial institution or service
                organization has entered into the appropriate agreement with
the distributor; further provided that      

           d.    retirement plans maintained pursuant to Section 403(b) of the
                Code are not eligible to purchase shares at NAV based on the
          aggregate investment made by the plan or the number of
               eligible employees unless the employer or plan sponsor is a
                  tax-exempt organization operated pursuant to Section 501(c)(3)
of the Code; and                            

           e.    purchases of AIM Opportunities I Fund by all retirement plans
are subject to initial sales charges;       

     -     Shareholders of record of Advisor Class shares of AIM International
         Growth Fund or AIM Worldwide Growth Fund on February 12, 1999 who
have continuously owned shares of the AIM Funds;        

-     Shareholders of record or discretionary advised clients of any
       investment advisor holding shares of AIM Weingarten Fund or AIM
          Constellation Fund on September 8, 1986, or of AIM Charter Fund on
      November 17, 1986, who have continuously owned shares having a
           market value of at least $500 and who purchase additional shares of
the same Fund;                                          

-     Unitholders of G/SET series unit investment trusts investing  
         proceeds from such trusts in shares of AIM Weingarten Fund or AIM
            Constellation Fund; provided, however, prior to the termination date
           of the trusts, a unitholder may invest proceeds from the redemption
or repurchase of his                                    

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           units only when the investment in shares of AIM Weingarten Fund and
           AIM Constellation Fund is effected within 30 days of the redemption
or repurchase;                                          

      -     A shareholder of a fund that merges or consolidates with an AIM Fund
            or that sells its assets to an AIM Fund in exchange for shares of an
AIM Fund;                                               

     -     Shareholders of the former GT Global funds as of April 30, 1987 who
       since that date continually have owned shares of one or more of
these funds;                                            

 -     Certain former AMA Investment Advisers' shareholders who became
            shareholders of the AIM Global Health Care Fund in October 1989, and
       who have continuously held shares in the former GT Global funds
since that time;                                        

  -     Shareholders of record of Advisor Class shares of an AIM Fund on
        February 11, 2000 who have continuously owned shares of that AIM
  Fund, and who purchase additional shares of that AIM Fund;

-     Shareholders of Investor Class shares of an AIM Fund;         

      -     Qualified Tuition Programs created and maintained in accordance with
Section 529 of the Code;                                

-     Insurance company separate accounts;                          

 -     a retirement plan established exclusively for the benefit of an
 individual (specifically including, but not limited to, a
          Traditional IRA, Roth IRA, SEP IRA, SIMPLE IRA, Solo 401(k), Keogh
 plan, or a tax-sheltered 403(b)(7) custodial account) if:

 a.    such plan is funded by a rollover of assets from an
Employer-Sponsored Retirement Plan;         

           b.    the account being funded by such rollover is to be maintained
        by the same trustee, custodian or administrator that
            maintained the plan from which the rollover distribution
                  funding such rollover originated, or an affiliate thereof; and

           c.    the dealer of record with respect to the account being funded
             by such rollover is the same as the dealer of record with
            respect to the plan from which the rollover distribution
              funding such rollover originated, or an affiliate thereof.

      -     Transfers to IRAs that are attributable to AIM Fund investments held
            in 403(b)(7)s, SIMPLEs, SEPs, SARSEPs, Traditional or Roth IRAs; and

      -     Rollovers from AIM-held 403(b)(7)s, 401(K)s, SEPs, SIMPLEs, SARSEPs,
        Money Purchase Plans, and Profit Sharing Plans if the assets are
transferred to an AIM IRA.                              

      In addition, an investor may acquire shares of any of the AIM Funds at net
asset value in connection with:                                                 

-     the reinvestment of dividends and distributions from a Fund;  

-     exchanges of shares of certain Funds;                         

-     a merger, consolidation or acquisition of assets of a Fund.   

  PAYMENTS TO DEALERS. AIM Distributors may elect to re-allow the entire
initial sales charge to dealers for all sales with respect to which orders are  
placed with AIM Distributors during a particular period. Dealers to whom        
substantially the entire sales charge is re-allowed may be deemed to be         
"underwriters" as that term is defined under the 1933 Act.                      

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    The financial advisor through which you purchase your shares may receive
all or a portion of the sales charges and Rule 12b-1 distribution fees discussed
above. In addition to those payments, AIM Distributors or one or more of its    
corporate affiliates (collectively, the "ADI Affiliates") may make additional   
cash payments to financial advisors in connection with the promotion and sale of
shares of AIM funds. ADI Affiliates makes these payments from its own resources,
from AIM Distributors' retention of underwriting concessions and from payments  
to AIM Distributors under Rule 12b-1 plans. These additional cash payments are  
described below. The categories described below are not mutually exclusive. The 
same financial advisor may receive payments under more than one or all          
categories. Most financial advisors that sell shares of AIM funds receive one or
more types of these cash payments.                                              

  In this context, "financial advisors" include any broker, dealer, bank
(including bank trust departments), registered investment advisor, financial    
planner, retirement plan administrator and any other financial intermediary     
having a selling, administration or similar agreement with AIM.                 

     REVENUE SHARING PAYMENTS. ADI Affiliates make revenue sharing payments as
incentives to certain financial advisors to promote and sell shares of AIM      
funds. The benefits ADI Affiliates receive when they make these payments        
include, among other things, placing AIM funds on the financial advisor's funds 
sales system, placing AIM funds on the financial advisor's preferred or         
recommended fund list, and access (in some cases on a preferential basis over   
other competitors) to individual members of the financial advisor's sales force 
or to the financial advisor's management. Revenue sharing payments are sometimes
referred to as "shelf space" payments because the payments compensate the       
financial advisor for including AIM funds in its fund sales system (on its      
"sales shelf"). ADI Affiliates compensate financial advisors differently        
depending typically on the level and/or type of considerations provided by the  
financial advisor. In addition, payments typically apply only to retail sales,  
and may not apply to other types of sales or assets (such as sales to retirement
plans, qualified tuition programs, or fee based advisor programs - some of which
may be generate certain other payments described below.)                        

 The revenue sharing payments ADI Affiliates make may be calculated on
sales of shares of AIM funds ("Sales-Based Payments"), in which case the total  
amount of such payments shall not exceed 0.25% of the public offering price of  
all shares sold by the financial advisor during the particular period. Such     
payments also may be calculated on the average daily net assets of the          
applicable AIM funds attributable to that particular financial advisor          
("Asset-Based Payments"), in which case the total amount of such cash payments  
shall not exceed 0.25% per annum of those assets during a defined period.       
Sales-Based Payments primarily create incentives to make new sales of shares of 
AIM funds and Asset-Based Payments primarily create incentives to retain        
previously sold shares of AIM funds in investor accounts. ADI Affiliates may pay
a financial advisor either or both Sales-Based Payments and Asset-Based         
Payments.                                                                       

   ADMINISTRATIVE AND PROCESSING SUPPORT PAYMENTS. ADI Affiliates also may
make payments to certain financial advisors that sell AIM Fund shares for       
certain administrative services, including record keeping and sub-accounting    
shareholder accounts. Payments for these services typically do not exceed 0.25% 
of average annual assets or $19 per annum per shareholder account. ADI          
Affiliates also may make payments to certain financial advisors that sell AIM   
Fund shares in connection with client account maintenance support, statement    
preparation and transaction processing. The types of payments that ADI          
Affiliates may make under this category include, among others, payment of ticket
charges per purchase or exchange order placed by a financial advisor, payment of
networking fees of up to $12 per shareholder account maintained on certain      
mutual fund trading systems, or one-time payments for ancillary services such as
setting up funds on a financial advisor's mutual fund trading systems.          

     OTHER CASH PAYMENTS. From time to time, ADI Affiliates, at their expense,
may provide additional compensation to financial advisors which sell or arrange 
for the sale of shares of the Fund. Such compensation provided by ADI Affiliates
may include financial assistance to financial advisors that enable ADI          
Affiliates to participate in and/or present at conferences or seminars, sales or
training programs for invited registered representatives and other employees,   
client entertainment, client and investor events, and other financial           
advisor-sponsored events, and travel expenses, including lodging                

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incurred by registered representatives and other employees in connection with   
client prospecting, retention and due diligence trips. Other compensation may be
offered to the extent not prohibited by state laws or any self-regulatory       
agency, such as the NASD, Inc. ("NASD"). ADI Affiliates make payments for       
entertainment events they deem appropriate, subject to ADI Affiliates guidelines
and applicable law. These payments may vary depending upon the nature of the    
event or the relationship.                                                      

   ADI Affiliates are motivated to make the payments described above since
they promote the sale of AIM fund shares and the retention of those investments 
by clients of financial advisors. To the extent financial advisors sell more    
shares of AIM funds or retain shares of AIM funds in their clients' accounts,   
ADI Affiliates benefit from the incremental management and other fees paid to   
ADI Affiliates by the AIM funds with respect to those assets.                   

 In certain cases these payments could be significant to the financial
advisor. Your financial advisor may charge you additional fees or commissions   
other than those disclosed in this prospectus. You can ask your financial       
advisor about any payments it receives from ADI Affiliates or the AIM funds, as 
well as about fees and/or commissions it charges.                               

Purchases of Class B Shares                                                     

 Class B shares are sold at net asset value, and are not subject to an
initial sales charge. Instead, investors may pay a CDSC if they redeem their    
shares within six years after purchase. See the Prospectus for additional       
information regarding contingent deferred sales charges. AIM Distributors may   
pay sales commissions to dealers and institutions who sell Class B shares of the
AIM Funds at the time of such sales. Payments will equal 4.00% of the purchase  
price and will consist of a sales commission equal to 3.75% plus an advance of  
the first year service fee of 0.25%.                                            

Purchases of Class C Shares                                                     

 Class C shares are sold at net asset value, and are not subject to an
initial sales charge. Instead, investors may pay a CDSC if they redeem their    
shares within the first year after purchase (no CDSC applies to Class C shares  
of AIM Short Term Bond Fund unless you exchange shares of another AIM Fund that 
are subject to a CDSC into AIM Short Term Bond Fund). See the Prospectus for    
additional information regarding this CDSC. AIM Distributors may pay sales      
commissions to dealers and institutions who sell Class C shares of the AIM Funds
(except for Class C shares of AIM Short Term Bond Fund) at the time of such     
sales. Payments will equal 1.00% of the purchase price and will consist of a    
sales commission of 0.75% plus an advance of the first year service fee of      
0.25%. These commissions are not paid on sales to investors exempt from the     
CDSC, including shareholders of record of AIM Advisor Funds, Inc. on April 30,  
1995, who purchase additional shares in any of the Funds on or after May 1,     
1995, and in circumstances where AIM Distributors grants an exemption on        
particular transactions.                                                        

     AIM Distributors may pay dealers and institutions who sell Class C shares
of AIM Short Term Bond Fund an annual fee of 0.50% of average daily net assets. 
These payments will consist of an asset-based fee of 0.25% and a service fee of 
0.25% and will commence immediately.                                            

Purchases of Class K Shares                                                     

 Class K shares are sold at net asset value, and are not subject to an
initial sales charge. If AIM Distributors pays a concession to the dealer of    
record, however, the Class K shares are subject to a 0.70% CDSC at the time of  
redemption if all retirement plan assets are redeemed within one year from the  
date of the retirement plan's initial purchase.                                 

    For purchases of Class K shares, AIM Distributors may make the following
payments to dealers of record:                                                  

Percent of Cumulative Purchase

0.70% of the first $5 million                 
plus 0.45% of amounts in excess of $5 million 

     If the dealer of record receives the above payments, the trail commission
will be paid out beginning in the 13th month. If no additional fee is paid to   
financial intermediaries, the trail commission will begin to accrue immediately.

Purchases of Class R Shares                                                     

 Class R shares are sold at net asset value, and are not subject to an
initial sales charge. If AIM Distributors pays a concession to the dealer of    
record, however, the Class R shares are subject to a 0.75% CDSC at the time of  
redemption if all retirement plan assets are redeemed within one year from the  
date of the retirement plan's initial purchase. For purchases of Class R shares 
of Category I or II Funds or AIM Short Term Bond Fund, AIM Distributors may make
the following payments to dealers of record provided that the applicable dealer 
of record is able to establish that the purchase of Class R shares is a new     
investment or a rollover from a retirement plan in which an AIM Fund was offered
as an investment option:                                                        

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 PERCENT OF CUMULATIVE PURCHASES

0.75% of the first $5 million 
               plus 0.50% of amounts in excess of $5 million

      With regard to any individual purchase of Class R shares, AIM Distributors
may make payment to the dealer of record based on the cumulative total of       
purchases made by the same plan over the life of the plan's account(s).         

Purchases of Investor Class Shares                                              

     Investor Class shares are sold at net asset value, and are not subject to
an initial sales charge or to a CDSC. AIM Distributors may pay dealers and      
institutions an annual fee of 0.25% of average daily net assets and such        
payments will commence immediately.                                             

Purchases of Institutional Class Shares                                         

   Institutional Class shares are sold at the net asset value, and are not
subject to an initial sales charge or to a CDSC.                                

Exchanges                                                                       

    TERMS AND CONDITIONS OF EXCHANGES. Normally, shares of an AIM Fund to be
acquired by exchange are purchased at their net asset value or applicable       
offering price, as the case may be, determined on the date that such request is 
received, but under unusual market conditions such purchases may be delayed for 
up to five business days if it is determined that a fund would be materially    
disadvantaged by an immediate transfer of the proceeds of the exchange. If a    
shareholder is exchanging into a fund paying daily dividends, and the release of
the exchange proceeds is delayed for the foregoing five-day period, such        
shareholder will not begin to accrue dividends until the sixth business day     
after the exchange.                                                             

EXCHANGES BY TELEPHONE. AIM Distributors has made arrangements with 
certain dealers and investment advisory firms to accept telephone instructions  
to exchange shares between any of the AIM Funds. AIM Distributors reserves the  
right to impose conditions on dealers or investment advisors who make telephone 
exchanges of shares of the funds, including the condition that any such dealer  
or investment advisor enter into an agreement (which contains additional        
conditions with respect to exchanges of shares) with AIM Distributors. To       
exchange shares by telephone, a shareholder, dealer or investment advisor who   
has satisfied the foregoing conditions must call AIS at (800) 959-4246. If a    
shareholder is unable to reach AIS by telephone, he may also request exchanges  
by fax, telegraph or use overnight courier services to expedite exchanges by    
mail, which will be effective on the business day received by AIS as long as    
such request is received prior to the close of the customary trading session of 
the New York Stock Exchange ("NYSE"). AIS and AIM Distributors may in certain   
cases be liable for losses due to unauthorized or fraudulent transactions if    
they do not follow reasonable procedures for verification of telephone          
transactions. Such reasonable procedures may include recordings of telephone    
transactions (maintained for six months), requests for confirmation of the      
shareholder's Social Security Number and current address, and mailings of       
confirmations promptly after the transaction.                                   

Redemptions                                                                     

 GENERAL. Shares of the AIM Funds may be redeemed directly through AIM
Distributors or through any dealer who has entered into an agreement with AIM   
Distributors. In addition to the Funds' obligation to redeem shares, AIM        
Distributors may also repurchase shares as an accommodation to shareholders. To 
effect a repurchase, those dealers who have executed Selected Dealer Agreements 
with AIM Distributors must phone orders to the order desk of the Funds at (800) 
959-4246 and guarantee                                                          

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delivery of all required documents in good order. A repurchase is effected at   
the net asset value per share of the applicable Fund next determined after the  
repurchase order is received. Such an arrangement is subject to timely receipt  
by AIS, the Funds' transfer agent, of all required documents in good order. If  
such documents are not received within a reasonable time after the order is     
placed, the order is subject to cancellation. While there is no charge imposed  
by a Fund or by AIM Distributors (other than any applicable contingent deferred 
sales charge) when shares are redeemed or repurchased, dealers may charge a fair
service fee for handling the transaction.                                       

      SUSPENSION OF REDEMPTIONS. The right of redemption may be suspended or the
date of payment postponed when (a) trading on the NYSE is restricted, as        
determined by applicable rules and regulations of the SEC, (b) the NYSE is      
closed for other than customary weekend and holiday closings, (c) the SEC has by
order permitted such suspension, or (d) an emergency as determined by the SEC   
exists making disposition of portfolio securities or the valuation of the net   
assets of a Fund not reasonably practicable.                                    

REDEMPTIONS BY TELEPHONE. By signing an account application form, an
investor appoints AIS as his true and lawful attorney-in-fact to surrender for  
redemption any and all unissued shares held by AIS in the designated account(s),
present or future, with full power of substitution in the premises. AIS and AIM 
Distributors are thereby authorized and directed to accept and act upon any     
telephone redemptions of shares held in any of the account(s) listed, from any  
person who requests the redemption. An investor acknowledges by signing the form
that he understands and agrees that AIS and AIM Distributors may not be liable  
for any loss, expense or cost arising out of any telephone redemption requests  
effected in accordance with the authorization set forth in these instructions if
they reasonably believe such request to be genuine, but may in certain cases be 
liable for losses due to unauthorized or fraudulent transactions. Procedures for
verification of telephone transactions may include recordings of telephone      
transactions (maintained for six months), requests for confirmation of the      
shareholder's Social Security Number and current address, and mailings of       
confirmations promptly after the transactions. AIS reserves the right to cease  
to act as attorney-in-fact subject to this appointment, and AIM Distributors    
reserves the right to modify or terminate the telephone redemption privilege at 
any time without notice. An investor may elect not to have this privilege by    
marking the appropriate box on the application. Then any redemptions must be    
effected in writing by the investor.                                            

SYSTEMATIC REDEMPTION PLAN. A Systematic Redemption Plan permits a  
shareholder of an AIM Fund to withdraw on a regular basis at least $50 per      
withdrawal. Under a Systematic Redemption Plan, all shares are to be held by AIS
and all dividends and distributions are reinvested in shares of the applicable  
AIM Fund by AIS. To provide funds for payments made under the Systematic        
Redemption Plan, AIS redeems sufficient full and fractional shares at their net 
asset value in effect at the time of each such redemption.                      

  Payments under a Systematic Redemption Plan constitute taxable events.
Since such payments are funded by the redemption of shares, they may result in a
return of capital and in capital gains or losses, rather than in ordinary       
income. Because sales charges are imposed on additional purchases of Class A    
shares it is disadvantageous to effect such purchases while a Systematic        
Redemption Plan is in effect.                                                   

 Each AIM Fund bears its share of the cost of operating the Systematic
Redemption Plan.                                                                

Contingent Deferred Sales Charges Imposed upon Redemption of Shares             

   A CDSC may be imposed upon the redemption of Large Purchases of Class A
shares of Category I and II Funds and AIM Short Term Bond Fund, or upon the     
redemption of Class B shares or Class C shares (no CDSC applies to Class C      
shares of AIM Short Term Bond Fund unless you exchange shares of another AIM    
Fund that are subject to a CDSC into AIM Short Term Bond Fund), and, in certain 
circumstances, upon the redemption of Class K or Class R shares. See the        
Prospectus for additional information regarding CDSCs.                          

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      CONTINGENT DEFERRED SALES CHARGE EXCEPTIONS FOR LARGE PURCHASES OF CLASS A
SHARES. An investor who has made a Large Purchase of Class A shares of a        
Category I, II, III Fund or AIM Short Term Bond Fund will not be subject to a   
CDSC upon the redemption of those shares in the following situations:           

   -     Redemptions of shares of Category I or II Funds or AIM Short Term
Bond Fund held more than 18 months;                     

-     Redemptions of shares of Category III Funds purchased prior to
November 15, 2001 or after October 30, 2002;            

   -     Redemptions of shares of Category III Funds purchased on or after
        November 15, 2001 and through October 30, 2002 and held for more
than 12 months;                                         

   -     Redemptions of shares held by retirement plans in cases where (i)
           the plan has remained invested in Class A shares of an AIM Fund for
    at least 12 months, or (ii) the redemption is not a complete
redemption of shares held by the plan;                  

-     Redemptions from private foundations or endowment funds;      

   -     Redemptions of shares by the investor where the investor's dealer
         waives the amounts otherwise payable to it by the distributor and
 notifies the distributor prior to the time of investment;

-     Redemptions of shares of Category I, II or III Funds, AIM Cash
           Reserve Shares of AIM Money Market Fund or AIM Short Term Bond Fund
           acquired by exchange from Class A shares of a Category I or II Fund
           or AIM Short Term Bond Fund, unless the shares acquired by exchange
        (on or after November 15, 2001 and through October 30, 2002 with
           respect to Category III Funds) are redeemed within 18 months of the
          original purchase of the exchanges of Category I or II Fund or AIM
Short Term Bond Fund shares;                            

-     Redemptions of shares of Category III Funds, shares of AIM    
           Tax-Exempt Cash Fund or AIM Cash Reserve Shares of AIM Money Market
            Fund acquired by exchange from Class A shares of a Category III Fund
purchased prior to November 15, 2001;                   

   -     Redemptions of shares of Category I or II Funds or AIM Short Term
            Bond Fund acquired by exchange from Class A shares of a Category III
         Fund purchased on and after November 15, 2001 and through October
            30, 2002, unless the shares acquired by exchange are redeemed within
        18 months of the original purchase of the exchanged Category III
Fund shares;                                            

      -     Redemption of shares of Category III Funds, shares of AIM Tax-Exempt
     Cash Fund or AIM Cash Reserve Shares of AIM Money Market Fund
       acquired by exchange from Class A shares of a Category III Fund
        purchased on and after November 15, 2001 and through October 30,
           2002, unless the shares acquired by exchange are redeemed within 12
          months of the original purchase of the exchanged Category III Fund
shares;                                                 

   -     Redemptions of shares of Category I or II Funds or AIM Short Term
          Bond Fund acquired by exchange on and after November 15, 2001 from
        AIM Cash Reserve Shares of AIM Money Market Fund if the AIM Cash
        Reserve Shares were acquired by exchange from a Category I or II
          Fund or AIM Short Term Bond Fund, unless the Category I or II Fund
            or AIM Short Term Bond Fund shares acquired by exchange are redeemed
           within 18 months of the original purchase of the exchanged Category
I or II Funds or AIM Short Term Bond Fund shares;       

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      -     Redemptions of Category I or II Funds or AIM Short Term Bond Fund by
         retirement plan participants resulting from a total redemption of
           the plan assets that occurs more than one year from the date of the
plan's initial purchase; and                            

  -     Redemption of shares of Category I or II Funds or AIM Short Term
Bond Fund held by an Investor Class shareholder.        

 CONTINGENT DEFERRED SALES CHARGE EXCEPTIONS FOR CLASS B AND C SHARES.
Investors who purchased former GT Global funds Class B shares before June 1,    
1998 are subject to the following waivers from the CDSC otherwise due upon      
redemption:                                                                     

      -     Total or partial redemptions resulting from a distribution following
    retirement in the case of a tax-qualified employer-sponsored
retirement;                                             

      -     Minimum required distributions made in connection with an IRA, Keogh
           Plan or custodial account under Section 403(b) of the Code or other
retirement plan following attainment of age 70 1/2;     

-     Redemptions pursuant to distributions from a tax-qualified    
           employer-sponsored retirement plan, which is invested in the former
       GT Global funds, which are permitted to be made without penalty
           pursuant to the Code, other than tax-free rollovers or transfers of
         assets, and the proceeds of which are reinvested in the former GT
Global funds;                                           

    -     Redemptions made in connection with participant-directed exchanges
between options in an employer-sponsored benefit plan;  

      -     Redemptions made for the purpose of providing cash to fund a loan to
a participant in a tax-qualified retirement plan;       

-     Redemptions made in connection with a distribution from any   
           retirement plan or account that is permitted in accordance with the
       provisions of Section 72(t)(2) of the Code, and the regulations
promulgated thereunder;                                 

     -     Redemptions made in connection with a distribution from a qualified
         profit-sharing or stock bonus plan described in Section 401(k) of
the Code to a participant or beneficiary under Section  
          401(k)(2)(B)(IV) of the Code upon hardship of the covered employee
(determined pursuant to Treasury Regulation Section     
1.401(k)-1(d)(2)); and                                  

    -     Redemptions made by or for the benefit of certain states, counties
       or cities, or any instrumentalities, departments or authorities
           thereof where such entities are prohibited or limited by applicable
law from paying a sales charge or commission.           

   CDSCs will not apply to the following redemptions of Class B or Class C
shares, as applicable:                                                          

  -     Additional purchases of Class C shares of AIM International Core
            Equity Fund (formerly known as AIM International Value Fund) and AIM
        Real Estate Fund by shareholders of record on April 30, 1995, of
           these Funds, except that shareholders whose broker-dealers maintain
          a single omnibus account with AIS on behalf of those shareholders,
            perform sub-accounting functions with respect to those shareholders,
         and are unable to segregate shareholders of record prior to April
         30, 1995, from shareholders whose accounts were opened after that
           date will be subject to a CDSC on all purchases made after March 1,
1996;                                                   

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    -     Redemptions following the death or post-purchase disability of (1)
       any registered shareholders on an account or (2) a settlor of a
           living trust, of shares held in the account at the time of death or
initial determination of post-purchase disability;      

    -     Certain distributions from individual retirement accounts, Section
            403(b) retirement plans, Section 457 deferred compensation plans and
      Section 401 qualified plans, where redemptions result from (i)
            required minimum distributions to plan participants or beneficiaries
          who are age 70 1/2 or older, and only with respect to that portion
      of such distributions that does not exceed 12% annually of the
        participant's or beneficiary's account value in a particular AIM
       Fund; (ii) in kind transfers of assets where the participant or
          beneficiary notifies the distributor of the transfer no later than
           the time the transfer occurs; (iii) tax-free rollovers or transfers
         of assets to another plan of the type described above invested in
       Class B or Class C shares of one or more of the AIM Funds; (iv)
     tax-free returns of excess contributions or returns of excess
          deferral amounts; and (v) distributions on the death or disability
   (as defined in the Code) of the participant or beneficiary;

     -     Amounts from a Systematic Redemption Plan of up to an annual amount
        of 12% of the account value on a per fund basis, at the time the
           withdrawal plan is established, provided the investor reinvests his
dividends;                                              

    -     Liquidation by the AIM Fund when the account value falls below the
minimum required account size of $500; and              

-     Investment account(s) of AIM.                                 

CDSCs will not apply to the following redemptions of Class C shares:

     -     A total or partial redemption of shares where the investor's dealer
          of record notified the distributor prior to the time of investment
            that the dealer would waive the upfront payment otherwise payable to
him;                                                    

-     A total or partial redemption which is necessary to fund a    
    distribution requested by a participant in a retirement plan
    maintained pursuant to Section 401, 403, or 457 of the Code;

   -     Redemptions of Class C shares of a Fund other than AIM Short Term
           Bond Fund if you received such Class C shares by exchanging Class C
shares of AIM Short Term Bond Fund; and                 

      -     Redemptions of Class C shares of AIM Short Term Bond Fund unless you
            received such Class C shares by exchanging Class C shares of another
Fund and the original purchase was subject to a CDSC.   

CDSCs will not apply to the following redemptions of Class K shares:

      -     Class K shares where the retirement plan's dealer of record notifies
       the distributor prior to the time of investment that the dealer
waives the upfront payment otherwise payable to him.    

CDSCs will not apply to the following redemptions of Class R shares:

      -     Class R shares where the retirement plan's dealer of record notifies
       the distributor prior to the time of investment that the dealer
waives the upfront payment otherwise payable to him; and

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   -     Redemptions of shares held by retirement plans in cases where (i)
         the plan has remained invested in Class R shares of a Fund for at
            least 12 months, or (ii) the redemption is not a complete redemption
of all Class R shares held by the plan.                 

General Information Regarding Purchases, Exchanges and Redemptions              

    GOOD ORDER. Purchase, exchange and redemption orders must be received in
good order. To be in good order, an investor must supply AIS with all required  
information and documentation, including signature guarantees when required. In 
addition, if a purchase of shares is made by check, the check must be received  
in good order. This means that the check must be properly completed and signed, 
and legible to AIS in its sole discretion.                                      

      AUTHORIZED AGENTS. AIS and AIM Distributors may authorize agents to accept
purchase and redemption orders that are in good form on behalf of the AIM Funds.
In certain cases, these authorized agents are authorized to designate other     
intermediaries to accept purchase and redemption orders on the Fund's behalf.   
The Fund will be deemed to have received the purchase or redemption order when  
the Fund's authorized agent or its designee accepts the order. The order will be
priced at the net asset value next determined after the order is accepted by the
Fund's authorized agent or its designee.                                        

      TIMING OF PURCHASE ORDERS. It is the responsibility of the dealer or other
financial intermediary to ensure that all orders are transmitted on a timely    
basis to AIS. Any loss resulting from the failure of the dealer or financial    
intermediary or financial intermediary's failure to submit an order within the  
prescribed time frame will be borne by that dealer or financial intermediary. If
a check used to purchase shares does not clear, or if any investment order must 
be canceled due to nonpayment, the investor will be responsible for any         
resulting loss to an AIM Fund or to AIM Distributors.                           

  SIGNATURE GUARANTEES. In addition to those circumstances listed in the
"Shareholder Information" section of each Fund's prospectus, signature          
guarantees are required in the following situations: (1) requests to transfer   
the registration of shares to another owner; (2) telephone exchange and         
telephone redemption authorization forms; (3) changes in previously designated  
wiring or electronic funds transfer instructions; and (4) written redemptions or
exchanges of shares previously reported as lost, whether or not the redemption  
amount is under $250,000 or the proceeds are to be sent to the address of       
record. AIM Funds may waive or modify any signature guarantee requirements at   
any time.                                                                       

Acceptable guarantors include banks, broker-dealers, credit unions, 
national securities exchanges, savings associations and any other organization, 
provided that such institution or organization qualifies as an "eligible        
guarantor institution" as that term is defined in rules adopted by the SEC, and 
further provided that such guarantor institution is listed in one of the        
reference guides contained in AIS' current Signature Guarantee Standards and    
Procedures, such as certain domestic banks, credit unions, securities dealers,  
or securities exchanges. AIS will also accept signatures with either: (1) a     
signature guaranteed with a medallion stamp of the STAMP Program, or (2) a      
signature guaranteed with a medallion stamp of the NYSE Medallion Signature     
Program, provided that in either event, the amount of the transaction involved  
does not exceed the surety coverage amount indicated on the medallion. For      
information regarding whether a particular institution or organization qualifies
as an "eligible guarantor institution," an investor should contact the Client   
Services Department of AIS.                                                     

 TRANSACTIONS BY TELEPHONE. By signing an account application form, an
investor appoints AIS as his true and lawful attorney-in-fact to surrender for  
redemption any and all unissued shares held by AIS in the designated account(s),
or in any other account with any of the AIM Funds, present or future, which has 
the identical registration as the designated account(s), with full power of     
substitution in the premises. AIS and AIM Distributors are thereby authorized   
and directed to accept and act upon any telephone redemptions of shares held in 
any of the account(s) listed, from any person who requests the redemption       
proceeds to be applied to purchase shares in any one or more of the AIM Funds,  
provided that such fund is available for sale and provided that the registration
and mailing address of the shares to be purchased are identical to the          
registration of the shares being redeemed. An investor acknowledges             

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by signing the form that he understands and agrees that AIS and AIM Distributors
may not be liable for any loss, expense or cost arising out of any telephone    
exchange requests effected in accordance with the authorization set forth in    
these instructions if they reasonably believe such request to be genuine, but   
may in certain cases be liable for losses due to unauthorized or fraudulent     
transactions. Procedures for verification of telephone transactions may include 
recordings of telephone transactions (maintained for six months), requests for  
confirmation of the shareholder's Social Security Number and current address,   
and mailings of confirmations promptly after the transactions. AIS reserves the 
right to modify or terminate the telephone exchange privilege at any time       
without notice. An investor may elect not to have this privilege by marking the 
appropriate box on the application. Then any exchanges must be effected in      
writing by the investor.                                                        

     INTERNET TRANSACTIONS. An investor may effect transactions in his account
through the internet by establishing a Personal Identification Number (PIN). By 
establishing a PIN, the investor acknowledges and agrees that neither AIS nor   
AIM Distributors will be liable for any loss, expense or cost arising out of any
internet transaction effected by them in accordance with any instructions       
submitted by a user who transmits the PIN as authentication of his or her       
identity. Procedures for verification of internet transactions include requests 
for confirmation of the shareholder's personal identification number and mailing
of confirmations promptly after the transactions. The investor also acknowledges
that the ability to effect internet transactions may be terminated at any time  
by the AIM Funds.                                                               

  ABANDONED PROPERTY. It is the responsibility of the investor to ensure
that AIS maintains a correct address for his account(s). An incorrect address   
may cause an investor's account statements and other mailings to be returned to 
AIS. Upon receiving returned mail, AIS will attempt to locate the investor or   
rightful owner of the account. If unsuccessful, AIS will retain a shareholder   
locator service with a national information database to conduct periodic        
searches for the investor. If the search firm is unable to locate the investor, 
the search firm will determine whether the investor's account has legally been  
abandoned. AIS is legally obligated to escheat (or transfer) abandoned property 
to the appropriate state's unclaimed property administrator in accordance with  
statutory requirements. The investor's last known address of record determines  
which state has jurisdiction.                                                   

OFFERING PRICE                                                                  

    The following formula may be used to determine the public offering price
per Class A share of an investor's investment:                                  

  Net Asset Value / (1 - Sales Charge as % of Offering Price) = Offering
Price.                                                                          

   For example, at the close of business on December 31, 2004, AIM Premier
Equity Fund - Class A shares had a net asset value per share of $9.88. The      
offering price, assuming an initial sales charge of 5.50%, therefore was $10.46.

Calculation of Net Asset Value                                                  

   Each Fund determines its net asset value per share once daily as of the
close of the customary trading session of the NYSE (generally 4:00 p.m. Eastern 
time) on each business day of the Fund. In the event the NYSE closes early      
(i.e., before 4:00 p.m. Eastern time) on a particular day, each Fund determines 
its net asset value per share as of the close of the NYSE on such day. For      
purposes of determining net asset value per share, futures and option contracts 
generally will be valued 15 minutes after the close of the customary trading    
session of the NYSE. 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. The   
Funds determine net asset value per share by dividing the value of a Fund's     
securities, cash and other assets (including interest accrued but not collected)
attributable to a particular class, less all its liabilities (including accrued 
expenses and dividends payable) attributable to that class, by the total number 
of shares outstanding of that class. Determination of a Fund's net asset value  

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per share is made in accordance with generally accepted accounting principles.  
The net asset value for shareholder transactions may be different than the net  
asset value reported in the Fund's financial statements due to adjustments      
required by generally accepted accounting principles made to the net assets of  
the Fund at period end.                                                         

Each equity security (excluding convertible bonds) held by a Fund is
valued at its last sales price on the exchange where the security is principally
traded or, lacking any sales on a particular day, the security is valued at the 
closing bid price on that day. Each equity security traded in the               
over-the-counter market (but not including securities reported on the NASDAQ    
National Market System) is valued on the basis of prices furnished by           
independent pricing vendors or market makers. Each security reported on the     
NASDAQ National Market System is valued at the NASDAQ Official Closing Price    
("NOCP") or absent a NOCP, at the closing bid price on that day. Debt securities
(including convertible bonds) are fair valued using an evaluated quote on the   
basis of prices provided by an independent pricing vendor. Evaluated quotes     
provided by the pricing vendors 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 special        
securities, dividend rate, yield, quality, coupon rate, maturity, type of issue,
individual trading characteristics and other market data.                       

   Securities for which market prices are not provided by any of the above
methods are valued based upon quotes furnished by independent sources and are   
valued at the last bid price in the case of equity securities and in the case of
debt obligations, the mean between the last bid and ask prices. Securities for  
which market quotations are not available, including situations where market    
quotations are unreliable, are valued at fair value as determined in good faith 
by or under the supervision of the Trust's officers in accordance with          
procedures approved by the Board. Short-term investments are valued at amortized
cost when the security has 60 days or less to maturity.                         

 Generally, trading in corporate bonds, U.S. Government securities and
money market instruments is substantially completed each day at various times   
prior to the close of the customary trading session of the NYSE. The values of  
such securities used in computing the net asset value of a Fund's shares are    
determined at such times. Occasionally, events affecting the values of such     
securities may occur between the times at which such values are determined and  
the close of the customary trading session of the NYSE. If AIM believes a       
development/event has actually caused a closing price to no longer reflect      
current market value, the closing prices may be adjusted to reflect the fair    
value of the affected security as of the close of the NYSE as determined in good
faith using procedures approved by the Board.                                   

    Foreign securities are converted into U.S. dollar amounts using exchange
rates as of the close of the NYSE. Trading in certain foreign securities is     
substantially completed each day at various times prior to the close of the     
NYSE. The values of such securities used in computing the net asset value of    
each Fund's shares are determined as of the close of the respective markets.    
Events affecting the values of such securities may occur between the times at   
which the particular foreign market closes and the close of the customary       
trading session of the NYSE. If an issuer specific event has occurred that AIM  
determines, in its judgment, is likely to have affected the closing price of a  
foreign security, it will price the security at fair value. Issuer specific     
events may include a merger or insolvency, events which affect a geographical   
area or an industry segment, such as political events or natural disasters, or  
market events, such as a significant movement in the U.S. market. AIM also      
relies on a screening process from a pricing vendor to indicate the degree of   
certainty, based on historical data, that the closing price in the principal    
market where a foreign security trades is not the current market value as of the
close of the NYSE. For foreign securities where AIM believes, at the approved   
degree of certainty, that the price is not reflective of current market value,  
AIM will use the indication of fair value from the pricing vendor to determine  
the fair value of the security. The pricing vendor, pricing methodology or      
degree of certainty may change from time to time. Multiple factors may be       
considered by the pricing vendor in determining adjustments to reflect fair     
value and may include information relating to sector indices, ADRs domestic and 
foreign index futures, and exchange-traded funds.                               

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     Fund securities primarily traded in foreign markets may be traded in such
markets on days which are not business days of the Fund. Because the net asset  
value per share of each Fund is determined only on business days of the Fund,   
the value of the portfolio securities of a Fund that invests in foreign         
securities may be significantly affected on days when an investor cannot        
exchange or redeem shares of the Fund.                                          

REDEMPTIONS IN KIND                                                             

    Although the Funds generally intend to pay redemption proceeds solely in
cash, the Funds reserve the right to determine, in their sole discretion,       
whether to satisfy redemption requests by making payment in securities or other 
property (known as a redemption in kind). For instance, a Fund may make a       
redemption in kind if a cash redemption would disrupt its operations or         
performance. Securities that will be delivered as payment in redemptions in kind
will be valued using the same methodologies that the Fund typically utilizes in 
valuing such securities. Shareholders receiving such securities are likely to   
incur transaction and brokerage costs on their subsequent sales of such         
securities, and the securities may increase or decrease in value until the      
shareholder sells them. The Trust, on behalf of the Funds, has made an election 
under Rule 18f-1 under the 1940 Act (a "Rule 18f-1 Election"), and therefore,   
the Trust, on behalf of the Fund, is obligated to redeem for cash all shares    
presented to such Fund for redemption by any one shareholder in an amount up to 
the lesser of $250,000 or 1% of that Fund's net assets in any 90-day period. The
Rule 18f-1 Election is irrevocable while Rule 18f-1 under the 1940 Act is in    
effect unless the SEC by order permits withdrawal of such Rule 18f-1 Election.  

BACKUP WITHHOLDING                                                              

   Accounts submitted without a correct, certified taxpayer identification
number or, alternatively, a completed Internal Revenue Service ("IRS") Form W-8 
(for non-resident aliens) or Form W-9 (certifying exempt status) accompanying   
the registration information will generally be subject to backup withholding.   

      Each AIM Fund, and other payers, generally must withhold 28% of redemption
payments and reportable dividends (whether paid or accrued) in the case of any  
shareholder who fails to provide the Fund with a taxpayer identification number 
("TIN") and a certification that he is not subject to backup withholding.       

An investor is subject to backup withholding if:                    

1.    the investor fails to furnish a correct TIN to the Fund;      

    2.    the IRS notifies the Fund that the investor furnished an incorrect
TIN;                                                    

      3.    the investor or the Fund is notified by the IRS that the investor is
           subject to backup withholding because the investor failed to report
            all of the interest and dividends on such investor's tax return (for
reportable interest and dividends only);                

    4.    the investor fails to certify to the Fund that the investor is not
     subject to backup withholding under (3) above (for reportable
  interest and dividend accounts opened after 1983 only); or

5.    the investor does not certify his TIN. This applies only to   
non-exempt mutual fund accounts opened after 1983.      

   Interest and dividend payments are subject to backup withholding in all
five situations discussed above. Redemption proceeds and long-term gain         
distributions are subject to backup withholding only if (1), (2) or (5) above   
applies.                                                                        

Certain payees and payments are exempt from backup withholding and  
information reporting. AIM or AIS will not provide Form 1099 to those payees.   

  Investors should contact the IRS if they have any questions concerning
withholding.                                                                    

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    IRS PENALTIES - Investors who do not supply the AIM Funds with a correct
TIN will be subject to a $50 penalty imposed by the IRS unless such failure is  
due to reasonable cause and not willful neglect. If an investor falsifies       
information on this form or makes any other false statement resulting in no     
backup withholding on an account which should be subject to backup withholding, 
such investor may be subject to a $500 penalty imposed by the IRS and to certain
criminal penalties including fines and/or imprisonment.                         

   NONRESIDENT ALIENS - Nonresident alien individuals and foreign entities
are not subject to the backup withholding previously discussed, but must certify
their foreign status by attaching IRS Form W-8 to their application. Form W-8   
generally remains in effect for a period starting on the date the Form is signed
and ending on the last day of the third succeeding calendar year. Such          
shareholders may, however, be subject to federal income tax withholding at a 30%
rate on ordinary income dividends and other distributions. Under applicable     
treaty law, residents of treaty countries may qualify for a reduced rate of     
withholding or a withholding exemption.                                         

DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS

DIVIDENDS AND DISTRIBUTIONS                                                     

 It is the present policy of each Fund to declare and pay annually net
investment income dividends and capital gain distributions, except for AIM      
Balanced Fund and AIM Basic Balanced Fund. It is each Fund's intention to       
distribute substantially all of its net investment income and realized net      
capital gains. In determining the amount of capital gains, if any, available for
distribution, capital gains will generally be offset against available net      
capital losses, if any, carried forward from previous fiscal periods. All       
dividends and distributions will be automatically reinvested in additional      
shares of the same class of each Fund unless the shareholder has requested in   
writing to receive such dividends and distributions in cash or that they be     
invested in shares of another AIM Fund, subject to the terms and conditions set 
forth in the Prospectus under the caption "Special Plans - Automatic Dividend   
Investment." Such dividends and distributions will be reinvested at the net     
asset value per share determined on the ex-dividend date. If a shareholder's    
account does not have any shares in it on a dividend or capital gain            
distribution payment date, the dividend or distribution will be paid in cash    
whether or not the shareholder has elected to have such dividends or            
distributions reinvested.                                                       

    It is the present policy of the AIM Balanced Fund and AIM Basic Balanced
Fund to declare and pay quarterly net investment income dividends and declare   
and pay annually capital gain distributions.                                    

 Dividends on Class B and Class C shares are expected to be lower than
those for Class A shares because of higher distribution fees paid by Class B and
Class C shares. Dividends on Class R shares may be lower than those for Class A 
shares, depending on whether the Class R shares pay higher distribution fees    
than those for Class A shares. Other class-specific expenses may also affect    
dividends on shares of those classes. Expenses attributable to a particular     
class ("Class Expenses") include distribution plan expenses, which must be      
allocated to the class for which they are incurred. Other expenses may be       
allocated as Class Expenses, consistent with applicable legal principles under  
the 1940 Act and the Code.                                                      

TAX MATTERS                                                                     

    The following is only a summary of certain additional tax considerations
generally affecting the Funds and their shareholders that are not described in  
the Prospectus. No attempt is made to present a detailed explanation of the tax 
treatment of each Fund or its shareholders, and the discussion here and in the  
Prospectus is not intended as a substitute for careful tax planning.            

     QUALIFICATION AS A REGULATED INVESTMENT COMPANY. Each Fund has elected to
be taxed under Subchapter M of the Code as a regulated investment company and   
intends to maintain its qualification as                                        

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such in each of its taxable years. As a regulated investment company, each Fund 
is not subject to federal income tax on the portion of its net investment income
(i.e., taxable interest, dividends and other taxable ordinary income, net of    
expenses) and capital gain net income (i.e., the excess of capital gains over   
capital losses) that it distributes to shareholders, provided that it           
distributes an amount equal to (i) at least 90% of its investment company       
taxable income (i.e., net investment income, net foreign currency ordinary gain 
or loss and the excess of net short-term capital gain over net long-term capital
loss) and (ii) at least 90% of the excess of its tax-exempt interest income     
under Code Section 103(a) over its deductions disallowed under Code Sections 265
and 171(a)(2) for the taxable year (the "Distribution Requirement"), and        
satisfies certain other requirements of the Code that are described below.      
Distributions by a Fund made during the taxable year or, under specified        
circumstances, within twelve months after the close of the taxable year, will be
considered distributions of income and gain of the taxable year and can         
therefore satisfy the Distribution Requirement.                                 

      Treasury regulations permit a regulated investment company, in determining
its investment company taxable income and net capital gain (i.e., the excess of 
net long-term capital gain over net short-term capital loss) for any taxable    
year, to elect (unless it has made a taxable year election for excise tax       
purposes as discussed below) to treat all or part of any net capital loss, any  
net long-term capital loss or any net foreign currency loss incurred after      
October 31 as if it had been incurred in the succeeding year.                   

     Each Fund may use "equalization accounting" in determining the portion of
its net investment income and capital gain net income that has been distributed.
A Fund that elects to use equalization accounting will allocate a portion of its
realized investment income and capital gain to redemptions of Fund shares and   
will reduce the amount of such income and gain that it distributes in cash.     
However, each Fund intends to make cash distributions for each taxable year in  
an aggregate amount that is sufficient to satisfy the Distribution Requirement  
without taking into account its use of equalization accounting. The Internal    
Revenue Service has not published any guidance concerning the methods to be used
in allocating investment income and capital gain to redemptions of shares. In   
the event that the Internal Revenue Service determines that a Fund is using an  
improper method of allocation and has underdistributed its net investment income
and capital gain net income for any taxable year, such Fund may be liable for   
additional federal income tax.                                                  

In addition to satisfying the Distribution Requirement, a regulated 
investment company must derive at least 90% of its gross income from dividends, 
interest, certain payments with respect to securities loans, gains from the sale
or other disposition of stock, securities or foreign currencies (to the extent  
such currency gain is directly related to the regulated investment company's    
principal business of investing in stock or securities), other income           
(including, but not limited to, gains from options, futures or forward          
contracts) derived from its business of investing in such stock, securities or  
currencies and (for Fund taxable years beginning after October 22, 2004) net    
income derived from certain publicly traded partnerships (the "Income           
Requirement"). Under certain circumstances, a fund may be required to sell      
portfolio holdings to meet this requirement.                                    

      In addition to satisfying the requirements described above, each Fund must
satisfy an asset diversification test in order to qualify as a regulated        
investment company (the "Asset Diversification Test"). Under this test, at the  
close of each quarter of each Fund's taxable year, at least 50% of the value of 
the Fund's assets must consist of cash and cash items, U.S. Government          
securities, securities of other regulated investment companies, and securities  
of other issuers, as to which the Fund has not invested more than 5% of the     
value of the Fund's total assets in securities of such issuer and as to which   
the Fund does not hold more than 10% of the outstanding voting securities of    
such issuer, and no more than 25% of the value of its total assets may be       
invested in the securities of any one issuer (other than U.S. Government        
securities and securities of other regulated investment companies), of two or   
more issuers which the Fund controls and which are engaged in the same or       
similar trades or businesses or of securities of certain publicly traded        
partnerships (for Fund taxable years beginning after October 22, 2004).         

      For purposes of the Asset Diversification Test, the IRS has ruled that the
issuer of a purchased listed call option on stock is the issuer of the stock    
underlying the option. The IRS has also informally                              

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ruled that, in general, the issuers of purchased or written call and put options
on securities, of long and short positions on futures contracts on securities   
and of options on such future contracts are the issuers of the securities       
underlying such financial instruments where the instruments are traded on an    
exchange.                                                                       

    Where the writer of a listed call option owns the underlying securities,
the IRS has ruled that the Asset Diversification Test will be applied solely to 
such securities and not to the value of the option itself. With respect to      
options on securities indexes, futures contracts on securities indexes and      
options on such futures contracts, the IRS has informally ruled that the issuers
of such options and futures contracts are the separate entities whose securities
are listed on the index, in proportion to the weighing of securities in the     
computation of the index. It is unclear under present law who should be treated 
as the issuer of forward foreign currency exchange contracts, of options on     
foreign currencies, or of foreign currency futures and related options. It has  
been suggested that the issuer in each case may be the foreign central bank or  
the foreign government backing the particular currency. Due to this uncertainty 
and because the Funds may not rely on informal rulings of the IRS, the Funds may
find it necessary to seek a ruling from the IRS as to the application of the    
Asset Diversification Test to certain of the foregoing types of financial       
instruments or to limit its holdings of some or all such instruments in order to
stay within the limits of such test.                                            

   Under an IRS revenue procedure, a Fund may treat its position as lender
under a repurchase agreement as a U.S. Government security for purposes of the  
Asset Diversification where the repurchase agreement is fully collateralized    
(under applicable SEC standards) with securities that constitute U.S. Government
securities.                                                                     

     If for any taxable year a Fund does not qualify as a regulated investment
company, all of its taxable income (including its net capital gain) will be     
subject to tax at regular corporate rates without any deduction for             
distributions to shareholders, and such distributions will be taxable as        
ordinary dividends to the extent of such Fund's current and accumulated earnings
and profits. Such distributions generally will be eligible for the dividends    
received deduction (to the extent discussed below) in the case of corporate     
shareholders and will be included in the qualified dividend income of           
non-corporate shareholders. See "Fund Distributions" below.                     

 DETERMINATION OF TAXABLE INCOME OF A REGULATED INVESTMENT COMPANY. In
general, gain or loss recognized by a Fund on the disposition of an asset will  
be a capital gain or loss. However, gain recognized on the disposition of a debt
obligation purchased by a Fund at a market discount (generally, at a price less 
than its principal amount) will be treated as ordinary income to the extent of  
the portion of the market discount which accrued during the period of time the  
Fund held the debt obligation unless the Fund made an election to accrue market 
discount into income. If a Fund purchases a debt obligation that was originally 
issued at a discount, the Fund is generally required to include in gross income 
each year the portion of the original issue discount which accrues during such  
year. In addition, under the rules of Code Section 988, gain or loss recognized 
on the disposition of a debt obligation denominated in a foreign currency or an 
option with respect thereto (but only to the extent attributable to changes in  
foreign currency exchange rates), and gain or loss recognized on the disposition
of a foreign currency forward contract or of foreign currency itself, will      
generally be treated as ordinary income or loss. In certain cases, a Fund may   
make an election to treat such gain or loss as capital.                         

 Certain hedging transactions that may be engaged in by certain of the
Funds (such as short sales "against the box") may be subject to special tax     
treatment as "constructive sales" under Section 1259 of the Code if a Fund holds
certain "appreciated financial positions" (defined generally as any interest    
(including a futures or forward contract, short sale or option) with respect to 
stock, certain debt instruments, or partnership interests if there would be a   
gain were such interest sold, assigned, or otherwise terminated at its fair     
market value). Upon entering into a constructive sales transaction with respect 
to an appreciated financial position, a Fund will generally be deemed to have   
constructively sold such appreciated financial position and will recognize gain 
as if such position were sold, assigned, or otherwise terminated at its fair    
market value on the date of such constructive sale (and will take into account  
any gain for the taxable year which includes such date).                        

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Some of the forward foreign currency exchange contracts, options and
futures contracts that certain of the Funds may enter into will be subject to   
special tax treatment as "Section 1256 contracts." Section 1256 contracts that a
Fund holds are treated as if they are sold for their fair market value on the   
last business day of the taxable year, regardless of whether a taxpayer's       
obligations (or rights) under such contracts have terminated (by delivery,      
exercise, entering into a closing transaction or otherwise) as of such date. Any
gain or loss recognized as a consequence of the year-end deemed disposition of  
Section 1256 contracts is combined with any other gain or loss that was         
previously recognized upon the termination of Section 1256 contracts during that
taxable year. The net amount of such gain or loss for the entire taxable year   
(including gain or loss arising as a consequence of the year-end deemed sale of 
such contracts) is deemed to be 60% long-term and 40% short-term gain or loss.  
However, in the case of Section 1256 contracts that are forward foreign currency
exchange contracts, the net gain or loss is separately determined and (as       
discussed above) generally treated as ordinary income or loss. If such a future 
or option is held as an offsetting position and can be considered a straddle    
under Section 1092 of the Code, such a straddle will constitute a mixed         
straddle. A mixed straddle will be subject to both Section 1256 and Section 1092
unless certain elections are made by the Fund.                                  

  Other hedging transactions in which the Funds may engage may result in
"straddles" or "conversion transactions" for U.S. federal income tax purposes.  
The straddle and conversion transaction rules may affect the character of gains 
(or in the case of the straddle rules, losses) realized by the Funds. In        
addition, losses realized by the Funds on positions that are part of a straddle 
may be deferred under the straddle rules, rather than being taken into account  
in calculating the taxable income for the taxable year in which the losses are  
realized. Because only a few regulations implementing the straddle rules and the
conversion transaction rules have been promulgated, the tax consequences to the 
Funds of hedging transactions are not entirely clear. The hedging transactions  
may increase the amount of short-term capital gain realized by the Funds (and,  
if they are conversion transactions, the amount of ordinary income) which is    
taxed as ordinary income when distributed to shareholders.                      

    Because application of any of the foregoing rules governing Section 1256
contracts, constructive sales, straddle and conversion transactions may affect  
the character of gains or losses, defer losses and/or accelerate the recognition
of gains or losses from the affected investment or straddle positions, the      
taxable income of a Fund may exceed or be less than its book income.            
Accordingly, the amount which must be distributed to shareholders and which will
be taxed to shareholders as ordinary income, qualified dividend income, or      
long-term capital gain may also differ from the book income of a Fund and may be
increased or decreased as compared to a fund that did not engage in such        
transactions.                                                                   

    EXCISE TAX ON REGULATED INVESTMENT COMPANIES. A 4% non-deductible excise
tax is imposed on a regulated investment company that fails to distribute in    
each calendar year an amount equal to 98% of ordinary taxable income for the    
calendar year and 98% of capital gain net income (excess of capital gains over  
capital losses) for the one-year period ended on October 31 of such calendar    
year (or, at the election of a regulated investment company having a taxable    
year ending November 30 or December 31, for its taxable year (a "taxable year   
election")). The balance of such income must be distributed during the next     
calendar year. For the foregoing purposes, a regulated investment company is    
treated as having distributed any amount on which it is subject to income tax   
for any taxable year ending in such calendar year.                              

    For purposes of the excise tax, a regulated investment company shall (1)
reduce its capital gain net income (but not below its net capital gain) by the  
amount of any net ordinary loss for the calendar year and (2) exclude Section   
988 foreign currency gains and losses incurred after October 31 (or after the   
end of its taxable year if it has made a taxable year election) in determining  
the amount of ordinary taxable income for the current calendar year (and,       
instead, include such gains and losses in determining ordinary taxable income   
for the succeeding calendar year).                                              

  Each Fund generally intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and capital gain net income prior  
to the end of each calendar year to avoid liability for the excise tax. However,
in the event that the Internal Revenue Service determines that a                

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Fund is using an improper method of allocation for purposes of equalization     
accounting (as discussed above), such Fund may be liable for excise tax.        
Moreover, investors should note that a Fund may in certain circumstances be     
required to liquidate portfolio investments to make sufficient distributions to 
avoid excise tax liability. In addition, under certain circumstances, a Fund may
elect to pay a minimal amount of excise tax.                                    

 PFIC INVESTMENTS. The Funds are permitted to invest in foreign equity
securities and thus may invest in stocks of foreign companies that are          
classified under the Code as passive foreign investment companies ("PFICs"). In 
general, a foreign company is classified as a PFIC if at least one-half of its  
assets constitute investment-type assets or 75% or more of its gross income is  
investment-type income.                                                         

 The application of the PFIC rules may affect, among other things, the
character of gain, the amount of gain or loss and the timing of the recognition 
and character of income with respect to PFIC stock, as well as subject the Funds
themselves to tax on certain income from PFIC stock. For these reasons the      
amount that must be distributed to shareholders, and which will be taxed to     
shareholders as ordinary income or long-term capital gain, may be increased or  
decreased substantially as compared to a fund that did not invest in PFIC stock.

SWAP AGREEMENTS. Each Fund may enter into swap agreements. The rules
governing the tax aspects of swap agreements are in a developing stage and are  
not entirely clear in certain respects. Accordingly, while a Fund intends to    
account for such transactions in a manner deemed to be appropriate, the IRS     
might not accept such treatment. If it did not, the status of a Fund as a       
regulated investment company might be affected. Each Fund intends to monitor    
developments in this area. Certain requirements that must be met under the Code 
in order for a Fund to qualify as a regulated investment company may limit the  
extent to which a Fund will be able to engage in swap agreements.               

    FUND DISTRIBUTIONS. Each Fund anticipates distributing substantially all
of its investment company taxable income for each taxable year. Such            
distributions will be taxable to shareholders as ordinary income and treated as 
dividends for federal income tax purposes, but they will qualify for the 70%    
dividends received deduction for corporations and as qualified dividend income  
for individuals and other non-corporate taxpayers to the extent discussed below.

  A Fund may either retain or distribute to shareholders its net capital
gain (net long-term capital gain over net short-term capital loss) for each     
taxable year. Each Fund currently intends to distribute any such amounts. If net
capital gain is distributed and designated as a capital gain dividend, it will  
be taxable to shareholders as long-term capital gain (currently taxable at a    
maximum rate of 15% for non-corporate shareholders) regardless of the length of 
time the shareholder has held his shares or whether such gain was recognized by 
the Fund prior to the date on which the shareholder acquired his shares.        
Conversely, if a Fund elects to retain its net capital gain, the Fund will be   
taxed thereon (except to the extent of any available capital loss carry         
forwards) at the 35% corporate tax rate. If a Fund elects to retain its net     
capital gain, it is expected that the Fund also will elect to have shareholders 
treated as if each received a distribution of its pro rata share of such gain,  
with the result that each shareholder will be required to report its pro rata   
share of such gain on its tax return as long-term capital gain, will receive a  
refundable tax credit for its pro rata share of tax paid by the Fund on the     
gain, and will increase the tax basis for its shares by an amount equal to the  
deemed distribution less the tax credit.                                        

   Ordinary income dividends paid by a Fund with respect to a taxable year
will qualify for the 70% dividends received deduction generally available to    
corporations (other than corporations, such as "S" corporations, which are not  
eligible for the deduction because of their special characteristics and other   
than for purposes of special taxes such as the accumulated earnings tax and the 
personal holding company tax) to the extent of the amount of qualifying         
dividends received by the Fund from domestic corporations for the taxable year. 
However, the alternative minimum tax applicable to corporations may reduce the  
value of the dividends received deduction.                                      

Ordinary income dividends paid by a Fund to individuals and other   
noncorporate taxpayers will be treated as qualified dividend income that is     
subject to tax at a maximum rate of 15% to the extent of the                    

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amount of qualifying dividends received by the Fund from domestic corporations  
and from foreign corporations that are either incorporated in a possession of   
the United States, or are eligible for benefits under certain income tax        
treaties with the United States that include an exchange of information program.
In addition, qualifying dividends include dividends paid with respect to stock  
of a foreign corporation that is readily tradable on an established securities  
market in the United States. However, dividends received by the Fund from       
foreign personal holding companies, foreign investment companies or PFICs are   
not qualifying dividends. If the qualifying dividend income received by a Fund  
is equal to 95% (or a greater percentage) of the Fund's gross income (exclusive 
of net capital gain) in any taxable year, all of the ordinary income dividends  
paid by the Fund will be qualifying dividend income.                            

    Dividends paid by a Fund will not be eligible for the dividends received
deduction when received by a corporation that has not held its shares of the    
Fund for at least 46 days during the 91-day period beginning 45 days before the 
date on which the shares become ex-dividend and will not be treated as qualified
dividend income when received by an individual or other noncorporate shareholder
who has not held its shares of the Fund for at least 61 days during the 121-day 
period beginning 60 days before the date on which the shares become ex-dividend.

      Alternative minimum tax ("AMT") is imposed in addition to, but only to the
extent it exceeds, the regular tax and is computed at a maximum rate of 28% for 
non-corporate taxpayers and 20% for corporate taxpayers on the excess of the    
taxpayer's alternative minimum taxable income ("AMTI") over an exemption amount.
However, the AMT on capital gain dividends and qualified dividend income paid by
a Fund to a non-corporate shareholder may not exceed a maximum rate of 15%. The 
corporate dividends received deduction is not itself an item of tax preference  
that must be added back to taxable income or is otherwise disallowed in         
determining a corporation's AMTI. However, corporate shareholders will generally
be required to take the full amount of any dividend received from the Fund into 
account (without a dividends received deduction) in determining their adjusted  
current earnings, which are used in computing an additional corporate preference
item (i.e., 75% of the excess of a corporate taxpayer's adjusted current        
earnings over its AMTI (determined without regard to this item and the AMTI net 
operating loss deduction)) that is includable in AMTI. However, certain small   
corporations are wholly exempt from the AMT.                                    

  Distributions by a Fund that are not from earnings and profits will be
treated as a return of capital to the extent of (and in reduction of) the       
shareholder's tax basis in his shares; any excess will be treated as gain from  
the sale of his shares.                                                         

 Distributions by a Fund will be treated in the manner described above
regardless of whether such distributions are paid in cash or reinvested in      
additional shares of the Fund (or of another Fund). Shareholders receiving a    
distribution in the form of additional shares will be treated as receiving a    
distribution in an amount equal to the fair market value of the shares received,
determined as of the ex-dividend date.                                          

      Ordinarily, shareholders are required to take distributions by a Fund into
account in the year in which the distributions are made. However, dividends     
declared in October, November or December of any year and payable to            
shareholders of record on a specified date in such a month will be deemed to    
have been received by the shareholders (and made by the Fund) on December 31 of 
such calendar year if such dividends are actually paid in January of the        
following year. Shareholders will be advised annually as to the U.S. federal    
income tax consequences of distributions made (or deemed made) during the year  
in accordance with the guidance that has been provided by the IRS.              

     If the net asset value of shares is reduced below a shareholder's cost as
a result of a distribution by a Fund, such distribution generally will be       
taxable even though it represents a return of invested capital. Investors should
be careful to consider the tax implications of buying shares of a Fund just     
prior to a distribution. The price of shares purchased at this time may reflect 
the amounts of the forthcoming distribution. Those purchasing just prior to a   
distribution will receive a distribution which generally will be taxable to     
them.                                                                           

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      SALE OR REDEMPTION OF SHARES. A shareholder will recognize gain or loss on
the sale or redemption of shares of a Fund in an amount equal to the difference 
between the proceeds of the sale or redemption and the shareholder's adjusted   
tax basis in the shares. All or a portion of any loss so recognized may be      
deferred under the wash sale rules if the shareholder purchases other shares of 
the Fund within 30 days before or after the sale or redemption. In general, any 
gain or loss arising from (or treated as arising from) the sale or redemption of
shares of a Fund will be considered capital gain or loss and will be long-term  
capital gain or loss if the shares were held for longer than one year.          
Currently, any long-term capital gain recognized by a non-corporate shareholder 
will be subject to tax at a maximum rate of 15%. However, any capital loss      
arising from the sale or redemption of shares held for six months or less will  
be treated as a long-term capital loss to the extent of the amount of capital   
gain dividends received on such shares. Capital losses in any year are          
deductible only to the extent of capital gains plus, in the case of a           
non-corporate taxpayer, $3,000 of ordinary income.                              

   If a shareholder (a) incurs a sales load in acquiring shares of a Fund,
(b) disposes of such shares less than 91 days after they are acquired, and (c)  
subsequently acquires shares of the Fund or another fund at a reduced sales load
pursuant to a right to reinvest at such reduced sales load acquired in          
connection with the acquisition of the shares disposed of, then the sales load  
on the shares disposed of (to the extent of the reduction in the sales load on  
the shares subsequently acquired) shall not be taken into account in determining
gain or loss on the shares disposed of, but shall be treated as incurred on the 
acquisition of the shares subsequently acquired. The wash sale rules may also   
limit the amount of loss that may be taken into account on disposition after    
such adjustment.                                                                

    BACKUP WITHHOLDING. The Funds may be required to withhold 28% of taxable
distributions and/or redemption payments. For more information refer to         
"Purchase, Redemption and Pricing of Shares - Backup Withholding."              

 FOREIGN SHAREHOLDERS. Taxation of a shareholder who, as to the United
States, is a nonresident alien individual, foreign trust or estate, foreign     
corporation, or foreign partnership ("foreign shareholder"), depends on whether 
the income from a Fund is "effectively connected" with a U.S. trade or business 
carried on by such shareholder. If the income from a Fund is not effectively    
connected with a U.S. trade or business carried on by a foreign shareholder,    
distributions (other than distributions of long-term and short-term capital gain
and of certain types of interest income) will be subject to U.S. withholding tax
at the rate of 30% (or lower treaty rate) upon the gross amount of the          
distribution. Such a foreign shareholder would generally be exempt from U.S.    
federal income tax on gain realized on the redemption of shares of a Fund,      
capital gain dividends and amounts retained by a Fund that are designated as    
undistributed net capital gain.                                                 

  As a consequence of the enactment of the American Jobs Creation Act of
2004, such a foreign shareholder will also generally be exempt from U.S. federal
income tax on distributions that a Fund designates as "short-term capital gain  
dividends" or as "interest-related dividends" for Fund taxable years beginning  
after December 31, 2004 and before January 1, 2008. The aggregate amount that   
may be designated as short-term capital gain dividends for a Fund's taxable year
is generally equal to the excess (if any) of the Fund's net short-term capital  
gain over its net long-term capital loss. The aggregate amount designated as    
interest-related dividends for any Fund taxable year is generally limited to the
excess of the amount of "qualified interest income" of the Fund over allocable  
expenses. Qualified interest income is generally equal to the sum of a Fund's   
U.S.-source income that constitutes (1) bank deposit interest; (2) short-term   
original issue discount that is exempt from withholding tax; (3) interest on a  
debt obligation which is in registered form, unless it is earned on a debt      
obligation issued by a corporation or partnership in which the Fund holds a     
10-percent ownership interest or its payment is contingent on certain events;   
and (4) interest-related dividends received from another regulated investment   
company.                                                                        

   If the income from a Fund is effectively connected with a U.S. trade or
business carried on by a foreign shareholder, then ordinary income dividends,   
capital gain dividends short-term capital gain dividends, interest related      
dividends and any gains realized upon the sale or redemption of shares of the   
Fund will be subject to U.S. federal income tax at the rates applicable to U.S. 
citizens or domestic corporations.                                              

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     In the case of foreign non-corporate shareholders, a Fund may be required
to withhold U.S. federal income tax at a rate of 28% on distributions that are  
otherwise exempt from withholding tax (or taxable at a reduced treaty rate)     
unless such shareholders furnish the Fund with proper notification of their     
foreign status.                                                                 

    Foreign shareholders may be subject to U.S. withholding tax at a rate of
30% on the income resulting from the Foreign Tax Election, but may not be able  
to claim a credit or deduction with respect to the withholding tax for the      
foreign tax treated as having been paid by them.                                

    Foreign persons who file a United States tax return to obtain a U.S. tax
refund and who are not eligible to obtain a social security number must apply to
the IRS for an individual taxpayer identification number, using IRS Form W-7.   
For a copy of the IRS Form W-7 and accompanying instructions, please contact    
your tax adviser or the IRS.                                                    

   Transfers by gift of shares of a Fund by a foreign shareholder who is a
nonresident alien individual will not be subject to U.S. federal gift tax. An   
individual who, at the time of death, is a foreign shareholder will nevertheless
be subject to U.S. federal estate tax with respect to shares at the graduated   
rates applicable to U.S. citizens and residents, unless a treaty exception      
applies. In the absence of a treaty, there is a $13,000 statutory estate tax    
credit. Estates of decedents dying after December 31, 2004 and before January 1,
2008 will be able to exempt from federal estate tax the proportion of the value 
of a Fund's shares attributable to "qualifying assets" held by the Fund at the  
end of the quarter immediately preceding the decedent's death (or such other    
time as the Internal Revenue Service may designate in regulations). Qualifying  
assets include bank deposits and other debt obligations that pay interest or    
accrue original issue discount that is exempt from withholding tax, debt        
obligations of a domestic corporation that are treated as giving rise to foreign
source income, and other investments that are not treated for tax purposes as   
being within the United States. Shareholders will be advised annually of the    
portion of a Fund's assets that constituted qualifying assets at the end of each
quarter of its taxable year.                                                    

The tax consequences to a foreign shareholder entitled to claim the 
benefits of an applicable tax treaty may be different from those described      
herein. Foreign shareholders are urged to consult their own tax advisers with   
respect to the particular tax consequences to them of an investment in a Fund,  
including the applicability of foreign tax.                                     

    FOREIGN INCOME TAX. Investment income received by each Fund from sources
within foreign countries may be subject to foreign income tax withheld at the   
source. The United States has entered into tax treaties with many foreign       
countries which entitle the Funds to a reduced rate of, or exemption from, tax  
on such income. It is impossible to determine the effective rate of foreign tax 
in advance since the amount of a Fund's assets to be invested in various        
countries is not known.                                                         

  If more than 50% of the value of a Fund's total assets at the close of
each taxable year consists of the stock or securities of foreign corporations,  
the Fund may elect to "pass through" to the Fund's shareholders the amount of   
foreign income tax paid by the Fund (the "Foreign Tax Election"). Pursuant to   
the Foreign Tax Election, shareholders will be required (i) to include in gross 
income, even though not actually received, their respective pro-rata shares of  
the foreign income taxes paid by the Fund that are attributable to any          
distributions they receive; and (ii) either to deduct their pro-rata share of   
foreign tax in computing their taxable income, or to use it (subject to various 
Code limitations) as a foreign tax credit against Federal income tax (but not   
both). No deduction for foreign tax may be claimed by a non-corporate           
shareholder who does not itemize deductions or who is subject to alternative    
minimum tax.                                                                    

    Unless certain requirements are met, a credit for foreign tax is subject
to the limitation that it may not exceed the shareholder's U.S. tax (determined 
without regard to the availability of the credit) attributable to the           
shareholder's foreign source taxable income. In determining the source and      
character of distributions received from a Fund for this purpose, shareholders  
will be required to allocate Fund distributions according to the source of the  
income realized by the Fund. Each Fund's gain from the sale of stock and        
securities and certain currency fluctuation gain and loss will generally be     
treated as derived                                                              

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from U.S. sources. In addition, the limitation on the foreign tax credit is     
applied separately to foreign source "passive" income, such as dividend income, 
and the portion of foreign source income consisting of qualified dividend income
is reduced by approximately 57% to account for the tax rate differential.       
Individuals who have no more than $300 ($600 for married persons filing jointly)
of creditable foreign tax included on Form 1099 and whose foreign source income 
is all "qualified passive income" may elect each year to be exempt from the     
foreign tax credit limitation and will be able to claim a foreign tax credit    
without filing Form 1116 with its corresponding requirement to report income and
tax by country. Moreover, no foreign tax credit will be allowable to any        
shareholder who has not held his shares of the Fund for at least 16 days during 
the 30-day period beginning 15 days before the day such shares become           
ex-dividend with respect to any Fund distribution to which foreign income taxes 
are attributed (taking into account certain holding period reduction            
requirements of the Code). Because of these limitations, shareholders may be    
unable to claim a credit for the full amount of their proportionate shares of   
the foreign income tax paid by a Fund.                                          

 EFFECT OF FUTURE LEGISLATION; LOCAL TAX CONSIDERATIONS. The foregoing
general discussion of U.S. federal income tax consequences is based on the Code 
and the regulations issued thereunder as in effect on February 21, 2005. Future 
legislative or administrative changes or court decisions may significantly      
change the conclusions expressed herein, and any such changes or decisions may  
have a retroactive effect with respect to the transactions contemplated herein. 

    Rules of state and local taxation of ordinary income, qualified dividend
income and capital gain dividends may differ from the rules for U.S. federal    
income taxation described above. Distributions may also be subject to additional
state, local and foreign taxes depending on each shareholder's particular       
situation. Non-U.S. shareholders may be subject to U.S. tax rules that differ   
significantly from those summarized above. Shareholders are urged to consult    
their tax advisers as to the consequences of these and other state and local tax
rules affecting investment in the Funds.                                        

DISTRIBUTION OF SECURITIES

DISTRIBUTION PLANS                                                              

     The Trust has adopted distribution plans pursuant to Rule 12b-1 under the
1940 Act with respect to each Fund's Class A shares, Class B shares, Class C    
shares and, if applicable, Class R and Investor Class shares (collectively the  
"Plans"). Each Fund, pursuant to the Plans, except the Investor Class Plan, pays
AIM Distributors compensation at the annual rate, shown immediately below, of   
the Fund's average daily net assets of the applicable class.                    

                                                                [Download Table]

FUND                                  CLASS A  CLASS B  CLASS C  CLASS R
----                                  -------  -------  -------  -------
                                                                        
AIM Balanced Fund                       0.25%   1.00%    1.00%     0.50%
AIM Basic Balanced Fund                 0.35    1.00     1.00      0.50 
AIM European Small Company Fund         0.35    1.00     1.00      N/A  
AIM Global Value Fund                   0.35    1.00     1.00      N/A  
AIM International Small Company Fund    0.35    1.00     1.00      N/A  
AIM Mid Cap Basic Value Fund            0.35    1.00     1.00      0.50 
AIM Premier Equity Fund                 0.25    1.00     1.00      0.50 
AIM Select Equity Fund                  0.25    1.00     1.00      N/A  
AIM Small Cap Equity Fund               0.35    1.00     1.00      0.50 

  AIM Basic Balanced Fund, pursuant to its Investor Class plan, pays AIM
Distributors an amount necessary to reimburse AIM Distributors for its actual   
allocated share of expenses incurred pursuant to the Investor Class Plan for the
period, up to a maximum annual rate of 0.25% of the average daily net assets of 
the Investor Class shares of the Fund.                                          

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     All of the Plans compensate or reimburse AIM Distributors, as applicable,
for the purpose of financing any activity which is primarily intended to result 
in the sale of shares of the Funds. Such activities include, but are not limited
to, the following: printing of prospectuses and statements of additional        
information and reports for other than existing shareholders; overhead;         
preparation and distribution of advertising material and sales literature;      
expenses of organizing and conducting sales seminars; supplemental payments to  
dealers and other institutions such as asset-based sales charges or as payments 
of service fees under shareholder service arrangements; and costs of            
administering each Plan.                                                        

     Amounts payable by a Fund under the Class A, Class B, Class C and Class R
Plans need not be directly related to the expenses actually incurred by AIM     
Distributors on behalf of each Fund. These Plans do not obligate the Funds to   
reimburse AIM Distributors for the actual allocated share of expenses AIM       
Distributors may incur in fulfilling its obligations under these Plans. Thus,   
even if AIM Distributors' actual allocated share of expenses exceeds the fee    
payable to AIM Distributors at any given time, under these Plans the Funds will 
not be obligated to pay more than that fee. If AIM Distributors' actual         
allocated share of expenses is less than the fee it receives, under these Plans 
AIM Distributors will retain the full amount of the fee.                        

    Amounts payable by AIM Basic Balanced Fund under its Investor Class Plan
are directly related to the expenses incurred by AIM Distributors on behalf of  
the Fund, as this Plan obligates the Fund to reimburse AIM Distributors for its 
actual allocated share of expenses incurred pursuant to the Investor Class Plan 
for the period, up to a maximum annual rate of 0.25% of the average daily net   
assets of the Investor Class shares of the Fund. If AIM Distributors' actual    
allocated share of expenses incurred pursuant to the Investor Class Plan for the
period exceeds the 0.25% annual cap, under this Plan AIM Basic Balanced Fund    
will not be obligated to pay more than the 0.25% annual cap. If AIM             
Distributors' actual allocated share of expenses incurred pursuant to the       
Investor Class Plan for the period is less than the 0.25% annual cap, under this
Plan AIM Distributors is entitled to be reimbursed only for its actual allocated
share of expenses.                                                              

     AIM Distributors may from time to time waive or reduce any portion of its
12b-1 fee for Class A shares, Class C shares, Class R or Investor Class shares. 
Voluntary fee waivers or reductions may be rescinded at any time without further
notice to investors. During periods of voluntary fee waivers or reductions, AIM 
Distributors will retain its ability to be reimbursed for such fee prior to the 
end of each fiscal year. Contractual fee waivers or reductions set forth in the 
Fee Table in a Prospectus may not be terminated or amended to the Funds'        
detriment during the period stated in the agreement between AIM Distributors and
the Fund.                                                                       

    The Funds may pay a service fee of 0.25% of the average daily net assets
of the Class A, Class B, Class C, Class R or Investor Class shares attributable 
to the customers of selected dealers and financial institutions to such dealers 
and financial institutions, including AIM Distributors, acting as principal, who
furnish continuing personal shareholder services to their customers who purchase
and own the applicable class of shares of the Fund. Under the terms of a        
shareholder service agreement, such personal shareholder services include       
responding to customer inquiries and providing customers with information about 
their investments. Any amounts not paid as a service fee under each Plan would  
constitute an asset-based sales charge.                                         

     AIM Distributors may pay dealers and institutions who sell Class R shares
an annual fee of 0.50% of average daily net assets. These payments will consist 
of an asset-based fee of 0.25% and a service fee of 0.25% and will commence     
either on the thirteenth month after the first purchase, on accounts on which a 
dealer concession was paid, or immediately, on accounts on which a dealer       
concession was not paid. If AIM Distributors pays a dealer concession, it will  
retain all payments received by it relating to Class R shares for the first year
after they are purchased. AIM Distributors will make quarterly payments to      
dealers and institutions based on the average net asset value of Class R shares 
which are attributable to shareholders for whom the dealers and institutions are
designated as dealers of record.                                                

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    Under a Shareholder Service Agreement, a Fund agrees to pay periodically
fees to selected dealers and other institutions who render the foregoing        
services to their customers. The fees payable under a Shareholder Service       
Agreement will be calculated at the end of each payment period for each business
day of the Funds during such period at the annual rate specified in each        
agreement based on the average daily net asset value of the Funds' shares       
purchased or acquired through exchange. Fees shall be paid only to those        
selected dealers or other institutions who are dealers or institutions of record
at the close of business on the last business day of the applicable payment     
period for the account in which such Fund's shares are held.                    

    Selected dealers and other institutions entitled to receive compensation
for selling Fund shares may receive different compensation for selling shares of
one particular class over another. Under the Plans, certain financial           
institutions which have entered into service agreements and which sell shares of
the Funds on an agency basis, may receive payments from the Funds pursuant to   
the respective Plans. AIM Distributors does not act as principal, but rather as 
agent for the Funds, in making dealer incentive and shareholder servicing       
payments to dealers and other financial institutions under the Plans. These     
payments are an obligation of the Funds and not of AIM Distributors.            

    Payments pursuant to the Plans are subject to any applicable limitations
imposed by rules of the NASD.                                                   

    See Appendix K for a list of the amounts paid by each class of shares of
each Fund to AIM Distributors pursuant to the Plans for the year, or period,    
ended December 31, 2004 and Appendix L for an estimate by category of the       
allocation of actual fees paid by each class of shares of each Fund pursuant to 
its respective distribution plan for the year or period ended December 31, 2004.

 As required by Rule 12b-1, the Plans and related forms of Shareholder
Service Agreements were approved by the Board, including a majority of the      
trustees who are not "interested persons" (as defined in the 1940 Act) of the   
Trust and who have no direct or indirect financial interest in the operation of 
the Plans or in any agreements related to the Plans (the "Rule 12b-1 Trustees").
In approving the Plans in accordance with the requirements of Rule 12b-1, the   
trustees considered various factors and determined that there is a reasonable   
likelihood that the Plans would benefit each class of the Funds and its         
respective shareholders.                                                        

   The anticipated benefits that may result from the Plans with respect to
each Fund and/or the classes of each Fund and its shareholders include but are  
not limited to the following: (1) rapid account access; (2) relatively          
predictable flow of cash; and (3) a well-developed, dependable network of       
shareholder service agents to help to curb sharp fluctuations in rates of       
redemptions and sales, thereby reducing the chance that an unanticipated        
increase in net redemptions could adversely affect the performance of each Fund.

Unless terminated earlier in accordance with their terms, the Plans 
continue from year to year as long as such continuance is specifically approved,
in person, at least annually by the Board, including a majority of the Rule     
12b-1 Trustees. A Plan may be terminated as to any Fund or class by the vote of 
a majority of the Rule 12b-1 Trustees or, with respect to a particular class, by
the vote of a majority of the outstanding voting securities of that class.      

   Any change in the Plans that would increase materially the distribution
expenses paid by the applicable class requires shareholder approval; otherwise, 
the Plans may be amended by the trustees, including a majority of the Rule 12b-1
Trustees, by votes cast in person at a meeting called for the purpose of voting 
upon such amendment. As long as the Plans are in effect, the selection or       
nomination of the Independent Trustees is committed to the discretion of the    
Independent Trustees.                                                           

     The Class B Plan obligates Class B shares to continue to make payments to
AIM Distributors following termination of the Class B shares Distribution       
Agreement with respect to Class B shares sold by or attributable to the         
distribution efforts of AIM Distributors or its predecessors, unless there has  
been a complete termination of the Class B Plan (as defined in such Plan) and   
the Class B Plan expressly                                                      

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authorizes AIM Distributors to assign, transfer or pledge its rights to payments
pursuant to the Class B Plan.                                                   

DISTRIBUTOR                                                                     

  The Trust has entered into master distribution agreements, as amended,
relating to the Funds (the "Distribution Agreements") with AIM Distributors, a  
registered broker-dealer and a wholly owned subsidiary of AIM, pursuant to which
AIM Distributors acts as the distributor of shares of the Funds. The address of 
AIM Distributors is P.O. Box 4739, Houston, Texas 77210-4739. Certain trustees  
and officers of the Trust are affiliated with AIM Distributors. See "Management 
of the Trust."                                                                  

   The Distribution Agreements provide AIM Distributors with the exclusive
right to distribute shares of the Funds on a continuous basis directly and      
through other broker-dealers with whom AIM Distributors has entered into        
selected dealer agreements. AIM Distributors has not undertaken to sell any     
specified number of shares of any classes of the Funds.                         

    AIM Distributors expects to pay sales commissions from its own resources
to dealers and institutions who sell Class B, Class C and Class R shares of the 
Funds at the time of such sales.                                                

    Payments with respect to Class B shares will equal 4.00% of the purchase
price of the Class B shares sold by the dealer or institution, and will consist 
of a sales commission equal to 3.75% of the purchase price of the Class B shares
sold plus an advance of the first year service fee of 0.25% with respect to such
shares. The portion of the payments to AIM Distributors under the Class B Plan  
which constitutes an asset-based sales charge (0.75%) is intended in part to    
permit AIM Distributors to recoup a portion of such sales commissions plus      
financing costs. In the future, if multiple distributors serve a Fund, each such
distributor (or its assignee or transferee) would receive a share of the        
payments under the Class B Plan based on the portion of the Fund's Class B      
shares sold by or attributable to the distribution efforts of that distributor. 

      AIM Distributors may pay sales commissions to dealers and institutions who
sell Class C shares of the AIM Funds at the time of such sales. Payments with   
respect to Class C shares will equal 1.00% of the purchase price of the Class C 
shares sold by the dealer or institution, and will consist of a sales commission
of 0.75% of the purchase price of the Class C shares sold plus an advance of the
first year service fee of 0.25% with respect to such shares. AIM Distributors   
will retain all payments received by it relating to Class C shares for the first
year after they are purchased. The portion of the payments to AIM Distributors  
under the Class A, Class C and Class R Plan attributable to Class C shares which
constitutes an asset-based sales charge (0.75%) is intended in part to permit   
AIM Distributors to recoup a portion of the sales commissions to dealers plus   
financing costs, if any. After the first full year, AIM Distributors will make  
quarterly payments to dealers and institutions based on the average net asset   
value of Class C shares which are attributable to shareholders for whom the     
dealers and institutions are designated as dealers of record. These payments    
will consist of an asset-based sales charge of 0.75% and a service fee of 0.25%.

     AIM Distributors may pay dealers and institutions who sell Class R shares
an annual fee of 0.50% of average daily net assets. These payments will consist 
of an asset-based fee of 0.25% and a service fee of 0.25% and will commence     
either on the thirteenth month after the first purchase, on accounts on which a 
dealer concession was paid, or immediately, on accounts on which a dealer       
concession was not paid. If AIM Distributors pays a dealer concession, it will  
retain all payments received by it relating to Class R shares for the first year
after they are purchased. AIM Distributors will make quarterly payments to      
dealers and institutions based on the average net asset value of Class R shares 
which are attributable to shareholders for whom the dealers and institutions are
designated as dealers of record.                                                

  The Trust (on behalf of any class of any Fund) or AIM Distributors may
terminate the Distribution Agreements on 60 days' written notice without        
penalty. The Distribution Agreements will terminate automatically in the event  
of their assignment. In the event the Class B shares Distribution Agreement is  
terminated, AIM Distributors would continue to receive payments of asset-based  
distribution fees in                                                            

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respect of the outstanding Class B shares attributable to the distribution      
efforts of AIM Distributors or its predecessors; provided, however that a       
complete termination of the Class B Plan (as defined in such Plan) would        
terminate all payments to AIM Distributors. Termination of the Class B Plan or  
the Distribution Agreement for Class B shares would not affect the obligation of
Class B shareholders to pay contingent deferred sales charges.                  

      Total sales charges (front end and contingent deferred sales charges) paid
in connection with the sale of shares of each class of each Fund, if applicable,
for the last three fiscal years ended December 31 are found in Appendix M.      

 CALCULATION OF PERFORMANCE DATA

 Although performance data may be useful to prospective investors when
comparing a Fund's performance with other funds and other potential investments,
investors should note that the methods of computing performance of other        
potential investments are not necessarily comparable to the methods employed by 
a Fund.                                                                         

Average Annual Total Return Quotation                                           

  The standard formula for calculating average annual total return is as
follows:                                                                        

   n
 P(1+T) =ERV

Where      P    =  a hypothetical initial payment of $1,000;                    

          T    =  average annual total return (assuming the applicable maximum
                 sales load is deducted at the beginning of the one, five or
ten year periods);                        

n    =  number of years; and                              

         ERV  =  ending redeemable value of a hypothetical $1,000 payment at
                 the end of the one, five or ten year periods (or fractional
portion of such period).                  

     The average annual total returns for each Fund, with respect to its Class
A, Class B, Class C, Class R and Investor Class shares, if applicable, for the  
one, five and ten year periods (or since inception if less than ten years) ended
December 31 are found in Appendix N.                                            

Total returns quoted in advertising reflect all aspects of a Fund's 
return, including the effect of reinvesting dividends and capital gain          
distributions, and any change in the Fund's net asset value per share over the  
period. Cumulative total return reflects the performance of a Fund over a stated
period of time. Average annual total returns are calculated by determining the  
growth or decline in value of a hypothetical investment in a Fund over a stated 
period of time, and then calculating the annually compounded percentage rate    
that would have produced the same result if the rate of growth or decline in    
value had been constant over the period.                                        

    Each Fund's total return is calculated in accordance with a standardized
formula for computation of annualized total return. Standardized total return   
for: (1) Class A shares reflects the deduction of a Fund's maximum front-end    
sales charge at the time of purchase; (2) Class B and Class C shares reflects   
the deduction of the maximum applicable CDSC on a redemption of shares held for 
the period; and (3) Class R shares does not reflect a deduction of any sales    
charge since that class is generally sold and redeemed at net asset value and   
(4) Investor Class shares does not reflect a deduction of any sales charge since
that class is sold and redeemed at net asset value.                             

      A Fund's total return shows its overall change in value, including changes
in share price and assuming all the Fund's dividends and capital gain           
distributions are reinvested. A cumulative total return reflects the Fund's     
performance over a stated period of time. An average annual total return        
reflects the hypothetical compounded annual rate of return that would have      
produced the same cumulative total return if the Fund's performance had been    
constant over the entire period. Because average annual                         

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returns tend to even out variations in the Fund's return, investors should      
recognize that such returns are not the same as actual year-by-year results. To 
illustrate the components of overall performance, a Fund may separate its       
cumulative and average annual returns into income results and capital gains or  
losses.                                                                         

Alternative Total Return Quotations                                             

   Standard total return quotes may be accompanied by total return figures
calculated by alternative methods. For example, average annual total return may 
be calculated without assuming payment of the full sales load according to the  
following formula:                                                              

   n
 P(1+U) =ERV

Where      P    =  a hypothetical initial payment of $1,000;                    

           U    =  average annual total return assuming payment of only a stated
                  portion of, or none of, the applicable maximum sales load at
the beginning of the stated period;       

n    =  number of years; and                              

         ERV  =  ending redeemable value of a hypothetical $1,000 payment at
the end of the stated period.             

Cumulative total return across a stated period may be calculated as 
follows:                                                                        

P(1+V)=ERV

Where      P    =  a hypothetical initial payment of $1,000;                    

          V    =  cumulative total return assuming payment of all of, a stated
                  portion of, or none of, the applicable maximum sales load at
the beginning of the stated period; and   

         ERV  =  ending redeemable value of a hypothetical $1,000 payment at
the end of the stated period.             

    The cumulative total returns for each Fund, with respect to its Class A,
Class B, Class C, Class R and Investor Class shares, if applicable, for the one,
five and ten year periods (or since inception if less than ten years) ended     
December 31 are found in Appendix N.                                            

Calculation of Certain Performance Data                                         

    AIM Balanced Fund, AIM Premier Equity Fund and AIM Small Cap Equity Fund
may use a restated or a blended performance calculation to derive certain       
performance data shown in this Statement of Additional Information and in the   
Funds' advertisements and other sales material. If the Funds' Class R shares    
were not offered to the public during the performance period covered, the       
performance data shown will be the restated historical performance of the Funds'
Class A shares at net asset value, adjusted to reflect the higher Rule 12b-1    
fees applicable to the Class R shares. If the Funds' Class R shares were offered
to the public only during a portion of the performance period covered, the      
performance data shown will be the blended returns of the historical performance
of the Funds' Class R shares since their inception and the restated historical  
performance of the Funds' Class A shares (for periods prior to inception of the 
Class R shares) at net asset value, adjusted to reflect the higher Rule 12b-1   
fees applicable to the Class R shares. If the Funds' Class R shares were offered
to the public during the entire performance period covered, the performance data
shown will be the historical performance of the Funds' Class R shares.          

    AIM Basic Balanced Fund may also use a restated or a blended performance
calculation to derive certain performance data shown for the Fund's Investor    
Class shares in this Statement of Additional Information and in the Fund's      
advertisements and other sales material. If the Fund's Investor Class shares    
were not offered to the public during the performance period covered, the       
performance data shown will be the restated historical performance of the Fund's
Class A shares at net asset value and reflecting the Rule 12b-1 fees applicable 
to the Class A shares. If the Fund's Investor Class shares were                 

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offered to the public only during a portion of the performance period covered,  
the performance data shown will be the blended returns of the historical        
performance of the Fund's Investor Class shares since their inception and the   
restated historical performance of the Fund's Class A shares (for periods prior 
to inception of the Investor Class shares) at net asset value and reflecting the
Rule 12b-1 fees applicable to the Class A shares. If the Fund's Investor Class  
shares were offered to the public during the entire performance period covered, 
the performance data shown will be the historical performance of the Fund's     
Investor Class shares.                                                          

   A restated or blended performance calculation may be used to derive (i)
each Fund's standardized average annual total returns over a stated period and  
(ii) each Fund's non-standardized cumulative total returns over a stated period.

Average Annual Total Return (After Taxes on Distributions) Quotation            

     A Fund's average annual total return (after taxes on distributions) shows
its overall change in value, including changes in share price and assuming all  
the Fund's dividends and capital gain distributions are reinvested. It reflects 
the deduction of federal income taxes on distributions, but not on redemption   
proceeds. Average annual total returns (after taxes on distributions) are       
calculated by determining the after-tax growth or decline in value of a         
hypothetical investment in a Fund over a stated period of time, and then        
calculating the annually compounded percentage rate that would have produced the
same result if the rate of growth or decline in value had been constant over the
period. Because average annual total returns (after taxes on distributions) tend
to even out variations in the Fund's return, investors should recognize that    
such returns are not the same as actual year-by-year results. To illustrate the 
components of overall performance, a Fund may separate its average annual total 
returns (after taxes on distributions) into income results and capital gains or 
losses.                                                                         

   The standard formula for calculating average annual total return (after
taxes on distributions) is:                                                     

n 
P(1+T)  = ATV 
             D

Where      P    =  a hypothetical initial payment of $1,000;                    

         T    =  average annual total return (after taxes on distributions);

n    =  number of years; and                              

       ATV  =  ending value of a hypothetical $1,000 payment made at the
         D    beginning of the one, five or ten-year periods (or since
                  inception, if applicable) at the end of the one, five or ten
                   year periods (or since inception, if applicable), after taxes
              on fund distributions but not after taxes on redemption.

   Standardized average annual total return (after taxes on distributions)
for: (1) Class A shares reflects the deduction of a Fund's maximum front-end    
sales charge at the time of purchase; and (2) Class B and Class C shares reflect
the deduction of the maximum applicable CDSC on a redemption of shares held for 
the period; and (3) Investor Class shares does not reflect a deduction of any   
sales charge since that class is sold and redeemed at net asset value.          

    The after-tax returns assume all distributions by a Fund, less the taxes
due on such distributions, are reinvested at the price calculated as stated in  
the prospectus on the reinvestment dates during the period. Taxes on a Fund's   
distributions are calculated by applying to each component of the distribution  
(e.g., ordinary income and long-term capital gain) the highest corresponding    
individual marginal federal income tax rates in effect on the reinvestment date.
The taxable amount and tax character of each distribution is as specified by the
Fund on the dividend declaration date, but reflects any subsequent              
recharacterizations of distributions. The effect of applicable tax credits, such
as the foreign tax credit, are also taken into account. The calculations only   
reflect federal taxes, and thus do not reflect state and local taxes or the     
impact of the federal alternative minimum tax.                                  

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    The average annual total returns (after taxes on distributions) for each
Fund, with respect to its Class A, Class B, Class C and Investor Class shares   
for the one, five and ten year periods (or since inception if less than ten     
years) ended December 31 are found in Appendix N.                               

Average Annual Total Return (After Taxes on Distributions and Sale of Fund      
Shares) Quotation                                                               

  A Fund's average annual total return (after taxes on distributions and
sale of Fund shares) shows its overall change in value, including changes in    
share price and assuming all the Fund's dividends and capital gain distributions
are reinvested. It reflects the deduction of federal income taxes on both       
distributions and proceeds. Average annual total returns (after taxes on        
distributions and redemption) are calculated by determining the after-tax growth
or decline in value of a hypothetical investment in a Fund over a stated period 
of time, and then calculating the annually compounded percentage rate that would
have produced the same result if the rate of growth or decline in value had been
constant over the period. Because average annual total returns (after taxes on  
distributions and redemption) tend to even out variations in the Fund's return, 
investors should recognize that such returns are not the same as actual         
year-by-year results. To illustrate the components of overall performance, a    
Fund may separate its average annual total returns (after taxes on distributions
and redemption) into income results and capital gains or losses.                

   The standard formula for calculating average annual total return (after
taxes on distributions and redemption) is:                                      

n 
P(1+T) = ATV  
            DR

Where      P    =  a hypothetical initial payment of $1,000;                    

           T    =  average annual total return (after taxes on distributions and
redemption);                              

n    =  number of years; and                              

       ATV  =  ending value of a hypothetical $1,000 payment made at the
          DR   beginning of the one, five, or ten year periods (or since
                   inception, if applicable) at the end of the one, five, or ten
                   year periods (or since inception, if applicable), after taxes
on fund distributions and redemption.     

      Standardized average annual total return (after taxes on distributions and
redemption) for: (1) Class A shares reflects the deduction of a Fund's maximum  
front-end sales charge at the time of purchase; and (2) Class B and Class C     
shares reflect the deduction of the maximum applicable CDSC on a redemption of  
shares held for the period; and (3) Investor Class shares does not reflect a    
deduction of any sales charge since that class is sold and redeemed at net asset
value.                                                                          

    The after-tax returns assume all distributions by a Fund, less the taxes
due on such distributions, are reinvested at the price calculated as stated in  
the prospectus on the reinvestment dates during the period. Taxes due on a      
Fund's distributions are calculated by applying to each component of the        
distribution (e.g., ordinary income and long-term capital gain) the highest     
corresponding individual marginal federal income tax rates in effect on the     
reinvestment date. The taxable amount and tax character of each distribution is 
as specified by the Fund on the dividend declaration date, but reflects any     
subsequent recharacterizations of distributions. The effect of applicable tax   
credits, such as the foreign tax credit, are also taken into account. The       
calculations only reflect federal taxes, and thus do not reflect state and local
taxes or the impact of the federal alternative minimum tax.                     

  The ending values for each period assume a complete liquidation of all
shares. The ending values for each period are determined by subtracting capital 
gains taxes resulting from the sale of Fund shares and adding the tax benefit   
from capital losses resulting from the sale of Fund shares. The capital gain or 
loss upon sale of Fund shares is calculated by subtracting the tax basis from   
the proceeds. Capital gains taxes (or the benefit resulting from tax losses) are
calculated using the highest federal individual capital gains tax rate for gains
of the appropriate character (e.g., ordinary income or long-term) in effect on  
the date of the sale of Fund shares and in accordance with federal tax law      
applicable on that date. The calculations assume that a shareholder may deduct  
all capital losses in full.                                                     

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  The basis of shares acquired through the $1,000 initial investment are
tracked separately from subsequent purchases through reinvested distributions.  
The basis for a reinvested distribution is the distribution net of taxes paid on
the distribution. Tax basis is adjusted for any distributions representing      
returns of capital and for any other tax basis adjustments that would apply to  
an individual taxpayer.                                                         

    The amount and character (i.e., short-term or long-term) of capital gain
or loss upon sale of Fund shares is determined separately for shares acquired   
through the $1,000 initial investment and each subsequent purchase through      
reinvested distributions. The tax character is determined by the length of the  
measurement period in the case of the initial $1,000 investment and the length  
of the period between reinvestment and the end of the measurement period in the 
case of reinvested distributions.                                               

The average annual total returns (after taxes on distributions and  
redemption) for each Fund, with respect to its Class A, Class B, Class C and    
Investor Class shares, for the one, five and ten year periods (or since         
inception if less than ten years) ended December 31 are found in Appendix N.    

Yield Quotation                                                                 

    Yield is a function of the type and quality of a Fund's investments, the
maturity of the securities held in a Fund's portfolio and the operating expense 
ratio of the Fund. Yield is computed in accordance with standardized formulas   
described below and can be expected to fluctuate from time to time and is not   
necessarily indicative of future results. Accordingly, yield information may not
provide a basis for comparison with investments which pay a fixed rate of       
interest for a stated period of time.                                           

A Fund may quote its distribution rate, which uses the most recent  
dividend paid annualized as a percentage of the Fund's offering price.          

     Income calculated for purposes of calculating a Fund's yield differs from
income as determined for other accounting purposes. Because of the different    
accounting methods used, and because of the compounding assumed in yield        
calculations, the yield quoted for a Fund may differ from the rate of           
distributions from the Fund paid over the same period or the rate of income     
reported in the Fund's financial statements.                                    

   The standard formula for calculating yield for each Fund is as follows:

                         6
 YIELD = 2[((a-b)/(c x d)+1) -1]

Where      a    =  dividends and interest earned during a stated 30-day period. 
             For purposes of this calculation, dividends are accrued
                   rather than recorded on the ex-dividend date. Interest earned
                  under this formula must generally be calculated based on the
       yield to maturity of each obligation (or, if more
appropriate, based on yield to call date);

     b    =  expenses accrued during period (net of reimbursements);

       c    =  the average daily number of shares outstanding during the
         period that were entitled to receive dividends; and

         d    =  the maximum offering price per share on the last day of the
period.                                   

     The yields and distribution rates for the AIM Balanced Fund and AIM Basic
Balanced Fund for the 30 day period ended December 31, 2004 are found in        
Appendix N.                                                                     

Performance Information                                                         

  All advertisements of the Funds will disclose the maximum sales charge
(including deferred sales charges) imposed on purchases of a Fund's shares. If  
any advertised performance data does not reflect the maximum sales charge (if   
any), such advertisement will disclose that the sales charge has not been       
deducted in computing the performance data, and that, if reflected, the maximum 
sales charge would                                                              

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reduce the performance quoted. Further information regarding each Fund's        
performance is contained in that Fund's annual report to shareholders, which is 
available upon request and without charge.                                      

  From time to time, AIM or its affiliates may waive all or a portion of
their fees and/or assume certain expenses of any Fund. Fee waivers or reductions
or commitments to reduce expenses will have the effect of increasing that Fund's
yield and total return.                                                         

     The performance of each Fund will vary from time to time and past results
are not necessarily indicative of future results.                               

Total return and yield figures for the Funds are neither fixed nor  
guaranteed. The Funds may provide performance information in reports, sales     
literature and advertisements. The Funds may also, from time to time, quote     
information about the Funds published or aired by publications or other media   
entities which contain articles or segments relating to investment results or   
other data about one or more of the Funds. The following is a list of such      
publications or media entities:                                                 

                                                                [Download Table]
                                                                                
Advertising Age             Forbes                      Nation's Business       
Barron's                    Fortune                     New York Times          
Best's Review               Hartford Courant            Pension World           
Bloomberg                   Inc.                        Pensions & Investments  
Broker World                Institutional Investor      Personal Investor       
Business Week               Insurance Forum             Philadelphia Inquirer   
Changing Times              Insurance Week              The Bond Buyer          
Christian Science Monitor   Investor's Business Daily   USA Today               
Consumer Reports            Journal of the American     U.S. News & World Report
Economist                      Society of CLU & ChFC    Wall Street Journal     
FACS of the Week            Kiplinger Letter            Washington Post         
Financial Planning          Money                       CNN                     
Financial Product News      Mutual Fund Forecaster      CNBC                    
Financial Services Week                                 PBS                     
Financial World                                                                 

     Each Fund may also compare its performance to performance data of similar
mutual funds as published by the following services:                            

Bank Rate Monitor                          Morningstar, Inc.                    
Bloomberg                                  Standard & Poor's                    
FactSet Date Systems                       Strategic Insight                    
Lipper, Inc.                               Thompson Financial                   

Each Fund's performance may also be compared in advertising to the  
performance of comparative benchmarks such as the following:                    

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Lehman U.S.Aggregate Bond Index                                                 
Lipper Balanced Fund Index                                                      
Lipper European Fund Index                                                      
Lipper Global Multi-Cap Value Fund Index                                        
Lipper Large Cap Core Fund Index                                                
Lipper Small/Mid Cap Fund Index                                                 
Lipper Mid Cap Value Fund Index                                                 
Lipper Multi Cap Core Fund Index                                                
Lipper Small Cap Core Fund Index                                                
Russell 1000--Registered Trademark-- Value Index                                
Russell 2000--Registered Trademark-- Index                                      
Russell 3000--Registered Trademark-- Index                                      
Russell Midcap--Registered Trademark-- Value Index                              
MSCI All Country World Free ex-USA Growth Index                                 
MSCI EAFE Index                                                                 
MSCI Europe Index                                                               
MSCI Europe Small Cap Index                                                     
MSCI World Index                                                                
MSCI World Value Free Index                                                     
Standard & Poor's 500 Index                                                     
Standard & Poor's 600 Index                                                     

  Each Fund may also compare its performance to rates on Certificates of
Deposit and other fixed rate investments such as the following:                 

10 year Treasury Notes                                              
90 day Treasury Bills                                               

  Advertising for the Funds may from time to time include discussions of
general economic conditions and interest rates. Advertising for such Funds may  
also include references to the use of those Funds as part of an individual's    
overall retirement investment program. From time to time, sales literature      
and/or advertisements for any of the Funds may disclose: (i) the largest        
holdings in the Funds' portfolios; (ii) certain selling group members; (iii)    
certain institutional shareholders; (iv) measurements of risk, including        
standard deviation, Beta and Sharpe ratios; and/or (v) capitalization and sector
analyses of holdings in the Funds' portfolios.                                  

    From time to time, the Funds' sales literature and/or advertisements may
discuss generic topics pertaining to the mutual fund industry. This includes,   
but is not limited to, literature addressing general information about mutual   
funds, discussions regarding investment styles, such as the growth, value or    
GARP (growth at a reasonable price) styles of investing, variable annuities,    
dollar-cost averaging, stocks, bonds, money markets, certificates of deposit,   
retirement, retirement plans, asset allocation, tax-free investing, college     
planning and inflation.                                                         

 SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING

On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former   
investment advisor to certain AIM Funds) and AIM reached final settlements with 
certain regulators, including without limitation the Securities and Exchange    
Commission ("SEC"), the New York Attorney General ("NYAG") and the Colorado     
Attorney General ("COAG"), to resolve civil enforcement actions and             
investigations related to market timing activity and related issues in the AIM  
Funds, including those formerly advised by IFG. These regulators alleged, in    
substance, that IFG and AIM failed to disclose in the prospectuses for the AIM  
Funds that they advised and to the independent directors/trustees of such Funds 
that they had entered into certain arrangements permitting market timing of such
Funds, thereby breaching their fiduciary duties to such Funds. As a result of   
the foregoing, the regulators alleged that IFG and AIM breached various Federal 
and state securities, business and consumer protection laws. On the same date, A
I M Distributors, Inc. ("ADI") (the distributor of the retail AIM Funds) reached
a final settlement with the SEC to resolve an investigation relating to market  
timing activity and related issues in the AIM Funds. The SEC also alleged that  
ADI violated various Federal securities laws. The SEC also has settled related  
market timing enforcement actions brought against certain former officers and   
employees of IFG.                                                               

 Under the terms of the settlements, IFG agreed to pay a total of $325
million, of which $110 million is civil penalties. Of this $325 million total   
payment, half has been paid and the remaining half will                         

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be paid on or before December 31, 2005. AIM and ADI agreed to pay a total of $50
million, of which $30 million is civil penalties, all of which has been paid.   
The entire $325 million IFG settlement payment will be made available for       
distribution to the shareholders of those AIM Funds that IFG formerly advised   
that were harmed by market timing activity, and the entire $50 million          
settlement payment by AIM and ADI will be made available for distribution to the
shareholders of those AIM Funds advised by AIM that were harmed by market timing
activity, all as to be determined by an independent distribution consultant. The
settlement payments will be distributed in accordance with a methodology to be  
determined by the independent distribution consultant, in consultation with AIM 
and the independent trustees of the AIM Funds and acceptable to the staff of the
SEC.                                                                            

     Under the terms of the settlements, AIM is undertaking certain governance
and compliance reforms, including maintaining an internal controls committee and
retaining an independent compliance consultant and a corporate ombudsman. Also, 
commencing in 2007 and at least once every other year thereafter, AIM will      
undergo a compliance review by an independent third party. In addition, under   
the terms of the settlements, AIM has undertaken to cause the AIM Funds to      
operate in accordance with certain governance policies and practices, including 
retaining a full-time independent senior officer whose duties include monitoring
compliance and managing the process by which proposed management fees to be     
charged the AIM Funds are negotiated. Also, commencing in 2008 and not less than
every fifth calendar year thereafter, the AIM Funds will hold shareholder       
meetings at which their Boards of Trustees will be elected.                     

      The SEC has also settled market timing enforcement actions against Raymond
R. Cunningham (the former president and chief executive officer of IFG and a    
former member of the board of directors of the AIM Funds formerly advised by    
IFG), Timothy J. Miller (the former chief investment officer and a former       
portfolio manager for IFG), Thomas A. Kolbe (the former national sales manager  
of IFG) and Michael D. Legoski (a former assistant vice president in IFG's sales
department). As part of these settlements, the SEC ordered these individuals to 
pay restitution and civil penalties in various amounts and prohibited them from 
associating with, or serving as an officer or director of, an investment        
advisor, broker, dealer and/or investment company, as applicable, for certain   
periods of time.                                                                

 REGULATORY INQUIRIES AND PENDING LITIGATION

  The mutual fund industry as a whole is currently subject to regulatory
inquiries and litigation related to a wide range of issues. These issues        
include, among others, market timing activity, late trading, fair value pricing,
excessive or improper advisory and/or distribution fees, mutual fund sales      
practices, including but not limited to revenue sharing and directed-brokerage  
arrangements, investments in securities of other registered investment          
companies, contractual plans, issues related to Section 529 college savings     
plans, procedures for locating lost security holders and participation in class 
action settlements.                                                             

     As described more fully below, IFG and AIM are the subject of a number of
ongoing regulatory inquiries and civil lawsuits related to one or more of the   
issues currently being scrutinized by various Federal and state regulators,     
including but not limited to those issues described above. Additional regulatory
actions and/or civil lawsuits related to the above or other issues may be filed 
against the AIM Funds, IFG, AIM and/or related entities and individuals in the  
future. Additional regulatory inquiries related to the above or other issues    
also may be received by the AIM Funds, IFG, AIM and/or related entities and     
individuals in the future. This statement of additional information will be     
supplemented periodically to disclose any such additional regulatory actions,   
civil lawsuits and/or regulatory inquiries.                                     

Ongoing Regulatory Inquiries Concerning IFG and AIM                 

IFG, certain related entities, certain of their current and former  
officers and/or certain of the AIM Funds formerly advised by IFG have received  
regulatory inquiries in the form of subpoenas or other oral or written requests 
for information and/or documents related to one or more of the following issues,
some of which concern one or more such Funds: market timing activity, late      
trading, fair value pricing,                                                    

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excessive or improper advisory and/or distribution fees, mutual fund sales      
practices, including revenue sharing and directed-brokerage arrangements, and   
investments in securities of other registered investment companies. These       
regulators include the SEC, the NASD, Inc. ("NASD"), the Florida Department of  
Financial Services, the Attorney General of the State of West Virginia, the West
Virginia Securities Commission and the Bureau of Securities of the State of New 
Jersey. IFG and certain of these other parties also have received more limited  
inquiries from the United States Department of Labor ("DOL") and the United     
States Attorney's Office for the Southern District of New York, some of which   
concern one or more of the AIM Funds formerly advised by IFG.                   

AIM, certain related entities, certain of their current and former  
officers and/or certain of the AIM Funds have received regulatory inquiries in  
the form of subpoenas or other oral or written requests for information and/or  
documents related to one or more of the following issues, some of which concern 
one or more AIM Funds: market timing activity, late trading, fair value pricing,
excessive or improper advisory and/or distribution fees, mutual fund sales      
practices, including revenue sharing and directed-brokerage arrangements,       
investments in securities of other registered investment companies, contractual 
plans, issues related to Section 529 college savings plans and procedures for   
locating lost securityholders. These regulators include the SEC, the NASD, the  
Department of Banking for the State of Connecticut, the Attorney General of the 
State of West Virginia, the West Virginia Securities Commission and the Bureau  
of Securities of the State of New Jersey. AIM and certain of these other parties
also have received more limited inquiries from the SEC, the NASD, the DOL, the  
Internal Revenue Service, the United States Attorney's Office for the Southern  
District of New York, the United States Attorney's Office for the Central       
District of California, the United States Attorney's Office for the District of 
Massachusetts, the Massachusetts Securities Division, the U.S. Postal Inspection
Service and the Commodity Futures Trading Commission, some of which concern one 
or more AIM Funds.                                                              

Pending Regulatory Civil Action Alleging Market Timing                

On April 12, 2005, the Attorney General of the State of West Virginia 
("WVAG") filed civil proceedings against AIM, IFG and ADI, as well as numerous  
unrelated mutual fund complexes and financial institutions. None of the AIM     
Funds has been named as a defendant in these proceedings. The WVAG complaint,   
filed in the Circuit Court of Marshall County, West Virginia [Civil Action No.  
05-C-81], alleges, in substance, that AIM, IFG and ADI engaged in unfair        
competition and/or unfair or deceptive trade practices by failing to disclose in
the prospectuses for the AIM Funds, including those formerly advised by IFG,    
that they had entered into certain arrangements permitting market timing of such
Funds. As a result of the foregoing, the WVAG alleges violations of W. Va. Code 
Section 46A-1-101, et seq. (the West Virginia Consumer Credit and Protection    
Act). The WVAG complaint is seeking injunctive relief; civil monetary penalties;
a writ of quo warranto against the defendants; pre-judgment and post-judgment   
interest; costs and expenses, including counsel fees; and other relief.         

    If AIM is unsuccessful in its defense of the WVAG proceedings, it could be
barred from serving as an investment adviser for any investment company         
registered under the Investment Company Act of 1940, as amended (a "registered  
investment company"). Such results could affect the ability of AIM or any other 
investment advisor directly or indirectly owned by AMVESCAP PLC, from serving as
an investment advisor to any registered investment company, including your Fund.
Your Fund has been informed by AIM that, if these results occur, AIM will seek  
exemptive relief from the SEC to permit it to continue to serve as your Fund's  
investment advisor. There is no assurance that such exemptive relief will be    
granted.                                                                        

Private Civil Actions Alleging Market Timing                        

     Multiple civil lawsuits, including purported class action and shareholder
derivative suits, have been filed against various parties (including, depending 
on the lawsuit, certain AIM Funds, IFG, AIM, AIM Management, AMVESCAP PLC       
("AMVESCAP"), the parent company of IFG and AIM, certain related entities,      
certain of their current and former officers and/or certain unrelated third     
parties) making allegations that are similar in many respects to those in the   
settled regulatory actions brought by the SEC, the NYAG and the COAG concerning 
market timing activity in the AIM Funds. These lawsuits allege a variety of     
theories of recovery, including but not limited to: (i) violation of various    
provisions of the Federal and state securities laws; (ii) violation of various  
provisions of ERISA; (iii) breach of fiduciary duty; and/or (iv) breach of      
contract. These lawsuits were initiated in both Federal and state courts and    
seek such remedies as compensatory damages; restitution; injunctive relief;     
disgorgement of management fees; imposition of a constructive trust; removal of 
certain directors and/or employees; various corrective measures under ERISA;    
rescission of certain Funds' advisory agreements; interest; and attorneys' and  
experts' fees. A list identifying such lawsuits that have been served on IFG,   
AIM, the AIM Funds or related entities, or for which service of process has been
waived, as of April 25, 2005 is set forth in Appendix O-1.                      

 All lawsuits based on allegations of market timing, late trading, and
related issues have been transferred to the United States District Court for the
District of Maryland (the "MDL Court") for consolidated or coordinated pre-trial
proceedings. Pursuant to an Order of the MDL Court, plaintiffs consolidated     
their claims for pre-trial purposes into three amended complaints against       
various AIM- and IFG-related parties. A list identifying the amended complaints 
in the MDL Court is included in Appendix O-1. Plaintiffs in one of the          
underlying lawsuits transferred to the MDL Court continue to seek remand of     
their action to state court. This lawsuit is identified in Appendix O-1.        

Private Civil Actions Alleging Improper Use of Fair Value Pricing   

Multiple civil class action lawsuits have been filed against various
parties (including, depending on the lawsuit, certain AIM Funds, IFG and/or AIM)
alleging that certain AIM Funds inadequately employed fair value pricing. These 
lawsuits allege a variety of theories of recovery, including but not            

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limited to: (i) violations of various provisions of the Federal securities laws;
(ii) common law breach of duty; and (iii) common law negligence and gross       
negligence. These lawsuits have been filed in both Federal and state courts and 
seek such remedies as compensatory and punitive damages; interest; and          
attorneys' fees and costs. A list identifying such lawsuits that have been      
served on IFG, AIM, the AIM Funds or related entities, or for which service of  
process has been waived, as of April 25, 2005 is set forth in Appendix O-2.     

      Private Civil Actions Alleging Excessive Advisory and/or Distribution Fees

     Multiple civil lawsuits, including purported class action and shareholder
derivative suits, have been filed against various parties (including, depending 
on the lawsuit, IFG, AIM, INVESCO Institutional (N.A.), Inc. ("IINA"), ADI      
and/or INVESCO Distributors, Inc. ("INVESCO Distributors")) alleging that the   
defendants charged excessive advisory and/or distribution fees and failed to    
pass on to shareholders the perceived savings generated by economies of scale.  
Certain of these lawsuits also allege that the defendants adopted unlawful      
distribution plans. These lawsuits allege a variety of theories of recovery,    
including but not limited to: (i) violation of various provisions of the Federal
securities laws; (ii) breach of fiduciary duty; and/or (iii) breach of contract.
These lawsuits have been filed in Federal courts and seek such remedies as      
damages; injunctive relief; rescission of certain Funds' advisory agreements and
distribution plans; interest; prospective relief in the form of reduced fees;   
and attorneys' and experts' fees. A list identifying such lawsuits that have    
been served on IFG, AIM, the AIM Funds or related entities, or for which service
of process has been waived, as of April 25, 2005 is set forth in Appendix O-3.  

    Private Civil Actions Alleging Improper Charging of Distribution Fees on
Limited Offering Funds or Share Classes                             

      Multiple civil lawsuits, including shareholder derivative suits, have been
filed against various parties (including, depending on the lawsuit, IFG, AIM,   
ADI and/or certain of the trustees of the AIM Funds) alleging that the          
defendants breached their fiduciary duties by charging distribution fees while  
funds and/or specific share classes were closed generally to new investors      
and/or while other share classes of the same fund were not charged the same     
distribution fees. These lawsuits allege a variety of theories of recovery,     
including but not limited to: (i) violation of various provisions of the Federal
securities laws; and (ii) breach of fiduciary duty. These lawsuits have been    
filed in Federal courts and seek such remedies as damages; injunctive relief;   
and attorneys' and experts' fees. A list identifying such lawsuits that have    
been served on IFG, AIM, the AIM Funds or related entities, or for which service
of process has been waived, as of April 25, 2005 is set forth in Appendix O-4.  

   Private Civil Actions Alleging Improper Mutual Fund Sales Practices and
Directed-Brokerage Arrangements                                     

     Multiple civil lawsuits, including purported class action and shareholder
derivative suits, have been filed against various parties (including, depending 
on the lawsuit, AIM Management, IFG, AIM, AIM Investment Services, Inc. ("AIS") 
and/or certain of the trustees of the AIM Funds) alleging that the defendants   
improperly used the assets of the AIM Funds to pay brokers to aggressively      
promote the sale of the AIM Funds over other mutual funds and that the          
defendants concealed such payments from investors by disguising them as         
brokerage commissions. These lawsuits allege a variety of theories of recovery, 
including but not limited to: (i) violation of various provisions of the Federal
securities laws; (ii) breach of fiduciary duty; and (iii) aiding and abetting a 
breach of fiduciary duty. These lawsuits have been filed in Federal courts and  
seek such remedies as compensatory and punitive damages; rescission of certain  
Funds' advisory agreements and distribution plans and recovery of all fees paid;
an accounting of all fund-related fees, commissions and soft dollar payments;   
restitution of all unlawfully or discriminatorily obtained fees and charges; and
attorneys' and experts' fees. A list identifying such lawsuits that have been   
served on IFG, AIM, the AIM Funds or related entities, or for which service of  
process has been waived, as of April 25, 2005 is set forth in Appendix O-5.     

  Private Civil Action Alleging Failure to Ensure Participation in Class
Action Settlements                                                  

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A civil lawsuit, purporting to be a class action lawsuit, has been filed against
AIM, IINA, A I M Capital Management, Inc. ("AIM Capital") and the trustees of   
the AIM Funds alleging that the defendants breached their fiduciary duties by   
failing to ensure that the AIM Funds participated in class action settlements in
which the AIM Funds were eligible to participate. This lawsuit alleges as       
theories of recovery: (i) violation of various provisions of the Federal        
securities laws; (ii) common law breach of fiduciary duty; and (iii) common law 
negligence. This lawsuit has been filed in Federal court and seeks such remedies
as compensatory and punitive damages; forfeiture of all commissions and fees    
paid by the class of plaintiffs; and costs and attorneys' fees. Such lawsuit,   
which was served on AIM and AIM Capital on April 25, 2005, is set forth in      
Appendix O-6.                                                                   

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APPENDIX A

RATINGS OF DEBT SECURITIES

     The following is a description of the factors underlying the debt ratings
of Moody's, S&P and Fitch:                                                      

MOODY'S LONG-TERM DEBT RATINGS

Moody's corporate ratings areas follows:                            

      Aaa: Bonds and preferred stock which are rated Aaa are judged to be of the
best quality. They carry the smallest degree of investment risk and are         
generally referred to as "gilt-edged." Interest payments are protected by a     
large or by an exceptionally stable margin and principal is secure. While the   
various protective elements are likely to change, such changes as can be        
visualized are most unlikely to impair the fundamentally strong position of such
issues.                                                                         

     Aa: Bonds and preferred stock which are rated Aa are judged to be of high
quality by all standards. Together with the Aaa group they comprise what are    
generally known as high grade bonds. These are rated lower than the best bonds  
because margins of protection may not be as large as in Aaa securities or       
fluctuation of protective elements may be of greater amplitude or there may be  
other elements present which make the long-term risk in Aa rated bonds appear   
somewhat larger than those securities rated Aaa.                                

 A: Bonds and preferred stock which are rated A possess many favorable
investment attributes and are to be considered as upper-medium-grade            
obligations. Factors giving security to principal and interest are considered   
adequate, but elements may be present which suggest a susceptibility to         
impairment sometime in the future.                                              

Baa: Bonds and preferred stock which are rated Baa are considered as
medium-grade obligations, i.e., they are neither highly protected nor poorly    
secured. Interest payments and principal security appear adequate for the       
present but certain protective elements may be lacking or may be                
characteristically unreliable over any great length of time. Such bonds lack    
outstanding investment characteristics and in fact have speculative             
characteristics as well.                                                        

Ba: Bonds and preferred stock which are rated Ba are judged to have 
speculative elements; their future cannot be considered as well assured. Often  
the protection of interest and principal payments may be very moderate and      
thereby not well safeguarded during both good and bad times over the future.    
Uncertainty of position characterizes bonds in this class.                      

B: Bonds and preferred stock which are rated B generally lack       
characteristics of the desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over any long period  
of time may be small.                                                           

    Caa: Bonds and preferred stock which are rated Caa are of poor standing.
Such issues may be in default or there may be present elements of danger with   
respect to principal or interest.                                               

  Ca: Bonds and preferred stock which are rated Ca represent obligations
which are speculative in a high degree. Such issues are often in default or have
other marked shortcomings.                                                      

     C: Bonds and preferred stock which are rated C are the lowest rated class
of bonds, and issues so rated can be regarded as having extremely poor prospects
of ever attaining any real investment standing.                                 

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 Note: Moody's applies numerical modifiers 1, 2, and 3 in each generic
rating classification from Aa through Caa. The modifier 1 indicates that the    
obligation ranks in the higher end of its generic rating category; the modifier 
2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the  
lower end of that generic rating category.                                      

MOODY'S SHORT-TERM PRIME RATING SYSTEM

      Moody's short-term ratings are opinions of the ability of issuers to honor
senior financial obligations and contracts. Such obligations generally have an  
original maturity not exceeding one year, unless explicitly noted.              

   Moody's employs the following designations, all judged to be investment
grade , to indicate the relative repayment ability of rated issuers.            

PRIME-1: Issuers (or supporting institutions) rated Prime-1 have a superior     
ability for repayment of senior short-term obligations. Prime-1 repayment       
ability will often be evidenced by many of the following characteristics:       
leading market positions in well-established industries; high rates of return on
funds employed; conservative capitalization structure with moderate reliance on 
debt and ample asset protection; broad margins in earnings coverage of fixed    
financial charges and high internal cash generation; and well-established access
to a range of financial markets and assured sources of alternate liquidity.     

PRIME-2: Issuers (or supporting institutions) rated Prime-2 have a strong       
ability to repay senior short-term debt obligations. This will normally be      
evidenced by many of the characteristics cited above but to a lesser degree.    
Earnings trends and coverage ratios, while sound, may be more subject to        
variation. Capitalization characteristics, while still appropriate, may be more 
affected by external conditions. Ample alternate liquidity is maintained.       

PRIME-3: Issuers (or supporting institutions) rated Prime-3 have an acceptable  
ability for repayment of senior short-term debt obligations. The effect of      
industry characteristics and market compositions may be more pronounced.        
Variability in earnings and profitability may result in changes in the level of 
debt protection measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.                                     

NOT PRIME: Issuers rated Not Prime do not fall within any of the Prime rating   
categories.                                                                     

    Note: In addition, in certain countries the prime rating may be modified
by the issuer's or guarantor's senior unsecured long-term debt rating.          

Moody's municipal ratings are as follows:                           

MOODY'S U.S. LONG-TERM MUNICIPAL BOND RATING DEFINITIONS

   Municipal Ratings are opinions of the investment quality of issuers and
issues in the US municipal and tax-exempt markets. As such, these ratings       
incorporate Moody's assessment of the default probability and loss severity of  
these issuers and issues.                                                       

Municipal Ratings are based upon the analysis of four primary factors relating  
to municipal finance: economy, debt, finances, and administration/management    
strategies. Each of the factors is evaluated individually and for its effect on 
the other factors in the context of the municipality's ability to repay its     
debt.                                                                           

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Aaa: Issuers or issues rated Aaa demonstrate the strongest          
creditworthiness relative to other US municipal or tax-exempt issuers or issues.

   Aa: Issuers or issues rated Aa demonstrate very strong creditworthiness
relative to other US municipal or tax-exempt issuers or issues.                 

A: Issuers or issues rated A present above-average creditworthiness 
relative to other US municipal or tax-exempt issuers or issues.                 

Baa: Issuers or issues rated Baa represent average creditworthiness 
relative to other US municipal or tax-exempt issuers or issues.                 

     Ba: Issuers or issues rated Ba demonstrate below-average creditworthiness
relative to other US municipal or tax-exempt issuers or issues.                 

      B: Issuers or issues rated B demonstrate weak creditworthiness relative to
other US municipal or tax-exempt issuers or issues.                             

   Caa: Issuers or issues rated Caa demonstrate very weak creditworthiness
relative to other US municipal or tax-exempt issuers or issues.                 

      Ca: Issuers or issues rated Ca demonstrate extremely weak creditworthiness
relative to other US municipal or tax-exempt issuers or issues.                 

 C: Issuers or issues rated C demonstrate the weakest creditworthiness
relative to other US municipal or tax-exempt issuers or issues.                 

Note: Also, Moody's applies numerical modifiers 1, 2, and 3 in each 
generic rating classification from Aa to Caa. The modifier 1 indicates that the 
issue ranks in the higher end of its generic rating category; the modifier 2    
indicates a mid-range ranking; and the modifier 3 indicates that the issue ranks
in the lower end of its generic category.                                       

MOODY'S MIG/VMIG US SHORT-TERM RATINGS

In municipal debt issuance, there are three rating categories for   
short-term obligations that are considered investment grade. These ratings are  
designated as Moody's Investment Grade (MIG) and are divided into three levels -
MIG 1 through MIG 3.                                                            

     In addition, those short-term obligations that are of speculative quality
are designated SG, or speculative grade.                                        

    In the case of variable rate demand obligations (VRDOs), a two-component
rating is assigned. The first element represents Moody's evaluation of the      
degree of risk associated with scheduled principal and interest payments. The   
second element represents Moody's evaluation of the degree of risk associated   
with the demand feature, using the MIG rating scale.                            

The short-term rating assigned to the demand feature of VRDOs is    
designated as VMIG. When either the long- or short-term aspect of a VRDO is not 
rated, that piece is designated NR, e.g., Aaa/NR or NR/VMIG 1.                  

     MIG ratings expire at note maturity. By contrast, VMIG rating expirations
will be a function of each issue's specific structural or credit features.      

  Gradations of investment quality are indicated by rating symbols, with
each symbol representing a group in which the quality characteristics are       
broadly the same.                                                               

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MIG 1/VMIG 1: This designation denotes superior credit quality. Excellent       
protection is afforded by established cash flows, highly reliable liquidity     
support or demonstrated broad-based access to the market for refinancing.       

MIG 2/VMIG 2: This designation denotes strong credit quality. Margins of        
protection are ample although not as large as in the preceding group.           

MIG 3/VMIG 3: This designation denotes acceptable credit quality. Liquidity and 
cash flow protection may be narrow and market access for refinancing is likely  
to be less well established.                                                    

SG: This designation denotes speculative-grade credit quality. Debt instruments 
in this category may lack sufficient margins of protection.                     

 STANDARD & POOR'S LONG-TERM CORPORATE AND MUNICIPAL RATINGS

Issue credit ratings are based in varying degrees, on the following 
considerations: likelihood of payment - capacity and willingness of the obligor 
to meet its financial commitment on an obligation in accordance with the terms  
of the obligation; nature of and provisions of the obligation; and protection   
afforded by, and relative position of, the obligation in the event of           
bankruptcy, reorganization, or other arrangement under the laws of bankruptcy   
and other laws affecting creditors' rights.                                     

    The issue ratings definitions are expressed in terms of default risk. As
such, they pertain to senior obligations of an entity. Junior obligations are   
typically rated lower than senior obligations, to reflect the lower priority in 
bankruptcy, as noted above.                                                     

   S&P describes its ratings for corporate and municipal bonds as follows:

AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity to pay     
interest and repay principal is extremely strong.                               

AA: Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest rated issues only in a small degree.               

A: Debt rated A has a strong capacity to meet its financial commitments although
it is somewhat more susceptible to the adverse effects of changes in            
circumstances and economic conditions than debt in higher rated categories.     

BBB: Debt rated BBB exhibits adequate protection parameters. However, adverse   
economic conditions or changing circumstances are more likely to lead to a      
weakened capacity to meet its financial commitment on the obligation.           

BB-B-CCC-CC-C: Debt rated BB, B, CCC, CC and C is regarded as having significant
speculative characteristics with respect to capacity to pay interest and repay  
principal. BB indicates the least degree of speculation and C the highest. While
such debt will likely have some quality and protective characteristics, these   
may be outweighed by large uncertainties or major exposures to adverse          
conditions.                                                                     

NR: Not Rated.                                                                  

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S&P DUAL RATINGS

   S&P assigns "dual" ratings to all debt issues that have a put option or
demand feature as part of their structure.                                      

   The first rating addresses the likelihood of repayment of principal and
interest as due, and the second rating addresses only the demand feature. The   
long-term debt rating symbols are used for bonds to denote the long-term        
maturity and the commercial paper rating symbols for the put option (for        
example, AAA/A-1+). With short-term demand debt, the note rating symbols are    
used with the commercial paper rating symbols (for example, SP-1+/A-1+).        

S&P COMMERCIAL PAPER RATINGS

    An S&P commercial paper rating is a current assessment of the likelihood
of timely payment of debt having an original maturity of no more than 365 days. 

These categories are as follows:                                    

A-1: This highest category indicates that the degree of safety regarding timely 
payment is strong. Those issues determined to possess extremely strong safety   
characteristics are denoted with a plus sign (+) designation.                   

A-2: Capacity for timely payment on issues with this designation is             
satisfactory. However, the relative degree of safety is not as high as for      
issues designated A-1.                                                          

A-3: Issues carrying this designation have adequate capacity for timely payment.
They are, however, more vulnerable to the adverse effects of changes in         
circumstances than obligations carrying the higher designations.                

B: Issues rated 'B' are regarded as having only speculative capacity for timely 
payment.                                                                        

C: This rating is assigned to short-term debt obligations with a doubtful       
capacity for payment.                                                           

D: Debt rated 'D' is in payment default. The 'D' rating category is used when   
interest payments or principal payments are not made on the date due, even if   
the applicable grace period has not expired, unless Standard & Poor's believes  
such payments will be made during such grace period.                            

S&P SHORT-TERM MUNICIPAL RATINGS

    An S&P note rating reflect the liquidity factors and market-access risks
unique to notes. Notes due in three years or less will likely receive a note    
rating. Notes maturing beyond three years will most likely receive a long-term  
debt rating. The following criteria will be used in making that assessment:     
amortization schedule (the larger the final maturity relative to other          
maturities, the more likely it will be treated as a note); and source of payment
(the more dependant the issue is on the market for its refinancing, the more    
likely it will be treated as a note).                                           

Note rating symbols are as follows:                                 

SP-1: Strong capacity to pay principal and interest. An issue determined to     
possess a very strong capacity to pay debt service is given a plus (+)          
designation.                                                                    

SP-2: Satisfactory capacity to pay principal and interest, with some            
vulnerability to adverse financial and economic changes over the term of the    
notes.                                                                          

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SP-3: Speculative capacity to pay principal and interest.                       

FITCH LONG-TERM CREDIT RATINGS

 Fitch Ratings provides an opinion on the ability of an entity or of a
securities issue to meet financial commitments, such as interest, preferred     
dividends, or repayment of principal, on a timely basis. These credit ratings   
apply to a variety of entities and issues, including but not limited to         
sovereigns, governments, structured financings, and corporations; debt,         
preferred/preference stock, bank loans, and counterparties; as well as the      
financial strength of insurance companies and financial guarantors.             

    Credit ratings are used by investors as indications of the likelihood of
getting their money back in accordance with the terms on which they invested.   
Thus, the use of credit ratings defines their function: "investment grade"      
ratings (international Long-term 'AAA' - 'BBB' categories; Short-term 'F1' -    
'F3') indicate a relatively low probability of default, while those in the      
"speculative" or "non-investment grade" categories (international Long-term 'BB'
- 'D'; Short-term 'B' - 'D') either signal a higher probability of default or   
that a default has already occurred. Ratings imply no specific prediction of    
default probability. However, for example, it is relevant to note that over the 
long term, defaults on 'AAA' rated U.S. corporate bonds have averaged less than 
0.10% per annum, while the equivalent rate for 'BBB' rated bonds was 0.35%, and 
for 'B' rated bonds, 3.0%.                                                      

    Fitch ratings do not reflect any credit enhancement that may be provided
by insurance policies or financial guaranties unless otherwise indicated.       

Entities or issues carrying the same rating are of similar but not  
necessarily identical credit quality since the rating categories do not fully   
reflect small differences in the degrees of credit risk.                        

      Fitch credit and research are not recommendations to buy, sell or hold any
security. Ratings do not comment on the adequacy of market price, the           
suitability of any security for a particular investor, or the tax-exempt nature 
of taxability of payments of any security.                                      

The ratings are based on information obtained from issuers, other   
obligors, underwriters, their experts, and other sources Fitch Ratings believes 
to be reliable. Fitch Ratings does not audit or verify the truth or accuracy of 
such information. Ratings may be changed or withdrawn as a result of changes in,
or the unavailability of, information or for other reasons.                     

     Our program ratings relate only to standard issues made under the program
concerned; it should not be assumed that these ratings apply to every issue made
under the program. In particular, in the case of non-standard issues, i.e.,     
those that are linked to the credit of a third party or linked to the           
performance of an index, ratings of these issues may deviate from the applicable
program rating.                                                                 

      Credit ratings do not directly address any risk other than credit risk. In
particular, these ratings do not deal with the risk of loss due to changes in   
market interest rates and other market considerations.                          

AAA: Bonds considered to be investment grade and of the highest credit quality. 
The obligor has an exceptionally strong capacity for timely payment of financial
commitments, which is unlikely to be affected by foreseeable events.            

AA: Bonds considered to be investment grade and of very high credit quality. The
obligor has a very strong capacity for timely payment of financial commitments  
which is not significantly vulnerable to foreseeable events.                    

A: Bonds considered to be investment grade and of high credit quality. The      
obligor's ability to pay interest and repay principal is considered to be       
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.                                   

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BBB: Bonds considered to be investment grade and of good credit quality. The    
obligor's ability to pay interest and repay principal is considered to be       
adequate. Adverse changes in economic conditions and circumstances are more     
likely to impair this capacity.                                                 

PLUS (+) MINUS (-): Plus and minus signs are used with a rating symbol to       
indicate the relative position of a credit within the rating category. Plus and 
minus signs, however, are not used in the "AAA" category.                       

NR: Indicates that Fitch does not rate the specific issue.                      

WITHDRAWN: A rating will be withdrawn when an issue matures or is called or     
refinanced and at Fitch's discretion, when Fitch Ratings deems the amount of    
information available to be inadequate for ratings purposes.                    

RATINGWATCH: Ratings are placed on RatingWatch to notify investors that there is
a reasonable possibility of a rating change and the likely direction of such    
change. These are designated as "Positive," indicating a potential upgrade,     
"Negative," for potential downgrade, or "Evolving," if ratings may be raised,   
lowered or maintained. RatingWatch is typically resolved over a relatively short
period.                                                                         

FITCH SPECULATIVE GRADE BOND RATINGS

BB: Bonds are considered speculative. There is a possibility of credit risk     
developing, particularly as the result of adverse economic changes over time.   
However, business and financial alternatives may be available to allow financial
commitments to be met. '                                                        

B: Bonds are considered highly speculative. Significant credit risk is present  
but a limited margin of safety remains. While bonds in this class are currently 
meeting financial commitments, the capacity for continued payment is contingent 
upon a sustained, favorable business and economic environment.                  

CCC: Default is a real possibility. Capacity for meeting financial commitments  
is solely reliant upon sustained, favorable business or economic developments.  

CC: Default of some kind appears probable.                                      

C: Bonds are in imminent default in payment of interest or principal.           

DDD, DD, AND D: Bonds are in default on interest and/or principal payments. Such
bonds are extremely speculative and are valued on the basis of their prospects  
for achieving partial or full recovery value in liquidation or reorganization of
the obligor. "DDD" represents the highest potential for recovery on these bonds,
and "D" represents the lowest potential for recovery.                           

PLUS (+) MINUS (-): Plus and minus signs are used with a rating symbol to       
indicate the relative position of a credit within the rating category. Plus and 
minus signs, however, are not used in categories below CCC.                     

 FITCH SHORT-TERM CREDIT RATINGS

      The following ratings scale applies to foreign currency and local currency
ratings. A Short-term rating has a time horizon of less than 12 months for most 
obligations, or up to three years for U.S. public finance securities, and thus  
places greater emphasis on the liquidity necessary to meet financial commitments
in a timely manner.                                                             

F-1+: Exceptionally Strong Credit Quality. Issues assigned this rating are      
regarded as having the strongest degree of assurance for timely payment.        

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F-1: Very Strong Credit Quality. Issues assigned this rating reflect an         
assurance of timely payment only slightly less in degree than issues rated      
"F-1+."                                                                         

F-2: Good Credit Quality. Issues assigned this rating have a satisfactory degree
of assurance for timely payment, but the margin of safety is not as great as in 
the case of the higher ratings.                                                 

F-3: Fair Credit Quality. Issues assigned this rating have characteristics      
suggesting that the degree of assurance for timely payment is adequate, however,
near-term adverse changes could result in a reduction to non-investment grade.  

B: Speculative. Minimal capacity for timely payment of financial commitments,   
plus vulnerability to near-term adverse changes in financial and economic       
conditions.                                                                     

C: High default risk. Default is a real possibility. Capacity for meeting       
financial commitments is solely reliant upon a sustained, favorable business and
economic environment.                                                           

D: Default. Issues assigned this rating are in actual or imminent payment       
default.                                                                        

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APPENDIX B
 TRUSTEES AND OFFICERS

As of March 31, 2005

--------------------------------------------------------------------------------
The address of each trustee and officer is 11 Greenway Plaza, Suite 100,        
Houston, Texas 77046. Each trustee oversees 114 portfolios in the AIM Funds     
complex. The trustees serve for the life of the Trust, subject to their earlier 
death, incapacitation, resignation, retirement or removal as more specifically  
provided in the Trust's organizational documents. Column two below includes     
length of time served with predecessor entities, if any.                        
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

 NAME, YEAR OF BIRTH    TRUSTEE         RINCIPAL OCCUPATION(S) DURING PAST        OTHER TRUSTEESHIP(S)
 AND POSITION(S) HELD   AND/OR                      5 YEARS                         HELD BY TRUSTEE   
    WITH THE TRUST      OFFICER                                                                       
                        SINCE                                                                         
----------------------  -------  -----------------------------------------------  --------------------
                                                                                                      
INTERESTED PERSONS                                                                                    

Robert H. Graham(1) --   1992    Director and Chairman, A I M Management Group    None                
1946                             Inc. (financial services holding company);                           
Trustee, Vice Chair              Director and Vice Chairman, AMVESCAP PLC and                         
and President                    Chairman of AMVESCAP PLC - AIM Division (parent                      
                                 of AIM and a global investment management firm)                      

                                 Formerly: President and Chief Executive                              
                                 Officer, A I M Management Group Inc.; Director,                      
                                 Chairman and President, A I M Advisors, Inc.                         
                                 (registered investment advisor); Director and                        
                                 Chairman, A I M Capital Management, Inc.                             
                                 (registered investment advisor), A I M                               
                                 Distributors, Inc. (registered broker dealer),                       
                                 AIM Investment Services, Inc., (registered                           
                                 transfer agent), and Fund Management Company                         
                                 (registered broker dealer); and Chief Executive                      
                                 Officer, AMVESCAP PLC - Managed Products                             

Mark H. Williamson(2)    2003    Director, President and Chief Executive          None                
- -- 1951                          Officer, A I M Management Group Inc. (financial                    
Trustee and Executive            services holding company); Director, Chairman                        
Vice President                   and President, A I M Advisors, Inc. (registered                      
                                 investment advisor); Director, A I M Capital                         
                                 Management, Inc. (registered investment                              
                                 advisor) and A I M Distributors, Inc.                                
                                 (registered broker dealer); Director and                             
                                 Chairman, AIM Investment Services, Inc.                              
                                 (registered transfer agent), Fund Management                         
                                 Company (registered broker dealer) and INVESCO                       
                                 Distributors, Inc. (registered broker dealer);                       
                                 and Chief Executive Officer, AMVESCAP PLC - AIM                      
                                 Division (parent of AIM and a global investment                      
                                 management firm)                                                     

                                 Formerly: Director, Chairman, President and                          
                                 Chief Executive Officer, INVESCO Funds Group,                        
                                 Inc.; President and Chief Executive Officer,                         
                                 INVESCO Distributors, Inc.; and Chief Executive                      
                                 Officer, AMVESCAP PLC - Managed Products                             

----------                                                                      

(1)   Mr. Graham is considered an interested person of the Trust because he is a
  director of AMVESCAP PLC, parent of the advisor to the Trust. Prior to
October 4, 2004, Mr. Graham served as Chairman of the Board.        

(2)   Mr. Williamson is considered an interested person of the Trust because he 
 is an officer and a director of the advisor to, and a director of the
principal underwriter of, the Trust.                                

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 NAME, YEAR OF BIRTH    TRUSTEE         RINCIPAL OCCUPATION(S) DURING PAST         OTHER TRUSTEESHIP(S)
 AND POSITION(S) HELD   AND/OR                      5 YEARS                          HELD BY TRUSTEE   
    WITH THE TRUST      OFFICER                                                                        
                        SINCE                                                                          
----------------------  -------  ------------------------------------------------  --------------------
                                                                                                       
INDEPENDENT TRUSTEES                                                                                   

Bruce L. Crockett(3) -   1987    Chairman, Crockett Technology Associates          ACE Limited         
1944                             (technology consulting company)                   (insurance company);
Trustee and Chair                                                                  and Captaris, Inc.  
                                                                                   (unified messaging  
                                                                                   provider)           

Bob R. Baker - 1936      2003    Retired                                           None                
Trustee                                                                                                

Frank S. Bayley --       2001    Retired                                           Badgley Funds, Inc. 
1939                                                                               (registered         
Trustee                          Formerly:  Partner, law firm of Baker &           investment company) 
                                 McKenzie                                                              

James T. Bunch - 1942    2003    Co-President and Founder, Green, Manning &        None                
Trustee                          Bunch, Ltd. (investment banking firm); and                            
                                 Director, Policy Studies, Inc. and Van Gilder                         
                                 Insurance Corporation                                                 

Albert R. Dowden --      2000    Director of a number of public and private        None                
1941                             business corporations, including the Boss                             
Trustee                          Group, Ltd. (private investment and management);                      
                                 Cortland Trust, Inc. (Chairman) (registered                           
                                 investment company); Annuity and Life Re                              
                                 (Holdings), Ltd. (insurance company) and                              
                                 CompuDyne Corporation (provider of products                           
                                 and services to the public security market)                           

                                 Formerly: Director, President and Chief                               
                                 Executive Officer, Volvo Group North America,                         
                                 Inc.; Senior Vice President, AB Volvo; and                            
                                 director of various affiliated Volvo companies                        

Edward K. Dunn, Jr.      1998    Retired                                           None                
- -- 1935                                                                                              
Trustee                          Formerly: Chairman, Mercantile Mortgage Corp.;                        
                                 President and Chief Operating Officer,                                
                                 Mercantile-Safe Deposit & Trust Co.; and                              
                                 President, Mercantile Bankshares Corp.                                

Jack M. Fields -- 1952   1997    Chief Executive Officer, Twenty First Century     Administaff,        
Trustee                          Group, Inc. (government affairs company); and     and Discovery Global
                                 Owner, Dos Angelos Ranch, L.P.                    Education Fund (non-
                                                                                   profit)             
                                 Formerly: Chief Executive Officer, Texana                             
                                 Timber LP (sustainable forestry company)                              

----------                                                                      

(3)   Mr. Crockett was elected Chair of the Board effective October 4, 2004.    

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 NAME, YEAR OF BIRTH    TRUSTEE         RINCIPAL OCCUPATION(S) DURING PAST        OTHER TRUSTEESHIP(S)
 AND POSITION(S) HELD   AND/OR                      5 YEARS                         HELD BY TRUSTEE   
    WITH THE TRUST      OFFICER                                                                       
                        SINCE                                                                         
----------------------  -------  -----------------------------------------------  --------------------
                                                                                                      
Carl Frischling --       1993    Partner, law firm of Kramer Levin                Cortland            
1937                             Naftalis and Frankel LLP                         Trust, Inc.         
Trustee                                                                           (registered         
                                                                                  investment          
                                                                                  company)            

Gerald J. Lewis - 1933   2003    Chairman, Lawsuit Resolution                     General             
Trustee                          Services (San Diego, California)                 Chemical            
                                                                                  Group, Inc.         

Prema Mathai-Davis --    1998    Formerly: Chief Executive Officer,               None                
1950                             YWCA of the USA                                                      
Trustee                                                                                               

Lewis F. Pennock --      1992    Partner, law firm of Pennock &                   None                
1942                             Cooper                                                               
Trustee                                                                                               

Ruth H. Quigley --       2001    Retired                                          None                
1935                                                                                                  

Trustee                                                                                               

Larry Soll - 1942        2003    Retired                                          None                
Trustee                                                                                               

OTHER OFFICERS                                                                                        

Lisa O. Brinkley(4) -    2004    Senior Vice President, A I M Management Group    N/A                 
1959                             Inc. (financial services holding company);                           
Senior Vice President            Senior Vice President and Chief Compliance                           
and Chief Compliance             Officer, A I M Advisors, Inc.; Vice President                        
Officer                          and Chief Compliance Officer, A I M Capital                          
                                 Management, Inc. and Vice President, A I M                           
                                 Distributors, Inc., AIM Investments Services,                        
                                 Inc. and Fund Management Company                                     

                                 Formerly: Senior Vice President and Compliance                       
                                 Director, Delaware Investments Family of Funds;                      
                                 and Chief Compliance Officer, AIM Distributors,                      
                                 Inc.                                                                 

----------                                                                      

(4)   Ms. Brinkley was elected Senior Vice President and Chief Compliance       
Officer of the Trust effective September 20, 2004.                  

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 NAME, YEAR OF BIRTH    TRUSTEE         RINCIPAL OCCUPATION(S) DURING PAST        OTHER TRUSTEESHIP(S)
 AND POSITION(S) HELD   AND/OR                      5 YEARS                         HELD BY TRUSTEE   
    WITH THE TRUST      OFFICER                                                                       
                        SINCE                                                                         
----------------------  -------  -----------------------------------------------  --------------------
                                                                                                      
Russell C. Burk(5) -     2005    Formerly: Director of Compliance and Assistant   N/A                 
1958                             General Counsel, ICON Advisers, Inc.; Financial                      
Senior Vice President            Consultant, Merrill Lynch; General Counsel and                       
                                 Director of Compliance, ALPS Mutual Funds, Inc.                      

Kevin M. Carome -        2003    Director, Senior Vice President, Secretary and   N/A                 
1956                             General Counsel, A I M Management Group Inc.                         
Senior Vice                      (financial services holding company) and A I M                       
President, Secretary             Advisors, Inc.; Director and Vice President,                         
and Chief Legal                  INVESCO Distributors, Inc.; Vice President, A I                      
Officer                          M Capital Management, Inc., and AIM Investment                       
                                 Services, Inc.; Director, Vice President and                         
                                 General Counsel, Fund Management Company; and                        
                                 Senior Vice President, A I M Distributors, Inc.                      

                                 Formerly: Senior Vice President and General                          
                                 Counsel, Liberty Financial Companies, Inc.;                          
                                 Senior Vice President and General Counsel,                           
                                 Liberty Funds Group, LLC; and Vice President, A                      
                                 I M Distributors, Inc.                                               

Robert G. Alley - 1948   1992    Managing Director, Chief Fixed Income Officer,   N/A                 
Vice President                   and Senior Investment Officer, AIM Capital                           
                                 Management, Inc.; and Vice President, A I M                          
                                 Advisors, Inc.                                                       

Stuart W. Coco - 1955    1992    Managing Director and Director of Money Market   N/A                 
Vice President                   Research and Special Projects, A I M Capital                         
                                 Management, Inc.; and Vice President, A I M                          
                                 Advisors, Inc.                                                       

Sidney M. Dilgren --     2004    Vice President and Fund Treasurer, A             N/A                 
1961                             I M Advisors, Inc.                                                   
Vice President and                                                                                    
Treasurer                        Formerly: Vice President, A I M Distributors,                        
                                 Inc.; and Senior Vice President, AIM Investment                      
                                 Services, Inc.                                                       

J. Philip Ferguson(6)    2005    Senior Vice President and Chief Investment       N/A                 
- -- 1945                          Officer, A I M Advisors Inc.; Director,                            
Vice President                   Chairman, Chief Executive Officer, President                         
                                 and Chief Investment Officer, A I M Capital                          
                                 Management, Inc; Executive Vice President, A I                       
                                 M Management Group Inc.;                                             

                                 Formerly: Senior Vice President, AIM Private                         
                                 Asset Management, Inc.; Chief Equity Officer,                        
                                 and Senior Investment Officer, A I M Capital                         
                                 Management, Inc.; and Managing Partner, Beutel,                      
                                 Goodman Capital Management                                           

----------                                                                      

(5)   Mr. Burk was elected Senior Vice President of the Trust effective February
15, 2005.                                                           

(6)   Mr. Ferguson was elected Vice President of the Trust effective February   
24, 2005.                                                           

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 NAME, YEAR OF BIRTH    TRUSTEE         RINCIPAL OCCUPATION(S) DURING PAST        OTHER TRUSTEESHIP(S)
 AND POSITION(S) HELD   AND/OR                      5 YEARS                         HELD BY TRUSTEE   
    WITH THE TRUST      OFFICER                                                                       
                        SINCE                                                                         
----------------------  -------  -----------------------------------------------  --------------------
                                                                                                      
Karen Dunn Kelley -      1992    Director of Cash Management, Managing Director   N/A                 
1960                             and Chief Cash Management Officer, A I M                             
Vice President                   Capital Management, Inc.; Director and                               
                                 President, Fund Management Company, and Vice                         
                                 President, A I M Advisors, Inc..                                     

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 TRUSTEE OWNERSHIP OF PORTFOLIO SHARES AS OF DECEMBER 31, 2004

                                                        [Enlarge/Download Table]

   NAME OF TRUSTEE             DOLLAR RANGE OF EQUITY SECURITIES         AGGREGATE DOLLAR RANGE OF  
                                        PER PORTFOLIO                     EQUITY SECURITIES IN ALL  
                                                                           REGISTERED INVESTMENT    
                                                                           COMPANIES OVERSEEN BY    
                                                                                TRUSTEE IN          
                                                                          THE AIM FAMILY OF FUNDS(R)
----------------------  -----------------------------------------------  ---------------------------
                                                                                                    
Robert H. Graham        Balanced                          Over $100,000        Over $100,000        
                        Basic Balanced                    Over $100,000                             
                        Premier Equity                    Over $100,000                             
                        Small Cap Equity                  Over $100,000                             

Mark H. Williamson      European Small Company        $10,001 - $50,000        Over $100,000        
                        International Small Company  $50,001 - $100,000                             
                        Mid Cap Basic Value          $50,001 - $100,000                             

Bob R. Baker            International Small Company       Over $100,000        Over $100,000        
                        Small Cap Equity                  Over $100,000                             

Frank S. Bayley         European Small Company        $10,001 - $50,000        Over $100,000        
                        Premier Equity                     $1 - $10,000                             

James T. Bunch                               - 0 -                             Over $100,000        

Bruce L. Crockett       Mid Cap Basic Value           $10,001 - $50,000     $50,001-$100,000(7)     
                        Premier Equity                     $1 - $10,000                             
                        Select Equity                      $1 - $10,000                             
                        Small Cap Equity              $10,001 - $50,000                             

Albert R. Dowden        Small Cap Equity              $10,001 - $50,000        Over $100,000        

Edward K. Dunn, Jr.     European Small Company          $10,001-$50,000       Over $100,000(7)      
                        International Small Company   $10,001 - $50,000                             
                        Premier Equity                $10,001 - $50,000                             

Jack M. Fields          Premier Equity                    Over $100,000       Over $100,000(7)      

Carl Frischling         European Small Company            Over $100,000       Over $100,000(7)      
                        International Small Company       Over $100,000                             
                        Select Equity                $50,001 - $100,000                             
                        Premier Equity               $50,001 - $100,000                             

----------                                                                      

(7)   Includes the total amount of compensation deferred by the trustee at his  
   or her election pursuant to a deferred compensation plan. Such deferred
     compensation is placed in a deferral account and deemed to be invested in
one or more of the AIM Funds.                                       

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                                                                [Download Table]
                                                                                    
Gerald J. Lewis                           -0-                        Over $100,000  

Prema Mathai-Davis                        -0-                       $1 - $10,000(7) 

Lewis F. Pennock    Balanced                     $10,001 - $50,000   Over $100,000  
                    Global Value                 $10,001 - $50,000                  
                    Select Equity                     $1 - $10,000                  

Ruth H. Quigley     European Small Company            $1 - $10,000  $10,001-$50,000 
                    International Small Company       $1 - $10,000                  
                    Premier Equity                    $1 - $10,000                  

Larry Soll                                -0-                       Over $100,000(7)

----------                                                                      

(7)   Includes the total amount of compensation deferred by the trustee at his  
   or her election pursuant to a deferred compensation plan. Such deferred
     compensation is placed in a deferral account and deemed to be invested in
one or more of the AIM Funds.                                       

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APPENDIX C

TRUSTEE COMPENSATION TABLE

     Set forth below is information regarding compensation paid or accrued for
each trustee of the Trust who was not affiliated with AIM during the year ended 
December 31, 2004:                                                              

                                                                [Download Table]

                                                       ESTIMATED                
                                                         ANNUAL                 
                                         RETIREMENT     BENEFITS                
                                          BENEFITS        UPON                  
                            AGGREGATE      ACCRUED     RETIREMENT       TOTAL   
         TRUSTEE           COMPENSATION    BY ALL       FROM ALL    COMPENSATION
                             FROM THE        AIM       AIM FUNDS    FROM ALL AIM
                            TRUST(1,2)    FUNDS(3)        (4)        FUNDS (5,6)
------------------------   ------------  ----------   -----------   ------------
                                                                                
Bob R. Baker               $   16,924    $ 198,871    $  144,786    $   189,750 
Frank S. Bayley                16,947      175,241       112,500        193,500 
James T. Bunch                 16,607      143,455       112,500        186,000 
Bruce L. Crockett              19,484       75,638       112,500        223,500 
Albert R. Dowden               16,860       93,210       112,500        192,500 
Edward K. Dunn, Jr.            16,947      133,390       112,500        193,500 
Jack M. Fields                 16,313       48,070       112,500        186,000 
Carl Frischling(7)             16,220       62,040       112,500        185,000 
Gerald J. Lewis                16,607      143,455       112,500        186,000 
Prema Mathai-Davis             16,630       55,768       112,500        189,750 
Lewis F. Pennock               16,313       80,777       112,500        186,000 
Ruth H. Quigley                16,630      154,767       112,500        189,750 
Louis S. Sklar(8)              16,313      115,160       101,250        186,000 
Larry Soll                     16,607      184,356       130,823        186,000 

(1)   Amounts shown are based on the fiscal year ended December 31, 2004. The   
     total amount of compensation deferred by all trustees of the Trust during
     the fiscal year ended December 31, 2004, including earnings, was $64,675.

(2)   At the request of the trustees, AMVESCAP has agreed to reimburse the Trust
for Fund expenses related to market timing matters. "Aggregate      
 Compensation from the Trust" above does not include $4,054 of trustee
      compensation which, pursuant to such agreement, was reimbursed by AMVESCAP
during the fiscal year ended December 31, 2004.                     

(3)   During the fiscal year ended December 31, 2004, the total amount of       
      expenses allocated to the Trust in respect of such retirement benefits was
$184,394.                                                           

(4)   These amounts represent the estimated annual benefits payable by the AIM  
    Funds upon the trustee's retirement and assume each trustee serves until
his or her normal retirement date.                                  

(5)   All trustees currently serve as trustees of 19 registered investment      
companies advised by AIM.                                           

(6)   At the request of the trustees, AMVESCAP has agreed to reimburse the Trust
   for Fund expenses related to market timing matters. "Total Compensation
      from All AIM Funds" above does not include $44,000 of trustee compensation
    which, pursuant to such agreement, was reimbursed by AMVESCAP during the
calendar year ended December 31, 2004.                              

(7)   During the fiscal year ended December 31, 2004 the Trust paid $51,523 in  
      legal fees to Kramer Levin Naftalis & Frankel LLP for services rendered by
such firm as counsel to the independent trustees of the Trust. Mr.  
Frischling is a partner of such firm.                               

(8)   Mr. Sklar retired as a trustee on December 31, 2004.                      

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APPENDIX D

 PROXY POLICIES AND PROCEDURES
 (AS AMENDED SEPTEMBER 16, 2004)

A.    PROXY POLICIES                                                            

     Each of A I M Advisors, Inc., A I M Capital Management, Inc., AIM Private
     Asset Management, Inc. and AIM Alternative Asset Management Company (each
     an "AIM Advisor" and collectively "AIM") has the fiduciary obligation to,
      at all times, make the economic best interest of advisory clients the sole
      consideration when voting proxies of companies held in client accounts. As
      a general rule, each AIM Advisor shall vote against any actions that would
      reduce the rights or options of shareholders, reduce shareholder influence
over the board of directors and management, reduce the alignment of 
 interests between management and shareholders, or reduce the value of
   shareholders' investments. At the same time, AIM believes in supporting
   the management of companies in which it invests, and will accord proper
  weight to the positions of a company's board of directors, and the AIM
  portfolio managers who chose to invest in the companies. Therefore, on
most issues, our votes have been cast in accordance with the        
recommendations of the company's board of directors, and we do not  
currently expect that trend to change. Although AIM's proxy voting  
   policies are stated below, AIM's proxy committee considers all relevant
    facts and circumstances, and retains the right to vote proxies as deemed
appropriate.                                                        

I.    BOARDS OF DIRECTORS                                           

        A board that has at least a majority of independent directors is
    integral to good corporate governance. Key board committees,
          including audit, compensation and nominating committees, should be
completely independent.                                 

       There are some actions by directors that should result in votes
being withheld. These instances include directors who:  

      -     Are not independent directors and (a) sit on the board's
                audit, compensation or nominating committee, or (b) sit on a
             board where the majority of the board is not independent;

    -     Attend less than 75 percent of the board and committee
meetings without a valid excuse;            

         -     Implement or renew a dead-hand or modified dead-hand poison
pill;                                       

    -     Sit on the boards of an excessive number of companies;

         -     Enacted egregious corporate governance or other policies or
failed to replace management as appropriate;

         -     Have failed to act on takeover offers where the majority of
   the shareholders have tendered their shares; or

          -     Ignore a shareholder proposal that is approved by a majority
of the shares outstanding.                  

         Votes in a contested election of directors must be evaluated on a
case-by-case basis, considering the following factors:  

            -     Long-term financial performance of the target company relative
to its industry;                            

Management's track record;                              

-     Portfolio manager's assessment;                   

-     Qualifications of director nominees (both slates);

           -     Evaluation of what each side is offering shareholders as well
                as the likelihood that the proposed objectives and goals can
be met; and                                 

-     Background to the proxy contest.                  

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II.   INDEPENDENT AUDITORS                                          

        A company should limit its relationship with its auditors to the
        audit engagement, and certain closely related activities that do
            not, in the aggregate, raise an appearance of impaired independence.
           We will support the reappointment of the company's auditors unless:

       -     It is not clear that the auditors will be able to fulfill
their function;                             

      -     There is reason to believe the independent auditors have
                  rendered an opinion that is neither accurate nor indicative of
the company's financial position; or        

      -     The auditors have a significant professional or personal
               relationship with the issuer that compromises the auditors'
independence.                               

III.  COMPENSATION PROGRAMS                                         

           Appropriately designed equity-based compensation plans, approved by
       shareholders, can be an effective way to align the interests of
         long-term shareholders and the interests of management, employees
          and directors. Plans should not substantially dilute shareholders'
     ownership interests in the company, provide participants with
           excessive awards or have objectionable structural features. We will
          consider all incentives, awards and compensation, and compare them
            to a company-specific adjusted allowable dilution cap and a weighted
        average estimate of shareholder wealth transfer and voting power
dilution.                                               

         -     We will generally vote against equity-based plans where the
        total dilution (including all equity-based plans) is
excessive.                                  

         -     We will support the use of employee stock purchase plans to
                increase company stock ownership by employees, provided that
                 shares purchased under the plan are acquired for no less than
85% of their market value.                  

       -     We will vote against plans that have any of the following
               structural features: ability to re-price underwater options
                  without shareholder approval, ability to issue options with an
                  exercise price below the stock's current market price, ability
             to issue reload options, or automatic share replenishment
("evergreen") feature.                      

         -     We will vote for proposals to reprice options if there is a
             value-for-value (rather than a share-for-share) exchange.

           -     We will generally support the board's discretion to determine
         and grant appropriate cash compensation and severance
packages.                                   

IV.   CORPORATE MATTERS                                             

          We will review management proposals relating to changes to capital
 structure, reincorporation, restructuring and mergers and
           acquisitions on a case by case basis, considering the impact of the
           changes on corporate governance and shareholder rights, anticipated
           financial and operating benefits, portfolio manager views, level of
      dilution, and a company's industry and performance in terms of
shareholder returns.                                    

        -     We will vote for merger and acquisition proposals that the
                  proxy committee and relevant portfolio managers believe, based
                  on their review of the materials, will result in financial and
               operating benefits, have a fair offer price, have favorable
             prospects for the combined companies, and will not have a
                  negative impact on corporate governance or shareholder rights.

      -     We will vote against proposals to increase the number of
             authorized shares of any class of stock that has superior
voting rights to another class of stock.    

 -     We will vote for proposals to increase common share
                  authorization for a stock split, provided that the increase in
                  authorized shares would not result in excessive dilution given
                a company's industry and performance in terms of shareholder
returns.                                    

       -     We will vote for proposals to institute open-market share
                repurchase plans in which all shareholders participate on an
equal basis.                                

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V.    SHAREHOLDER PROPOSALS                                         

         Shareholder proposals can be extremely complex, and the impact on
     share value can rarely be anticipated with any high degree of
          confidence. The proxy committee reviews shareholder proposals on a
            case-by-case basis, giving careful consideration to such factors as:
       the proposal's impact on the company's short-term and long-term
         share value, its effect on the company's reputation, the economic
         effect of the proposal, industry and regional norms applicable to
           the company, the company's overall corporate governance provisions,
and the reasonableness of the request.                  

   -     We will generally abstain from shareholder social and
environmental proposals.                    

        -     We will generally support the board's discretion regarding
        shareholder proposals that involve ordinary business
practices.                                  

       -     We will generally vote for shareholder proposals that are
           designed to protect shareholder rights if the company's
                corporate governance standards indicate that such additional
protections are warranted.                  

       -     We will generally vote for proposals to lower barriers to
shareholder action.                         

         -     We will generally vote for proposals to subject shareholder
                  rights plans to a shareholder vote. In evaluating these plans,
             we give favorable consideration to the presence of "TIDE"
       provisions (short-term sunset provisions, qualified
                bid/permitted offer provisions, and/or mandatory review by a
           committee of independent directors at least every three
years).                                     

VI.   OTHER                                                         

         -     We will vote against any proposal where the proxy materials
              lack sufficient information upon which to base an informed
decision.                                   

          -     We will vote against any proposals to authorize the proxy to
                 conduct any other business that is not described in the proxy
statement.                                  

        -     We will vote any matters not specifically covered by these
                  proxy policies and procedures in the economic best interest of
advisory clients.                           

            AIM's proxy policies, and the procedures noted below, may be amended
from time to time.                                      

B.    PROXY COMMITTEE PROCEDURES                                                

    The proxy committee currently consists of representatives from the Legal
 and Compliance Department, the Investments Department and the Finance
Department.                                                         

    The committee members review detailed reports analyzing the proxy issues
     and have access to proxy statements and annual reports. Committee members
may also speak to management of a company regarding proxy issues and
should share relevant considerations with the proxy committee. The  
      committee then discusses the issues and determines the vote. The committee
      shall give appropriate and significant weight to portfolio managers' views
    regarding a proposal's impact on shareholders. A proxy committee meeting
requires a quorum of three committee members, voting in person or by
e-mail.                                                             

    AIM's proxy committee shall consider its fiduciary responsibility to all
clients when addressing proxy issues and vote accordingly. The proxy
committee may enlist the services of reputable outside professionals
and/or proxy evaluation services, such as Institutional Shareholder 
    Services or any of its subsidiaries ("ISS"), to assist with the analysis
  of voting issues and/or to carry out the actual voting process. To the
extent the services of ISS or another provider are used, the proxy  
  committee shall periodically review the policies of that provider. The
      proxy committee shall prepare a report for the Funds' Board of Trustees on
 a periodic basis regarding issues where AIM's votes do not follow the
  recommendation of ISS or another provider because AIM's proxy policies
differ from those of such provider.                                 

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    In addition to the foregoing, the following shall be strictly adhered to
     unless contrary action receives the prior approval of the Funds' Board of
Trustees:                                                           

1.    Other than by voting proxies and participating in Creditors'  
            committees, AIM shall not engage in conduct that involves an attempt
to change or influence the control of a company.        

      2.    AIM will not publicly announce its voting intentions and the reasons
therefore.                                              

     3.    AIM shall not participate in a proxy solicitation or otherwise seek
         proxy-voting authority from any other public company shareholder.

4.    All communications regarding proxy issues between the proxy   
            committee and companies or their agents, or with fellow shareholders
        shall be for the sole purpose of expressing and discussing AIM's
           concerns for its advisory clients' interests and not for an attempt
to influence or control management.                     

C.    BUSINESS/DISASTER RECOVERY                                                

If the proxy committee is unable to meet due to a temporary business
interruption, such as a power outage, a sub-committee of the proxy  
     committee may vote proxies in accordance with the policies stated herein.
    If the sub-committee of the proxy committee is not able to vote proxies,
the sub-committee shall authorize ISS to vote proxies by default in 
accordance with ISS' proxy policies and procedures, which may vary  
slightly from AIM's.                                                

D.    RESTRICTIONS AFFECTING VOTING                                             

    If a country's laws allow a company in that country to block the sale of
      the company's shares by a shareholder in advance of a shareholder meeting,
      AIM will not vote in shareholder meetings held in that country, unless the
company represents that it will not block the sale of its shares in 
    connection with the meeting. Administrative or other procedures, such as
   securities lending, may also cause AIM to refrain from voting. Although
      AIM considers proxy voting to be an important shareholder right, the proxy
 committee will not impede a portfolio manager's ability to trade in a
stock in order to vote at a shareholder meeting.                    

E.    CONFLICTS OF INTEREST                                                     

      The proxy committee reviews each proxy to assess the extent to which there
    may be a material conflict between AIM's interests and those of advisory
     clients. A potential conflict of interest situation may include where AIM
    or an affiliate manages assets for, administers an employee benefit plan
     for, provides other financial products or services to, or otherwise has a
material business relationship with, a company whose management is  
     soliciting proxies, and failure to vote proxies in favor of management of
 the company may harm AIM's relationship with the company. In order to
  avoid even the appearance of impropriety, the proxy committee will not
    take AIM's relationship with the company into account, and will vote the
company's proxies in the best interest of the advisory clients, in  
accordance with these proxy policies and procedures.                

     In the event that AIM's proxy policies and voting record do not guide the
      proxy committee's vote in a situation where a conflict of interest exists,
the proxy committee will vote the proxy in the best interest of the 
     advisory clients, and will provide information regarding the issue to the
Funds' Board in the next quarterly report.                          

   To the extent that a committee member has any conflict of interest with
    respect to a company or an issue presented, that committee member should
  inform the proxy committee of such conflict and abstain from voting on
that company or issue.                                              

F.    FUND OF FUNDS                                                             

      WHEN AN AIM FUND THAT INVESTS IN ANOTHER AIM FUND(S) HAS THE RIGHT TO VOTE
    ON THE PROXY OF THE UNDERLYING AIM FUND, AIM WILL SEEK GUIDANCE FROM THE
  BOARD OF TRUSTEES OF THE INVESTING AIM FUND ON HOW TO VOTE SUCH PROXY.

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APPENDIX E

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES 

     To the best knowledge of the Trust, the names and addresses of the record
and beneficial holders of 5% or more of the outstanding shares of each class of 
the Trust's equity securities and the percentage of the outstanding shares held 
by such holders are set forth below. Unless otherwise indicated below, the Trust
has no knowledge as to whether all or any portion of the shares owned of record 
are also owned beneficially.                                                    

A shareholder who owns beneficially 25% or more of the outstanding  
securities of a Fund is presumed to "control" that Fund as defined in the 1940  
Act. Such control may affect the voting rights of other shareholders.           

All information listed below is as of March 15, 2005.                           

AIM BALANCED FUND                                                               

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                                               CLASS A             CLASS B            CLASS C            CLASS R       INSTITUTIONAL
                                                SHARES             SHARES             SHARES             SHARES         CLASS SHARES
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                                           PERCENTAGE OWNED   PERCENTAGE OWNED   PERCENTAGE OWNED   PERCENTAGE OWNED     PERCENTAGE 
NAME AND ADDRESS OF                               OF                 OF                 OF                 OF             OWNED OF  
PRINCIPAL HOLDER                                RECORD             RECORD             RECORD             RECORD            RECORD   
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Merrill Lynch Pierce Fenner                                                                                                         
& Smith                                                                                                                             
FBO The Sole Benefit of                                                                                                             
Customers                                                                                                                           
ATTN:  Fund Administration                                                                                                          
4800 Deer Lake Dr., East,                                                                                                           
2nd Floor                                       6.62%               6.00%             12.65%                --               --     
Jacksonville, FL  32246-                                                                                                            
6484                                                                                                                                
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Reliance Trust Co.                                                                                                                  
FBO Tahoe Regional Planning Agency                --                  --                 --               7.46%              --     
PO Box 48529                                                                                                                        
Atlanta, GA 30362-1529                                                                                                              
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A I M Advisors, Inc(*)                                                                                                              
ATTN:  David Hessel Corporate Controller                                                                                            
11 Greenway Plaza, Suite                                                                                                            
100                                               --                  --                 --                 --              100%    
Houston, TX 77046                                                                                                                   
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Crittenden Health Systems                                                                                                           
Hwy 60                                                                                                                              
Marion, KY  42064                                 --                  --                 --               8.98%              --     
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(*)   Owned of record and beneficially.                                         

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                                               CLASS A             CLASS B            CLASS C            CLASS R       INSTITUTIONAL
                                                SHARES             SHARES             SHARES             SHARES         CLASS SHARES
------------------------------------------------------------------------------------------------------------------------------------
                                           PERCENTAGE OWNED   PERCENTAGE OWNED   PERCENTAGE OWNED   PERCENTAGE OWNED     PERCENTAGE 
NAME AND ADDRESS OF                               OF                 OF                 OF                 OF             OWNED OF  
PRINCIPAL HOLDER                                RECORD             RECORD             RECORD             RECORD            RECORD   
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                    
Branch Banking Trust TTE                                                                                                            
FBO W.E. Stanley & Co.                                                                                                              
Inc.                                                                                                                                
OMNIBUS Daily 401k                                                                                                                  
FBO WE Stanley & Co.                                                                                                                
300 E Wendover Avenue,                                                                                                              
Ste 100                                           --                  --                 --               5.23%              --     
Greensboro, NC  27401-                                                                                                              
1221                                                                                                                                
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AMVESCAP National Trust                                                                                                             
Company TTEE                                                                                                                        
FBO Big Horn Basin                                                                                                                  
Orthopedic Clinic                                 --                  --                 --              15.47%              --     
Profit PC Sharing Plan                                                                                                              
P.O. Box 105779                                                                                                                     
Atlanta, GA 30348-5779                                                                                                              
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MCB Trust Services Cust FBO                                                                                                         
Fresh Meadow Mechanical                                                                                                             
Corp.                                             --                  --                 --               6.35%              --     
700 17th Street, Ste. 300                                                                                                           
Denver, CO 80202-3531                                                                                                               
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AMVESCAP National Trust                                                                                                             
Co. as agent for Fleet                                                                                                              
National Bank FBO Fleet                                                                                                             
Boston Financial Savings                        5.44%                 --                 --                 --               --     
Plusn                                                                                                                               
P.O. Box 105779                                                                                                                     
Atlanta, GA 30348-5779                                                                                                              
------------------------------------------------------------------------------------------------------------------------------------
Scudder Trust Company                                                                                                               
TTEE                                                                                                                                
FBO Loos + Company Inc.                           --                  --                 --               6.77%              --     
401K Plan                                                                                                                           
P. O. Box 1757                                                                                                                      
Salem, NH  03079-1143                                                                                                               
------------------------------------------------------------------------------------------------------------------------------------
Symetra Investment                                                                                                                  
Services Inc.                                                                                                                       
P. O. Box 34443                                                                                                                     
Seattle, WA  98124-1443                           --                  --                 --               5.30%              --     
------------------------------------------------------------------------------------------------------------------------------------

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AIM BASIC BALANCED FUND                                                         

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                                     CLASS A        CLASS B         CLASS C        CLASS R         INVESTOR      INSTITUTIONAL      
                                     SHARES          SHARES         SHARES          SHARES          CLASS            CLASS          
                                                                                                   SHARES(1)         SHARES         
------------------------------------------------------------------------------------------------------------------------------------
                                   PERCENTAGE      PERCENTAGE     PERCENTAGE      PERCENTAGE      PERCENTAGE       PERCENTAGE       
NAME AND ADDRESS                     OWNED           OWNED          OWNED           OWNED           OWNED            OWNED          
OF                                     OF              OF             OF              OF              OF               OF           
PRINCIPAL HOLDER                     RECORD          RECORD         RECORD          RECORD          RECORD           RECORD         
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                    
Merrill Lynch Pierce                                                                                                                
Fenner & Smith                                                                                                                      
FBO The Sole                                                                                                                        
Benefit of                                                                                                                          
Customers                               --           5.55%           5.17%            --              --               --           
ATTN:  Fund Administration                                                                                                          
4800 Deer Lake Dr.,                                                                                                                 
East, 2nd Floor                                                                                                                     
Jacksonville, FL 32246-6484                                                                                                         
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AIM Advisors Inc.                                                                                                                   
Attn:  Corporate                                                                                                                    
Controller                                                                                                                          
11 E Greenway                                                                                                                       
Plaza, Suite 1919                       --             --              --           37.64%            --             100%(*)        
Houston, TX  77046-1103                                                                                                             
------------------------------------------------------------------------------------------------------------------------------------
Wayne J. Kropp Sr.                                                                                                                  
P. O. Box 1078                          --             --              --           28.88%            --               --           
Fairfield Bay, AR                                                                                                                   
72088-1078                                                                                                                          
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Manufacturer's                                                                                                                      
Agents Inc.                                                                                                                         
Jan E. Gardner                          --             --              --           9.99%             --               --           
1736 Defoor Pl NW                                                                                                                   
Atlanta, GA  30318-                                                                                                                 
3709                                                                                                                                
------------------------------------------------------------------------------------------------------------------------------------
Jeffrey E. Gamble                                                                                                                   
20 Windy Reef Ct.                                                                                                                   
Barnegat, NJ                            --             --              --           9.35%             --               --           
08005-5608                                                                                                                          
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(*)   Owned of record and beneficially.                                         
(1)   Investor Class shares commenced operations as of April 29, 2005.          

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AIM EUROPEAN SMALL COMPANY FUND                                                 

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                                                      CLASS A SHARES                 CLASS B SHARES                 CLASS C SHARES  
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                                                     PERCENTAGE OWNED               PERCENTAGE OWNED               PERCENTAGE OWNED 
NAME AND ADDRESS OF                                         OF                             OF                             OF        
PRINCIPAL HOLDER                                          RECORD                         RECORD                         RECORD      
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                    
FTC & Co.                                                                                                                           
Datalynx                                                                                                                            
PO Box 173736                                             11.71%                            --                             --       
Denver, CO   80217-3736                                                                                                             
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Merrill Lynch Pierce Fenner &                                                                                                       
Smith                                                                                                                               
FBO The Sole Benefit of                                                                                                             
Customers                                                  5.29%                            --                          11.49%      
ATTN:  Fund Administration                                                                                                          
4800 Deer Lake Dr East                                                                                                              
2nd Floor                                                                                                                           
Jacksonville, FL 32246-6484                                                                                                         
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Morgan Stanley DW                                                                                                                   
3 Harborside Pl. Fl 6                                                                                                               
Jersey City, NJ  07311-3907                                  --                             --                           8.53%      
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AIM GLOBAL VALUE FUND                                                           

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                                                      CLASS A SHARES                 CLASS B SHARES                 CLASS C SHARES  
------------------------------------------------------------------------------------------------------------------------------------
                                                     PERCENTAGE OWNED               PERCENTAGE OWNED               PERCENTAGE OWNED 
NAME AND ADDRESS OF                                         OF                             OF                             OF        
PRINCIPAL HOLDER                                          RECORD                         RECORD                         RECORD      
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                    
Merrill Lynch Pierce Fenner &                                                                                                       
Smith                                                                                                                               
FBO The Sole Benefit of                                                                                                             
Customers                                                                                                                           
ATTN: Fund Administration                                                                                                           
4800 Deer Lake Dr., East, 2nd                                                                                                       
Floor                                                      6.73%                          8.35%                          5.44%      
Jacksonville, FL 32246-6484                                                                                                         

AIM INTERNATIONAL SMALL COMPANY FUND                                            

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                                                      CLASS A SHARES                 CLASS B SHARES                 CLASS C SHARES  
------------------------------------------------------------------------------------------------------------------------------------
                                                     PERCENTAGE OWNED               PERCENTAGE OWNED               PERCENTAGE OWNED 
NAME AND ADDRESS OF                                         OF                             OF                             OF        
PRINCIPAL HOLDER                                          RECORD                         RECORD                         RECORD      
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                    
Merrill Lynch Pierce Fenner &                                                                                                       
Smith                                                                                                                               
FBO The Sole Benefit of                                                                                                             
Customers                                                                                                                           
ATTN:  Fund Administration                                                                                                          
4800 Deer Lake Dr East                                    10.55%                          6.34%                         18.64%      
2nd Floor                                                                                                                           
Jacksonville, FL   32246-6484                                                                                                       
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Morgan Stanley DW                                                                                                                   
Attn:  Mutual Fund Operations                                --                          10.33%                          8.08%      
3 Harborside Pl. Fl 6                                                                                                               
Jersey City, NJ  07311-3907                                                                                                         
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Citigroup Global Markets House                                                                                                      
Acct.                                                                                                                               
Attn:  Cindy Tempesta 7th Fl.                                                                                                       
333 West 34th St.                                            --                           9.10%                          9.83%      
New York, NY  10001-2402                                                                                                            
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AIM MID CAP BASIC VALUE FUND                                                    

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                                                                                                                      INSTITUTIONAL 
                                              CLASS A           CLASS B           CLASS C             CLASS R             CLASS     
                                              SHARES            SHARES             SHARES             SHARES             SHARES     
------------------------------------------------------------------------------------------------------------------------------------
                                            PERCENTAGE        PERCENTAGE         PERCENTAGE         PERCENTAGE         PERCENTAGE   
NAME AND ADDRESS OF                          OWNED OF           OWNED OF          OWNED OF            OWNED OF           OWNED OF   
PRINCIPAL HOLDER                              RECORD            RECORD             RECORD             RECORD             RECORD     
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Merrill Lynch Pierce Fenner                                                                                                         
& Smith                                                                                                                             
FBO The Sole Benefit of                                                                                                             
Customers                                                                                                                           
ATTN:  Fund Administration                                                                                                          
4800 Deer Lake Dr, East,                                                                                                            
2nd Floor                                        --                --              6.13%                 --                 --      
Jacksonville, FL  32246-                                                                                                            
6484                                                                                                                                
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Citigroup Global Markets House Acct.                                                                                                
Attn:  Cindy Tempesta 7th Fl.                    --                --              8.26%                 --                 --      
333 West 34th St.                                                                                                                   
New York, NY  10001-2402                                                                                                            
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AIM Advisors Inc.                                                                                                                   
Attn:  Corporate Controller                      --                --                --               31.25%                --      
11 E Greenway Plaza, Suite 1919                                                                                                     
Houston, TX  77046-1103                                                                                                             
------------------------------------------------------------------------------------------------------------------------------------
Donna M. Lambert                                                                                                                    
660 Cardinal St.                                 --                --                --               24.37%                --      
Plantation, FL  33324                                                                                                               
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Essential Personnel Services                                                                                                        
Sharon Dubruyne                                  --                --                --               15.98%                --      
13582 Woodland Dr.                                                                                                                  
Tustin, CA  92780-4775                                                                                                              
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Lorry Sirkin                                                                                                                        
1115 W. Altgeld St.                              --                --                --                9.13%                --      
Chicago, IL  60614-2218                                                                                                             
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Audrey S. Gamm                                                                                                                      
1115 W. Altgeld St.                              --                --                --                9.13%                --      
Chicago, IL  60614-2218                                                                                                             
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Hartmann Metals                                                                                                                     
Hanni H. Hartmann                                --                --                --                5.61%                --      
139 Makaweli St.                                                                                                                    
Honolulu, HI  96825-2143                                                                                                            
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                                                                                                                      INSTITUTIONAL 
                                              CLASS A           CLASS B           CLASS C             CLASS R             CLASS     
                                              SHARES            SHARES             SHARES             SHARES             SHARES     
------------------------------------------------------------------------------------------------------------------------------------
                                            PERCENTAGE        PERCENTAGE         PERCENTAGE         PERCENTAGE         PERCENTAGE   
NAME AND ADDRESS OF                          OWNED OF           OWNED OF          OWNED OF            OWNED OF           OWNED OF   
PRINCIPAL HOLDER                              RECORD            RECORD             RECORD             RECORD             RECORD     
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AIM Moderate Asset                                                                                                                  
Allocation Fund                                                                                                                     
Omnibus Account                                                                                                                     
c/o AIM Advisors                                 --                --                --                  --               99.9%     
11 E. Greenway Plaza, Suite                                                                                                         
100                                                                                                                                 
Houston, TX  77046-1113                                                                                                             
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AIM PREMIER EQUITY FUND                                                         

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                                                                                                                      INSTITUTIONAL 
                                              CLASS A           CLASS B           CLASS C             CLASS R             CLASS     
                                              SHARES            SHARES             SHARES             SHARES             SHARES     
------------------------------------------------------------------------------------------------------------------------------------
                                            PERCENTAGE        PERCENTAGE         PERCENTAGE         PERCENTAGE         PERCENTAGE   
NAME AND ADDRESS OF                          OWNED OF           OWNED OF          OWNED OF            OWNED OF           OWNED OF   
PRINCIPAL HOLDER                              RECORD            RECORD             RECORD             RECORD             RECORD     
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                    
Citigroup Global Markets                                                                                                            
House Acct.                                                                                                                         
Attn:  Cindy Tempesta, 17th                                                                                                         
Floor                                                                                                                               
333 West 34th Street                                                                                                                
New York, NY   10001-                          6.87%               7.88%               9.70%                --                  --  
2402                                                                                                                                
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Merrill Lynch Pierce Fenner                                                                                                         
& Smith                                                                                                                             
FBO The Sole Benefit of                                                                                                             
Customers                                                                                                                           
ATTN:  Fund Administration                     7.49%               7.59%              16.67%              21.80%                --  
4800 Deer Lake Dr., East                                                                                                            
2nd Floor                                                                                                                           
Jacksonville, FL   32246-                                                                                                           
6484                                                                                                                                
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AMVESCAP National Trust                                                                                                             
Company TTEE                                                                                                                        
FBO Guys Inc. 401(k) Profit                      --                  --                  --               8.81%                 --  
Sharing Plan                                                                                                                        
P.O. Box 105779                                                                                                                     
Atlanta, GA 30348-5779                                                                                                              
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                                                                                                                      INSTITUTIONAL 
                                              CLASS A           CLASS B           CLASS C             CLASS R             CLASS     
                                              SHARES            SHARES             SHARES             SHARES             SHARES     
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                                            PERCENTAGE        PERCENTAGE         PERCENTAGE         PERCENTAGE         PERCENTAGE   
NAME AND ADDRESS OF                          OWNED OF           OWNED OF          OWNED OF            OWNED OF           OWNED OF   
PRINCIPAL HOLDER                              RECORD            RECORD             RECORD             RECORD             RECORD     
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First Command Bank Trust                                                                                                            
Attention: Trust Department                      --                  --                  --                 --                9.68% 
P.O. Box 901075                                                                                                                     
Fort Worth, TX 76101-2075                                                                                                           
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Putnam Fiduciary Trust Co.                                                                                                          
Trustee                                                                                                                             
FBO Raymond James                                                                                                                   
Financial Inc.                                                                                                                      
Star Plan Trust                                                                                                                     
One Investors Way                                --                  --                  --                 --                89.46%
Norwood, MA  02062-1599                                                                                                             
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AIM SELECT EQUITY FUND                                                          

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                                                       CLASS A                 CLASS B                CLASS C  
                                                        SHARES                  SHARES                 SHARES  
---------------------------------------------------------------------------------------------------------------
                                                      PERCENTAGE              PERCENTAGE             PERCENTAGE
NAME AND ADDRESS OF                                    OWNED OF                OWNED OF               OWNED OF 
PRINCIPAL HOLDER                                        RECORD                  RECORD                 RECORD  
---------------------------------------------------------------------------------------------------------------
                                                                                                               
Merrill Lynch Pierce Fenner & Smith                                                                            
FBO The Sole Benefit of Customers                                                                              
ATTN:  Fund Administration                                                                                     
4800 Deer Lake Dr., East, 2nd Floor                     5.40%                   6.04%                  7.02%   
Jacksonville, FL  32246-6484                                                                                   
---------------------------------------------------------------------------------------------------------------
Citigroup Global Markets House Account                                                                         
ATTN: Cindy Tempesta, 7th Floor                                                                                
333 West 34th Street                                                                                           
New York, NY 10001-2402                                 5.13%                     --                     --    
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AIM SMALL CAP EQUITY FUND                                                       

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                                                                                                                      INSTITUTIONAL 
                                                CLASS A           CLASS B           CLASS C           CLASS R             CLASS     
                                                SHARES            SHARES            SHARES            SHARES            SHARES(2)   
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                                              PERCENTAGE        PERCENTAGE        PERCENTAGE        PERCENTAGE         PERCENTAGE   
NAME AND ADDRESS OF                            OWNED OF          OWNED OF          OWNED OF          OWNED OF           OWNED OF    
PRINCIPAL HOLDER                                RECORD            RECORD            RECORD            RECORD             RECORD     
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Merrill Lynch Pierce Fenner & Smith                                                                                                 
FBO The Sole Benefit of Customers                                                                                                   
ATTN:  Fund Administration                                                                                                          
4800 Deer Lake Dr., East                                                                                                            
2nd Floor                                        6.31%             5.67%            15.27%               --                 --      
Jacksonville, FL   32246-6484                                                                                                       
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Reliance Trust Co.                                                                                                                  
FBO Knightsbridge Solutions 401k                   --                --                --              5.66%               N/A      
P.O. Box 48529                                                                                                                      
Atlanta, GA  30362-1529                                                                                                             
------------------------------------------------------------------------------------------------------------------------------------
Symetra Investments Inc.                                                                                                            
P. O. Box 34443                                                                                                                     
Seattle, WA  98124-1443                            --                --                --              8.55%                --      
------------------------------------------------------------------------------------------------------------------------------------

(2)   Institutional Class shares commenced operations as of April 29, 2005.     

MANAGEMENT OWNERSHIP                                                            

As of March 15, 2005, the trustees and officers as a group owned less than 1% of
the outstanding shares of each class of each Portfolio.                         

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APPENDIX F
MANAGEMENT FEES 

For the last three fiscal years ended December 31, the management fees payable  
by each Fund, the amounts waived by AIM and the net fees paid by each Fund were 
as follows:                                                                     

                                                        [Enlarge/Download Table]

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          FUND NAME                                     2004                                             2003                       
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                                    MANAGEMENT FEE  MANAGEMENT FEE   NET MANAGEMENT  MANAGEMENT FEE  MANAGEMENT FEE  NET MANAGEMENT 
                                       PAYABLE         WAIVERS          FEE PAID        PAYABLE         WAIVERS        FEE PAID     
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AIM Balanced Fund                      $10,703,307          $3,064     $10,700,243      $12,247,956         $26,441     $12,221,515 
------------------------------------------------------------------------------------------------------------------------------------
AIM Basic Balanced Fund                  1,094,829             292       1,094,537          762,772          87,087         675,685 
------------------------------------------------------------------------------------------------------------------------------------
AIM European Small Company Fund            898,035             908         897,127          329,310         235,934          93,376 
------------------------------------------------------------------------------------------------------------------------------------
AIM Global Value Fund                      310,539          49,124         261,415          119,494         119,494             -0- 
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AIM International Small Company          1,828,269           1,642       1,826,627          433,171         158,359         274,812 
Fund                                                                                                                                
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AIM Mid Cap Basic Value Fund             1,259,409           1,532       1,257,877          585,948          87,608         498,340 
------------------------------------------------------------------------------------------------------------------------------------
AIM Premier Equity Fund                 49,234,296         770,935      48,463,361       56,790,898       1,170,110      55,620,788 
------------------------------------------------------------------------------------------------------------------------------------
AIM Select Equity Fund                   3,284,662           3,147       3,281,515        3,333,532           4,384       3,329,148 
------------------------------------------------------------------------------------------------------------------------------------
AIM Small Cap Equity Fund                4,233,084           3,093       4,229,991        3,062,023           3,786       3,058,237 
------------------------------------------------------------------------------------------------------------------------------------

                                                                [Download Table]

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          FUND NAME                                    2002                     
--------------------------------------------------------------------------------
                                  MANAGEMENT FEE  MANAGEMENT FEE  NET MANAGEMENT
                                     PAYABLE          WAIVERS         FEE PAID  
--------------------------------------------------------------------------------
                                                                                
AIM Balanced Fund                    $16,549,652         $42,255     $16,507,397
--------------------------------------------------------------------------------
AIM Basic Balanced Fund                  425,485         124,214         301,271
--------------------------------------------------------------------------------
AIM European Small Company Fund          197,592         197,592             -0-
--------------------------------------------------------------------------------
AIM Global Value Fund                    114,141         101,252          12,889
--------------------------------------------------------------------------------
AIM International Small Company          157,455         157,455             -0-
Fund                                                                            
--------------------------------------------------------------------------------
AIM Mid Cap Basic Value Fund             396,344          65,709         330,635
--------------------------------------------------------------------------------
AIM Premier Equity Fund               83,590,822       3,054,474      80,536,348
--------------------------------------------------------------------------------
AIM Select Equity Fund                 4,526,857           5,546       4,521,311
--------------------------------------------------------------------------------
AIM Small Cap Equity Fund              2,448,587           3,987       2,444,600
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APPENDIX G
PORTFOLIO MANAGERS

As of December 31, 2004 

INVESTMENTS IN EACH FUND

                                                                [Download Table]

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NAME OF PORTFOLIO MANAGER            DOLLAR RANGE OF INVESTMENTS IN EACH FUND(1)
--------------------------------------------------------------------------------
                                                                                
                               AIM BALANCED FUND                                
--------------------------------------------------------------------------------
R. Canon Coleman II                                     None                    
--------------------------------------------------------------------------------
Jan H. Friedli                                          None                    
--------------------------------------------------------------------------------
Scot W. Johnson                                         None                    
--------------------------------------------------------------------------------
Matthew W. Seinsheimer                            $10,001 - $50,000             
--------------------------------------------------------------------------------
Michael J. Simon                                        None                    
--------------------------------------------------------------------------------
Bret W. Stanley                                         None                    
--------------------------------------------------------------------------------
                            AIM BASIC BALANCED FUND                             
--------------------------------------------------------------------------------
R. Canon Coleman II                                 $1 - $10,000                
--------------------------------------------------------------------------------
Jan H. Friedli                                          None                    
--------------------------------------------------------------------------------
Scot W. Johnson                                   $10,001 - $50,000             
--------------------------------------------------------------------------------
Matthew W. Seinsheimer                            $10,001 - $50,000             
--------------------------------------------------------------------------------
Michael J. Simon                                        None                    
--------------------------------------------------------------------------------
Bret W. Stanley                                         None                    
--------------------------------------------------------------------------------
                        AIM EUROPEAN SMALL COMPANY FUND                         
--------------------------------------------------------------------------------
Borge Endresen                                    $10,001 - $50,000             
--------------------------------------------------------------------------------
Jason T. Holzer                                    Over $1,000,000              
--------------------------------------------------------------------------------
                             AIM GLOBAL VALUE FUND                              
--------------------------------------------------------------------------------
Glen Hilton                                             None                    
--------------------------------------------------------------------------------
                      AIM INTERNATIONAL SMALL COMPANY FUND                      
--------------------------------------------------------------------------------
Shuxin Cao                                       $50,001 - $100,000             
--------------------------------------------------------------------------------
Borge Endresen                                    $10,001 - $50,000             
--------------------------------------------------------------------------------
Jason T. Holzer                                 $500,001 - $1,000,000           
--------------------------------------------------------------------------------
Richard Nield                                     $10,001 - $50,000             
--------------------------------------------------------------------------------
Barrett K. Sides                                 $100,001 - $500,000            
--------------------------------------------------------------------------------
                          AIM MID CAP BASIC VALUE FUND                          
--------------------------------------------------------------------------------
R. Canon Coleman II                               $10,001 - $50,000             
--------------------------------------------------------------------------------
Matthew W. Seinsheimer                           $100,001 - $500,000            
--------------------------------------------------------------------------------
Michael J. Simon                                 $100,001 - $500,000            
--------------------------------------------------------------------------------

----------                                                                      
(1)   This column reflects investments in a Fund's shares owned directly by a   
portfolio manager or beneficially owned by a portfolio manager (as  
determined in accordance with Rule 16a-1(a)(2) under the Securities 
      Exchange Act of 1934, as amended). A portfolio manager is presumed to be a
beneficial owner of securities that are held by his or her immediate
family members sharing the same household.                          

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NAME OF PORTFOLIO MANAGER            DOLLAR RANGE OF INVESTMENTS IN EACH FUND(1)
--------------------------------------------------------------------------------
                                                                                
Bret W. Stanley                                 $500,001 - $1,000,000           
--------------------------------------------------------------------------------
                            AIM PREMIER EQUITY FUND                             
--------------------------------------------------------------------------------
Lanny H. Sachnowitz                              $100,001 - $500,000            
--------------------------------------------------------------------------------
Ronald S. Sloan                                         None                    
--------------------------------------------------------------------------------
Bret W. Stanley                                         None                    
--------------------------------------------------------------------------------
                             AIM SELECT EQUITY FUND                             
--------------------------------------------------------------------------------
Duy Nguyen                                        $10,001 - $50,000             
--------------------------------------------------------------------------------
                           AIM SMALL CAP EQUITY FUND                            
--------------------------------------------------------------------------------
Juliet S. Ellis                                  $100,001 - $500,000            
--------------------------------------------------------------------------------
Michael Chapman(2)                                $50,001 - $100,000            
--------------------------------------------------------------------------------

DESCRIPTION OF COMPENSATION STRUCTURE                                           

AIM ADVISORS, INC.                                                              

AIM seeks to maintain a compensation program that is competitively  
positioned to attract and retain high-caliber investment professionals.         
Portfolio managers receive a base salary, an incentive bonus opportunity, an    
equity compensation opportunity, and a benefits package. Portfolio manager      
compensation is reviewed and may be modified each year as appropriate to reflect
changes in the market, as well as to adjust the factors used to determine       
bonuses to promote good sustained fund performance. AIM evaluates competitive   
market compensation by reviewing compensation survey results conducted by an    
independent third party of investment industry compensation. Each portfolio     
manager's compensation consists of the following five elements:                 

-     BASE SALARY. Each portfolio manager is paid a base salary. In setting the 
base salary, AIM's intention is to be competitive in light of the   
particular portfolio manager's experience and responsibilities.     

-     ANNUAL BONUS. Each portfolio manager is eligible to receive an annual cash
    bonus which has quantitative and non-quantitative components. Generally,
70% of the bonus is quantitatively determined, based typically on a 
four-year rolling average of pre-tax performance of all registered  
    investment company accounts for which a portfolio manager has day-to-day
  management responsibilities versus the performance of a pre-determined
     peer group. In instances where a portfolio manager has responsibility for
 management of more than one fund, an asset weighted four-year rolling
average is used.                                                    

High fund performance (against applicable peer group) would deliver 
      compensation generally associated with top pay in the industry (determined
     by reference to the third-party provided compensation survey information)
    and poor fund performance (versus applicable peer group) could result in
  no bonus. The amount of fund assets under management typically have an
      impact on the bonus potential (for example, managing more assets increases
    the bonus potential); however, this factor typically carries less weight
than relative performance. The remaining 30% portion of the bonus is
      discretionary as determined by AIM and takes into account other subjective
factors.                                                            

----------                                                                      
(1)   This column reflects investments in a Fund's shares owned directly by a   
portfolio manager or beneficially owned by a portfolio manager (as  
determined in accordance with Rule 16a-1(a)(2) under the Securities 
      Exchange Act of 1934, as amended). A portfolio manager is presumed to be a
beneficial owner of securities that are held by his or her immediate
family members sharing the same household.                          

(2)   Mr. Chapman began serving as portfolio manager on AIM Small Cap Equity    
 Fund on April 29, 2005. Ownership information has been provided as of
March 31, 2005.                                                     
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-     EQUITY-BASED COMPENSATION. Portfolio managers may be awarded options to   
     purchase common shares and/or granted restricted shares of AMVESCAP stock
    from pools determined from time to time by the Remuneration Committee of
the AMVESCAP Board of Directors. Awards of equity-based compensation
      typically vest over time, so as to create incentives to retain key talent.

-     PARTICIPATION IN GROUP INSURANCE PROGRAMS. Portfolio managers are provided
  life insurance coverage in the form of a group variable universal life
   insurance policy, under which they may make additional contributions to
purchase additional insurance coverage or for investment purposes.  

-     PARTICIPATION IN DEFERRED COMPENSATION PLAN. Portfolio managers are       
  eligible to participate in a non-qualified deferred compensation plan,
   which affords participating employees the tax benefits of deferring the
receipt of a portion of their cash compensation.                    

Portfolio managers also participate in benefit plans and programs available     
generally to all employees.                                                     

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OTHER MANAGED ACCOUNTS

As of December 31, 2004 

AIM's portfolio managers develop investment models which are used in
connection with the management of certain AIM funds as well as other mutual     
funds for which AIM or an affiliate acts as sub-advisor, other pooled investment
vehicles that are not registered mutual funds, and other accounts managed for   
organizations and individuals. The following chart reflects information         
regarding accounts other than the Fund for which each portfolio manager has     
day-to-day management responsibilities. Accounts are grouped into three         
categories: (i) mutual funds, (ii) other pooled investment vehicles, and (iii)  
other accounts. To the extent that any of these accounts pay advisory fees that 
are based on account performance ("performance-based fees"), information on     
those accounts is specifically broken out.                                      

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NAME OF PORTFOLIO MANAGER                         NUMBER OF ACCOUNTS MANAGED BY EACH PORTFOLIO MANAGER AND TOTAL ASSETS BY CATEGORY 
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                                                           AIM BALANCED FUND                                                        
------------------------------------------------------------------------------------------------------------------------------------
R. Canon Coleman II                               8 Registered Mutual Funds with $9,207,251,766 in total assets under management    

                                                  1 Unregistered Pooled Investment Vehicle with $8,111,766 in total assets under    
                                                  management                                                                        

                                                  3596 Other Accounts with $1,078,482,755 in total assets under management(3)       
------------------------------------------------------------------------------------------------------------------------------------
Jan H. Friedli                                    6 Registered Mutual Funds with $1,543,553,540 in total assets under management    

                                                  2 Unregistered Pooled Investment Vehicles with $535,758,225 in total assets under 
                                                  management                                                                        
------------------------------------------------------------------------------------------------------------------------------------
Scot W. Johnson                                   9 Registered Mutual Funds with $3,504,834,363 in total assets under management    

                                                  2 Unregistered Pooled Investment Vehicles with $535,758,225 in total assets under 
                                                  management                                                                        
------------------------------------------------------------------------------------------------------------------------------------
Matthew W. Seinsheimer                            8 Registered Mutual Funds with $9,207,251,766 in total assets under management    

                                                  1 Unregistered Pooled Investment Vehicle with $8,111,766 in total assets under    
                                                  management                                                                        

                                                  3596 Other Accounts with $1,078,482,755 in total assets under management(3)       
------------------------------------------------------------------------------------------------------------------------------------

----------                                                                      
(3)   These are accounts of individual investors for which AIM's affiliate, AIM 
    Private Asset Management, Inc. ("APAM") provides investment advice. APAM
offers separately managed accounts that are managed according to the
investment models developed by AIM's portfolio managers and used in 
     connection with the management of certain AIM funds. APAM accounts may be
  invested in accordance with one or more of those investment models and
investments held in those accounts are traded in accordance with the
applicable models.                                                  

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NAME OF PORTFOLIO MANAGER                         NUMBER OF ACCOUNTS MANAGED BY EACH PORTFOLIO MANAGER AND TOTAL ASSETS BY CATEGORY 
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Michael J. Simon                                  12 Registered Mutual Funds with $10,541,502,795 in total assets under management  

                                                  1 Unregistered Pooled Investment Vehicle with $8,111,766 in total assets under    
                                                  management                                                                        

                                                  3596 Other Accounts with $1,078,482,755 in total assets under management(3)       
------------------------------------------------------------------------------------------------------------------------------------
Bret W. Stanley                                   11 Registered Mutual Funds with $20,046,886,345 in total assets under management  

                                                  1 Unregistered Pooled Investment Vehicle with $8,111,766 in total assets under    
                                                  management                                                                        

                                                  3596 Other Accounts with $1,078,482,755 in total assets under management(3)       
------------------------------------------------------------------------------------------------------------------------------------
                                                        AIM BASIC BALANCED FUND                                                     
------------------------------------------------------------------------------------------------------------------------------------
R. Canon Coleman II                               8 Registered Mutual Funds with $10,911,900,425 in total assets under management   

                                                  1 Unregistered Pooled Investment Vehicle with $8,111,766 in total assets under    
                                                  management                                                                        

                                                  3596 Other Accounts with $1,078,482,755 in total assets under management(3)       
------------------------------------------------------------------------------------------------------------------------------------
Jan H. Friedli                                    6 Registered Mutual Funds with $3,248,202,199 in total assets under management    

                                                  2 Unregistered Pooled Investment Vehicles with $535,758,225 in total assets under 
                                                  management                                                                        
------------------------------------------------------------------------------------------------------------------------------------
Scot W. Johnson                                   9 Registered Mutual Funds with $5,209,483,022 in total assets under management    

                                                  2 Unregistered Pooled Investment Vehicles with $535,758,225 in total assets under 
                                                  management                                                                        
------------------------------------------------------------------------------------------------------------------------------------
Matthew W. Seinsheimer                            8 Registered Mutual Funds with $10,911,900,425 in total assets under management   

                                                  1 Unregistered Pooled Investment Vehicle with $8,111,766 in total assets under    
                                                  management                                                                        

                                                  3596 Other Accounts with $1,078,482,755 in total assets under management(3)       
------------------------------------------------------------------------------------------------------------------------------------

----------                                                                      
(3)   These are accounts of individual investors for which AIM's affiliate, AIM 
    Private Asset Management, Inc. ("APAM") provides investment advice. APAM
offers separately managed accounts that are managed according to the
investment models developed by AIM's portfolio managers and used in 
     connection with the management of certain AIM funds. APAM accounts may be
  invested in accordance with one or more of those investment models and
investments held in those accounts are traded in accordance with the
applicable models.                                                  

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NAME OF PORTFOLIO MANAGER                       NUMBER OF ACCOUNTS MANAGED BY EACH PORTFOLIO MANAGER AND TOTAL ASSETS BY CATEGORY   
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                    
Michael J. Simon                                12 Registered Mutual Funds with $12,246,151,454 in total assets under management    

                                                1 Unregistered Pooled Investment Vehicle with $8,111,766 in total assets under      
                                                management                                                                          

                                                3596 Other Accounts with $1,078,482,755 in total assets under management(3)         
------------------------------------------------------------------------------------------------------------------------------------
Bret W. Stanley                                 11 Registered Mutual Funds with $21,751,535,004 in total assets under management    

                                                1 Unregistered Pooled Investment Vehicle with $8,111,766 in total assets under      
                                                management                                                                          

                                                3596 Other Accounts with $1,078,482,755 in total assets under management(3)         
------------------------------------------------------------------------------------------------------------------------------------
                                                        AIM EUROPEAN SMALL COMPANY FUND                                             
------------------------------------------------------------------------------------------------------------------------------------
Borge Endresen                                  4 Registered Mutual Funds with $2,433,574,930 in total assets under management      

                                                3 Unregistered Pooled Investment Vehicles with $97,056,195 in total assets under    
                                                management                                                                          
------------------------------------------------------------------------------------------------------------------------------------
Jason T. Holzer                                 6 Registered Mutual Funds with $4,513,738,037 in total assets under management      

                                                10 Unregistered Pooled Investment Vehicles with $1,936,727,984 in total assets under
                                                management                                                                          

                                                42 Other Accounts with $16,090,814 in total assets under management(3)              
------------------------------------------------------------------------------------------------------------------------------------
                                                       AIM GLOBAL VALUE FUND                                                        
------------------------------------------------------------------------------------------------------------------------------------
Glen Hilton                                     3 Registered Mutual Funds that pay performance-based fees with $659,447,958 in      
                                                total assets under management                                                       

                                                3 Unregistered Pooled Investment Vehicles with $988,048,976 in total assets under   
                                                management                                                                          
------------------------------------------------------------------------------------------------------------------------------------

----------                                                                      
(3)   These are accounts of individual investors for which AIM's affiliate, AIM 
    Private Asset Management, Inc. ("APAM") provides investment advice. APAM
offers separately managed accounts that are managed according to the
investment models developed by AIM's portfolio managers and used in 
     connection with the management of certain AIM funds. APAM accounts may be
  invested in accordance with one or more of those investment models and
investments held in those accounts are traded in accordance with the
applicable models.                                                  

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NAME OF PORTFOLIO MANAGER                       NUMBER OF ACCOUNTS MANAGED BY EACH PORTFOLIO MANAGER AND TOTAL ASSETS BY CATEGORY   
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                                                        AIM INTERNATIONAL SMALL COMPANY FUND                                        
------------------------------------------------------------------------------------------------------------------------------------
Shuxin Cao                                      7 Registered Mutual Funds with $4,172,631,616 in total assets under management      

                                                1 Unregistered Pooled Investment Vehicle with $19,755,718 in total assets under     
                                                management                                                                          

                                                42 Other Accounts with $16,090,814 in total assets under management(3)              
------------------------------------------------------------------------------------------------------------------------------------
Borge Endresen                                  4 Registered Mutual Funds with $2,295,519,647 in total assets under management      

                                                3 Unregistered Pooled Investment Vehicles with $97,056,195 in total assets under    
                                                management                                                                          
------------------------------------------------------------------------------------------------------------------------------------
Jason T. Holzer                                 6 Registered Mutual Funds with $4,375,682,754 in total assets under management      

                                                10 Unregistered Pooled Investment Vehicles with $1,936,727,984 in total assets under
                                                management                                                                          

                                                42 Other Accounts with $16,090,814 in total assets under management(3)              
------------------------------------------------------------------------------------------------------------------------------------
Richard Nield                                   1 Registered Mutual Fund with $894,866,373 in total assets under management         

                                                7 Unregistered Pooled Investment Vehicles with $1,827,980,978 in total assets under 
                                                management                                                                          
------------------------------------------------------------------------------------------------------------------------------------
Barrett K. Sides                                6 Registered Mutual Funds with $3,911,045,752 in total assets under management      

                                                1 Unregistered Pooled Investment Vehicle with $19,755,718 in total assets under     
                                                management                                                                          

                                                42 Other Accounts with $16,090,814 in total assets under management(3)              
------------------------------------------------------------------------------------------------------------------------------------
                                                        AIM MID CAP BASIC VALUE FUND                                                
------------------------------------------------------------------------------------------------------------------------------------
R. Canon Coleman II                             8 Registered Mutual Funds with $10,875,219,621 in total assets under management     

                                                1 Unregistered Pooled Investment Vehicle with $8,111,766 in total assets under      
                                                management                                                                          

                                                3596 Other Accounts with $1,078,482,755 in total assets under management(3)         
------------------------------------------------------------------------------------------------------------------------------------

----------                                                                      
(3)   These are accounts of individual investors for which AIM's affiliate, AIM 
    Private Asset Management, Inc. ("APAM") provides investment advice. APAM
offers separately managed accounts that are managed according to the
investment models developed by AIM's portfolio managers and used in 
     connection with the management of certain AIM funds. APAM accounts may be
  invested in accordance with one or more of those investment models and
investments held in those accounts are traded in accordance with the
applicable models.                                                  

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NAME OF PORTFOLIO MANAGER                         NUMBER OF ACCOUNTS MANAGED BY EACH PORTFOLIO MANAGER AND TOTAL ASSETS BY CATEGORY 
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Matthew W. Seinsheimer                            8 Registered Mutual Funds with $10,875,219,621 in total assets under management   

                                                  1 Unregistered Pooled Investment Vehicle with $8,111,766 in total assets under    
                                                  management                                                                        

                                                  3596 Other Accounts with $1,078,482,755 in total assets under management(3)       
------------------------------------------------------------------------------------------------------------------------------------
Michael J. Simon                                  12 Registered Mutual Funds with $12,209,470,651 in total assets under management  

                                                  1 Unregistered Pooled Investment Vehicle with $8,111,766 in total assets under    
                                                  management                                                                        

                                                  3596 Other Accounts with $1,078,482,755 in total assets under management(3)       
------------------------------------------------------------------------------------------------------------------------------------
Bret W. Stanley                                   11 Registered Mutual Funds with $21,714,854,200 in total assets under management  

                                                  1 Unregistered Pooled Investment Vehicle with $8,111,766 in total assets under    
                                                  management                                                                        

                                                  3596 Other Accounts with $1,078,482,755 in total assets under management(3)       
------------------------------------------------------------------------------------------------------------------------------------
                                                        AIM PREMIER EQUITY FUND                                                     
------------------------------------------------------------------------------------------------------------------------------------
Lanny H. Sachnowitz                               6 Registered Mutual Funds with $5,175,096,978 in total assets under management    
------------------------------------------------------------------------------------------------------------------------------------
Ronald S. Sloan                                   9 Registered Mutual Funds with $10,783,411,311 in total assets under management   

                                                  2 Unregistered Pooled Investment Vehicles with $55,285,105 in total assets under  
                                                  management                                                                        

                                                  8796 Other Accounts with $1,925,777,183 in total assets under management(3)       
------------------------------------------------------------------------------------------------------------------------------------
Bret W. Stanley                                   11 Registered Mutual Funds with $15,048,368,238 in total assets under management  

                                                  1 Unregistered Pooled Investment Vehicle with $8,111,766 in total assets under    
                                                  management                                                                        

                                                  3596 Other Accounts with $1,078,482,755 in total assets under management(3)       
------------------------------------------------------------------------------------------------------------------------------------

----------                                                                      
(3)   These are accounts of individual investors for which AIM's affiliate, AIM 
    Private Asset Management, Inc. ("APAM") provides investment advice. APAM
offers separately managed accounts that are managed according to the
investment models developed by AIM's portfolio managers and used in 
     connection with the management of certain AIM funds. APAM accounts may be
  invested in accordance with one or more of those investment models and
investments held in those accounts are traded in accordance with the
applicable models.                                                  

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NAME OF PORTFOLIO MANAGER                         NUMBER OF ACCOUNTS MANAGED BY EACH PORTFOLIO MANAGER AND TOTAL ASSETS BY CATEGORY 
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                                                        AIM SELECT EQUITY FUND                                                      
------------------------------------------------------------------------------------------------------------------------------------
Duy Nguyen                                        1 Registered Mutual Fund with $1,050,557 in total assets under management         
------------------------------------------------------------------------------------------------------------------------------------
                                                       AIM SMALL CAP EQUITY FUND                                                    
------------------------------------------------------------------------------------------------------------------------------------
Juliet S. Ellis                                   5 Registered Mutual Funds with $2,759,158,944 in total assets under management    

                                                  1 Other Account with $124,542 in total assets under management(3)                 
------------------------------------------------------------------------------------------------------------------------------------
Michael Chapman(4)                                7 Registered Mutual Funds with $3,712,416,204 in total assets under management    
------------------------------------------------------------------------------------------------------------------------------------

POTENTIAL CONFLICTS OF INTEREST                                                 

Actual or apparent conflicts of interest may arise when a portfolio 
manager has day-to-day management responsibilities with respect to more than one
Fund or other account. More specifically, portfolio managers who manage multiple
Funds and /or other accounts may be presented with one or more of the following 
potential conflicts:                                                            

-     The management of multiple Funds and/or other accounts may result in a    
      portfolio manager devoting unequal time and attention to the management of
each Fund and/or other account. AIM seeks to manage such competing  
interests for the time and attention of portfolio managers by having
      portfolio managers focus on a particular investment discipline. Most other
accounts managed by a portfolio manager are managed using the same  
    investment models that are used in connection with the management of the
Funds.                                                              

-     If a portfolio manager identifies a limited investment opportunity which  
      may be suitable for more than one Fund or other account, a Fund may not be
   able to take full advantage of that opportunity due to an allocation of
filled purchase or sale orders across all eligible Funds and other  
   accounts. To deal with these situations, AIM and the Funds have adopted
      procedures for allocating portfolio transactions across multiple accounts.

-     With respect to securities transactions for the Funds, AIM determines     
  which broker to use to execute each order, consistent with its duty to
    seek best execution of the transaction. However, with respect to certain
      other accounts (such as mutual funds for which AIM or an affiliate acts as
 sub-advisor, other pooled investment vehicles that are not registered
mutual funds, and other accounts managed for organizations and      
individuals), AIM may be limited by the client with respect to the  
selection of brokers or may be instructed to direct trades through a
particular broker. In these cases, trades for a Fund in a particular
     security may be placed separately from, rather than aggregated with, such
   other accounts. Having separate transactions with respect to a security
    may temporarily affect the market price of the security or the execution
 of the transaction, or both, to the possible detriment of the Fund or
other account(s) involved.                                          

----------                                                                      
(3)   These are accounts of individual investors for which AIM's affiliate, AIM 
    Private Asset Management, Inc. ("APAM") provides investment advice. APAM
offers separately managed accounts that are managed according to the
investment models developed by AIM's portfolio managers and used in 
     connection with the management of certain AIM funds. APAM accounts may be
  invested in accordance with one or more of those investment models and
investments held in those accounts are traded in accordance with the
applicable models.                                                  

(4)   Mr. Chapman began serving as portfolio manager on AIM Small Cap Equity    
     Fund on April 29, 2005. Information on other accounts that he manages has
been provided as of March 31, 2005.                                 

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-     Finally, the appearance of a conflict of interest may arise where AIM has 
      an incentive, such as a performance-based management fee, which relates to
     the management of one Fund or account but not all Funds and accounts with
respect to which a portfolio manager has day-to-day management      
responsibilities.                                                   

  AIM and the Funds have adopted certain compliance procedures which are
designed to address these types of conflicts. However, there is no guarantee    
that such procedures will detect each and every situation in which a conflict   
arises.                                                                         

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APPENDIX H

ADMINISTRATIVE SERVICES FEES

The Funds paid AIM the following amounts for administrative services for the    
last three fiscal years ended December 31:                                      

                                                                [Download Table]

--------------------------------------------------------------------------------
           FUND NAME                          2004           2003         2002  
--------------------------------------------------------------------------------
                                                                                
AIM Balanced Fund                           $458,536       $498,697     $441,158
--------------------------------------------------------------------------------
AIM Basic Balanced Fund                      50,000         50,000       50,000 
--------------------------------------------------------------------------------
AIM European Small Company Fund              50,000         50,000       50,000 
--------------------------------------------------------------------------------
AIM Global Value Fund                        50,000         50,000       50,000 
--------------------------------------------------------------------------------
AIM International Small Company              50,000         50,000       50,000 
Fund                                                                            
--------------------------------------------------------------------------------
AIM Mid Cap Basic Value Fund                 50,000         50,000       50,000 
--------------------------------------------------------------------------------
AIM Premier Equity Fund                     725,065         761,336     744,086 
--------------------------------------------------------------------------------
AIM Select Equity Fund                      131,215         133,014     140,339 
--------------------------------------------------------------------------------
AIM Small Cap Equity Fund                   144,542         112,855      83,395 
--------------------------------------------------------------------------------

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APPENDIX I

 BROKERAGE COMMISSIONS

   Brokerage commissions (1) paid by each of the Funds listed below during
the last three fiscal years ended December 31 were as follows:                  

                                                                [Download Table]

FUND                                          2004          2003          2002  
----                                          ----          ----          ----  
                                                                                
AIM Balanced Fund(2)                     $   711,386    $4,904,217   $ 3,264,475
AIM Basic Balanced Fund                       69,379        64,027        86,276
AIM European Small Company Fund(3)           422,682       196,726       115,950
AIM Global Value Fund(4)                     263,911       229,443        41,687
AIM International Small Company Fund(5)    1,276,368       408,813       109,136
AIM Mid Cap Basic Value Fund                 180,373       143,936       177,248
AIM Premier Equity Fund(6)                18,105,431    12,470,891    19,179,821
AIM Select Equity Fund(7)                    637,302     1,367,378     2,058,156
AIM Small Cap Equity Fund(8)               2,275,749     1,690,283     1,620,294

1    Disclosure regarding brokerage commissions is limited to commissions paid  
on agency trades and designated as such on the trade confirm.         

2    The variation in brokerage commissions paid by AIM Balanced Fund for the   
  fiscal year ended December 31, 2004 as compared to the prior fiscal year
    ended December 31, 2003 was due to the realignment of the Fund's portfolio
   to fit the investment process of the current management team that assumed
management of the Fund in December of 2003. The variation in brokerage
    commissions for the fiscal year ended December 31, 2003 as compared to the
prior fiscal year ended December 31, 2002 was due to an increase in   
transactions executed with commissions.                               

3    The variation in brokerage commissions paid by AIM European Small Company  
   Fund for the fiscal year ended December 31, 2004 as compared to the prior
  fiscal year ended December 31, 2003 can be attributed to the Fund's high
    fluctuation inflows during the 2003 period. Since then flows have steadied
and the fund is now at its normal level.                              

4    The variation in brokerage commissions paid by AIM Global Value Fund for   
 the fiscal year ended December 31, 2003 as compared to the prior fiscal
year ended December 31, 2002 was due to an increase in transactions   
executed with commissions as a result of the Fund's name change and   
corresponding change in investment strategy.                          

5    The variation in brokerage commissions paid by AIM International Small     
 Company Fund for fiscal year ended December 31, 2004 as compared to the
prior fiscal year ended December 31, 2003 was predominately due to the
     significant increase in new net flows as seen by the fund toward the end of
2004. The variation in brokerage commissions for the fiscal year ended
  December 31, 2003 as compared to the fiscal year ended December 31, 2002
was due to an increase in transactions executed with commissions.     

6    The variation in brokerage commissions paid by the AIM Premier Equity Fund 
     for the fiscal year ended December 31, 2003 as compared to the prior fiscal
   year ended December 31, 2002 was due to a decline in average daily assets
of the Fund.                                                          

7    The variation of brokerage commissions paid by AIM Select Equity Fund for  
    the fiscal year end December 31, 2004 as compared to the prior fiscal year
    ended December 31, 2003 can be attributed to the realignment of the Fund's
portfolio in 2003 by the Fund's current management team.              

8    The variation in brokerage commissions paid by AIM Small Cap Equity Fund   
     for the fiscal year ended December 31, 2004 as compared to the prior fiscal
year ended December 31, 2003 was due to an increase in transactions   
executed with commissions as a result of the realignment of the Fund's
     portfolio to fit the investment process of the current management team that
assumed management of the Fund in September of 2004.                  

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APPENDIX J

DIRECTED BROKERAGE (RESEARCH SERVICES) AND PURCHASES OF 
SECURITIES OF REGULAR BROKERS OR DEALERS  

    During the last fiscal year ended December 31, 2004, each Fund allocated
the following amount of transactions to broker-dealers that provided AIM with   
certain research, statistics and other information:                             

                                                                [Download Table]

                                                         Related Brokerage
Fund                                    Transactions(1)    Commissions(1) 
----                                   ----------------    -------------- 
                                                                          
AIM Balanced Fund                     $2,716,308,785.53     $  582,437.24 
AIM Basic Balanced Fund                  241,980,801.57         57,529.63 
AIM European Small Company Fund          190,861,972.35        393,970.93 
AIM Global Value Fund                     76,399,468.54        231,250.60 
AIM International Small Company Fund     396,001,159.10      1,458,171.35 
AIM Mid Cap Basic Value Fund             150,399,160.33        361,194.00 
AIM Premier Equity Fund               11,975,610,719.17     15,518,096.66 
AIM Select Equity Fund                   397,671,919.17      1,517,531.74 
AIM Small Cap Equity Fund                689,507,260.50      6,045,548.68 

(1)   Amount is inclusive of commission paid to, and brokerage transactions     
   placed with, certain brokers that provide execution, research and other
services.                                                           

    During the last fiscal year ended December 31, 2004, the Funds purchased
securities issued by the following companies, which are "regular" brokers or    
dealers of one or more of the Funds identified below:                           

                                                        [Enlarge/Download Table]

Fund/Issuer                           Security        Market Value (as of December 31, 2004)
-----------                           --------        --------------------------------------
                                                                                            
AIM Balanced Fund                                                                           

   Bank of New York Co., Inc. (The)  Common Stock              $ 27,738,600                 
   JPMorgan Chase & Co.              Common Stock                35,746,332                 
   Merrill Lynch & Co., Inc.         Common Stock                24,595,355                 
   Morgan Stanley                    Common Stock                27,149,280                 

   ABN AMRO                          Preferred Stock              1,400,000                 

   HSBC Capital Funding L.P.         Bonds & Notes                  379,508                 
   Lehman Brothers Inc.              Bonds & Notes                3,719,380                 
   Merrill Lynch & Co., Inc.         Bonds & Notes                1,420,773                 
   Wells Fargo & Co.                 Bonds & Notes                6,781,455                 
   Wells Fargo N.A.                  Bonds & Notes                2,148,300                 
   UBS Preferred Funding Trust I     Bonds & Notes                1,198,690                 

AIM Basic Balanced Fund                                                                     

   Bank of New York Co., Inc. (The)  Common Stock               $ 2,713,704                 
   JPMorgan Chase & Co.              Common Stock                 3,781,161                 
   Merrill Lynch & Co., Inc.         Common Stock                 2,331,030                 
   Morgan Stanley                    Common Stock                 2,565,024                 

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                                                                [Download Table]

  ABN AMRO                             Preferred Stock                   200,000
  --------                             ---------------                   -------
                                                                                
   Lehman Brothers Inc.                 Bonds & Notes                   130,159 
   Merrill Lynch & Co., Inc.            Bonds & Notes                    40,163 

AIM Global Value Fund                                                           

   HSBC Holdings PLC                    Common Stock                $   775,761 
   Merrill Lynch & Co., Inc.            Common Stock                    227,126 

AIM Premier Equity Fund                                                         

   Bank of America Corp.                Common Stock                $52,882,546 
   Goldman Sachs Group, Inc. (The)      Common Stock                 31,212,000 
   JPMorgan Chase & Co.                 Common Stock                 57,110,640 
   Merrill Lynch & Co., Inc.            Common Stock                 38,832,569 
   Morgan Stanley                       Common Stock                 95,666,512 
      Wachovia Corp.                    Common Stock                 33,695,560 

AIM Select Equity Fund                                                          

   Bank of New York Co., Inc. (The)     Common Stock                $ 2,984,406 
   Goldman Sachs Group, Inc. (The)      Common Stock                    936,360 
   JPMorgan Chase & Co.                 Common Stock                  8,191,476 
   Merrill Lynch & Co., Inc.            Common Stock                  2,408,731 
   Morgan Stanley                       Common Stock                  3,009,184 

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APPENDIX K

AMOUNTS PAID TO A I M DISTRIBUTORS, INC. PURSUANT TO DISTRIBUTION PLANS 

A list of amounts paid by each class of shares to AIM Distributors  
pursuant to the Plans for the fiscal year or period ended December 31, 2004     
follows:                                                                        

                                                        [Enlarge/Download Table]

                                                                                   INVESTOR 
                                        CLASS A      CLASS B     CLASS C  CLASS R   CLASS   
FUND                                    SHARES       SHARES      SHARES   SHARES    SHARES  
----                                    ------       ------      ------   ------    ------  
                                                                                            
AIM Balanced Fund                     $2,887,535  $6,710,792  $2,349,482  $23,049     N/A   
AIM Basic Balanced Fund                  217,699     796,944     265,274       35     N/A(1)
AIM European Small Company Fund          240,353     149,573     109,003      N/A     N/A   
AIM Global Value Fund                     62,525     130,059      56,638      N/A     N/A   
AIM International Small Company Fund     495,861     273,185     234,563      N/A     N/A   
AIM Mid Cap Basic Value Fund             300,274     505,688     189,702       43     N/A   
AIM Premier Equity Fund               11,551,335  28,505,751   3,624,154    3,593     N/A   
AIM Select Equity Fund                   708,687   1,691,392     309,320      N/A     N/A   
AIM Small Cap Equity Fund                655,183   1,645,132     694,862   35,241     N/A   

(1)   As of the date of this Statement of Additional Information, Investor Class
shares of AIM Basic Balanced Fund has not yet commenced operations. 

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APPENDIX L

 ALLOCATION OF ACTUAL FEES PAID PURSUANT TO DISTRIBUTION PLANS

        An estimate by category of the allocation of actual fees paid by
Class A shares of the Funds during the year ended December 31, 2004 follows:    

                                                        [Enlarge/Download Table]

                                                    PRINTING &             UNDERWRITERS    DEALERS                         
                                       ADVERTISING   MAILING     SEMINARS  COMPENSATION  COMPENSATION   PERSONNEL   TRAVEL 
                                       -----------   -------     --------  ------------  ------------   ---------   ------ 
                                                                                                                           
AIM Balanced Fund                            --          --           --    $   0        $ 2,887,535          --        -- 
AIM Basic Balanced Fund               $   7,820     $ 1,066     $  2,962        0            169,568   $     740   $ 35,543
AIM European Small Company Fund          10,500       1,012        1,071        0            185,335      41,364      1,071
AIM Global Value Fund                     2,302         179          248        0             48,631      11,165         --
AIM International Small Company Fund     20,175       2,007        3,064        0            383,968      83,583      3,064
AIM Mid Cap Basic Value Fund             10,476       1,108        3,620        0            235,839      47,421      1,810
AIM Premier Equity Fund                       0           0            0        0         11,551,335           0          0
AIM Select Equity Fund                        0           0            0        0            708,687           0          0
AIM Small Cap Equity Fund                 4,017         407        1,180        0            625,787      22,809        983

        An estimate by category of the allocation of actual fees paid by
Class B shares of the Funds during the year ended December 31, 2004, follows:   

                                                        [Enlarge/Download Table]

                                                     PRINTING &            UNDERWRITERS    DEALERS                           
                                       ADVERTISING    MAILING    SEMINARS  COMPENSATION  COMPENSATION     PERSONNEL    TRAVEL
                                       -----------    -------    --------  ------------  ------------     ---------    ------
                                                                                                                             
AIM Balanced Fund                     $     9,294   $    969     $  3,504  $ 5,033,094   $ 1,618,627   $    43,427   $  1,877
AIM Basic Balanced Fund                     2,373        295          821      597,708       185,282        10,055        410
AIM European Small Company Fund             1,343         73          405      112,180        30,111         5,259        202
AIM Global Value Fund                         242          0            0       97,544        29,118         3,155         --
AIM International Small Company Fund        2,692        234          162      204,888        53,837        11,047        325
AIM Mid Cap Basic Value Fund                2,616        357          991      379,266       111,558        10,405        495
AIM Premier Equity Fund                    27,754      2,884       10,588   21,379,314     6,949,916       129,299      5,996
AIM Select Equity Fund                      2,921        274        1,217    1,268,544       403,831        13,996        609
AIM Small Cap Equity Fund                   5,389        533        2,369    1,233,849       374,866        26,943      1,184

        An estimate by category of the allocation of actual fees paid by
Class C shares of the Funds during the year ended December 31, 2004, follows:   

                                                        [Enlarge/Download Table]

                                                   PRINTING &            UNDERWRITERS    DEALERS                        
                                      ADVERTISING   MAILING    SEMINARS  COMPENSATION  COMPENSATION  PERSONNEL    TRAVEL
                                      -----------   -------    --------  ------------  ------------  ---------    ------
                                                                                                                        
AIM Balanced Fund                     $    4,206   $   416     $  1,444  $   99,234     $2,224,104   $   19,211  $   867
AIM Basic Balanced Fund                    1,358        87          722      34,674        221,450        6,742      241
AIM European Small Company Fund            1,895       154          341      42,481         54,749        9,042      341
AIM Global Value Fund                        301         0            0      15,361         37,361        3,615       --
AIM International Small Company Fund       5,611       555        1,186     121,663         79,697       24,902      949
AIM Mid Cap Basic Value Fund               2,336       260          866      52,803        122,761       10,387      289
AIM Premier Equity Fund                    5,370       555        1,975     125,912      3,465,036       24,195    1,111
AIM Select Equity Fund                       787        29          489      19,570        284,531        3,751      163
AIM Small Cap Equity Fund                  4,996       586        1,861     114,430        550,196       21,863      930

        An estimate by category of the allocation of actual fees paid by
Class R shares of the Funds during the year ended December 31, 2004, follows:   

                                                        [Enlarge/Download Table]

                                           PRINTING &            UNDERWRITERS     DEALERS                      
                              ADVERTISING   MAILING    SEMINARS  COMPENSATION  COMPENSATION  PERSONNEL   TRAVEL
                              -----------   -------    --------  ------------  ------------  ---------   ------
                                                                                                               
AIM Balanced Fund             $   331      $  33       $    85      $ 4,440      $16,665        1,453   $    42
AIM Basic Balanced Fund             0          0             0           18            0            4        13
AIM Mid Cap Basic Value Fund        2          0             0           21            5           15         0
AIM Premier Equity Fund            44          5            14          849        2,452          222         7
AIM Small Cap Equity Fund         823         87           290       13,193       16,739        3,965       144

INVESTOR CLASS                                                                  

      As of the date of this Statement of Additional Information, Investor Class
Shares of AIM Basic Balanced Fund has not yet commenced operations.             

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APPENDIX M

 TOTAL SALES CHARGES

The following chart reflects the total sales charges paid in connection with the
sale of Class A shares of each Fund and the amount retained by AIM Distributors 
for the last three fiscal years ended December 31:                              

                                                        [Enlarge/Download Table]

                                                 2004                      2003                      2002          
                                                 ----                      ----                      ----          
                                          SALES         AMOUNT      SALES         AMOUNT      SALES         AMOUNT 
                                         CHARGES       RETAINED    CHARGES       RETAINED    CHARGES       RETAINED
                                         -------       --------    -------       --------    -------       --------
                                                                                                                   
AIM Balanced Fund                     $  870,608    $  164,698   $  949,856    $  167,714  $1,451,273    $  268,091
AIM Basic Balanced Fund                  249,452        44,826      293,619        54,699     354,894        61,611
AIM European Small Company Fund          581,044        90,095       74,772        11,964      42,708         6,559
AIM Global Value Fund                    219,891        35,815       50,688         8,617      38,808         6,560
AIM International Small Company Fund   1,046,746       164,316      155,527        25,330      37,780         5,940
AIM Mid Cap Basic Value Fund             609,599        99,857      242,365        37,836     269,601        41,770
AIM Premier Equity Fund                2,320,866       388,971    2,995,862       467,280   5,431,749       848,167
AIM Select Equity Fund                   263,703        47,026      243,262        40,200     442,333        69,411
AIM Small Cap Equity Fund                415,868        69,295    1,037,324       161,868   1,423,426       215,904

          The following chart reflects the contingent deferred sales charges
paid by Class A, Class B and Class C and Class R shareholders and retained by   
AIM Distributors for the last three fiscal years ended December 31:             

                                                                [Download Table]

                                         2004      2003       2002 
                                         ----      ----       ---- 
                                                                   
AIM Balanced Fund                     $ 121,072  $ 14,929  $ 83,438
AIM Basic Balanced Fund                  11,417     3,417     4,957
AIM European Small Company Fund          56,226    11,872     1,570
AIM Global Value Fund                     1,174       402       651
AIM International Small Company Fund    105,085     2,977     1,003
AIM Mid Cap Basic Value Fund             24,965    13,288     3,372
AIM Premier Equity Fund                 267,736    83,809   193,652
AIM Select Equity Fund                   21,252     3,017    18,952
AIM Small Cap Equity Fund                44,636    11,190    25,831

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APPENDIX N

PERFORMANCE DATA

AVERAGE ANNUAL TOTAL RETURNS                                                    

The average annual total returns (including sales loads) for each Fund, with    
respect to its Class A shares, for the one, five and ten year periods (or since 
inception if less than ten years) ended December 31 are as follows:             

                                                        [Enlarge/Download Table]

                                       PERIODS ENDED                                     
                                      DECEMBER 31, 2004                                  
                                      -----------------                                  
                                                                      SINCE     INCEPTION
CLASS A SHARES:                       1 YEAR      5 YEARS  10 YEARS  INCEPTION     DATE  
--------------                        ------      -------  --------  ---------     ----  
                                                                                         
AIM Balanced Fund                      2.55%      (3.46)%   8.44%       N/A      03/31/78
AIM Basic Balanced Fund                1.84         N/A      N/A       5.67%     09/28/01
AIM European Small Company Fund       35.78         N/A      N/A      12.24      08/31/00
AIM Global Value Fund                 11.06         N/A      N/A       7.36      12/29/00
AIM International Small Company Fund  28.39         N/A      N/A      10.82      08/31/00
AIM Mid Cap Basic Value Fund           9.88         N/A      N/A       7.44      12/31/01
AIM Premier Equity Fund               (0.36)      (8.64)    7.71        N/A      05/01/84
AIM Select Equity Fund                 7.62       (6.45)    9.39        N/A      12/04/67
AIM Small Cap Equity Fund              3.43         N/A      N/A       5.19      08/31/00

      The average annual total returns (including maximum applicable
contingent deferred sales charge) for each Fund, with respect to its Class B    
shares, for the one, five and ten year periods (or since inception if less than 
ten years) ended December 31 are as follows:                                    

                                                        [Enlarge/Download Table]

                                         PERIODS ENDED                                    
                                       DECEMBER 31, 2004                                  
                                       -----------------                                  
                                                                       SINCE     INCEPTION
CLASS B SHARES:                       1 YEAR       5 YEARS  10 YEARS  INCEPTION     DATE  
--------------                        ------       -------  --------  ---------     ----  
                                                                                          
AIM Balanced Fund                      1.91%       (3.60)%   8.28%       N/A      10/18/93
AIM Basic Balanced Fund                1.12          N/A      N/A       5.76%     09/28/01
AIM European Small Company Fund       37.67          N/A      N/A      12.64      08/31/00
AIM Global Value Fund                 11.77          N/A      N/A       7.79      12/29/00
AIM International Small Company Fund  29.94          N/A      N/A      11.20      08/31/00
AIM Mid Cap Basic Value Fund          10.53          N/A      N/A       7.92      12/31/01
AIM Premier Equity Fund               (0.31)       (8.64)    7.65        N/A      10/18/93
AIM Select Equity Fund                 8.04        (6.41)    9.30        N/A      09/01/93
AIM Small Cap Equity Fund              3.64          N/A      N/A       5.45      08/31/00

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      The average annual total returns (including maximum applicable
contingent deferred sales charge) for each Fund, with respect to its Class C    
shares, for the one, five and ten year periods (or since inception if less than 
ten years) ended December 31 are as follows:                                    

                                                        [Enlarge/Download Table]

                                        PERIODS ENDED                                    
                                      DECEMBER 31, 2004                                  
                                      -----------------                                  
                                                                       SINCE    INCEPTION
CLASS C SHARES:                       1 YEAR      5 YEARS  10 YEARS  INCEPTION    DATE   
--------------                        ------      -------  --------  ---------  ---------
                                                                                         
AIM Balanced Fund                      5.90%      (3.24)%     N/A       2.15%    08/04/97
AIM Basic Balanced Fund                5.21         N/A       N/A       6.59     09/28/01
AIM European Small Company Fund       41.75         N/A       N/A      12.96     08/31/00
AIM Global Value Fund                 15.75         N/A       N/A       8.20     12/29/00
AIM International Small Company Fund  34.06         N/A       N/A      11.53     08/31/00
AIM Mid Cap Basic Value Fund          14.54         N/A       N/A       8.75     12/31/01
AIM Premier Equity Fund                3.68       (8.30)      N/A       1.30     08/04/97
AIM Select Equity Fund                11.98       (6.10)      N/A       2.96     08/04/97
AIM Small Cap Equity Fund              7.64         N/A       N/A       5.84     08/31/00

            The average annual total returns (not including the 0.75% contingent
deferred sales charge that may be imposed on a total redemption of retirement   
plan assets within the first year) for each Fund, with respect to its Class R   
shares, for the one, five and ten year periods (or since inception if less than 
ten years) ended December 31 are as follows:                                    

                                                                [Download Table]

                                  PERIODS ENDED                                    
                                DECEMBER 31, 2004                                  
                                -----------------                                  
                                                                 SINCE    INCEPTION
CLASS R SHARES:                 1 YEAR      5 YEARS  10 YEARS  INCEPTION   DATE*** 
--------------                  ------      -------  --------  ---------   ------- 
                                                                                   
AIM Balanced Fund*               7.43%      (2.74)%    8.70%       N/A    03/31/78 
AIM Basic Balanced Fund**        6.80         N/A       N/A       7.12%   09/28/01 
AIM Mid Cap Basic Value Fund**  16.17         N/A       N/A       9.32    12/31/01 
AIM Premier Equity Fund*         5.25       (7.83)     8.05        N/A    05/01/84 
AIM Small Cap Equity Fund*       9.06         N/A       N/A       6.33    08/31/00 

*       The returns shown for the one year period are the historical returns of 
      the Funds' Class R shares. The returns shown for the five and ten year
     periods and since inception are the blended returns of the historical
  performance of the Funds Class R shares since June 3, 2002 and the
 restated historical performance of the Funds' Class A shares (for
      periods prior to June 3, 2002) at net asset value, adjusted to reflect
the higher Rule 12b-1 fees applicable to the Class R shares.    

**      The returns shown for these periods are blended returns of the          
   historical performance of the Funds' Class R shares since April 30,
  2004, and the restate historical performance of the Fund's Class A
shares (for periods prior to April 30, 2004) at net asset value,
        adjusted to reflect the higher Rule 12b-1 fees applicable to the Class R
shares..                                                        

***     The inception date shown in the table is that of the Funds' Class A     
        shares. The inception date of AIM Balanced Fund, AIM Premier Equity Fund
   and AIM Small Cap Equity Fund's Class R shares is June 3, 2002. The
     inception date of AIM Basic Balanced Fund and AIM Mid Cap Basic Value
Fund's Class R shares is April 30, 2004.                        

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The average annual total returns for the Fund, with respect to its Investor     
Class shares, for the one, five and ten year periods (or since inception if less
than ten years) ended December 31, are as follows:                              

                                                                [Download Table]

                            PERIODS ENDED                                    
                          DECEMBER 31, 2004                                  
                          -----------------                                  
                                                           SINCE    INCEPTION
INVESTOR CLASS SHARES:    1 YEAR      5 YEARS  10 YEARS  INCEPTION    DATE** 
---------------------     ------      -------  --------  ---------  ---------
                                                                             
AIM Basic Balanced Fund*   6.89%        N/A       N/A      7.27%     09/28/01

*     The returns shown for these periods are the restated historical           
    performance of AIM Basic Balanced Fund's Class A shares at the net asset
value, and reflect the higher Rule 12b-1 fees applicable to Class A 
Shares.                                                             

**    The inception date shown in the table is the Fund's A Class shares. As of 
    the date of this Statement of Additional Information, the Investor Class
shares of AIM Basic Balanced Fund had not yet commenced operations. 

CUMULATIVE TOTAL RETURNS                                                        

           The cumulative total returns (including sales loads) for each Fund,
with respect to its Class A shares, for the one, five and ten year periods (or  
since inception if less than ten years) ended December 31 are as follows:       

                                                        [Enlarge/Download Table]

                                         PERIODS ENDED                                     
                                       DECEMBER 31, 2004                                   
                                       -----------------                                   
                                                                        SINCE     INCEPTION
CLASS A SHARES:                       1 YEAR       5 YEARS   10 YEARS  INCEPTION     DATE  
--------------                        ------       -------   --------  ---------  ---------
                                                                                           
AIM Balanced Fund                      2.55%       (16.14)%  124.82%       N/A     03/31/78
AIM Basic Balanced Fund                1.84           N/A       N/A      19.69%    09/28/01
AIM European Small Company Fund       35.78           N/A       N/A      64.92     08/31/00
AIM Global Value Fund                 11.06           N/A       N/A      32.88     12/29/00
AIM International Small Company Fund  28.39           N/A       N/A      56.10     08/31/00
AIM Mid Cap Basic Value Fund           9.88           N/A       N/A      24.01     12/31/01
AIM Premier Equity Fund               (0.36)       (36.34)   110.20        N/A     05/01/84
AIM Select Equity Fund                 7.62        (28.34)   145.38        N/A     12/04/67
AIM Small Cap Equity Fund              3.43           N/A       N/A      24.51     08/31/00

  The cumulative total returns (including maximum applicable
contingent deferred sales charge) for each Fund, with respect to its Class B    
shares, for the one, five and ten year periods (or since inception if less than 
ten years) ended December 31 are as follows:                                    

                                                        [Enlarge/Download Table]

                                          PERIODS ENDED                                     
                                        DECEMBER 31, 2004                                   
                                        -----------------                                   
                                                                          SINCE    INCEPTION
CLASS B SHARES:                       1 YEAR        5 YEARS   10 YEARS  INCEPTION    DATE   
--------------                        ------        -------   --------  ---------  ---------
                                                                                            
AIM Balanced Fund                      1.91%        (16.73)%  121.62%       N/A    10/18/93 
AIM Basic Balanced Fund                1.12            N/A       N/A      20.01%   09/28/01 
AIM European Small Company Fund       37.67            N/A       N/A      67.49    08/31/00 
AIM Global Value Fund                 11.77            N/A       N/A      35.03    12/29/00 
AIM International Small Company Fund  29.94            N/A       N/A      58.44    08/31/00 
AIM Mid Cap Basic Value Fund          10.53            N/A       N/A      25.70    12/31/01 
AIM Premier Equity Fund               (0.31)        (36.36)   108.97        N/A    10/18/93 
AIM Select Equity Fund                 8.04         (28.21)   143.23        N/A    09/01/93 
AIM Small Cap Equity Fund              3.64            N/A       N/A      25.87    08/31/00 

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  The cumulative total returns (including maximum applicable
contingent deferred sales charge) for each Fund, with respect to its Class C    
shares, for the one, five and ten year periods (or since inception if less than 
ten years) ended December 31 are as follows:                                    

                                                        [Enlarge/Download Table]

                                        PERIODS ENDED                                       
                                       DECEMBER 31, 2004                                    
                                       -----------------                                    
                                                                         SINCE     INCEPTION
CLASS C SHARES:                       1 YEAR        5 YEARS   10 YEARS  INCEPTION     DATE  
--------------                        ------        -------   --------  ---------  ---------
                                                                                            
AIM Balanced Fund                      5.90%        (15.17)%     N/A      17.03%    08/04/97
AIM Basic Balanced Fund                5.21            N/A       N/A      23.11     09/28/01
AIM European Small Company Fund       41.75            N/A       N/A      69.59     08/31/00
AIM Global Value Fund                 15.75            N/A       N/A      37.13     12/29/00
AIM International Small Company Fund  34.06            N/A       N/A      60.44     08/31/00
AIM Mid Cap Basic Value Fund          14.54            N/A       N/A      28.60     12/31/01
AIM Premier Equity Fund                3.68         (35.16)      N/A      10.03     08/04/97
AIM Select Equity Fund                11.98         (26.99)      N/A      24.12     08/04/97
AIM Small Cap Equity Fund              7.64            N/A       N/A      27.87     08/31/00

        The cumulative total returns (not including the 0.75% contingent
deferred sales charge that may be imposed on a total redemption of retirement   
plan assets within the first year) for each Fund, with respect to its Class R   
shares, for the one, five and ten year periods (or since inception if less than 
ten years) ended December 31 are as follows:                                    

                                                                [Download Table]

                                   PERIODS ENDED                                    
                                 DECEMBER 31, 2004                                  
                                 -----------------                                  
                                                                  SINCE    INCEPTION
CLASS R SHARES:                 1 YEAR       5 YEARS  10 YEARS  INCEPTION   DATE*** 
--------------                  ------       -------  --------  ---------   ------- 
                                                                                    
AIM Balanced Fund*               7.43%      (12.99)%   130.37%      N/A    03/31/78 
AIM Basic Balanced Fund**        6.80          N/A        N/A     25.13%   09/28/01 
AIM Mid Cap Basic Value Fund**  16.17          N/A        N/A     30.65    12/31/01 
AIM Premier Equity Fund*         5.25       (33.48)    116.92       N/A    05/01/84 
AIM Small Cap Equity Fund*       9.06          N/A        N/A     30.49    08/31/00 

 *     The returns shown for the one year period are the historical returns of
      the Funds' Class R shares. The returns shown for the five and ten year
     periods and since inception are the blended returns of the historical
  performance of the Funds Class R shares since June 3, 2002 and the
 restated historical performance of the Funds' Class A shares (for
      periods prior to June 3, 2002) at net asset value, adjusted to reflect
the higher Rule 12b-1 fees applicable to the Class R shares.    

**    The returns shown for these periods are blended returns of the        
   historical performance of the Funds' Class R shares since April 30,
  2004, and the restate historical performance of the Fund's Class A
shares (for periods prior to April 30, 2004) at net asset value,
        adjusted to reflect the higher Rule 12b-1 fees applicable to the Class R
shares..                                                        

***   The inception date shown in the table is that of the Funds' Class A   
        shares. The inception date of AIM Balanced Fund, AIM Premier Equity Fund
       and AIM Small Cap Equity Fund's R shares is June 3, 2002. The inception
        date of AIM Basic Balanced Fund and AIM Mid Cap Basic Value Fund's Class
R shares is April 30, 2004.                                     

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The cumulative total returns for the Fund, with respect to its Investor Class   
shares, for the one, five and ten year periods (or since inception if less than 
ten years) ended December 31, are as follows:                                   

                                                                [Download Table]

                             PERIODS ENDED                                   
                           DECEMBER 31, 2004                                 
                           ----------------                                  
                                                           SINCE    INCEPTION
INVESTOR CLASS SHARES:    1 YEAR      5 YEARS  10 YEARS  INCEPTION    DATE** 
---------------------     ------      -------  --------  ---------  ---------
                                                                             
AIM Basic Balanced Fund*   6.89%        N/A       N/A      25.67%    09/28/01

*     The returns shown for these periods are the restated historical           
    performance of AIM Basic Balanced Fund's Class A shares at the net asset
value, and reflect the higher Rule 12b-1 fees applicable to Class A 
Shares.                                                             

**    The inception date shown in the table is the Fund's A Class shares. As of 
    the date of this Statement of Additional Information, the Investor Class
shares of AIM Basic Balanced Fund had not yet commenced operations. 

AVERAGE ANNUAL TOTAL RETURN (AFTER TAXES ON DISTRIBUTIONS)                      

          The average annual total returns (after taxes on distributions and
including sales loads) for each Fund, with respect to its Class A shares, for   
the one, five and ten year periods (or since inception if less then ten years)  
ended December 31 are as follows:                                               

                                                        [Enlarge/Download Table]

                                         PERIODS ENDED                                    
                                        DECEMBER 31, 2004                                 
                                        -----------------                                 
                                                                        SINCE    INCEPTION
CLASS A SHARES:                       1 YEAR       5 YEARS  10 YEARS  INCEPTION    DATE   
--------------                        ------       -------  --------  ---------  ---------
                                                                                          
AIM Balanced Fund                      2.11%       (4.26)%   7.26%        N/A    03/31/78 
AIM Basic Balanced Fund                1.30          N/A      N/A        5.27%   09/28/01 
AIM European Small Company Fund       35.34          N/A      N/A       12.09    08/31/00 
AIM Global Value Fund                  9.94          N/A      N/A        7.00    12/29/00 
AIM International Small Company Fund  28.11          N/A      N/A       10.71    08/31/00 
AIM Mid Cap Basic Value Fund           9.88          N/A      N/A        7.44    12/31/01 
AIM Premier Equity Fund               (0.38)       (9.02)    6.38         N/A    05/01/84 
AIM Select Equity Fund                 7.62        (6.87)    8.31         N/A    12/04/67 
AIM Small Cap Equity Fund              3.00          N/A      N/A        5.08    08/31/00 

          The average annual total returns (after taxes on distributions and
including maximum applicable contingent deferred sales charge) for each Fund,   
with respect to its Class B shares, for the one, five and ten year periods (or  
since inception if less than ten years) ended December 31 are as follows:       

                                                        [Enlarge/Download Table]

                                         PERIODS ENDED                                     
                                       DECEMBER 31, 2004                                   
                                       -----------------                                   
                                                                         SINCE    INCEPTION
CLASS B SHARES:                       1 YEAR        5 YEARS  10 YEARS  INCEPTION    DATE   
--------------                        ------        -------  --------  ---------  ---------
                                                                                           
AIM Balanced Fund                      1.64%        (4.17)%   7.36%       N/A     10/18/93 
AIM Basic Balanced Fund                0.66           N/A      N/A       5.51%    09/28/01 
AIM European Small Company Fund       37.19           N/A      N/A      12.51     08/31/00 
AIM Global Value Fund                 10.62           N/A      N/A       7.46     12/29/00 
AIM International Small Company Fund  29.64           N/A      N/A      11.15     08/31/00 
AIM Mid Cap Basic Value Fund          10.53           N/A      N/A       7.92     12/31/01 
AIM Premier Equity Fund               (0.31)        (9.05)    6.35        N/A     10/18/93 
AIM Select Equity Fund                 8.04         (6.88)    8.17        N/A     09/01/93 
AIM Small Cap Equity Fund              3.17           N/A      N/A       5.34     08/31/00 

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          The average annual total returns (after taxes on distributions and
including maximum applicable contingent deferred sales charge) for each Fund,   
with respect to its Class C shares, for the one, five and ten year periods (or  
since inception if less than ten years) ended December 31 are as follows:       

                                                        [Enlarge/Download Table]

                                          PERIODS ENDED                                      
                                        DECEMBER 31, 2004                                    
                                        ----------------                                     
                                                                          SINCE     INCEPTION
CLASS C SHARES:                        1 YEAR         5 YEARS  10 YEARS  INCEPTION     DATE  
--------------                         ------         -------  --------  ---------  ---------
                                                                                             
AIM Balanced Fund                      5.63%         (3.80)%     N/A       1.37%    08/04/97 
AIM Basic Balanced Fund                4.75            N/A       N/A       6.35     09/28/01 
AIM European Small Company Fund       41.28            N/A       N/A      12.84     08/31/00 
AIM Global Value Fund                 14.61            N/A       N/A       7.88     12/29/00 
AIM International Small Company Fund  33.76            N/A       N/A      11.47     08/31/00 
AIM Mid Cap Basic Value Fund          14.54            N/A       N/A       8.75     12/31/01 
AIM Premier Equity Fund                3.68          (8.70)      N/A       0.12     08/04/97 
AIM Select Equity Fund                11.98          (6.56)      N/A       1.99     08/04/97 
AIM Small Cap Equity Fund              7.17            N/A       N/A       5.73     08/31/00 

The average total returns (after taxes on distributions and including maximum   
applicable contingent deferred sales charge) for the Fund, with respect to its  
Investor Class shares, for the one, five and ten year periods (or since         
inception if less than ten years) ended December 31, are as follows:            

                                                                [Download Table]

                            PERIODS ENDED                                    
                           DECEMBER 31, 2004                                 
                           -----------------                                 
                                                           SINCE    INCEPTION
INVESTOR CLASS SHARES:    1 YEAR      5 YEARS  10 YEARS  INCEPTION    DATE** 
---------------------     ------      -------  --------  ---------  ---------
                                                                             
AIM Basic Balanced Fund*   6.33%        N/A       N/A      6.86%     09/28/01

*     The returns shown for these periods are the restated historical           
    performance of AIM Basic Balanced Fund's Class A shares at the net asset
value, and reflect the higher Rule 12b-1 fees applicable to Class A 
Shares.                                                             

**    The inception date shown in the table is the Fund's A Class shares. As of 
    the date of this Statement of Additional Information, the Investor Class
shares of AIM Basic Balanced Fund had not yet commenced operations. 

AVERAGE ANNUAL TOTAL RETURNS (AFTER TAXES ON DISTRIBUTIONS AND REDEMPTION)      

          The average annual total returns (after taxes on distributions and
redemption and including sales loads) for each Fund, with respect to its Class A
shares, for the one, five and ten year periods (or since inception if less than 
ten years) ended December 31 are as follows:                                    

                                                        [Enlarge/Download Table]

                                        PERIODS ENDED                                      
                                       DECEMBER 31, 2004                                   
                                       -----------------                                   
                                                                         SINCE    INCEPTION
CLASS A SHARES:                       1 YEAR        5 YEARS  10 YEARS  INCEPTION    DATE   
--------------                        ------        -------  --------  ---------  ---------
                                                                                           
AIM Balanced Fund                      1.84%        (3.33)%   6.72%       N/A     03/31/78 
AIM Basic Balanced Fund                1.90           N/A      N/A       4.72%    09/28/01 
AIM European Small Company Fund       23.82           N/A      N/A      10.62     08/31/00 
AIM Global Value Fund                  7.50           N/A      N/A       6.20     12/29/00 
AIM International Small Company Fund  18.81           N/A      N/A       9.37     08/31/00 
AIM Mid Cap Basic Value Fund           6.42           N/A      N/A       6.39     12/31/01 
AIM Premier Equity Fund               (0.21)        (7.18)    6.20        N/A     05/01/84 
AIM Select Equity Fund                 4.95         (5.39)    7.88        N/A     12/04/67 
AIM Small Cap Equity Fund              2.80           N/A      N/A       4.46     08/31/00 

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          The average annual total returns (after taxes on distributions and
redemption and including maximum applicable contingent deferred sales charge)   
for each Fund, with respect to its Class B shares, for the one, five and ten    
year periods (or since inception if less than ten years) ended December 31 are  
as follows:                                                                     

                                                        [Enlarge/Download Table]

                                          PERIODS ENDED                                    
                                        DECEMBER 31, 2004                                  
                                        ----------------                                   
                                                                         SINCE    INCEPTION
CLASS B SHARES:                       1 YEAR        5 YEARS  10 YEARS  INCEPTION    DATE   
--------------                        ------        -------  --------  ---------  ---------
                                                                                           
AIM Balanced Fund                      1.36%        (3.32)%   6.77%        N/A    10/18/93 
AIM Basic Balanced Fund                1.33           N/A      N/A        4.87%   09/28/01 
AIM European Small Company Fund       25.08           N/A      N/A       11.00    08/31/00 
AIM Global Value Fund                  7.96           N/A      N/A        6.58    12/29/00 
AIM International Small Company Fund  19.83           N/A      N/A        9.75    08/31/00 
AIM Mid Cap Basic Value Fund           6.84           N/A      N/A        6.81    12/31/01 
AIM Premier Equity Fund               (0.20)        (7.18)    6.18         N/A    10/18/93 
AIM Select Equity Fund                 5.22         (5.35)    7.79         N/A    09/01/93 
AIM Small Cap Equity Fund              2.98           N/A      N/A        4.69    08/31/00 

          The average annual total returns (after taxes on distributions and
redemption and including maximum applicable contingent deferred sales charge)   
for each Fund, with respect to its Class C shares, for the one, five and ten    
year periods (or since inception if less than ten years) ended December 31 are  
as follows:                                                                     

                                                        [Enlarge/Download Table]

                                          PERIODS ENDED                                    
                                        DECEMBER 31,22004                                  
                                        -----------------                                  
                                                                         SINCE    INCEPTION
CLASS C SHARES:                       1 YEAR        5 YEARS  10 YEARS  INCEPTION    DATE   
--------------                        ------        -------  --------  ---------  ---------
                                                                                           
AIM Balanced Fund                      3.95%        (3.01)%     N/A       1.40%   08/04/97 
AIM Basic Balanced Fund                3.99           N/A       N/A       5.59    09/28/01 
AIM European Small Company Fund       27.74           N/A       N/A      11.29    08/31/00 
AIM Global Value Fund                 10.55           N/A       N/A       6.95    12/29/00 
AIM International Small Company Fund  22.51           N/A       N/A      10.03    08/31/00 
AIM Mid Cap Basic Value Fund           9.45           N/A       N/A       7.52    12/31/01 
AIM Premier Equity Fund                2.39         (6.90)      N/A       0.72    08/04/97 
AIM Select Equity Fund                 7.79         (5.10)      N/A       2.27    08/04/97 
AIM Small Cap Equity Fund              5.58           N/A       N/A       5.02    08/31/00 

The average total returns (after taxes on distributions) for the Fund, with     
respect to its Investor Class shares, for the one, five and ten year periods (or
since inception if less than ten years) ended December 31, are as follows:      

                                                                [Download Table]

                            PERIODS ENDED                                     
                           DECEMBER 31, 2004                                  
                           -----------------                                  
                                                            SINCE    INCEPTION
INVESTOR CLASS SHARES:    1 YEAR       5 YEARS  10 YEARS  INCEPTION    DATE** 
---------------------     ------       -------  --------  ---------  ---------
                                                                              
AIM Basic Balanced Fund*   5.21%         N/A       N/A      6.10%     09/28/01

*     The returns shown for these periods are the restated historical           
    performance of AIM Basic Balanced Fund's Class A shares at the net asset
value, and reflect the higher Rule 12b-1 fees applicable to Class A 
Shares.                                                             

**    The inception date shown in the table is the Fund's A Class shares. As of 
    the date of this Statement of Additional Information, the Investor Class
shares of AIM Basic Balanced Fund had not yet commenced operations. 

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YIELDS                                                                          

     The 30-day yields for each of the named Funds are as follows:

                                                                [Download Table]

                             30 DAYS ENDED                                       
                            DECEMBER 31, 2004                                    
                            -----------------                                    
                         CLASS A        CLASS B  CLASS C  CLASS R  INVESTOR CLASS
                         -------        -------  -------  -------  --------------
                                                                                 
AIM Balanced Fund          1.11%         0.43%    0.43%    0.96%        N/A      
AIM Basic Balanced Fund    0.79          0.19     0.19     0.68         N/A*     

DISTRIBUTION RATES                                                              

            The distribution rates at offering price for each of the named Funds
are as follows:                                                                 

                                                                [Download Table]

                            30 DAYS ENDED                                       
                           DECEMBER 31, 2004                                    
                           -----------------                                    
                         CLASS A       CLASS B  CLASS C  CLASS R  INVESTOR CLASS
                         -------       -------  -------  -------  --------------
                                                                                
AIM Balanced Fund          1.78%        1.13%    1.13%    1.63%        N/A      
AIM Basic Balanced Fund    1.10         0.50     0.50     1.00         N/A*     

*     As of the date of this Statement of Additional Information, the Investor  
     Class shares of AIM Basic Balanced Fund had not yet commenced operations.

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APPENDIX O-1
 PENDING LITIGATION ALLEGING MARKET TIMING

          The following civil lawsuits, including purported class action and
shareholder derivative suits, involve, depending on the lawsuit, one or more AIM
Funds, IFG, AIM, AIM Management, AMVESCAP, certain related entities, certain of 
their current and former officers and/or certain unrelated third parties and    
make allegations that are similar in many respects to those in the settled      
regulatory actions brought by the SEC, the NYAG and the COAG, concerning market 
timing activity in the AIM Funds. These lawsuits either have been served or have
had service of process waived as of April 25, 2005.                             

     RICHARD LEPERA, ON BEHALF OF HIMSELF AND ALL OTHERS SIMILARLY
          SITUATED, V. INVESCO FUNDS GROUP, INC., INVESCO STOCK FUNDS, INC.,
    INVESCO BOND FUNDS, INC., INVESCO SECTOR FUNDS, INC. AND DOE
           DEFENDANTS 1-100, in the District Court, City and County of Denver,
          Colorado, (Civil Action No. 03-CV-7600), filed on October 2, 2003.
           This claim alleges: common law breach of fiduciary duty; common law
     breach of contract; and common law tortious interference with
         contract. The plaintiff in this case is seeking: compensatory and
         punitive damages; injunctive relief; disgorgement of revenues and
          profits; and costs and expenses, including counsel fees and expert
fees.                                                   

      MIKE SAYEGH, ON BEHALF OF THE GENERAL PUBLIC, V. JANUS CAPITAL
         CORPORATION, JANUS CAPITAL MANAGEMENT LLC, JANUS INVESTMENT FUND,
       EDWARD J. STERN, CANARY CAPITAL PARTNERS LLC, CANARY INVESTMENT
  MANAGEMENT LLC, CANARY CAPITAL PARTNERS LTD., KAPLAN & CO.
            SECURITIES INC., BANK ONE CORPORATION, BANC ONE INVESTMENT ADVISORS,
        THE ONE GROUP MUTUAL FUNDS, BANK OF AMERICA CORPORATION, BANC OF
     AMERICA CAPITAL MANAGEMENT LLC, BANC OF AMERICA ADVISORS LLC,
            NATIONS FUND INC., ROBERT H. GORDON, THEODORE H. SIHPOL III, CHARLES
       D. BRYCELAND, SECURITY TRUST COMPANY, STRONG CAPITAL MANAGEMENT
            INC., JB OXFORD & COMPANY, ALLIANCE CAPITAL MANAGEMENT HOLDING L.P.,
     ALLIANCE CAPITAL MANAGEMENT L.P., ALLIANCE CAPITAL MANAGEMENT
       CORPORATION, AXA FINANCIAL INC., ALLIANCEBERNSTEIN REGISTRANTS,
           GERALD MALONE, CHARLES SCHAFFRAN, MARSH & MCLENNAN COMPANIES, INC.,
          PUTNAM INVESTMENTS TRUST, PUTNAM INVESTMENT MANAGEMENT LLC, PUTNAM
            INVESTMENT FUNDS, AND DOES 1-500, in the Superior Court of the State
          of California, County of Los Angeles (Case No. BC304655), filed on
       October 22, 2003 and amended on December 17, 2003 to substitute
           INVESCO Funds Group, Inc. and Raymond R. Cunningham for unnamed Doe
    defendants. This claim alleges unfair business practices and
         violations of Sections 17200 and 17203 of the California Business
    and Professions Code. The plaintiff in this case is seeking:
           injunctive relief; restitution, including pre-judgment interest; an
           accounting to determine the amount to be returned by the defendants
       and the amount to be refunded to the public; the creation of an
          administrative process whereby injured customers of the defendants
receive their losses; and counsel fees.                 

          RAJ SANYAL, DERIVATIVELY ON BEHALF OF NATIONS INTERNATIONAL EQUITY
           FUND, V. WILLIAM P. CARMICHAEL, WILLIAM H. GRIGG, THOMAS F. KELLER,
         CARL E. MUNDY, JR., CORNELIUS J. PINGS, A. MAX WALKER, CHARLES B.
          WALKER, EDMUND L. BENSON, III, ROBERT H. GORDON, JAMES B. SOMMERS,
       THOMAS S. WORD, JR., EDWARD D. BEDARD, GERALD MURPHY, ROBERT B.
   CARROLL, INVESCO GLOBAL ASSET MANAGEMENT, PUTNAM INVESTMENT
            MANAGEMENT, BANK OF AMERICA CORPORATION, MARSICO CAPITAL MANAGEMENT,
   LLC, BANC OF AMERICA ADVISORS, LLC, BANC OF AMERICA CAPITAL
       MANAGEMENT, LLC, AND NATIONS FUNDS TRUST, in the Superior Court
          Division, State of North Carolina (Civil Action No. 03-CVS-19622),
filed on November 14, 2003.                             

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        This claim alleges common law breach of fiduciary duty; abuse of
      control; gross mismanagement; waste of fund assets; and unjust
     enrichment. The plaintiff in this case is seeking: injunctive
      relief, including imposition of a constructive trust; damages;
       restitution and disgorgement; and costs and expenses, including
counsel fees and expert fees.                           

            L. SCOTT KARLIN, DERIVATIVELY ON BEHALF OF INVESCO FUNDS GROUP, INC.
      V. AMVESCAP, PLC, INVESCO, INC., CANARY CAPITAL PARTNERS, LLC,
       CANARY INVESTMENT MANAGEMENT, LLC, AND CANARY CAPITAL PARTNERS,
       LTD., in the United States District Court, District of Colorado
       (Civil Action No. 03-MK-2406), filed on November 28, 2003. This
           claim alleges violations of Section 36(b) of the Investment Company
        Act of 1940 ("Investment Company Act"), and common law breach of
         fiduciary duty. The plaintiff in this case is seeking damages and
   costs and expenses, including counsel fees and expert fees.

         RICHARD RAVER, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY
         SITUATED, V. INVESCO FUNDS GROUP, INC., INVESCO STOCK FUNDS, INC,
           AIM MANAGEMENT GROUP, INC., AIM STOCK FUNDS, AIM STOCK FUNDS, INC.,
          AMVESCAP PLC, INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE
        EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO
     FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND,
       INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY
        FUND, INVESCO LEISURE FUND, INVESCO MID-CAP GROWTH FUND, INVESCO
            MULTI-SECTOR FUND, INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY
        GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND,
        INVESCO UTILITIES FUND, INVESCO ADVANTAGE FUND, INVESCO BALANCED
            FUND, INVESCO EUROPEAN FUND, INVESCO GROWTH FUND, INVESCO HIGH YIELD
           FUND, INVESCO GROWTH & INCOME FUND, INVESCO INTERNATIONAL BLUE CHIP
        VALUE FUND, INVESCO REAL ESTATE OPPORTUNITY FUND, INVESCO SELECT
          FUND, INVESCO TAX-FREE BOND FUND, INVESCO TELECOMMUNICATIONS FUND,
           INVESCO U.S. GOVERNMENT SECURITIES FUND, INVESCO VALUE FUND, EDWARD
   J. STERN, CANARY INVESTMENT MANAGEMENT, LLC, CANARY CAPITAL
            PARTNERS, LTD., CANARY CAPITAL PARTNERS, LLC, AND DOES 1-100, in the
            United States District Court, District of Colorado (Civil Action No.
            03-F-2441), filed on December 2, 2003. This claim alleges violations
 of: Sections 11 and 15 of the Securities Act of 1933 (the
     "Securities Act"); Sections 10(b) and 20(a) of the Securities
       Exchange Act of 1934 (the "Exchange Act"); Rule 10b-5 under the
           Exchange Act; and Sections 34(b), 36(a) and 36(b) of the Investment
          Company Act. The claim also alleges common law breach of fiduciary
            duty. The plaintiffs in this case are seeking: damages; pre-judgment
           and post-judgment interest; counsel fees and expert fees; and other
relief.                                                 

            JERRY FATTAH, CUSTODIAN FOR BASIM FATTAH, INDIVIDUALLY AND ON BEHALF
     OF ALL OTHERS SIMILARLY SITUATED, V. INVESCO ADVANTAGE HEALTH
       SCIENCES FUND, INVESCO CORE EQUITY FUND, INVESCO DYNAMICS FUND,
            INVESCO ENERGY FUND, INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD &
   PRECIOUS METALS FUND, INVESCO HEALTH SCIENCES FUND, INVESCO
            INTERNATIONAL CORE EQUITY FUND (FORMERLY KNOWN AS INTERNATIONAL BLUE
            CHIP VALUE FUND), INVESCO LEISURE FUND, INVESCO MID-CAP GROWTH FUND,
          INVESCO MULTI-SECTOR FUND, AIM INVESCO S&P 500 INDEX FUND, INVESCO
         SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL
       RETURN FUND, INVESCO UTILITIES FUND, AIM MONEY MARKET FUND, AIM
         INVESCO TAX-FREE MONEY FUND, AIM INVESCO TREASURER'S MONEY MARKET
          RESERVE FUND, AIM INVESCO TREASURER'S TAX-EXEMPT RESERVE FUND, AIM
           INVESCO U.S. GOVERNMENT MONEY FUND, INVESCO ADVANTAGE FUND, INVESCO
BALANCED FUND, INVESCO EUROPEAN FUND, INVESCO           

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           GROWTH FUND, INVESCO HIGH YIELD FUND, INVESCO GROWTH & INCOME FUND,
         INVESCO REAL ESTATE OPPORTUNITY FUND, INVESCO SELECT INCOME FUND,
            INVESCO TAX-FREE BOND FUND, INVESCO TELECOMMUNICATIONS FUND, INVESCO
     U.S. GOVERNMENT SECURITIES FUND, INVESCO VALUE FUND, INVESCO,
     INVESCO LATIN AMERICAN GROWTH FUND (COLLECTIVELY KNOWN AS THE
          "INVESCO FUNDS"), AIM STOCK FUNDS, AIM COUNSELOR SERIES TRUST, AIM
         SECTOR FUNDS INC., AIM BOND FUNDS INC., AIM COMBINATION STOCK AND
       BOND FUNDS INC., AIM MONEY MARKET FUNDS INC., AIM INTERNATIONAL
           FUNDS INC. (COLLECTIVELY KNOWN AS THE "INVESCO FUNDS REGISTRANTS"),
       AMVESCAP PLC, INVESCO FUNDS GROUP INC., TIMOTHY MILLER, RAYMOND
            CUNNINGHAM, THOMAS KOLBE, EDWARD STERN, AMERICAN SKANDIA INC., BREAN
           MURRAY & CO., INC., CANARY CAPITAL PARTNERS, LLC, CANARY INVESTMENT
            MANAGEMENT, LLC, CANARY CAPITAL PARTNERS, LTD., AND JOHN DOES 1-100,
        in the United States District Court, District of Colorado (Civil
            Action No. 03-F-2456), filed on December 4, 2003. This claim alleges
           violations of: Sections 11 and 15 of Securities Act; Sections 10(b)
         and 20(a) of the Exchange Act; Rule 10b-5 under the Exchange Act;
          and Section 206 of the Investment Advisers Act of 1940, as amended
      (the "Advisers Act"). The plaintiffs in this case are seeking:
         compensatory damages; rescission; return of fees paid; accounting
          for wrongfully gotten gains, profits and compensation; restitution
         and disgorgement; and other costs and expenses, including counsel
fees and expert fees.                                   

          EDWARD LOWINGER AND SHARON LOWINGER, INDIVIDUALLY AND ON BEHALF OF
           ALL OTHERS SIMILARLY SITUATED, V. INVESCO ADVANTAGE HEALTH SCIENCES
      FUND, INVESCO CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO
    ENERGY FUND, INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD &
   PRECIOUS METALS FUND, INVESCO HEALTH SCIENCES FUND, INVESCO
            INTERNATIONAL CORE EQUITY FUND (FORMERLY KNOWN AS INTERNATIONAL BLUE
            CHIP VALUE FUND), INVESCO LEISURE FUND, INVESCO MID-CAP GROWTH FUND,
          INVESCO MULTI-SECTOR FUND, AIM INVESCO S&P 500 INDEX FUND, INVESCO
         SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL
       RETURN FUND, INVESCO UTILITIES FUND, AIM MONEY MARKET FUND, AIM
         INVESCO TAX-FREE MONEY FUND, AIM INVESCO TREASURER'S MONEY MARKET
          RESERVE FUND, AIM INVESCO TREASURER'S TAX-EXEMPT RESERVE FUND, AIM
           INVESCO U.S. GOVERNMENT MONEY FUND, INVESCO ADVANTAGE FUND, INVESCO
          BALANCED FUND, INVESCO EUROPEAN FUND, INVESCO GROWTH FUND, INVESCO
          HIGH-YIELD FUND, INVESCO GROWTH & INCOME FUND, INVESCO REAL ESTATE
           OPPORTUNITY FUND, INVESCO SELECT INCOME FUND, INVESCO TAX-FREE BOND
      FUND, INVESCO TELECOMMUNICATIONS FUND, INVESCO U.S. GOVERNMENT
            SECURITIES FUND, INVESCO VALUE FUND, INVESCO; INVESCO LATIN AMERICAN
          GROWTH FUND (COLLECTIVELY KNOWN AS THE "INVESCO FUNDS"), AIM STOCK
          FUNDS, AIM COUNSELOR SERIES TRUST, AIM SECTOR FUNDS INC., AIM BOND
        FUNDS INC., AIM COMBINATION STOCK AND BOND FUNDS INC., AIM MONEY
           MARKET FUNDS INC., AIM INTERNATIONAL FUNDS INC. (COLLECTIVELY KNOWN
        AS THE "INVESCO FUNDS REGISTRANTS"), AMVESCAP PLC, INVESCO FUNDS
      GROUP, INC., TIMOTHY MILLER, RAYMOND CUNNINGHAM, THOMAS KOLBE,
         EDWARD J. STERN, AMERICAN SKANDIA INC., BREAN MURRAY & CO., INC.,
        CANARY CAPITAL PARTNERS, LLC, CANARY INVESTMENT MANAGEMENT, LLC,
         CANARY CAPITAL PARTNERS, LTD., AND JOHN DOES 1-100, in the United
          States District Court, Southern District of New York (Civil Action
      No. 03-CV-9634), filed on December 4, 2003. This claim alleges
         violations of: Sections 11 and 15 of the Securities Act; Sections
          10(b) and 20(a) of the Exchange Act; Rule 10b-5 under the Exchange
        Act; and Section 206 of the Advisers Act. The plaintiffs in this
          case are seeking: compensatory damages; rescission; return of fees
 paid; accounting for wrongfully gotten gains, profits and
       compensation; restitution and disgorgement; and other costs and
expenses, including counsel fees and expert fees.       

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        JOEL GOODMAN, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY
            SITUATED, V. INVESCO FUNDS GROUP, INC. AND RAYMOND R. CUNNINGHAM, in
            the District Court, City and County of Denver, Colorado (Case Number
           03CV9268), filed on December 5, 2003. This claim alleges common law
            breach of fiduciary duty and aiding and abetting breach of fiduciary
         duty. The plaintiffs in this case are seeking: injunctive relief;
      accounting for all damages and for all profits and any special
           benefits obtained; disgorgement; restitution and damages; costs and
            disbursements, including counsel fees and expert fees; and equitable
relief.                                                 

         STEVEN B. EHRLICH, CUSTODIAN FOR ALEXA P. EHRLICH, UGTMA/FLORIDA,
       AND DENNY P. JACOBSON, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS
      SIMILARLY SITUATED, V. INVESCO ADVANTAGE HEALTH SCIENCES FUND,
       INVESCO CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY
      FUND, INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS
        METALS FUND, INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL
         CORE EQUITY FUND (FORMERLY KNOWN AS INTERNATIONAL BLUE CHIP VALUE
         FUND), INVESCO LEISURE FUND, INVESCO MID-CAP GROWTH FUND, INVESCO
        MULTI-SECTOR FUND, AIM INVESCO S&P 500 INDEX FUND, INVESCO SMALL
          COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN
        FUND, INVESCO UTILITIES FUND, AIM MONEY MARKET FUND, AIM INVESCO
        TAX-FREE MONEY FUND, AIM INVESCO TREASURERS MONEY MARKET RESERVE
            FUND, AIM INVESCO TREASURERS TAX-EXEMPT RESERVE FUND, AIM INVESCO US
       GOVERNMENT MONEY FUND, INVESCO ADVANTAGE FUND, INVESCO BALANCED
            FUND, INVESCO EUROPEAN FUND, INVESCO GROWTH FUND, INVESCO HIGH-YIELD
           FUND, INVESCO GROWTH & INCOME FUND, INVESCO REAL ESTATE OPPORTUNITY
     FUND, INVESCO SELECT INCOME FUND, INVESCO TAX-FREE BOND FUND,
           INVESCO TELECOMMUNICATIONS FUND, INVESCO U.S. GOVERNMENT SECURITIES
    FUND, INVESCO VALUE FUND, INVESCO LATIN AMERICAN GROWTH FUND
         (COLLECTIVELY KNOWN AS THE "INVESCO FUNDS"), AIM STOCK FUNDS, AIM
           COUNSELOR SERIES TRUST, AIM SECTOR FUNDS INC., AIM BOND FUNDS INC.,
         AIM COMBINATION STOCK AND BOND FUNDS INC., AIM MONEY MARKET FUNDS
     INC., AIM INTERNATIONAL FUNDS INC. (COLLECTIVELY KNOWN AS THE
        "INVESCO FUNDS REGISTRANTS"), AMVESCAP PLC, INVESCO FUNDS GROUP,
         INC., TIMOTHY MILLER, RAYMOND CUNNINGHAM, THOMAS KOLBE, EDWARD J.
      STERN, AMERICAN SKANDIA INC., BREAN MURRAY & CO., INC., CANARY
        CAPITAL PARTNERS, LLC, CANARY INVESTMENT MANAGEMENT, LLC, CANARY
         CAPITAL PARTNERS, LTD., AND JOHN DOES 1-100, in the United States
          District Court, District of Colorado (Civil Action No. 03-N-2559),
     filed on December 17, 2003. This claim alleges violations of:
          Sections 11 and 15 of the Securities Act; Sections 10(b) and 20(a)
           of the Exchange Act; Rule 10b-5 under the Exchange Act; and Section
         206 of the Advisers Act. The plaintiffs in this case are seeking:
         compensatory damages; rescission; return of fees paid; accounting
          for wrongfully gotten gains, profits and compensation; restitution
         and disgorgement; and other costs and expenses, including counsel
fees and expert fees.                                   

           JOSEPH R. RUSSO, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY
         SITUATED, V. INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE
        EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO
     FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND,
            INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND
       (FORMERLY KNOWN AS INTERNATIONAL BLUE CHIP VALUE FUND), INVESCO
       LEISURE FUND, INVESCO MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR
          FUND, AIM INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH
         FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO
         UTILITIES FUND, AIM MONEY MARKET FUND, AIM INVESCO TAX-FREE MONEY
FUND, AIM INVESCO TREASURERS MONEY MARKET RESERVE FUND, 

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      AIM INVESCO TREASURERS TAX-EXEMPT RESERVE FUND, AIM INVESCO US
       GOVERNMENT MONEY FUND, INVESCO ADVANTAGE FUND, INVESCO BALANCED
            FUND, INVESCO EUROPEAN FUND, INVESCO GROWTH FUND, INVESCO HIGH-YIELD
           FUND, INVESCO GROWTH & INCOME FUND, INVESCO REAL ESTATE OPPORTUNITY
     FUND, INVESCO SELECT INCOME FUND, INVESCO TAX-FREE BOND FUND,
           INVESCO TELECOMMUNICATIONS FUND, INVESCO U.S. GOVERNMENT SECURITIES
    FUND, INVESCO VALUE FUND, INVESCO LATIN AMERICAN GROWTH FUND
         (COLLECTIVELY KNOWN AS THE "INVESCO FUNDS"), AIM STOCK FUNDS, AIM
           COUNSELOR SERIES TRUST, AIM SECTOR FUNDS INC., AIM BOND FUNDS INC.,
         AIM COMBINATION STOCK AND BOND FUNDS INC., AIM MONEY MARKET FUNDS
     INC., AIM INTERNATIONAL FUNDS INC. (COLLECTIVELY KNOWN AS THE
        "INVESCO FUNDS REGISTRANTS"), AMVESCAP PLC, INVESCO FUNDS GROUP,
         INC., TIMOTHY MILLER, RAYMOND CUNNINGHAM, THOMAS KOLBE, EDWARD J.
      STERN, AMERICAN SKANDIA INC., BREAN MURRAY & CO., INC., CANARY
        CAPITAL PARTNERS, LLC, CANARY INVESTMENT MANAGEMENT, LLC, CANARY
         CAPITAL PARTNERS, LTD., AND JOHN DOES 1-100, in the United States
       District Court, Southern District of New York (Civil Action No.
    03-CV-10045), filed on December 18, 2003. This claim alleges
         violations of: Sections 11 and 15 of the Securities Act; Sections
          10(b) and 20(a) of the Exchange Act; Rule 10b-5 under the Exchange
        Act; and Section 206 of the Advisers Act. The plaintiffs in this
          case are seeking: compensatory damages; rescission; return of fees
 paid; accounting for wrongfully gotten gains, profits and
       compensation; restitution and disgorgement; and other costs and
expenses, including counsel fees and expert fees.       

           MIRIAM CALDERON, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY
        SITUATED, V. AMVESCAP PLC, AVZ, INC., AMVESCAP RETIREMENT, INC.,
     AMVESCAP NATIONAL TRUST COMPANY, ROBERT F. MCCULLOUGH, GORDON
           NEBEKER, JEFFREY G. CALLAHAN, INVESCO FUNDS GROUP, INC., RAYMOND R.
        CUNNINGHAM, AND DOES 1-100, in the United States District Court,
            District of Colorado (Civil Action No. 03-M-2604), filed on December
        24, 2003. This claim alleges violations of Sections 404, 405 and
          406B of the Employee Retirement Income Security Act ("ERISA"). The
  plaintiffs in this case are seeking: declarations that the
          defendants breached their ERISA fiduciary duties and that they are
           not entitled to the protection of Section 404(c)(1)(B) of ERISA; an
    order compelling the defendants to make good all losses to a
          particular retirement plan described in this case (the "Retirement
         Plan") resulting from the defendants' breaches of their fiduciary
      duties, including losses to the Retirement Plan resulting from
            imprudent investment of the Retirement Plan's assets, and to restore
          to the Retirement Plan all profits the defendants made through use
         of the Retirement Plan's assets, and to restore to the Retirement
      Plan all profits which the participants would have made if the
        defendants had fulfilled their fiduciary obligations; damages on
          behalf of the Retirement Plan; imposition of a constructive trust,
         injunctive relief, damages suffered by the Retirement Plan, to be
       allocated proportionately to the participants in the Retirement
         Plan; restitution and other costs and expenses, including counsel
fees and expert fees.                                   

         PAT B. GORSUCH AND GEORGE L. GORSUCH V. INVESCO FUNDS GROUP, INC.
            AND AIM ADVISER, INC., in the United States District Court, District
        of Colorado (Civil Action No. 03-MK-2612), filed on December 24,
        2003. This claim alleges violations of Sections 15(a), 20(a) and
            36(b) of the Investment Company Act. The plaintiffs in this case are
     seeking: rescission and/or voiding of the investment advisory
     agreements; return of fees paid; damages; and other costs and
expenses, including counsel fees and expert fees.       

        LORI WEINRIB, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY
    SITUATED, V. INVESCO FUNDS GROUP, INC., AIM STOCK FUNDS, AIM
           COUNSELOR SERIES TRUST, AIM SECTOR FUNDS INC., AIM BOND FUNDS INC.,
AIM COMBINATION                                         

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   STOCK AND BOND FUNDS INC., AIM MONEY MARKET FUNDS INC., AIM
       INTERNATIONAL FUNDS INC., AMVESCAP PLC, TIMOTHY MILLER, RAYMOND
         CUNNINGHAM, THOMAS KOLBE, EDWARD J. STERN, AMERICAN SKANDIA INC.,
      BREAN MURRAY & CO., INC., CANARY CAPITAL PARTNERS, LLC, CANARY
           INVESTMENT MANAGEMENT, LLC, CANARY CAPITAL PARTNERS, LTD., AND JOHN
          DOES 1-100, in the United States District Court, Southern District
        of New York (Civil Action No. 04-CV-00492), filed on January 21,
         2004. This claim alleges violations of: Sections 11 and 15 of the
          1933 Act; Sections 10(b) and 20(a) of the Exchange Act; Rule 10b-5
        under the Exchange Act; and Section 206 of the Advisers Act. The
  plaintiffs in this case are seeking: compensatory damages;
         rescission; return of fees paid; accounting for wrongfully gotten
          gains, profits and compensation; restitution and disgorgement; and
         other costs and expenses, including counsel fees and expert fees.

        ROBERT S. BALLAGH, JR., INDIVIDUALLY AND ON BEHALF OF ALL OTHERS
       SIMILARLY SITUATED, V. INVESCO FUNDS GROUP, INC., INVESCO STOCK
           FUNDS, INC., AIM MANAGEMENT GROUP, INC., AIM STOCK FUNDS, AIM STOCK
          FUNDS, INC., AMVESCAP PLC, INVESCO ADVANTAGE HEALTH SCIENCES FUND,
       INVESCO CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY
      FUND, INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS
        METALS FUND, INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL
            CORE EQUITY FUND, INVESCO LEISURE FUND, INVESCO MID-CAP GROWTH FUND,
            INVESCO MULTI-SECTOR FUND, INVESCO S&P 500 INDEX FUND, INVESCO SMALL
          COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN
     FUND, INVESCO UTILITIES FUND, INVESCO ADVANTAGE FUND, INVESCO
          BALANCED FUND, INVESCO EUROPEAN FUND, INVESCO GROWTH FUND, INVESCO
            HIGH YIELD FUND, INVESCO GROWTH & INCOME FUND, INVESCO INTERNATIONAL
           BLUE CHIP VALUE FUND, INVESCO REAL ESTATE OPPORTUNITY FUND, INVESCO
           SELECT FUND, INVESCO TAX-FREE BOND FUND, INVESCO TELECOMMUNICATIONS
          FUND, INVESCO U.S. GOVERNMENT SECURITIES FUND, INVESCO VALUE FUND,
          EDWARD J. STERN, CANARY INVESTMENT MANAGEMENT, LLC, CANARY CAPITAL
            PARTNERS, LTD., CANARY CAPITAL PARTNERS, LLC, AND DOES 1-100, in the
            United States District Court, District of Colorado (Civil Action No.
  04-MK-0152), filed on January 28, 2004. This claim alleges
         violations of: Sections 11 and 15 of the Securities Act; Sections
          10(b) and 20(a) of the Exchange Act; Rule 10b-5 under the Exchange
          Act; and Sections 34(b), 36(a) and 36(b) of the Investment Company
            Act. The claim also alleges common law breach of fiduciary duty. The
      plaintiffs in this case are seeking: damages; pre-judgment and
       post-judgment interest; counsel fees and expert fees; and other
relief.                                                 

          JONATHAN GALLO, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY
          SITUATED, V. INVESCO FUNDS GROUP, INC., INVESCO STOCK FUNDS, INC.,
           AIM MANAGEMENT GROUP, INC., AIM STOCK FUNDS, AIM STOCK FUNDS, INC.,
          AMVESCAP PLC, INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE
        EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO
     FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND,
       INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY
        FUND, INVESCO LEISURE FUND, INVESCO MID-CAP GROWTH FUND, INVESCO
            MULTI-SECTOR FUND, INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY
        GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND,
        INVESCO UTILITIES FUND, INVESCO ADVANTAGE FUND, INVESCO BALANCED
            FUND, INVESCO EUROPEAN FUND, INVESCO GROWTH FUND, INVESCO HIGH YIELD
           FUND, INVESCO GROWTH & INCOME FUND, INVESCO INTERNATIONAL BLUE CHIP
        VALUE FUND, INVESCO REAL ESTATE OPPORTUNITY FUND, INVESCO SELECT
          FUND, INVESCO TAX-FREE BOND FUND, INVESCO TELECOMMUNICATIONS FUND,
           INVESCO U.S. GOVERNMENT SECURITIES FUND, INVESCO VALUE FUND, EDWARD
J. STERN, CANARY                                        

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         INVESTMENT MANAGEMENT, LLC, CANARY CAPITAL PARTNERS, LTD., CANARY
            CAPITAL PARTNERS, LLC, AND DOES 1-100, in the United States District
           Court, District of Colorado (Civil Action No. 04-MK-0151), filed on
           January 28, 2004. This claim alleges violations of: Sections 11 and
          15 of the Securities Act; Sections 10(b) and 20(a) of the Exchange
         Act; Rule 10b-5 under the Exchange Act; and Sections 34(b), 36(a)
       and 36(b) of the Investment Company Act. The claim also alleges
            common law breach of fiduciary duty. The plaintiffs in this case are
          seeking: damages; pre-judgment and post-judgment interest; counsel
fees and expert fees; and other relief.                 

         EILEEN CLANCY, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY
         SITUATED, V. INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO CORE
        EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO
     FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND,
            INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND
       (FORMERLY KNOWN AS INTERNATIONAL BLUE CHIP VALUE FUND), INVESCO
       LEISURE FUND, INVESCO MID-CAP GROWTH FUND, INVESCO MULTI-SECTOR
          FUND, AIM INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH
         FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO
         UTILITIES FUND, AIM MONEY MARKET FUND, AIM INVESCO TAX-FREE MONEY
            FUND, AIM INVESCO TREASURER'S MONEY MARKET RESERVE FUND, AIM INVESCO
            TREASURER'S TAX-EXEMPT RESERVE FUND, AIM INVESCO US GOVERNMENT MONEY
    FUND, INVESCO ADVANTAGE FUND, INVESCO BALANCED FUND, INVESCO
            EUROPEAN FUND, INVESCO GROWTH FUND, INVESCO HIGH-YIELD FUND, INVESCO
           GROWTH & INCOME FUND, INVESCO REAL ESTATE OPPORTUNITY FUND, INVESCO
SELECT INCOME FUND, INVESCO TAX-FREE BOND FUND, INVESCO 
         TELECOMMUNICATIONS FUND, INVESCO U.S. GOVERNMENT SECURITIES FUND,
       INVESCO VALUE FUND, INVESCO, INVESCO LATIN AMERICAN GROWTH FUND
         (COLLECTIVELY KNOWN AS THE "INVESCO FUNDS"), AIM STOCK FUNDS, AIM
           COUNSELOR SERIES TRUST, AIM SECTOR FUNDS INC., AIM BOND FUNDS INC.,
         AIM COMBINATION STOCK AND BOND FUNDS INC., AIM MONEY MARKET FUNDS
     INC., AIM INTERNATIONAL FUNDS INC. (COLLECTIVELY KNOWN AS THE
        "INVESCO FUNDS REGISTRANTS"), AMVESCAP PLC, INVESCO FUNDS GROUP,
         INC., TIMOTHY MILLER, RAYMOND CUNNINGHAM AND THOMAS KOLBE, in the
          United States District Court, Southern District of New York (Civil
     Action No. 04-CV-0713), filed on January 30, 2004. This claim
           alleges violations of Sections 11 and 15 of the Securities Act. The
  plaintiffs in this case are seeking: compensatory damages,
      rescission; return of fees paid; and other costs and expenses,
including counsel fees and expert fees.                 

    SCOTT WALDMAN, ON BEHALF OF HIMSELF AND ALL OTHERS SIMILARLY
      SITUATED, V. INVESCO FUNDS GROUP, INC., INVESCO DYNAMICS FUND,
         INVESCO EUROPEAN FUND, INVESCO SMALL COMPANY GROWTH FUND, INVESCO
         TECHNOLOGY FUND, AIM STOCK FUNDS, AIM COUNSELOR SERIES TRUST, AIM
         SECTOR FUNDS INC., AIM BOND FUNDS INC., AIM COMBINATION STOCK AND
       BOND FUNDS INC., AIM MONEY MARKET FUNDS INC., AIM INTERNATIONAL
       FUNDS INC., AMVESCAP PLC, AND RAYMOND CUNNINGHAM, in the United
          States District Court, Southern District of New York (Civil Action
       No. 04-CV-00915), filed on February 3, 2004. This claim alleges
         violations of Sections 11 and 15 of the Securities Act and common
     law breach of fiduciary duty. The plaintiffs in this case are
      seeking compensatory damages; injunctive relief; and costs and
expenses, including counsel fees and expert fees.       

          CARL E. VONDER HAAR AND MARILYN P. MARTIN, ON BEHALF OF THEMSELVES
        AND ALL OTHERS SIMILARLY SITUATED, V. INVESCO FUNDS GROUP, INC.,
         INVESCO STOCK FUNDS, INC. AND DOE DEFENDANTS 1-100, in the United
     States District Court, District of Colorado (Civil Action No.
04-CV-812), filed on February 5, 2004. This claim       

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         alleges: common law breach of fiduciary duty; breach of contract;
            and tortious interference with contract. The plaintiffs in this case
            are seeking: injunctive relief; damages; disgorgement; and costs and
expenses, including counsel fees and expert fees.       

            HENRY KRAMER, DERIVATIVELY ON BEHALF OF INVESCO ENERGY FUND, INVESCO
     STOCK FUNDS, INC., AND INVESCO MUTUAL FUNDS V. AMVESCAP, PLC,
       INVESCO FUNDS GROUP, INC., CANARY CAPITAL PARTNERS, LLC, CANARY
      INVESTMENT MANAGEMENT, LLC, AND CANARY CAPITAL PARTNERS, LTD.,
           DEFENDANTS, AND INVESCO ENERGY FUND, INVESCO STOCK FUNDS, INC., AND
      INVESCO MUTUAL FUNDS, NOMINAL DEFENDANTS, in the United States
           District Court, District of Colorado (Civil Action No. 04-MK-0397),
        filed on March 4, 2004. This claim alleges violations of Section
    36(b) of the Investment Company Act and common law breach of
         fiduciary duty. The plaintiff in this case is seeking damages and
   costs and expenses, including counsel fees and expert fees.

     CYNTHIA L. ESSENMACHER, DERIVATIVELY ON BEHALF OF THE INVESCO
        DYNAMICS FUND AND THE REMAINING "INVESCO FUNDS" V. INVESCO FUNDS
       GROUPS, INC., AMVESCAP PLC, AIM MANAGEMENT GROUP, INC., RAYMOND
     CUNNINGHAM, TIMOTHY MILLER, THOMAS KOLBE AND MICHAEL LEGOSKI,
      DEFENDANTS, AND INVESCO DYNAMICS FUND AND THE "INVESCO FUNDS",
            NOMINAL DEFENDANTS, in the United States District Court, District of
            Delaware (Civil Action No. 04-CV-188), filed on March 29, 2004. This
            claim alleges: violations of Section 36(b) of the Investment Company
      Act; violations of Section 206 of the Advisers Act; common law
        breach of fiduciary duty; and civil conspiracy. The plaintiff in
       this case is seeking: damages; injunctive relief; and costs and
expenses, including counsel fees and expert fees.       

      Pursuant to an Order of the MDL Court, plaintiffs in the above
lawsuits (with the exception of Carl E. Vonder Haar, et al. v. INVESCO Funds    
Group, Inc. et al. and Sayegh v. Janus Capital, et al.) consolidated their      
claims for pre-trial purposes into three amended complaints against various AIM-
and IFG-related parties: (i) a Consolidated Amended Class Action Complaint      
purportedly brought on behalf of shareholders of the AIM Funds (the Lepera      
lawsuit discussed below); (ii) a Consolidated Amended Fund Derivative Complaint 
purportedly brought on behalf of the AIM Funds and fund registrants (the        
Essenmacher lawsuit discussed below); and (iii) an Amended Class Action         
Complaint for Violations of the Employee Retirement Income Securities Act       
("ERISA") purportedly brought on behalf of participants in AMVESCAP's 401(k)    
plan (the Calderon lawsuit discussed below). The plaintiffs in the Vonder Haar  
lawsuit continue to seek remand of their lawsuit to state court. Set forth below
is detailed information about these three amended complaints.                   

          RICHARD LEPERA, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY
       SITUATED (LEAD PLAINTIFF: CITY OF CHICAGO DEFERRED COMPENSATION
            PLAN), V. INVESCO FUNDS GROUP, INC., AMVESCAP, PLC, AIM INVESTMENTS,
       AIM ADVISORS, INC., INVESCO INSTITUTIONAL (N.A.), INC., INVESCO
           ASSETS MANAGEMENT LIMITED, INVESCO GLOBAL ASSETS MANAGEMENT (N.A.),
       AIM STOCK FUNDS, AIM MUTUAL FUNDS, AIM COMBINATION STOCK & BOND
      FUNDS, AIM SECTOR FUNDS, AIM TREASURER'S SERIES TRUST, INVESCO
          DISTRIBUTORS, INC., AIM DISTRIBUTORS, INC., RAYMOND R. CUNNINGHAM,
          TIMOTHY J. MILLER, THOMAS A. KOLBE, MICHAEL D. LEGOSKI, MICHAEL K.
           BRUGMAN, MARK WILLIAMSON, EDWARD J. STERN, CANARY CAPITAL PARTNERS,
        LLC, CANARY INVESTMENT MANAGEMENT, LLC, CANARY CAPITAL PARTNERS,
      LTD., RYAN GOLDBERG, MICHAEL GRADY, CITIGROUP, INC., CITIGROUP
         GLOBAL MARKETS HOLDINGS, INC., SALOMON SMITH BARNEY, INC., MORGAN
   STANLEY DW, ANNA BRUGMAN, ANB CONSULTING, LLC, KAPLAN & CO.
          SECURITIES INC., SECURITY TRUST COMPANY, N.A., GRANT D. SEEGER, JB
      OXFORD HOLDINGS, INC., NATIONAL CLEARING CORPORATION, JAMES G.
LEWIS, KRAIG L. KIBBLE, JAMES Y. LIN, BANK OF AMERICA   

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        CORPORATION, BANC OF AMERICA SECURITIES LLC, THEODORE C. SIHPOL,
     III, BEAR STEARNS & CO., INC., BEAR STEARNS SECURITIES CORP.,
    CHARLES SCHWAB & CO., CREDIT SUISSE FIRST BOSTON (USA) INC.,
         PRUDENTIAL FINANCIAL, INC., PRUDENTIAL SECURITIES, INC., CANADIAN
        IMPERIAL BANK OF COMMERCE, JP MORGAN CHASE AND CO., AND JOHN DOE
     DEFENDANTS 1-100, in the MDL Court (Case No. 04-MD-15864; No.
            04-CV-00814-JFM) (originally in the United States District Court for
            the District of Colorado), filed on September 29, 2004. This lawsuit
  alleges violations of Sections 11, 12(a)(2), and 15 of the
        Securities Act; Section 10(b) of the Exchange Act and Rule 10b-5
           promulgated thereunder; Section 20(a) of the Exchange Act; Sections
           34(b), 36(a), 36(b) and 48(a) of the Investment Company Act; breach
           of fiduciary duty/constructive fraud; aiding and abetting breach of
     fiduciary duty; and unjust enrichment. The plaintiffs in this
          lawsuit are seeking: compensatory damages, including interest; and
    other costs and expenses, including counsel and expert fees.

          CYNTHIA ESSENMACHER, SILVANA G. DELLA CAMERA, FELICIA BERNSTEIN AS
          CUSTODIAN FOR DANIELLE BROOKE BERNSTEIN, EDWARD CASEY, TINA CASEY,
            SIMON DENENBERG, GEORGE L. GORSUCH, PAT B. GORSUCH, L. SCOTT KARLIN,
       HENRY KRAMER, JOHN E. MORRISEY, HARRY SCHIPPER, BERTY KREISLER,
            GERSON SMITH, CYNTHIA PULEO, ZACHARY ALAN STARR, JOSHUA GUTTMAN, AND
         AMY SUGIN, DERIVATIVELY ON BEHALF OF THE MUTUAL FUNDS, TRUSTS AND
          CORPORATIONS COMPRISING THE INVESCO AND AIM FAMILY OF MUTUAL FUNDS
          V. AMVESCAP, PLC, INVESCO FUNDS GROUP, INC., INVESCO DISTRIBUTORS,
           INC., INVESCO INSTITUTIONAL (N.A.), INC., INVESCO ASSETS MANAGEMENT
        LIMITED, INVESCO GLOBAL ASSETS MANAGEMENT (N.A.), AIM MANAGEMENT
           GROUP, INC., AIM ADVISERS, INC., AIM INVESTMENT SERVICES, INC., AIM
        DISTRIBUTORS, INC., FUND MANAGEMENT COMPANY, MARK H. WILLIAMSON,
    RAYMOND R. CUNNINGHAM, TIMOTHY MILLER, THOMAS KOLBE, MICHAEL
            LEGOSKI, MICHAEL BRUGMAN, FRED A. DEERING, VICTOR L. ANDREWS, BOB R.
           BAKER, LAWRENCE H. BUDNER, JAMES T. BUNCH, GERALD J. LEWIS, JOHN W.
       MCINTYRE, LARRY SOLL, RONALD L. GROOMS, WILLIAM J. GALVIN, JR.,
       ROBERT H. GRAHAM, FRANK S. BAYLEY, BRUCE L. CROCKETT, ALBERT R.
       DOWDEN, EDWARD K. DUNN, JACK M. FIELDS, CARL FRISCHILING, PREMA
        MATHAI-DAVIS, LEWIS F. PENNOCK, RUTH H. QUIGLEY, LOUIS S. SKLAR,
      OWEN DALY II, AURUM SECURITIES CORP., AURUM CAPITAL MANAGEMENT
            CORP., GOLDEN GATE FINANCIAL GROUP, LLC, BANK OF AMERICA CORP., BANC
        OF AMERICA SECURITIES LLC, BANK OF AMERICA, N.A., BEAR STEARNS &
         CO., INC., CANARY CAPITAL PARTNERS, LLC, CANARY CAPITAL PARTNERS,
          LTD., CANARY INVESTMENT MANAGEMENT, LLC, EDWARD J. STERN, CANADIAN
       IMPERIAL BANK OF COMMERCE, CIRCLE TRUST COMPANY, RYAN GOLDBERG,
            MICHAEL GRADY, KAPLAN & CO. SECURITIES, INC., JP MORGAN CHASE & CO.,
     OPPENHEIMER & CO., INC., PRITCHARD CAPITAL PARTNERS LLC, TIJA
           MANAGEMENT, TRAUTMAN WASSERMAN & COMPANY, INC., DEFENDANTS, AND THE
            INVESCO FUNDS AND THE AIM FUNDS AND ALL TRUSTS AND CORPORATIONS THAT
     COMPRISE THE INVESCO FUNDS AND AIM FUNDS THAT WERE MANAGED BY
       INVESCO AND AIM, NOMINAL DEFENDANTS, in the MDL Court (Case No.
       04-MD-15864-FPS; No. 04-819), filed on September 29, 2004. This
            lawsuit alleges violations of Sections 206 and 215 of the Investment
            Advisers Act; Sections 36(a), 36(b) and 47 of the Investment Company
        Act; control person liability under Section 48 of the Investment
            Company Act; breach of fiduciary duty; aiding and abetting breach of
           fiduciary duty; breach of contract; unjust enrichment; interference
           with contract; and civil conspiracy. The plaintiffs in this lawsuit
        are seeking: removal of director defendants; removal of adviser,
            sub-adviser and distributor defendants; rescission of management and
       other contracts between the Funds and defendants; rescission of
12b-1 plans; disgorgement of management fees and other  
compensation/profits paid to adviser                    

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   defendants; compensatory and punitive damages; and fees and
expenses, including attorney and expert fees.           

           MIRIAM CALDERON, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY
            SITUATED, V. AVZ, INC., AMVESCAP RETIREMENT, INC., AMVESCAP NATIONAL
     TRUST COMPANY, INVESCO FUNDS GROUP, INC., AMVESCAP, ROBERT F.
       MCCULLOUGH, GORDON NEBEKER, JEFFREY G. CALLAHAN, AND RAYMOND R.
           CUNNINGHAM, in the MDL Court (Case No. 1:04-MD-15864-FPS), filed on
    September 29, 2004. This lawsuit alleges violations of ERISA
     Sections 404, 405 and 406. The plaintiffs in this lawsuit are
            seeking: declaratory judgment; restoration of losses suffered by the
          plan; disgorgement of profits; imposition of a constructive trust;
           injunctive relief; compensatory damages; costs and attorneys' fees;
and equitable restitution.                              

APPENDIX O-2
PENDING LITIGATION ALLEGING INADEQUATELY EMPLOYED FAIR VALUE PRICING

           The following civil class action lawsuits involve, depending on the
lawsuit, one or more AIM Funds, IFG and/or AIM and allege that the defendants   
inadequately employed fair value pricing. These lawsuits either have been served
or have had service of process waived as of April 25, 2005.                     

          T.K. PARTHASARATHY, EDMUND WOODBURY, STUART ALLEN SMITH AND SHARON
           SMITH, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED,
 V. T. ROWE PRICE INTERNATIONAL FUNDS, INC., T. ROWE PRICE
          INTERNATIONAL, INC., ARTISAN FUNDS, INC., ARTISAN PARTNERS LIMITED
          PARTNERSHIP, AIM INTERNATIONAL FUNDS, INC. AND AIM ADVISORS, INC.,
        in the Third Judicial Circuit Court for Madison County, Illinois
         (Case No. 2003-L-001253), filed on September 23, 2003. This claim
        alleges: common law breach of duty and common law negligence and
    gross negligence. The plaintiffs in these cases are seeking:
            compensatory and punitive damages; interest; and attorneys' fees and
            costs. The Third Judicial Circuit Court for Madison County, Illinois
          has issued an order severing the claims of plaintiff Parthasarathy
     from the claims of the other plaintiffs against AIM and other
            defendants. As a result, AIM is a defendant in the following severed
     action: EDMUND WOODBURY, STUART ALLEN SMITH and SHARON SMITH,
           Individually and On Behalf of All Others Similarly Situated, v. AIM
        INTERNATIONAL FUNDS, INC., ET AL., in the Third Judicial Circuit
            Court for Madison County, Illinois (Case No. 03-L-1253A). The claims
     made by plaintiffs and the relief sought are identical to the
            Parthasarathy lawsuit. On April 22, 2005, Defendants in the Woodbury
     Case removed the action to Federal Court (U.S. District Court
Southern District of Illinois, Cause No. 05-CV-302-DRH).

       JOHN BILSKI, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY
       SITUATED, V. AIM INTERNATIONAL FUNDS, INC., AIM ADVISORS, INC.,
        INVESCO INTERNATIONAL FUNDS, INC., INVESCO FUNDS GROUP, INC., T.
ROWE PRICE INTERNATIONAL FUNDS, INC. AND T. ROWE PRICE  
          INTERNATIONAL, INC., in the United States District Court, Southern
         District of Illinois (East St. Louis) (Case No. 03-772), filed on
           November 19, 2003. This claim alleges: violations of Sections 36(a)
          and 36(b) of the Investment Company Act of 1940; common law breach
    of duty; and common law negligence and gross negligence. The
    plaintiff in this case is seeking: compensatory and punitive
          damages; interest; and attorneys' fees and costs. This lawsuit has
       been transferred to the MDL Court by order of the United States
       District Court, Southern District of Illinois (East St. Louis).

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APPENDIX O-3
 PENDING LITIGATION ALLEGING EXCESSIVE ADVISORY AND/OR DISTRIBUTION FEES

          The following civil lawsuits, including purported class action and
shareholder derivative suits, involve, depending on the lawsuit, one or more of 
IFG, AIM, IINA, ADI and/or INVESCO Distributors and allege that the defendants  
charged excessive advisory and/or distribution fees and failed to pass on to    
shareholders the perceived savings generated by economies of scale and, in some 
cases, also allege that the defendants adopted unlawful distribution plans.     
These lawsuits either have been served or have had service of process waived as 
of April 25, 2005. All of these lawsuits have been transferred to the United    
States District Court for the Southern District of Texas, Houston Division by   
order of the applicable United States District Court in which they were         
initially filed. By order of the United States District Court for the Southern  
District of Texas, Houston Division, the KONDRACKI and PAPIA actions have been  
consolidated for pre-trial purposes in the BERDAT action and administratively   
closed.                                                                         

            RONALD KONDRACKI V. AIM ADVISORS, INC. AND AIM DISTRIBUTOR, INC., in
     the United States District Court for the Southern District of
           Illinois (Civil Action No. 04-CV-263-DRH), filed on April 16, 2004.
        This claim alleges violations of Section 36(b) of the Investment
            Company Act of 1940 (the "Investment Company Act"). The plaintiff in
            this case is seeking: damages; injunctive relief; prospective relief
          in the form of reduced fees; rescission of the investment advisory
            agreements and distribution plans; and costs and expenses, including
counsel fees.                                           

        DOLORES BERDAT, MARVIN HUNT, MADELINE HUNT, RANDAL C. BREVER AND
         RHONDA LECURU V. INVESCO FUNDS GROUP, INC., INVESCO INSTITUTIONAL
            (N.A.), INC., INVESCO DISTRIBUTORS, INC., AIM ADVISORS, INC. AND AIM
       DISTRIBUTORS, INC., in the United States District Court for the
Middle District of Florida, Tampa Division (Case No.    
         8:04-CV-978-T24-TBM), filed on April 29, 2004. This claim alleges
        violations of Sections 36(b) and 12(b) of the Investment Company
         Act. The plaintiffs in this case are seeking: damages; injunctive
    relief; rescission of the investment advisory agreements and
           distribution plans; and costs and expenses, including counsel fees.

         FERDINANDO PAPIA, FRED DUNCAN, GRACE GIAMANCO, JEFFREY S. THOMAS,
        COURTNEY KING, KATHLEEN BLAIR, HENRY BERDAT, RUTH MOCCIA, MURRAY
        BEASLEY AND FRANCES J. BEASLEY V. A I M ADVISORS, INC. AND A I M
       DISTRIBUTORS, INC., in the United States District Court for the
Middle District of Florida, Tampa Division (Case No.    
         8:04-CV-977-T17-MSS), filed on April 29, 2004. This claim alleges
        violations of Sections 36(b) and 12(b) of the Investment Company
         Act. The plaintiffs in this case are seeking: damages; injunctive
    relief; rescission of the investment advisory agreements and
           distribution plans; and costs and expenses, including counsel fees.
            By order of the United States District Court for the Middle District
        of Florida, Tampa Division, the claims made in the Papia lawsuit
           were consolidated into the Berdat lawsuit discussed above the Papia
lawsuit was administratively closed.                    

APPENDIX O-4
PENDING LITIGATION ALLEGING IMPROPER CHARGING OF DISTRIBUTION FEES
ON LIMITED OFFERING FUNDS OR SHARE CLASSES

      The following civil lawsuits, including shareholder derivative
suits, involve, depending on the lawsuit, one or more of IFG, AIM, ADI and/or   
certain of the trustees of the AIM Funds and allege that the defendants breached
their fiduciary duties by charging distribution fees while funds and/or specific
share classes were closed generally to new investors and/or while other share   
classes of the same fund were not charged the same distribution fees. By order  
of the United States District Court for the Southern District of Texas, Houston 
Division, the LIEBER action has been consolidated for pre-trail purposes into   
the ZUCKER action and administratively closed. These lawsuits either have been  
served or have had service of process waived as of April 25, 2005.              

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       LAWRENCE ZUCKER, ON BEHALF OF AIM SMALL CAP GROWTH FUND AND AIM
       LIMITED MATURITY TREASURY FUND, V. A I M ADVISORS, INC., in the
         United States District Court, Southern District of Texas, Houston
          Division (Civil Action No. H-03-5653), filed on December 10, 2003.
        This claim alleges violations of Section 36(b) of the Investment
         Company Act of 1940 (the "Investment Company Act") and common law
        breach of fiduciary duty. The plaintiff in this case is seeking:
     damages; injunctive relief; and costs and expenses, including
      counsel fees. In March 2005, the parties entered a Stipulation
            whereby, among other things, the plaintiff agreed to dismiss without
         prejudice all claims against all of the individual defendants and
        his claims based on state law causes of action. This effectively
            limits this suit to alleged violations of Section 36(b) against ADI.

        STANLEY LIEBER, ON BEHALF OF INVESCO BALANCED FUND, INVESCO CORE
        EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND, INVESCO
      EUROPEAN FUND, INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD &
          PRECIOUS METALS FUND, INVESCO GROWTH & INCOME FUND, INVESCO GROWTH
          FUND, INVESCO HEALTH SCIENCE FUND, INVESCO HIGH YIELD FUND, INVECO
         INTERNATIONAL BLUE CHIP VALUE FUND, INVESCO LEISURE FUND, INVESCO
         REAL ESTATE OPPORTUNITY FUND, INVESCO S&P 500 INDEX FUND, INVESCO
          SELECT INCOME FUND, INVESCO TAX FREE BOND FUND, INVESCO TECHNOLOGY
         FUND, INVESCO TELECOMMUNICATIONS FUND, INVESCO TOTAL RETURN FUND,
      INVESCO US GOVERNMENT SECURITIES FUND, INVESCO UTILITIES FUND,
         INVESCO VALUE EQUITY FUND, V. INVESCO FUNDS GROUP, INC. AND A I M
     ADVISORS, INC., in the United States District Court, Southern
         District of Texas, Houston Division (Civil Action No. H-03-5744),
            filed on December 17, 2003. This claim alleges violations of Section
    36(b) of the Investment Company Act and common law breach of
       fiduciary duty. The plaintiff in this case is seeking: damages;
          injunctive relief; and costs and expenses, including counsel fees.
       In March 2005, the parties entered a Stipulation whereby, among
           other things, the plaintiff agreed to dismiss without prejudice all
            claims against all of the individual defendants and his claims based
           on state law causes of action. This effectively limits this suit to
alleged violations of Section 36(b) against ADI.        

       HERMAN C. RAGAN, DERIVATIVELY, AND ON BEHALF OF HIMSELF AND ALL
          OTHERS SIMILARLY SITUATED, V. INVESCO FUNDS GROUP, INC., AND A I M
       DISTRIBUTORS, INC., in the United States District Court for the
       Southern District of Georgia, Dublin Division (Civil Action No.
           CV304-031), filed on May 6, 2004. This claim alleges violations of:
           Section 10(b) of the Securities Exchange Act of 1934 (the "Exchange
          Act") and Rule 10b-5 thereunder; Sections 17(a)(2) and 17(a)(3) of
       the Securities Act of 1933; and Section 36(b) of the Investment
          Company Act. This claim also alleges controlling person liability,
         within the meaning of Section 20 of the Exchange Act against ADI.
    The plaintiff in this case is seeking: damages and costs and
expenses, including counsel fees.                       

APPENDIX O-5
PENDING LITIGATION ALLEGING IMPROPER MUTUAL FUND SALES PRACTICES
 AND DIRECTED-BROKERAGE ARRANGEMENTS

          The following civil lawsuits, including purported class action and
shareholder derivative suits, involve, depending on the lawsuit, one or more of 
AIM Management, IFG, AIM, AIS and/or certain of the trustees of the AIM Funds   
and allege that the defendants improperly used the assets of the AIM Funds to   
pay brokers to aggressively push the AIM Funds over other mutual funds and that 
the defendants concealed such payments from investors by disguising them as     
brokerage commissions. These lawsuits either have been served or have had       
service of process waived as of April 25, 2005. By order of the                 

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United States District Court for the Southern District of Texas, Houston        
Division, the claims made in the Beasley, Kehlbeck Trust, Fry, Apu and Bendix   
lawsuits discussed below were consolidated into the Boyce lawsuit discussed     
below and these other lawsuits were administratively closed.                    

           JOY D. BEASLEY AND SHEILA MCDAID, INDIVIDUALLY AND ON BEHALF OF ALL
        OTHERS SIMILARLY SITUATED, V. AIM MANAGEMENT GROUP INC., INVESCO
       FUNDS GROUP, INC., AIM INVESTMENT SERVICES, INC., AIM ADVISORS,
          INC., ROBERT H. GRAHAM, MARK H. WILLIAMSON, FRANK S. BAYLEY, BRUCE
           L. CROCKETT, ALBERT R. DOWDEN, EDWARD K. DUNN, JR., JACK M. FIELDS,
      CARL FRISCHLING, PREMA MATHAI-DAVIS, LEWIS F. PENNOCK, RUTH H.
         QUIGLEY, AND LOUIS S. SKLAR, AND JOHN DOES 1-100, DEFENDANTS, AND
     AIM AGGRESSIVE GROWTH FUND, AIM ASIA PACIFIC GROWTH FUND, AIM
         BALANCED FUND, AIM BASIC BALANCED FUND, AIM BASIC VALUE FUND, AIM
           BLUE CHIP FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND, AIM
            CONSTELLATION FUND, AIM DENT DEMOGRAPHIC TRENDS FUND, AIM DEVELOPING
        MARKETS FUND, AIM DIVERSIFIED DIVIDEND FUND, AIM EMERGING GROWTH
            FUND, AIM EUROPEAN GROWTH FUND, AIM EUROPEAN SMALL COMPANY FUND, AIM
         FLOATING RATE FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL
         EQUITY FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL HEALTH CARE FUND,
       AIM GLOBAL VALUE FUND, AIM HIGH INCOME MUNICIPAL FUND, AIM HIGH
          YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND, AIM
          INTERNATIONAL EMERGING GROWTH FUND, AIM INTERNATIONAL GROWTH FUND,
            AIM LARGE CAP BASIC VALUE FUND, AIM LARGE CAP GROWTH FUND, AIM LIBRA
         FUND, AIM LIMITED MATURITY TREASURY FUND, AIM MID CAP BASIC VALUE
        FUND, AIM MID CAP CORE EQUITY FUND, AIM MID CAP GROWTH FUND, AIM
           MUNICIPAL BOND FUND, AIM OPPORTUNITIES I FUND, AIM OPPORTUNITIES II
           FUND, AIM OPPORTUNITIES III FUND, AIM PREMIER EQUITY FUND, AIM REAL
          ESTATE FUND, AIM SELECT EQUITY FUND, AIM SHORT TERM BOND FUND, AIM
      SMALL CAP EQUITY FUND, AIM SMALL CAP GROWTH FUND, AIM TAX-FREE
           INTERMEDIATE FUND, AIM TOTAL RETURN BOND FUND, AIM TRIMARK ENDEAVOR
     FUND, AIM TRIMARK FUND, AIM TRIMARK SMALL COMPANIES FUND, AIM
        WEINGARTEN FUND, INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO
     CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND,
       INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS
      FUND, INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE
       EQUITY FUND, INVESCO LEISURE FUND, INVESCO MID-CAP GROWTH FUND,
            INVESCO MULTI-SECTOR FUND, INVESCO S&P 500 INDEX FUND, INVESCO SMALL
          COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN
       FUND, INVESCO UTILITIES FUND, NOMINAL DEFENDANTS, in the United
            States District Court for the District of Colorado (Civil Action No.
     04-B-0958), filed on May 10, 2004. The plaintiffs voluntarily
          dismissed this case in Colorado and re-filed it on July 2, 2004 in
            the United States District Court for the Southern District of Texas,
     Houston Division (Civil Action H-04-2589). This claim alleges
       violations of Sections 34(b), 36(b) and 48(a) of the Investment
            Company Act of 1940 (the "Investment Company Act") and violations of
        Sections 206 and 215 of the Investment Advisers Act of 1940 (the
    "Advisers Act"). The claim also alleges common law breach of
fiduciary duty. The plaintiffs in this case are seeking:
       compensatory and punitive damages; rescission of certain Funds'
           advisory agreements and distribution plans and recovery of all fees
          paid; an accounting of all fund-related fees, commissions and soft
          dollar payments; restitution of all unlawfully or discriminatorily
    obtained fees and charges; and attorneys' and experts' fees.

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            RICHARD TIM BOYCE V. AIM MANAGEMENT GROUP INC., INVESCO FUNDS GROUP,
          INC., AIM INVESTMENT SERVICES, INC., AIM ADVISORS, INC., ROBERT H.
       GRAHAM, MARK H. WILLIAMSON, FRANK S. BAYLEY, BRUCE L. CROCKETT,
   ALBERT R. DOWDEN, EDWARD K. DUNN, JR., JACK M. FIELDS, CARL
          FRISCHLING, PREMA MATHAI-DAVIS, LEWIS F. PENNOCK, RUTH H. QUIGLEY,
    AND LOUIS S. SKLAR, AND JOHN DOES 1-100, DEFENDANTS, AND AIM
          AGGRESSIVE GROWTH FUND, AIM ASIA PACIFIC GROWTH FUND, AIM BALANCED
          FUND, AIM BASIC BALANCED FUND, AIM BASIC VALUE FUND, AIM BLUE CHIP
 FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND, AIM
            CONSTELLATION FUND, AIM DENT DEMOGRAPHIC TRENDS FUND, AIM DEVELOPING
        MARKETS FUND, AIM DIVERSIFIED DIVIDEND FUND, AIM EMERGING GROWTH
            FUND, AIM EUROPEAN GROWTH FUND, AIM EUROPEAN SMALL COMPANY FUND, AIM
         FLOATING RATE FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL
         EQUITY FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL HEALTH CARE FUND,
       AIM GLOBAL VALUE FUND, AIM HIGH INCOME MUNICIPAL FUND, AIM HIGH
          YIELD FUND, AIM INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND, AIM
          INTERNATIONAL EMERGING GROWTH FUND, AIM INTERNATIONAL GROWTH FUND,
            AIM LARGE CAP BASIC VALUE FUND, AIM LARGE CAP GROWTH FUND, AIM LIBRA
         FUND, AIM LIMITED MATURITY TREASURY FUND, AIM MID CAP BASIC VALUE
        FUND, AIM MID CAP CORE EQUITY FUND, AIM MID CAP GROWTH FUND, AIM
           MUNICIPAL BOND FUND, AIM OPPORTUNITIES I FUND, AIM OPPORTUNITIES II
           FUND, AIM OPPORTUNITIES III FUND, AIM PREMIER EQUITY FUND, AIM REAL
          ESTATE FUND, AIM SELECT EQUITY FUND, AIM SHORT TERM BOND FUND, AIM
      SMALL CAP EQUITY FUND, AIM SMALL CAP GROWTH FUND, AIM TAX-FREE
           INTERMEDIATE FUND, AIM TOTAL RETURN BOND FUND, AIM TRIMARK ENDEAVOR
     FUND, AIM TRIMARK FUND, AIM TRIMARK SMALL COMPANIES FUND, AIM
        WEINGARTEN FUND, INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO
     CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND,
       INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS
      FUND, INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE
       EQUITY FUND, INVESCO LEISURE FUND, INVESCO MID-CAP GROWTH FUND,
            INVESCO MULTI-SECTOR FUND, INVESCO S&P 500 INDEX FUND, INVESCO SMALL
          COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN
       FUND, INVESCO UTILITIES FUND, NOMINAL DEFENDANTS, in the United
            States District Court for the District of Colorado (Civil Action No.
    04-N-0989), filed on May 13, 2004. The plaintiff voluntarily
          dismissed this case in Colorado and re-filed it on July 1, 2004 in
            the United States District Court for the Southern District of Texas,
     Houston Division (Civil Action H-04-2587). This claim alleges
       violations of Sections 34(b), 36(b) and 48(a) of the Investment
          Company Act and violations of Sections 206 and 215 of the Advisers
            Act. The claim also alleges common law breach of fiduciary duty. The
    plaintiff in this case is seeking: compensatory and punitive
     damages; rescission of certain Funds' advisory agreements and
          distribution plans and recovery of all fees paid; an accounting of
    all fund-related fees, commissions and soft dollar payments;
           restitution of all unlawfully or discriminatorily obtained fees and
charges; and attorneys' and experts' fees.              

            KEHLBECK TRUST DTD 1-25-93, BILLY B. KEHLBECK AND DONNA J. KEHLBECK,
          TTEES V. AIM MANAGEMENT GROUP INC., INVESCO FUNDS GROUP, INC., AIM
        INVESTMENT SERVICES, INC., AIM ADVISORS, INC., ROBERT H. GRAHAM,
         MARK H. WILLIAMSON, FRANK S. BAYLEY, BRUCE L. CROCKETT, ALBERT R.
           DOWDEN, EDWARD K. DUNN, JR., JACK M. FIELDS, CARL FRISCHLING, PREMA
            MATHAI-DAVIS, LEWIS F. PENNOCK, RUTH H. QUIGLEY, AND LOUIS S. SKLAR,
            AND JOHN DOES 1-100, DEFENDANTS, AND AIM AGGRESSIVE GROWTH FUND, AIM
       ASIA PACIFIC GROWTH FUND, AIM BALANCED FUND, AIM BASIC BALANCED
   FUND, AIM BASIC VALUE FUND, AIM BLUE CHIP FUND, AIM CAPITAL
            DEVELOPMENT FUND, AIM CHARTER FUND, AIM CONSTELLATION FUND, AIM DENT

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 DEMOGRAPHIC TRENDS FUND, AIM DEVELOPING MARKETS FUND, AIM
         DIVERSIFIED DIVIDEND FUND, AIM EMERGING GROWTH FUND, AIM EUROPEAN
       GROWTH FUND, AIM EUROPEAN SMALL COMPANY FUND, AIM FLOATING RATE
            FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL EQUITY FUND, AIM
         GLOBAL GROWTH FUND, AIM GLOBAL HEALTH CARE FUND, AIM GLOBAL VALUE
      FUND, AIM HIGH INCOME MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM
        INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND, AIM INTERNATIONAL
          EMERGING GROWTH FUND, AIM INTERNATIONAL GROWTH FUND, AIM LARGE CAP
        BASIC VALUE FUND, AIM LARGE CAP GROWTH FUND, AIM LIBRA FUND, AIM
         LIMITED MATURITY TREASURY FUND, AIM MID CAP BASIC VALUE FUND, AIM
        MID CAP CORE EQUITY FUND, AIM MID CAP GROWTH FUND, AIM MUNICIPAL
           BOND FUND, AIM OPPORTUNITIES I FUND, AIM OPPORTUNITIES II FUND, AIM
        OPPORTUNITIES III FUND, AIM PREMIER EQUITY FUND, AIM REAL ESTATE
         FUND, AIM SELECT EQUITY FUND, AIM SHORT TERM BOND FUND, AIM SMALL
CAP EQUITY FUND, AIM SMALL CAP GROWTH FUND, AIM TAX-FREE
           INTERMEDIATE FUND, AIM TOTAL RETURN BOND FUND, AIM TRIMARK ENDEAVOR
     FUND, AIM TRIMARK FUND, AIM TRIMARK SMALL COMPANIES FUND, AIM
        WEINGARTEN FUND, INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO
     CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND,
       INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS
      FUND, INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE
     EQUITY FUND, INVESCO LEISURE FUND, INVESCO MULTI-SECTOR FUND,
        INVESCO MID-CAP GROWTH FUND, INVESCO S&P 500 INDEX FUND, INVESCO
         SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL
       RETURN FUND, INVESCO UTILITIES FUND, NOMINAL DEFENDANTS, in the
        United States District Court for the Southern District of Texas,
       Houston Division (Civil Action No. H-04-2802), filed on July 9,
        2004. This claim alleges violations of Sections 34(b), 36(b) and
          48(a) of the Investment Company Act and violations of Sections 206
      and 215 of the Advisers Act. The claim also alleges common law
        breach of fiduciary duty. The plaintiff in this case is seeking:
       compensatory and punitive damages; rescission of certain Funds'
           advisory agreements and distribution plans and recovery of all fees
          paid; an accounting of all fund-related fees, commissions and soft
          dollar payments; restitution of all unlawfully or discriminatorily
    obtained fees and charges; and attorneys' and experts' fees.

       JANICE R. FRY, BOB J. FRY, JAMES P. HAYES, VIRGINIA L. MAGBUAL,
            HENRY W. MEYER AND GEORGE ROBERT PERRY V. AIM MANAGEMENT GROUP INC.,
     INVESCO FUNDS GROUP, INC., AIM INVESTMENT SERVICES, INC., AIM
      ADVISORS, INC., ROBERT H. GRAHAM, MARK H. WILLIAMSON, FRANK S.
         BAYLEY, BRUCE L. CROCKETT, ALBERT R. DOWDEN, EDWARD K. DUNN, JR.,
     JACK M. FIELDS, CARL FRISCHLING, PREMA MATHAI-DAVIS, LEWIS F.
          PENNOCK, RUTH H. QUIGLEY, AND LOUIS S. SKLAR, AND JOHN DOES 1-100,
           DEFENDANTS, AND AIM AGGRESSIVE GROWTH FUND, AIM ASIA PACIFIC GROWTH
         FUND, AIM BALANCED FUND, AIM BASIC BALANCED FUND, AIM BASIC VALUE
           FUND, AIM BLUE CHIP FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER
           FUND, AIM CONSTELLATION FUND, AIM DENT DEMOGRAPHIC TRENDS FUND, AIM
            DEVELOPING MARKETS FUND, AIM DIVERSIFIED DIVIDEND FUND, AIM EMERGING
         GROWTH FUND, AIM EUROPEAN GROWTH FUND, AIM EUROPEAN SMALL COMPANY
            FUND, AIM FLOATING RATE FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM
          GLOBAL EQUITY FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL HEALTH CARE
           FUND, AIM GLOBAL VALUE FUND, AIM GROUP INCOME FUND, AIM GROUP VALUE
      FUND, AIM HIGH INCOME MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM
        INCOME FUND, AIM INTERMEDIATE GOVERNMENT FUND, AIM INTERNATIONAL
          EMERGING GROWTH FUND, AIM INTERNATIONAL GROWTH FUND, AIM LARGE CAP
        BASIC VALUE FUND, AIM LARGE CAP GROWTH FUND, AIM LIBRA FUND, AIM
         LIMITED MATURITY TREASURY FUND, AIM MID CAP BASIC VALUE FUND, AIM
MID CAP CORE EQUITY FUND, AIM MID CAP GROWTH FUND,      

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            AIM MUNICIPAL BOND FUND, AIM OPPORTUNITIES I FUND, AIM OPPORTUNITIES
         II FUND, AIM OPPORTUNITIES III FUND, AIM PREMIER EQUITY FUND, AIM
           REAL ESTATE FUND, AIM SELECT EQUITY FUND, AIM SHORT TERM BOND FUND,
          AIM SMALL CAP EQUITY FUND, AIM SMALL CAP GROWTH FUND, AIM TAX-FREE
           INTERMEDIATE FUND, AIM TOTAL RETURN BOND FUND, AIM TRIMARK ENDEAVOR
     FUND, AIM TRIMARK FUND, AIM TRIMARK SMALL COMPANIES FUND, AIM
        WEINGARTEN FUND, INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO
     CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND,
       INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS
      FUND, INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE
     EQUITY FUND, INVESCO LEISURE FUND, INVESCO MULTI-SECTOR FUND,
        INVESCO MID-CAP GROWTH FUND, INVESCO S&P 500 INDEX FUND, INVESCO
         SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL
       RETURN FUND, INVESCO UTILITIES FUND, NOMINAL DEFENDANTS, in the
        United States District Court for the Southern District of Texas,
        Houston Division (Civil Action No. H-04-2832), filed on July 12,
        2004. This claim alleges violations of Sections 34(b), 36(b) and
          48(a) of the Investment Company Act and violations of Sections 206
      and 215 of the Advisers Act. The claim also alleges common law
        breach of fiduciary duty. The plaintiff in this case is seeking:
       compensatory and punitive damages; rescission of certain Funds'
           advisory agreements and distribution plans and recovery of all fees
          paid; an accounting of all fund-related fees, commissions and soft
          dollar payments; restitution of all unlawfully or discriminatorily
    obtained fees and charges; and attorneys' and experts' fees.

      ROBERT P. APU, SUZANNE K. APU, MARINA BERTI, KHANH DINH, FRANK
           KENDRICK, EDWARD A. KREZEL, DAN B. LESIUK, JOHN B. PERKINS, MILDRED
            E. RUEHLMAN, LOUIS E. SPERRY, J. DORIS WILLSON AND ROBERT W. WOOD V.
            AIM MANAGEMENT GROUP INC., INVESCO FUNDS GROUP, INC., AIM INVESTMENT
     SERVICES, INC., AIM ADVISORS, INC., ROBERT H. GRAHAM, MARK H.
         WILLIAMSON, FRANK S. BAYLEY, BRUCE L. CROCKETT, ALBERT R. DOWDEN,
   EDWARD K. DUNN, JR., JACK M. FIELDS, CARL FRISCHLING, PREMA
            MATHAI-DAVIS, LEWIS F. PENNOCK, RUTH H. QUIGLEY, AND LOUIS S. SKLAR,
            AND JOHN DOES 1-100, DEFENDANTS, AND AIM AGGRESSIVE GROWTH FUND, AIM
       ASIA PACIFIC GROWTH FUND, AIM BALANCED FUND, AIM BASIC BALANCED
   FUND, AIM BASIC VALUE FUND, AIM BLUE CHIP FUND, AIM CAPITAL
            DEVELOPMENT FUND, AIM CHARTER FUND, AIM CONSTELLATION FUND, AIM DENT
 DEMOGRAPHIC TRENDS FUND, AIM DEVELOPING MARKETS FUND, AIM
         DIVERSIFIED DIVIDEND FUND, AIM EMERGING GROWTH FUND, AIM EUROPEAN
       GROWTH FUND, AIM EUROPEAN SMALL COMPANY FUND, AIM FLOATING RATE
            FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL EQUITY FUND, AIM
         GLOBAL GROWTH FUND, AIM GLOBAL HEALTH CARE FUND, AIM GLOBAL VALUE
          FUND, AIM GROUP INCOME FUND, AIM GROUP VALUE FUND, AIM HIGH INCOME
 MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME FUND, AIM
       INTERMEDIATE GOVERNMENT FUND, AIM INTERNATIONAL EMERGING GROWTH
            FUND, AIM INTERNATIONAL GROWTH FUND, AIM LARGE CAP BASIC VALUE FUND,
       AIM LARGE CAP GROWTH FUND, AIM LIBRA FUND, AIM LIMITED MATURITY
            TREASURY FUND, AIM MID CAP BASIC VALUE FUND, AIM MID CAP CORE EQUITY
   FUND, AIM MID CAP GROWTH FUND, AIM MUNICIPAL BOND FUND, AIM
          OPPORTUNITIES I FUND, AIM OPPORTUNITIES II FUND, AIM OPPORTUNITIES
           III FUND, AIM PREMIER EQUITY FUND, AIM REAL ESTATE FUND, AIM SELECT
         EQUITY FUND, AIM SHORT TERM BOND FUND, AIM SMALL CAP EQUITY FUND,
            AIM SMALL CAP GROWTH FUND, AIM TAX-FREE INTERMEDIATE FUND, AIM TOTAL
          RETURN BOND FUND, AIM TRIMARK ENDEAVOR FUND, AIM TRIMARK FUND, AIM
            TRIMARK SMALL COMPANIES FUND, AIM WEINGARTEN FUND, INVESCO ADVANTAGE
        HEALTH SCIENCES FUND, INVESCO CORE EQUITY FUND, INVESCO DYNAMICS
FUND, INVESCO ENERGY FUND, INVESCO FINANCIAL            

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          SERVICES FUND, INVESCO GOLD & PRECIOUS METALS FUND, INVESCO HEALTH
      SCIENCES FUND, INVESCO INTERNATIONAL CORE EQUITY FUND, INVESCO
       LEISURE FUND, INVESCO MULTI-SECTOR FUND, INVESCO MID-CAP GROWTH
            FUND, INVESCO S&P 500 INDEX FUND, INVESCO SMALL COMPANY GROWTH FUND,
   INVESCO TECHNOLOGY FUND, INVESCO TOTAL RETURN FUND, INVESCO
         UTILITIES FUND, NOMINAL DEFENDANTS, in the United States District
         Court for the Southern District of Texas, Houston Division (Civil
         Action No. H-04-2884), filed on July 15, 2004. This claim alleges
       violations of Sections 34(b), 36(b) and 48(a) of the Investment
          Company Act and violations of Sections 206 and 215 of the Advisers
            Act. The claim also alleges common law breach of fiduciary duty. The
    plaintiff in this case is seeking: compensatory and punitive
     damages; rescission of certain Funds' advisory agreements and
          distribution plans and recovery of all fees paid; an accounting of
    all fund-related fees, commissions and soft dollar payments;
           restitution of all unlawfully or discriminatorily obtained fees and
charges; and attorneys' and experts' fees.              

      HARVEY R. BENDIX, CVETAN GEORGIEV, DAVID M. LUCOFF, MICHAEL E.
            PARMELEE, TRUSTEE OF THE HERMAN S. AND ESPERANZA A.. DRAYER RESIDUAL
           TRUST U/A 1/22/83 AND STANLEY S. STEPHENSON, TRUSTEE OF THE STANLEY
       J. STEPHENSON TRUST V. AIM MANAGEMENT GROUP INC., INVESCO FUNDS
       GROUP, INC., AIM INVESTMENT SERVICES, INC., AIM ADVISORS, INC.,
       ROBERT H. GRAHAM, MARK H. WILLIAMSON, FRANK S. BAYLEY, BRUCE L.
        CROCKETT, ALBERT R. DOWDEN, EDWARD K. DUNN, JR., JACK M. FIELDS,
      CARL FRISCHLING, PREMA MATHAI-DAVIS, LEWIS F. PENNOCK, RUTH H.
         QUIGLEY, AND LOUIS S. SKLAR, AND JOHN DOES 1-100, DEFENDANTS, AND
     AIM AGGRESSIVE GROWTH FUND, AIM ASIA PACIFIC GROWTH FUND, AIM
         BALANCED FUND, AIM BASIC BALANCED FUND, AIM BASIC VALUE FUND, AIM
           BLUE CHIP FUND, AIM CAPITAL DEVELOPMENT FUND, AIM CHARTER FUND, AIM
            CONSTELLATION FUND, AIM DENT DEMOGRAPHIC TRENDS FUND, AIM DEVELOPING
        MARKETS FUND, AIM DIVERSIFIED DIVIDEND FUND, AIM EMERGING GROWTH
            FUND, AIM EUROPEAN GROWTH FUND, AIM EUROPEAN SMALL COMPANY FUND, AIM
         FLOATING RATE FUND, AIM GLOBAL AGGRESSIVE GROWTH FUND, AIM GLOBAL
         EQUITY FUND, AIM GLOBAL GROWTH FUND, AIM GLOBAL HEALTH CARE FUND,
           AIM GLOBAL VALUE FUND, AIM GROUP INCOME FUND, AIM GROUP VALUE FUND,
       AIM HIGH INCOME MUNICIPAL FUND, AIM HIGH YIELD FUND, AIM INCOME
          FUND, AIM INTERMEDIATE GOVERNMENT FUND, AIM INTERNATIONAL EMERGING
       GROWTH FUND, AIM INTERNATIONAL GROWTH FUND, AIM LARGE CAP BASIC
          VALUE FUND, AIM LARGE CAP GROWTH FUND, AIM LIBRA FUND, AIM LIMITED
         MATURITY TREASURY FUND, AIM MID CAP BASIC VALUE FUND, AIM MID CAP
           CORE EQUITY FUND, AIM MID CAP GROWTH FUND, AIM MUNICIPAL BOND FUND,
AIM OPPORTUNITIES I FUND, AIM OPPORTUNITIES II FUND, AIM
        OPPORTUNITIES III FUND, AIM PREMIER EQUITY FUND, AIM REAL ESTATE
         FUND, AIM SELECT EQUITY FUND, AIM SHORT TERM BOND FUND, AIM SMALL
CAP EQUITY FUND, AIM SMALL CAP GROWTH FUND, AIM TAX-FREE
           INTERMEDIATE FUND, AIM TOTAL RETURN BOND FUND, AIM TRIMARK ENDEAVOR
     FUND, AIM TRIMARK FUND, AIM TRIMARK SMALL COMPANIES FUND, AIM
        WEINGARTEN FUND, INVESCO ADVANTAGE HEALTH SCIENCES FUND, INVESCO
     CORE EQUITY FUND, INVESCO DYNAMICS FUND, INVESCO ENERGY FUND,
       INVESCO FINANCIAL SERVICES FUND, INVESCO GOLD & PRECIOUS METALS
      FUND, INVESCO HEALTH SCIENCES FUND, INVESCO INTERNATIONAL CORE
     EQUITY FUND, INVESCO LEISURE FUND, INVESCO MULTI-SECTOR FUND,
        INVESCO MID-CAP GROWTH FUND, INVESCO S&P 500 INDEX FUND, INVESCO
         SMALL COMPANY GROWTH FUND, INVESCO TECHNOLOGY FUND, INVESCO TOTAL
       RETURN FUND, INVESCO UTILITIES FUND, NOMINAL DEFENDANTS, in the
        United States District Court for the Southern District of Texas,
        Houston Division (Civil Action No. H-04-3030), filed on July 27,
        2004. This claim alleges violations of Sections 34(b), 36(b) and
48(a) of the Investment Company                         

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           Act and violations of Sections 206 and 215 of the Advisers Act. The
   claim also alleges common law breach of fiduciary duty. The
    plaintiff in this case is seeking: compensatory and punitive
     damages; rescission of certain Funds' advisory agreements and
          distribution plans and recovery of all fees paid; an accounting of
    all fund-related fees, commissions and soft dollar payments;
           restitution of all unlawfully or discriminatorily obtained fees and
charges; and attorneys' and experts' fees.              

APPENDIX O-6
 PENDING LITIGATION ALLEGING FAILURE TO ENSURE PARTICIPATION IN CLASS ACTION
SETTLEMENTS 

    The following civil lawsuit, purporting to be a class action
lawsuit, has been filed against AIM, IINA, AIM Capital and the trustees of the  
AIM Funds alleging that the defendants breached their fiduciary duties by       
failing to ensure that the AIM Funds participated in class action settlements in
which the AIM Funds were eligible to participate. This lawsuit was served on    
April 25, 2005.                                                                 

        AVO HOGAN AND JULIAN W. MEADOWS, ON BEHALF OF THEMSELVES AND ALL
OTHERS SIMILARLY SITUATED, V. BOB R. BAKER, FRANK S. BAYLEY, JAMES T. BUNCH,    
BRUCE L. CROCKETT, ALBERT R. DOWDEN, EDWARD K. DUNN, JR., JACK M. FIELDS, CARL  
FRISCHLING, ROBERT H. GRAHAM, GERALD J. LEWIS, PREMA MATHAI-DAVIS, LEWIS F.     
PENNOCK, RUTH H. QUIGLEY, LOUIS S. SKLAR, LARRY SOLL, PH.D, MARK H. WILLIAMSON, 
AIM INVESTMENTS, LTD., AIM ADVISORS, INC., AIM CAPITAL MANAGEMENT, INC., INVESCO
INSTITUTIONAL (N.A.), INC. AND JOHN DOES NO. 1 THROUGH 100, in the United States
District Court, Northern District of Texas (Civil Action No. 3:05-CV-73-P),     
filed on January 11, 2005. This claim alleges violations of Sections 36(a),     
36(b) and 47(b) of the Investment Company Act. The claim also alleges common law
breach of fiduciary duty and negligence. The plaintiffs in this case are        
seeking: compensatory and punitive damages; forfeiture of all commissions and   
fees paid by the class of plaintiffs; and costs and counsel fees.               

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FINANCIAL STATEMENTS

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                         

To the Board of Trustees and Shareholders of                                    
AIM Balanced 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 Balanced Fund (one of the funds
constituting AIM Funds Group hereafter referred to as the "Fund") at December   
31, 2004, the results of its operations for the year then ended, the changes in 
its net assets for each of the two years in the period then ended and the       
financial highlights for each of the five years in the period then ended, in    
conformity with accounting principles generally accepted in the United States of
America. These financial statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of the Fund's management;  
our responsibility is to express an opinion on these financial statements based 
on our audits. We conducted our audits of these financial statements in         
accordance with the standards of the Public Company Accounting Oversight Board  
(United States). Those standards require that we plan and perform the audit to  
obtain reasonable assurance about whether the financial statements are free of  
material misstatement. An audit includes examining, on a test basis, evidence   
supporting the amounts and disclosures in the financial statements, assessing   
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our    
audits, which included confirmation of securities at December 31, 2004 by       
correspondence with the custodian and brokers, provide a reasonable basis for   
our opinion.                                                                    

/S/ PRICEWATERHOUSECOOPERS LLP                                                  

February 18, 2005                                                               
Houston, Texas                                                                  

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FINANCIALS                                                                      

SCHEDULE OF INVESTMENTS                                                         

December 31, 2004                                                               

                                                                [Download Table]


                                                                     MARKET    
                                                  SHARES             VALUE     
-------------------------------------------------------------------------------
                                                                               
STOCKS & OTHER EQUITY INTERESTS-66.08%                                         

ADVERTISING-3.19%                                                              

Interpublic Group of Cos., Inc. (The)(a)(b)       1,650,000      $   22,110,000
-------------------------------------------------------------------------------
Omnicom Group Inc.(b)                               445,000          37,522,400
===============================================================================
                                                                     59,632,400
===============================================================================

AEROSPACE & DEFENSE-1.14%                                                      

Honeywell International Inc.                        605,000          21,423,050
===============================================================================

ALUMINUM-0.88%                                                                 

Alcoa Inc.                                          525,300          16,504,926
===============================================================================

APPAREL RETAIL-1.20%                                                           

Gap, Inc. (The)(b)                                1,063,700          22,465,344
===============================================================================

ASSET MANAGEMENT & CUSTODY BANKS-1.48%                                         

Bank of New York Co., Inc. (The)                    830,000          27,738,600
===============================================================================

BUILDING PRODUCTS-2.34%                                                        

American Standard Cos. Inc.(a)                      391,700          16,185,044
-------------------------------------------------------------------------------
Masco Corp.(b)                                      752,900          27,503,437
===============================================================================
                                                                     43,688,481
===============================================================================

COMMUNICATIONS EQUIPMENT-0.69%                                                 

Motorola, Inc.                                      750,000          12,900,000
===============================================================================

CONSUMER ELECTRONICS-2.12%                                                     

Koninklijke (Royal) Philips Electronics N.V.-                                  
  New York Shares (Netherlands)                     641,000          16,986,500
-------------------------------------------------------------------------------
Sony Corp.-ADR (Japan)                              581,000          22,635,760
===============================================================================
                                                                     39,622,260
===============================================================================

DATA PROCESSING & OUTSOURCED SERVICES-3.00%                                    

Ceridian Corp.(a)                                   975,100          17,824,828
-------------------------------------------------------------------------------
First Data Corp.                                    900,800          38,320,032
===============================================================================
                                                                     56,144,860
===============================================================================

DEPARTMENT STORES-0.87%                                                        

May Department Stores Co. (The)(b)                  556,300          16,355,220
===============================================================================

DIVERSIFIED CHEMICALS-0.53%                                                    

Dow Chemical Co. (The)                              201,000           9,951,510
===============================================================================

DIVERSIFIED COMMERCIAL SERVICES-1.74%                                          

Cendant Corp.                                     1,393,400          32,577,692
===============================================================================

ENVIRONMENTAL SERVICES-1.99%                                                   

Waste Management, Inc.                            1,244,100          37,248,354
===============================================================================

                                                                [Download Table]
                                                                     MARKET    
                                                  SHARES             VALUE     
-------------------------------------------------------------------------------


                                                                               

FOOD RETAIL-1.96%                                                              

Kroger Co. (The)(a)                               1,264,000      $   22,170,560
-------------------------------------------------------------------------------
Safeway Inc.(a)(b)                                  733,000          14,469,420
===============================================================================
                                                                     36,639,980
===============================================================================

GENERAL MERCHANDISE STORES-1.65%                                               

Target Corp.                                        594,500          30,872,385
===============================================================================

HEALTH CARE DISTRIBUTORS-3.80%                                                 

Cardinal Health, Inc.                               831,000          48,322,650
-------------------------------------------------------------------------------
McKesson Corp.                                      725,000          22,808,500
===============================================================================
                                                                     71,131,150
===============================================================================

HEALTH CARE EQUIPMENT-1.01%                                                    

Baxter International Inc.                           549,000          18,962,460
===============================================================================

HEALTH CARE FACILITIES-1.21%                                                   

HCA, Inc.                                           565,000          22,577,400
===============================================================================

HEALTH CARE SERVICES-0.36%                                                     

IMS Health Inc.                                     289,600           6,721,616
===============================================================================

INDUSTRIAL CONGLOMERATES-4.15%                                                 

General Electric Co.                                736,200          26,871,300
-------------------------------------------------------------------------------
Tyco International Ltd. (Bermuda)(b)              1,421,300          50,797,262
===============================================================================
                                                                     77,668,562
===============================================================================

INDUSTRIAL MACHINERY-1.49%                                                     

Illinois Tool Works Inc.(b)                         300,000          27,804,000
===============================================================================

INSURANCE BROKERS-0.60%                                                        

Aon Corp.(b)                                        474,600          11,323,956
===============================================================================

INTEGRATED OIL & GAS-0.11%                                                     

Shell Frontier Oil & Gas Inc.-Series B, 2.91%                                  
  Floating Rate Pfd.(c)                                  20           2,000,000
===============================================================================

INVESTMENT BANKING & BROKERAGE-2.77%                                           

Merrill Lynch & Co., Inc.(b)                        411,500          24,595,355
-------------------------------------------------------------------------------
Morgan Stanley                                      489,000          27,149,280
===============================================================================
                                                                     51,744,635
===============================================================================

MANAGED HEALTH CARE-1.95%                                                      

WellPoint Inc.(a)(b)                                316,900          36,443,500
===============================================================================

MOVIES & ENTERTAINMENT-1.69%                                                   

Walt Disney Co. (The)                             1,137,000          31,608,600
===============================================================================

MULTI-LINE INSURANCE-1.05%                                                     

Hartford Financial Services Group, Inc.                                        
  (The)(b)                                          282,700          19,593,937
===============================================================================

OIL & GAS DRILLING-1.54%                                                       

Transocean Inc. (Cayman Islands)(a)                 678,500          28,761,615
===============================================================================

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                                                                     MARKET    
                                                  SHARES             VALUE     
-------------------------------------------------------------------------------
                                                                               

OIL & GAS EQUIPMENT & SERVICES-3.16%                                           

Halliburton Co.(b)                                  920,000      $   36,100,800
-------------------------------------------------------------------------------
Schlumberger Ltd. (Netherlands)                     343,000          22,963,850
===============================================================================
                                                                     59,064,650
===============================================================================

OTHER DIVERSIFIED FINANCIAL SERVICES-4.29%                                     

ABN AMRO XVIII Custodial Receipts- Series                                      
  MM18, 2.79% Floating Rate Pfd. (Acquired                                     
  09/10/04-09/13/04; Cost                                                      
  $1,399,980)(d)(e)(f)                                   14           1,400,000
-------------------------------------------------------------------------------
Citigroup Inc.                                      741,933          35,746,332
-------------------------------------------------------------------------------
JPMorgan Chase & Co.                              1,002,200          39,095,822
-------------------------------------------------------------------------------
Zurich RegCaPS Funding Trust III, 2.75%                                        
  Floating Rate Pfd. (Acquired 06/03/04-                                       
  09/28/04; Cost $3,952,517)(c)(d)(f)                 4,050           3,997,350
===============================================================================
                                                                     80,239,504
===============================================================================

PACKAGED FOODS & MEATS-1.10%                                                   

Kraft Foods Inc.-Class A(b)                         578,600          20,603,946
===============================================================================

PHARMACEUTICALS-4.99%                                                          

Pfizer Inc.                                       1,019,600          27,417,044
-------------------------------------------------------------------------------
Sanofi-Aventis (France)(g)                          530,640          42,339,591
-------------------------------------------------------------------------------
Wyeth                                               552,600          23,535,234
===============================================================================
                                                                     93,291,869
===============================================================================

PROPERTY & CASUALTY INSURANCE-1.54%                                            

ACE Ltd. (Cayman Islands)                           676,000          28,899,000
===============================================================================

SYSTEMS SOFTWARE-2.18%                                                         

Computer Associates International, Inc.(b)        1,311,000          40,719,660
===============================================================================

THRIFTS & MORTGAGE FINANCE-2.31%                                               

Fannie Mae(b)                                       531,600          37,855,236
-------------------------------------------------------------------------------
Fannie Mae-Series J, 4.72% Pfd.(h)                   52,000           2,626,000
-------------------------------------------------------------------------------
Fannie Mae-Series K, 3.00% Pfd.(h)                   55,000           2,782,659
===============================================================================
                                                                     43,263,895
===============================================================================
    Total Stocks & Other Equity                                                
      Interests-(Cost $1,063,952,155)                            $1,236,189,017
===============================================================================


                                                PRINCIPAL                      
                                                  AMOUNT                       
                                                                               

BONDS & NOTES-16.18%                                                           

ADVERTISING-0.02%                                                              

Interpublic Group of Cos., Inc. (The), Sr.                                     
  Unsec. Notes, 7.88%, 10/15/05(h)             $    393,000             405,454
===============================================================================

AEROSPACE & DEFENSE-0.02%                                                      

Lockheed Martin Corp.-Series A, Medium Term                                    
  Notes, 8.66%, 11/30/06(h)                         300,000             328,188
===============================================================================

                                                                [Download Table]
-------------------------------------------------------------------------------

                                                PRINCIPAL            MARKET    
                                                  AMOUNT             VALUE     
                                                                               

AUTO PARTS & EQUIPMENT-0.09%                                                   

Lear Corp.-Series B, Sr. Unsec. Gtd Notes,                                     
  7.96%, 05/15/05(h)                           $  1,560,000      $    1,591,933
===============================================================================

AUTOMOBILE MANUFACTURERS-0.13%                                                 

DaimlerChrysler N.A. Holding Corp., Unsec.                                     
  Gtd. Global Notes, 7.40%, 01/20/05(h)           1,990,000           1,994,438
-------------------------------------------------------------------------------
General Motors Corp., Unsec. Global Notes,                                     
  6.25%, 05/01/05(h)                                450,000             454,252
===============================================================================
                                                                      2,448,690
===============================================================================

BROADCASTING & CABLE TV-0.90%                                                  

Continental Cablevision, Inc., Sr. Unsec.                                      
  Deb.,                                                                        
  8.88%, 09/15/05(h)                              5,200,000           5,397,080
-------------------------------------------------------------------------------
  9.50%, 08/01/13(h)                              1,710,000           1,823,629
-------------------------------------------------------------------------------
Cox Communications, Inc., Unsec. Notes,                                        
  6.88%, 06/15/05(h)                                600,000             610,200
-------------------------------------------------------------------------------
Cox Radio, Inc., Sr. Unsec. Notes, 6.63%,                                      
  02/15/06(h)                                       750,000             773,212
-------------------------------------------------------------------------------
Lenfest Communications, Inc., Sr. Unsec.                                       
  Notes,                                                                       
  8.38%, 11/01/05(h)                              1,000,000           1,045,750
-------------------------------------------------------------------------------
TCI Communications, Inc.,                                                      
  Sr. Notes, 7.25%, 08/01/05(h)                   1,175,000           1,203,165
-------------------------------------------------------------------------------
  Sr. Unsec. Notes, 8.00%, 08/01/05(h)              575,000             591,209
-------------------------------------------------------------------------------
Time Warner Cos., Inc.,                                                        
  Sr. Unsec. Gtd. Deb., 7.57%, 02/01/24(h)          250,000             294,082
-------------------------------------------------------------------------------
  Unsec. Deb., 9.15%, 02/01/23(h)                 2,150,000           2,874,485
-------------------------------------------------------------------------------
  Unsec. Notes, 7.75%, 06/15/05(h)                2,232,000           2,277,778
===============================================================================
                                                                     16,890,590
===============================================================================

CONSUMER FINANCE-3.45%                                                         

Associates Corp. of North America, Sr. Global                                  
  Deb., 6.95%, 11/01/18(h)                        1,525,000           1,768,878
-------------------------------------------------------------------------------
Capital One Bank, Sr. Global Notes, 8.25%,                                     
  06/15/05(h)                                     3,250,000           3,322,085
-------------------------------------------------------------------------------
Capital One Capital I, Sub. Floating Rate                                      
  Bonds, 3.71%, 02/01/27 (Acquired 09/16/04;                                   
  Cost $4,383,420)(c)(d)(f)(h)                    4,300,000           4,371,681
-------------------------------------------------------------------------------
Capital One Financial Corp.,                                                   
  Sr. Unsec. Notes, 7.25%, 05/01/06(h)            1,820,000           1,906,887
-------------------------------------------------------------------------------
  Unsec. Notes, 7.13%, 08/01/08(h)                1,000,000           1,095,310
-------------------------------------------------------------------------------
Ford Motor Credit Co., Global Notes, 7.60%,                                    
  08/01/05(h)                                     6,750,000           6,903,832
-------------------------------------------------------------------------------
  Notes, 6.75%, 05/15/05(h)                       2,425,000           2,455,409
-------------------------------------------------------------------------------
  Unsec. Floating Rate Global Notes,                                           
  2.31%, 04/28/05(c)(h)                           3,261,000           3,259,859
-------------------------------------------------------------------------------
  Unsec. Global Notes,                                                         
    6.50%, 01/25/07(h)                            1,890,000           1,966,261
-------------------------------------------------------------------------------
    6.88%, 02/01/06(h)                            6,690,000           6,898,260
-------------------------------------------------------------------------------
    7.50%, 03/15/05(h)                            2,690,000           2,714,129
-------------------------------------------------------------------------------
  Unsec. Notes, 7.75%, 03/15/05(h)                2,205,000           2,225,352
-------------------------------------------------------------------------------

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                                                PRINCIPAL            MARKET    
                                                  AMOUNT             VALUE     
-------------------------------------------------------------------------------
                                                                               
CONSUMER FINANCE-(CONTINUED)                                                   

General Motors Acceptance Corp., Floating                                      
  Rate Medium Term Notes,                                                      
    4.23%, 05/19/05(c)(h)                      $  6,250,000      $    6,272,125
-------------------------------------------------------------------------------
    4.44%, 03/04/05(c)(h)                         7,100,000(i)        7,115,265
-------------------------------------------------------------------------------
  Global Notes,                                                                
    4.50%, 07/15/06(h)                            2,000,000           2,004,320
-------------------------------------------------------------------------------
    7.50%, 07/15/05(h)                              400,000             408,488
-------------------------------------------------------------------------------
  Medium Term Notes,                                                           
    4.15%, 02/07/05(h)                            1,650,000           1,651,864
-------------------------------------------------------------------------------
    5.25%, 05/16/05(h)                            4,600,000           4,632,200
-------------------------------------------------------------------------------
  Unsec. Unsub. Global Notes,                                                  
  6.75%, 01/15/06(h)                              3,500,000(i)        3,592,330
===============================================================================
                                                                     64,564,535
===============================================================================

DIVERSIFIED BANKS-2.13%                                                        

AB Spintab (Sweden), Bonds, 7.50% (Acquired                                    
  02/12/04; Cost $3,682,866)(d)(h)(j)             3,300,000           3,505,263
-------------------------------------------------------------------------------
American Savings Bank, Notes, 6.63%, 02/15/06                                  
  (Acquired 03/05/03; Cost $554,525)(d)(f)(h)       500,000             514,425
-------------------------------------------------------------------------------
Banco Nacional de Comercio Exterior S.N.C.                                     
  (Mexico), Notes, 3.88%, 01/21/09 (Acquired                                   
  02/25/04; Cost $983,750)(d)(f)(h)               1,000,000             963,810
-------------------------------------------------------------------------------
BankBoston Capital Trust IV, Gtd. Floating                                     
  Rate Notes, 3.04%, 06/08/28(c)(h)               3,215,000           3,104,436
-------------------------------------------------------------------------------
Barclays Bank PLC (United Kingdom), Bonds,                                     
  8.55% (Acquired 11/05/03; Cost                                               
  $652,239)(d)(h)(j)                                530,000             642,296
-------------------------------------------------------------------------------
Centura Capital Trust I, Gtd. Notes, 8.85%,                                    
  06/01/27 (Acquired 05/22/03; Cost                                            
  $1,771,602)(d)(f)(h)                            1,400,000           1,652,028
-------------------------------------------------------------------------------
Chohung Bank (South Korea), Unsec. Sub.                                        
  Second Tier Notes, 11.50%, 04/01/10                                          
  (Acquired 07/01/04; Cost                                                     
  $3,407,008)(d)(f)(h)                            3,200,000           3,260,672
-------------------------------------------------------------------------------
Corporacion Andina de Fomento (Venezuela),                                     
  Unsec. Global Notes, 6.88%, 03/15/12(h)           900,000           1,004,382
-------------------------------------------------------------------------------
  Unsec. Yankee Notes, 8.88%, 06/01/05(h)         1,835,000           1,875,150
-------------------------------------------------------------------------------
Daiwa P.B. Ltd. (Cayman Islands), Gtd. Sub.                                    
  Floating Rate Medium Term Euro Notes,                                        
  3.09%(j)(k)                                     1,200,000           1,188,000
-------------------------------------------------------------------------------
Danske Bank A/S (Denmark), First Tier Bonds,                                   
  5.91% (Acquired 06/07/04; Cost                                               
  $1,245,000)(d)(h)(j)                            1,245,000           1,320,186
-------------------------------------------------------------------------------
HSBC Capital Funding L.P. (United Kingdom),                                    
  Gtd. Bonds, 4.61% (Acquired 11/05/03; Cost                                   
  $373,008)(d)(h)(j)                                400,000             379,508
-------------------------------------------------------------------------------
Lloyds Bank PLC (United Kingdom)-Series 1,                                     
  Unsec. Sub. Euro Dollar Notes,                                               
  2.94%(h)(j)(k)                                  3,870,000           3,451,537
-------------------------------------------------------------------------------
National Bank of Canada (Canada), Floating                                     
  Rate Euro Deb., 2.13%, 08/29/87(h)(k)           1,500,000           1,234,780
-------------------------------------------------------------------------------
National Westminster Bank PLC (United                                          
  Kingdom)-Series B, Unsec. Sub. Floating                                      
  Rate Euro Notes, 2.13%(h)(j)(k)                 1,000,000             882,831
-------------------------------------------------------------------------------
NBD Bank N.A. Michigan, Unsec. Sub. Deb.,                                      
  8.25%, 11/01/24(h)                              1,715,000           2,238,298
-------------------------------------------------------------------------------

                                                                [Download Table]
-------------------------------------------------------------------------------

                                                PRINCIPAL            MARKET    
                                                  AMOUNT             VALUE     
                                                                               
DIVERSIFIED BANKS-(CONTINUED)                                                  

RBS Capital Trust I, Bonds, 4.71%(h)(j)        $    400,000      $      382,948
-------------------------------------------------------------------------------
Wells Fargo & Co., Sr. Unsec. Global Notes,                                    
  3.75%, 10/15/07(h)                              6,750,000           6,781,455
-------------------------------------------------------------------------------
Wells Fargo Bank, N.A., Unsec. Sub. Global                                     
  Notes, 7.80%, 06/15/10(h)                       2,100,000           2,148,300
-------------------------------------------------------------------------------
Woori Bank (South Korea), Unsec. Sub. Second                                   
  Tier Notes, 11.75%, 03/01/10 (Acquired                                       
  07/01/04; Cost $3,388,480)(d)(f)(h)             3,200,000           3,283,840
===============================================================================
                                                                     39,814,145
===============================================================================

DIVERSIFIED CAPITAL MARKETS-0.06%                                              

UBS Preferred Funding Trust I, Gtd. Global                                     
  Bonds, 8.62%(h)(j)                              1,000,000           1,198,690
===============================================================================

ELECTRIC UTILITIES-0.57%                                                       

AmerenEnergy Generating Co.-Series C, Sr.                                      
  Unsec. Global Notes, 7.75%, 11/01/05(h)           350,000             363,590
-------------------------------------------------------------------------------
Consolidated Edison Co. of New York- Series                                    
  96A, Unsec. Deb., 7.75%, 06/01/26(h)(l)           900,000             979,380
-------------------------------------------------------------------------------
Hydro-Quebec-Series B (Canada), Gtd. Medium                                    
  Term Notes, 8.62%, 12/15/11(h)                  2,150,000           2,669,633
-------------------------------------------------------------------------------
MidAmerican Energy Holdings Co., Sr. Unsec.                                    
  Notes, 7.23%, 09/15/05(h)                       4,100,000           4,207,994
-------------------------------------------------------------------------------
Pacific Gas & Electric Co., First Mortgage                                     
  Floating Rate Notes, 2.72%, 04/03/06(c)(h)        500,000             500,447
-------------------------------------------------------------------------------
Yorkshire Power Finance (Cayman Islands)-                                      
  Series B, Sr. Unsec. Gtd. Unsub. Global                                      
  Notes, 6.50%, 02/25/08(h)                       1,875,000           1,980,037
===============================================================================
                                                                     10,701,081
===============================================================================

FOOD RETAIL-0.04%                                                              

Safeway Inc., Sr. Unsec. Notes, 2.50%,                                         
  11/01/05(h)                                       775,000             769,908
===============================================================================

GAS UTILITIES-0.35%                                                            

CenterPoint Energy Resources Corp., Unsec.                                     
  Deb., 6.50%, 02/01/08(h)                        1,990,000           2,132,603
-------------------------------------------------------------------------------
Columbia Energy Group-Series C, Notes, 6.80%,                                  
  11/28/05(h)                                     3,540,000           3,645,917
-------------------------------------------------------------------------------
NiSource Capital Markets, Inc., Medium Term                                    
  Notes, 7.68%, 04/15/05(h)                         745,000             754,536
===============================================================================
                                                                      6,533,056
===============================================================================

HOMEBUILDING-0.33%                                                             

D.R. Horton, Inc., Sr. Unsec. Notes, 7.88%,                                    
  08/15/11(h)                                       800,000             921,000
-------------------------------------------------------------------------------
Lennar Corp.-Series B, Sr. Unsec. Gtd. Global                                  
  Notes, 9.95%, 05/01/10(h)                       3,855,000           4,133,794
-------------------------------------------------------------------------------
Pulte Homes, Inc., Unsec. Gtd. Notes, 7.30%,                                   
  10/24/05(h)                                       520,000             535,038
-------------------------------------------------------------------------------
Ryland Group, Inc. (The), Sr. Unsec. Unsub.                                    
  Notes, 9.75%, 09/01/10(h)                         500,000             544,975
===============================================================================
                                                                      6,134,807
===============================================================================

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                                                PRINCIPAL            MARKET    
                                                  AMOUNT             VALUE     
-------------------------------------------------------------------------------
                                                                               

INDUSTRIAL CONGLOMERATES-0.21%                                                 

Tyco International Group S.A. (Luxembourg),                                    
  Unsec. Unsub. Gtd. Yankee Notes, 6.38%,                                      
  06/15/05(h)                                  $  3,050,000      $    3,095,842
-------------------------------------------------------------------------------
URC Holdings Corp., Sr. Notes, 7.88%,                                          
  06/30/06 (Acquired 10/08/03; Cost                                            
  $849,203)(d)(f)(h)                                750,000             798,548
===============================================================================
                                                                      3,894,390
===============================================================================

INTEGRATED OIL & GAS-0.37%                                                     

Amerada Hess Corp., Unsec. Notes, 7.13%,                                       
  03/15/33(h)                                     1,800,000           1,981,458
-------------------------------------------------------------------------------
ConocoPhillips, Unsec. Deb., 7.13%,                                            
  03/15/28(h)                                     1,000,000           1,074,580
-------------------------------------------------------------------------------
Husky Oil Ltd. (Canada), Yankee Bonds, 8.90%,                                  
  08/15/28(h)                                     2,009,000           2,290,461
-------------------------------------------------------------------------------
Repsol International Finance B.V.                                              
  (Netherlands), Unsec. Gtd. Global Notes,                                     
  7.45%, 07/15/05(h)                              1,590,000           1,631,054
===============================================================================
                                                                      6,977,553
===============================================================================

INTEGRATED TELECOMMUNICATION SERVICES-1.30%                                    

Deutsche Telekom International Finance B.V.                                    
  (Netherlands), Unsec. Unsub. Gtd. Global                                     
  Bonds, 8.25%, 06/15/05(h)                       4,550,000           4,656,743
-------------------------------------------------------------------------------
France Telecom S.A. (France), Sr. Unsec.                                       
  Global Notes, 8.50%, 03/01/31(h)                  930,000           1,262,001
-------------------------------------------------------------------------------
SBC Communications Inc., Notes, 4.21%,                                         
  06/05/05 (Acquired 12/10/04; Cost                                            
  $1,332,977)(d)(f)(h)                            1,325,000           1,332,757
-------------------------------------------------------------------------------
Southwestern Bell Telephone Co.- Series B,                                     
  Medium Term Notes, 6.25%, 07/07/05(h)             350,000             355,681
-------------------------------------------------------------------------------
Sprint Capital Corp.,                                                          
  Sr. Unsec. Gtd. Global Notes,                                                
  7.13%, 01/30/06(h)                              2,210,000           2,298,776
-------------------------------------------------------------------------------
  Unsec. Gtd. Global Notes, 7.90%,                                             
  03/15/05(h)                                     3,730,000           3,769,277
-------------------------------------------------------------------------------
Sprint Corp., Deb., 9.25%, 04/15/22(h)            1,000,000           1,332,550
-------------------------------------------------------------------------------
TELUS Corp. (Canada), Yankee Notes,                                            
  7.50%, 06/01/07(h)                                635,000             690,074
-------------------------------------------------------------------------------
  8.00%, 06/01/11(h)                                500,000             592,440
-------------------------------------------------------------------------------
Verizon California Inc.-Series F, Unsec.                                       
  Deb., 6.75%, 05/15/27(h)                        1,000,000           1,041,070
-------------------------------------------------------------------------------
Verizon Communications Inc., Unsec. Deb.,                                      
  6.36%, 04/15/06(h)                              2,570,000           2,667,557
-------------------------------------------------------------------------------
  8.75%, 11/01/21(h)                              1,350,000           1,705,280
-------------------------------------------------------------------------------
Verizon Florida Inc.-Series F, Sr. Unsec.                                      
  Deb., 6.13%, 01/15/13(h)                        1,635,000           1,742,305
-------------------------------------------------------------------------------
Verizon Virginia Inc.-Series A, Unsec. Global                                  
  Deb., 4.63%, 03/15/13(h)                          950,000             929,547
===============================================================================
                                                                     24,376,058
===============================================================================

                                                                [Download Table]
-------------------------------------------------------------------------------

                                                PRINCIPAL            MARKET    
                                                  AMOUNT             VALUE     
                                                                               

INVESTMENT BANKING & BROKERAGE-0.28%                                           

Lehman Brothers Inc.,                                                          
  Sr. Sub. Deb., 11.63%, 05/15/05(h)           $  2,585,000      $    2,659,370
-------------------------------------------------------------------------------
  Sr. Unsec. Sub. Notes, 7.63%, 06/01/06(h)       1,000,000           1,060,010
-------------------------------------------------------------------------------
Merrill Lynch & Co., Inc.-Series B, Medium                                     
  Term Notes, 4.54%, 03/08/05(h)                  1,415,000           1,420,773
===============================================================================
                                                                      5,140,153
===============================================================================

LIFE & HEALTH INSURANCE-0.29%                                                  

Prudential Holdings, LLC-Series B, Bonds,                                      
  7.25%, 12/18/23 (Acquired 01/22/04-                                          
  01/29/04; Cost $4,717,650)(d)(h)(l)             4,000,000           4,771,320
-------------------------------------------------------------------------------
ReliaStar Financial Corp., Unsec. Notes,                                       
  8.00%, 10/30/06(h)                                600,000             647,736
===============================================================================
                                                                      5,419,056
===============================================================================

MOVIES & ENTERTAINMENT-0.12%                                                   

Time Warner Inc., Sr. Unsec. Gtd. Global                                       
  Notes, 5.63%, 05/01/05(h)                       2,220,000           2,239,736
===============================================================================

MULTI-UTILITIES & UNREGULATED POWER-0.09%                                      

Dominion Resources, Inc.-Series B, Sr. Unsec.                                  
  Unsub. Global Notes, 7.63%, 07/15/05(h)         1,710,000           1,752,904
===============================================================================

MUNICIPALITIES-0.58%                                                           

Chicago (City of), Illinois; O'Hare                                            
  International Airport; Refunding Taxable                                     
  General Airport Third Lien Series 2004 E                                     
  RB, 3.88%, 01/01/08(h)(l)                       2,400,000           2,404,992
-------------------------------------------------------------------------------
Industry (City of), California Urban                                           
  Development Agency (Project 3); Taxable                                      
  Allocation Series 2003 B, 6.10%,                                             
  05/01/24(h)(l)                                  1,910,000           1,967,300
-------------------------------------------------------------------------------
Phoenix (City of), Arizona Civic Improvement                                   
  Corp.; Taxable Rental Car Facility Series                                    
  2004 RB, 3.69%, 07/01/07(h)(l)                  1,000,000           1,001,650
-------------------------------------------------------------------------------
  4.21%, 07/01/08(h)(l)                           1,185,000           1,193,888
-------------------------------------------------------------------------------
Sacramento (County of), California; Taxable                                    
  Pension Funding Series 2004 C-1 RB, 0.27%,                                   
  07/10/30(h)(l)(m)                               4,425,000           4,190,475
===============================================================================
                                                                     10,758,305
===============================================================================

OIL & GAS EXPLORATION & PRODUCTION-0.21%                                       

Pemex Project Funding Master Trust, Unsec.                                     
  Gtd. Unsub. Global Notes, 7.38%,                                             
  12/15/14(h)                                     3,535,000           3,922,083
===============================================================================

OTHER DIVERSIFIED FINANCIAL SERVICES-1.18%                                     

General Electric Capital Corp.-Series A,                                       
  Medium Term Global Notes, 2.85%,                                             
  01/30/06(h)                                       305,000             304,256
-------------------------------------------------------------------------------

  FS-5

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                                                PRINCIPAL            MARKET    
                                                  AMOUNT             VALUE     
-------------------------------------------------------------------------------
                                                                               
OTHER DIVERSIFIED FINANCIAL SERVICES-(CONTINUED)                               

Heller Financial, Inc., Sr. Unsec. Global                                      
  Notes, 8.00%, 06/15/05(h)                    $  2,425,000      $    2,481,260
-------------------------------------------------------------------------------
ING Capital Funding Trust III, Gtd. Global                                     
  Bonds, 8.44%(h)(j)                                900,000           1,073,340
-------------------------------------------------------------------------------
Mizuho JGB Investment LLC-Series A, Bonds,                                     
  9.87% (Acquired 06/16/04; Cost                                               
  $1,357,500)(d)(h)(j)                            1,200,000           1,390,692
-------------------------------------------------------------------------------
Pemex Finance Ltd. (Cayman Islands),                                           
  Sr. Unsec. Global Notes, 8.02%, 05/15/07(h)     1,833,333           1,940,547
-------------------------------------------------------------------------------
  Series 1999-2, Class A1, Global Bonds,                                       
  9.69%,(h) 08/15/09                              2,755,000           3,088,355
-------------------------------------------------------------------------------
Pemex Project Funding Master Trust, Unsec.                                     
  Gtd. Unsub. Global Notes, 8.63%,                                             
  02/01/22(h)                                     2,475,000           2,877,683
-------------------------------------------------------------------------------
PLC Trust 2003-1, Sec. Notes, 2.71%, 03/31/06                                  
  (Acquired 03/23/04; Cost                                                     
  $1,259,552)(d)(f)(h)                            1,205,877           1,201,151
-------------------------------------------------------------------------------
Premium Asset 2004-04 Trust, Sr. Notes,                                        
  4.13%, 03/12/09 (Acquired 03/04/04; Cost                                     
  $3,572,605)(d)(f)(h)                            3,575,000           3,499,174
-------------------------------------------------------------------------------
Regional Diversified Funding (Cayman                                           
  Islands), Sr. Notes, 9.25%, 03/15/30                                         
  (Acquired 09/22/04; Cost                                                     
  $3,221,976)(d)(f)(h)                            2,723,333           3,244,470
-------------------------------------------------------------------------------
UFJ Finance Aruba AEC (Aruba), Gtd. Sub.                                       
  Second Tier Euro Bonds, 8.75%(h)(j)               945,000           1,055,979
===============================================================================
                                                                     22,156,907
===============================================================================

PACKAGED FOODS & MEATS-0.04%                                                   

Nabisco, Inc., Notes, 6.38%, 02/01/05(h)            750,000             754,928
===============================================================================

PROPERTY & CASUALTY INSURANCE-0.45%                                            

FGIC Corp., Sr. Unsec. Unsub. Notes, 6.00%,                                    
  01/15/34 (Acquired 12/07/04; Cost                                            
  $1,828,278)(d)(f)(h)                            1,800,000           1,862,856
-------------------------------------------------------------------------------
First American Capital Trust I, Gtd. Notes,                                    
  8.50%, 04/15/12(h)                              4,295,000           4,879,592
-------------------------------------------------------------------------------
Oil Insurance Ltd. (Bermuda), Unsec. Sub.                                      
  Deb., 5.15%, 08/15/33 (Acquired 03/23/04;                                    
  Cost $908,164)(d)(f)(h)                           865,000             872,949
-------------------------------------------------------------------------------
Travelers Property Casualty Corp., Sr. Unsec.                                  
  Notes, 6.75%, 11/15/06(h)                         700,000             739,459
===============================================================================
                                                                      8,354,856
===============================================================================

REAL ESTATE-0.20%                                                              

CarrAmerica Realty Corp., Sr. Unsec. Gtd.                                      
  Notes, 6.63%, 03/01/05(h)                         420,000             422,453
-------------------------------------------------------------------------------
EOP Operating L.P., Sr. Unsec. Notes, 6.63%,                                   
  02/15/05(h)                                       430,000             431,883
-------------------------------------------------------------------------------
Health Care Property Investors, Inc., Sr.                                      
  Unsec. Notes, 6.88%, 06/08/05(h)                  380,000             386,122
-------------------------------------------------------------------------------
HRPT Properties Trust, Sr. Unsec. Notes,                                       
  6.70%, 02/23/05(h)                              1,435,000           1,442,720
-------------------------------------------------------------------------------

                                                                [Download Table]
-------------------------------------------------------------------------------

                                                PRINCIPAL            MARKET    
                                                  AMOUNT             VALUE     
                                                                               
REAL ESTATE-(CONTINUED)                                                        

Spieker Properties, Inc., Medium Term Notes,                                   
  8.00%, 07/19/05(h)                           $    600,000      $      615,390
-------------------------------------------------------------------------------
  Unsec. Unsub. Notes, 6.88%, 02/01/05(h)           400,000             401,224
===============================================================================
                                                                      3,699,792
===============================================================================

REAL ESTATE MANAGEMENT & DEVELOPMENT-0.04%                                     

Southern Investments UK PLC (United Kingdom),                                  
  Sr. Unsec. Unsub. Yankee Notes, 6.80%,                                       
  12/01/06(h)                                       735,000             772,404
===============================================================================

REGIONAL BANKS-1.02%                                                           

Cullen/Frost Capital Trust I, Unsec. Sub.                                      
  Floating Rate Notes, 3.95%, 03/01/34(c)(h)      2,425,000           2,513,852
-------------------------------------------------------------------------------
Greater Bay Bancorp-Series B, Sr. Notes,                                       
  5.25%, 03/31/08(h)                              3,000,000           3,021,720
-------------------------------------------------------------------------------
PNC Capital Trust C, Gtd. Floating Rate                                        
  Notes, 2.97%, 06/01/28(c)(h)                    1,000,000             949,720
-------------------------------------------------------------------------------
Popular North America, Inc., Gtd. Notes,                                       
  4.70%, 06/30/09(h)                              3,125,000           3,188,250
-------------------------------------------------------------------------------
Santander Financial Issuances (Cayman                                          
  Islands), Sec. Sub. Floating Rate Euro                                       
  Notes, 2.87%(h)(j)(k)                           8,000,000           7,953,176
-------------------------------------------------------------------------------
TCF Financial Corp., Sub. Notes, 5.00%,                                        
  06/15/14(h)                                     1,400,000           1,424,444
===============================================================================
                                                                     19,051,162
===============================================================================

RESTAURANTS-0.05%                                                              

McDonald's Corp., Unsec. Deb., 7.05%,                                          
  11/15/25(h)                                       850,000             901,587
===============================================================================

SOVEREIGN DEBT-0.86%                                                           

Japan Bank for International Cooperation                                       
  (Japan), Unsec. Gtd. Euro Bonds, 6.50%,                                      
  10/06/05(h)                                     4,600,000           4,719,572
-------------------------------------------------------------------------------
New Brunswick (Province of) (Canada), Sec.                                     
  Yankee Deb., 6.75%, 08/15/13(h)                   830,000             968,278
-------------------------------------------------------------------------------
Quebec (Province of) (Canada), Sr. Unsec.                                      
  Unsub. Global Deb., 5.75%, 02/15/09(h)          1,400,000           1,502,438
-------------------------------------------------------------------------------
Russian Federation (Russia), Unsec. Unsub.                                     
  Bonds,                                                                       
    7.50%, 03/31/30 (Acquired 05/18/04; Cost                                   
    $1,260,875)(d)(h)(n)                          1,400,000           1,446,760
-------------------------------------------------------------------------------
    8.75%, 07/24/05 (Acquired 09/10/04-                                        
    12/03/04; Cost $1,271,188)(d)(h)              1,225,000           1,259,300
-------------------------------------------------------------------------------
  Unsec. Unsub. Euro Bonds-REGS,                                               
    8.75%, 07/24/05 (Acquired 05/14/04; Cost                                   
    $2,218,650)(d)(h)                             2,100,000           2,160,690
-------------------------------------------------------------------------------
    10.00%, 06/26/07 (Acquired 05/14/04-                                       
    05/18/04; Cost $1,892,475)(d)(h)              1,680,000           1,902,768
-------------------------------------------------------------------------------
United Mexican States (Mexico)-Series A,                                       
  Medium Term Global Notes,                                                    
  6.63%, 03/03/15(h)                                490,000             525,819
-------------------------------------------------------------------------------
  7.50%, 04/08/33(h)                              1,570,000           1,689,556
===============================================================================
                                                                     16,175,181
===============================================================================

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                                                PRINCIPAL            MARKET    
                                                  AMOUNT             VALUE     
-------------------------------------------------------------------------------
                                                                               

THRIFTS & MORTGAGE FINANCE-0.16%                                               

Greenpoint Capital Trust I, Gtd. Sub. Notes,                                   
  9.10%, 06/01/27(h)                           $    950,000      $    1,123,917
-------------------------------------------------------------------------------
Washington Mutual Finance Corp., Sr. Unsec.                                    
  Notes, 8.25%, 06/15/05(h)                       1,775,000           1,817,920
===============================================================================
                                                                      2,941,837
===============================================================================

TOBACCO-0.17%                                                                  

Altria Group, Inc.,                                                            
  Sr. Unsec. Notes, 7.00%, 11/04/13(h)              450,000             486,891
-------------------------------------------------------------------------------
  Unsec. Global Notes, 7.00%, 07/15/05(h)         2,650,000           2,702,444
===============================================================================
                                                                      3,189,335
===============================================================================

TRUCKING-0.16%                                                                 

Roadway Corp., Sr. Unsec. Gtd. Global Notes,                                   
  8.25%, 12/01/08(h)                              2,655,000           2,956,210
===============================================================================

WIRELESS TELECOMMUNICATION SERVICES-0.31%                                      

AT&T Wireless Services Inc., Sr. Unsec.                                        
  Unsub. Global Notes, 6.88%, 04/18/05(h)         1,100,000           1,112,188
-------------------------------------------------------------------------------
TeleCorp PCS, Inc., Sr. Unsec. Gtd. Sub.                                       
  Global Notes, 10.63%, 07/15/10(h)               4,355,000           4,764,370
===============================================================================
                                                                      5,876,558
===============================================================================
    Total Bonds & Notes (Cost $301,177,791)                         302,692,072
===============================================================================

U.S. MORTGAGE-BACKED SECURITIES-9.36%                                          

FEDERAL HOME LOAN MORTGAGE CORP.                                               
  (FHLMC)-1.37%                                                                

Pass Through Ctfs.,                                                            
  5.50%, 05/01/13 to 12/01/33(h)                  2,819,286           2,909,098
-------------------------------------------------------------------------------
  7.00%, 06/01/15 to 06/01/32(h)                  7,379,632           4,643,345
-------------------------------------------------------------------------------
  6.50%, 05/01/16 to 03/01/33(h)                  3,770,547           3,960,176
-------------------------------------------------------------------------------
  6.00%, 04/01/17 to 01/01/34(h)                  8,861,576           9,246,465
-------------------------------------------------------------------------------
  8.00%, 01/01/27(h)                              1,407,647           1,532,643
-------------------------------------------------------------------------------
  7.50%, 12/01/30 to 03/01/32(h)                    806,751             864,968
-------------------------------------------------------------------------------
Pass Through Ctfs., TBA,                                                       
  5.00%, 01/01/15(o)                              2,420,000           2,458,388
===============================================================================
                                                                     25,615,083
===============================================================================

FEDERAL NATIONAL MORTGAGE ASSOCIATION                                          
  (FNMA)-6.99%                                                                 

Pass Through Ctfs.,                                                            
  8.50%, 03/01/10 to 10/01/28(h)                  2,244,012           2,471,769
-------------------------------------------------------------------------------
  6.50%, 04/01/14 to 09/01/34(h)                 19,928,660          20,962,643
-------------------------------------------------------------------------------
  7.50%, 11/01/15 to 05/01/32(h)                  1,621,130           1,733,128
-------------------------------------------------------------------------------
  7.00%, 12/01/15 to 09/01/32(h)                  5,469,257           5,800,455
-------------------------------------------------------------------------------
  6.00%, 01/01/17 to 03/01/22(h)                    520,993             542,238
-------------------------------------------------------------------------------
  5.00%, 11/01/17 to 11/01/18(h)                  2,953,720           3,004,906
-------------------------------------------------------------------------------
  8.00%, 08/01/21 to 10/01/30(h)                  1,286,605           1,400,645
-------------------------------------------------------------------------------
  5.50%, 08/01/33 to 09/01/33(h)                  3,395,457           3,451,121
-------------------------------------------------------------------------------

                                                                [Download Table]
-------------------------------------------------------------------------------

                                                PRINCIPAL            MARKET    
                                                  AMOUNT             VALUE     
                                                                               
FEDERAL NATIONAL MORTGAGE ASSOCIATION-(CONTINUED)                              

Pass Through Ctfs., TBA,                                                       
  5.00%, 01/01/20 to 01/01/35(o)               $ 25,346,640      $   25,591,364
-------------------------------------------------------------------------------
  5.50%, 01/01/20 to 01/01/35(o)                 44,688,574          45,546,247
-------------------------------------------------------------------------------
  6.00%, 01/01/35(o)                             19,643,600          20,316,339
===============================================================================
                                                                    130,820,855
===============================================================================

GOVERNMENT NATIONAL MORTGAGE ASSOCIATION                                       
  (GNMA)-1.00%                                                                 

Pass Through Ctfs.,                                                            
  6.50%, 10/15/08 to 02/15/33(h)                  3,731,806           3,932,388
-------------------------------------------------------------------------------
  7.00%, 10/15/08 to 05/15/32(h)                  2,211,242           2,349,894
-------------------------------------------------------------------------------
  6.00%, 11/15/08 to 10/15/33(h)                  5,808,970           6,030,415
-------------------------------------------------------------------------------
  8.00%, 08/15/22 to 01/20/31(h)                    766,023             837,419
-------------------------------------------------------------------------------
  7.50%, 06/15/23 to 05/15/32(h)                  2,032,869           2,192,997
-------------------------------------------------------------------------------
  8.50%, 11/15/24 to 02/15/25(h)                    122,231             134,121
-------------------------------------------------------------------------------
  5.50%, 06/15/33 to 12/15/33(h)                  3,191,779           3,263,972
===============================================================================
                                                                     18,741,206
===============================================================================
    Total U.S. Mortgage-Backed Securities                                      
      (Cost $173,863,280)                                           175,177,144
===============================================================================

U.S. GOVERNMENT AGENCY SECURITIES-6.37%                                        

FEDERAL HOME LOAN BANK-5.71%                                                   

Unsec. Disc. Notes,                                                            
  1.25%, 01/03/05(p)                            106,887,000         106,879,577
===============================================================================

FEDERAL NATIONAL MORTGAGE ASSOCIATION                                          
  (FNMA)-0.66%                                                                 

Unsec. Floating Rate Global Notes,                                             
  3.68%, 02/17/09(h)(q)                           8,675,000           8,756,372
-------------------------------------------------------------------------------
Unsec. Global Notes,                                                           
  3.38%, 12/15/08(h)                              3,525,000           3,480,479
===============================================================================
                                                                     12,236,851
===============================================================================
    Total U.S. Government Agency Securities                                    
      (Cost $118,963,428)                                           119,116,428
===============================================================================

U.S. TREASURY SECURITIES-4.30%                                                 

U.S. TREASURY NOTES-3.34%                                                      

2.50%, 09/30/06(h)                                2,500,000           2,478,525
-------------------------------------------------------------------------------
6.50%, 10/15/06(h)                               17,165,000          18,197,646
-------------------------------------------------------------------------------
3.50%, 11/15/06 to 11/15/09(h)                   28,850,000          28,913,486
-------------------------------------------------------------------------------
3.13%, 10/15/08(h)                                2,115,000           2,092,518
-------------------------------------------------------------------------------
4.75%, 11/15/08(h)                                5,680,000           5,951,561
-------------------------------------------------------------------------------
5.00%, 02/15/11(h)                                4,525,000           4,816,274
===============================================================================
                                                                     62,450,010
===============================================================================

U.S. TREASURY BONDS-0.90%                                                      

7.25%, 05/15/16 to 08/15/22(h)                   11,555,000          14,588,714
-------------------------------------------------------------------------------
7.50%, 11/15/16(h)                                   60,000              76,697
-------------------------------------------------------------------------------
5.38%, 02/15/31(h)                                2,095,000           2,264,569
===============================================================================
                                                                     16,929,980
===============================================================================

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                                                PRINCIPAL            MARKET    
                                                  AMOUNT             VALUE     
-------------------------------------------------------------------------------
                                                                               

U.S. TREASURY STRIPS-0.06%                                                     

3.03%, 02/15/07(h)(p)                          $  1,175,000      $    1,103,219
===============================================================================
    Total U.S. Treasury Securities (Cost                                       
      $78,706,691)                                                   80,483,209
===============================================================================

ASSET-BACKED SECURITIES-1.32%                                                  

OTHER DIVERSIFIED FINANCIAL SERVICES-1.09%                                     

Citicorp Lease-Series 1999-1, Class A1, Pass                                   
  Through Ctfs., 7.22%, 06/15/05 (Acquired                                     
  05/08/02-02/25/04; Cost $5,734,000)(d)(h)       5,400,171           5,498,724
-------------------------------------------------------------------------------
Citicorp Lease-Series 1999-1, Class A2, Pass                                   
  Through Ctfs., 8.04%, 12/15/19 (Acquired                                     
  06/01/00; Cost $3,901,297)(d)(h)                3,950,000           4,707,626
-------------------------------------------------------------------------------
Patrons' Legacy-Series 2003-III, Ctfs.,                                        
  5.65%, 01/17/17 (Acquired 11/04/04; Cost                                     
  $2,563,525)(d)(f)                               2,500,000           2,543,406
-------------------------------------------------------------------------------
Patrons' Legacy-Series 2004-I, Ctfs., 6.67%,                                   
  02/04/17 (Acquired 04/30/04; Cost                                            
  $5,000,000)(d)(f)                               5,000,000           5,097,013
-------------------------------------------------------------------------------
Twin Reefs Pass Through Trust, Floating Rate                                   
  Pass Through Ctfs., 3.37%, (Acquired                                         
  12/07/04; Cost $1,900,000)(d)(f)(h)(j)(q)       1,900,000           1,910,811
-------------------------------------------------------------------------------
Yorkshire Power Pass-Through Asset Trust                                       
  (Cayman Islands)-Series 2000-1, Pass                                         
  Through Ctfs., 8.25%, 02/15/05 (Acquired                                     
  11/12/03; Cost $640,800)(d)(f)(h)                 600,000             603,294
===============================================================================
                                                                     20,360,874
===============================================================================

PROPERTY & CASUALTY INSURANCE-0.12%                                            

North Front Pass-Through Trust, Bonds, 5.81%,                                  
  12/15/24 (Acquired 12/08/04; Cost                                            
  $2,144,192)(d)(f)(h)                            2,125,000           2,167,351
===============================================================================

                                                                [Download Table]
------------------------------------------------------------------------------- 

                                                PRINCIPAL            MARKET     
                                                  AMOUNT             VALUE      
                                                                                

THRIFTS & MORTGAGE FINANCE-0.11%                                                

Sovereign Bank-Class A-1, Pass Through Ctfs.,                                   
  10.20%, 06/30/05 (Acquired 09/22/04; Cost                                     
  $2,352,075)(d)(f)(h)                         $  2,020,308      $    2,080,331 
=============================================================================== 
    Total Asset-Backed Securities (Cost                                         
      $23,933,783)                                                   24,608,556 
=============================================================================== 
TOTAL INVESTMENTS-103.61% (excluding                                            
  investments purchased with cash collateral                                    
  from securities loaned) (Cost                                                 
  $1,760,597,128)                                                 1,938,266,426 
=============================================================================== 


                                                  SHARES                        
                                                                                
INVESTMENTS PURCHASED WITH CASH COLLATERAL                                      
  FROM SECURITIES LOANED                                                        

MONEY MARKET FUNDS-12.95%                                                       

Liquid Assets Portfolio-Institutional                                           
  Class(r)(s)                                   121,085,396         121,085,396 
------------------------------------------------------------------------------- 
STIC Prime Portfolio-Institutional                                              
  Class(r)(s)                                   121,085,396         121,085,396 
=============================================================================== 
    Total Money Market Funds (purchased with                                    
      cash collateral from securities loaned)                                   
      (Cost $242,170,792)                                           242,170,792 
=============================================================================== 
TOTAL INVESTMENTS-116.56% (Cost                                                 
  $2,002,767,920)                                                 2,180,437,218 
=============================================================================== 
OTHER ASSETS LESS LIABILITIES-(16.56)%                             (309,714,704)
_______________________________________________________________________________ 
=============================================================================== 
NET ASSETS-100.00%                                               $1,870,722,514 
_______________________________________________________________________________ 
=============================================================================== 

Investment Abbreviations:                                                       

                                                                [Download Table]
                                                                      
ADR     - American Depositary Receipt                                 
Ctfs.   - Certificates                                                
Deb.    - Debentures                                                  
Disc.   - Discounted                                                  
Gtd.    - Guaranteed                                                  
Pfd.    - Preferred                                                   
RB      - Revenue Bonds                                               
REGS    - Regulation S                                                
Sec.    - Secured                                                     
Sr.     - Senior                                                      
STRIPS  - Separately Traded Registered Interest and Principal Security
Sub.    - Subordinated                                                
TBA     - To Be Announced                                             
Unsec.  - Unsecured                                                   
Unsub.  - Unsubordinated                                              

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Notes to Schedule of Investments:                                               

(a) Non-income producing security.                                              
(b) All or a portion of this security has been pledged as collateral for        
securities lending transactions at December 31, 2004.                   
(c) Interest rate is redetermined quarterly. Rate shown is the rate in effect on
December 31, 2004.                                                      
(d) Security not registered under the Securities Act of 1933, as amended (e.g., 
the security was purchased in a Rule 144A transaction or a Regulation D 
   transaction). The security may be resold only pursuant to an exemption from
registration under the 1933 Act, typically to qualified institutional   
  buyers. The Fund has no rights to demand registration of these securities.
The aggregate market value of these securities at December 31, 2004 was 
$75,643,050, which represented 4.04% of the Fund's Net Assets. Unless   
otherwise indicated, these securities are not considered illiquid.      
(e) Interest rate is redetermined annually. Rate shown is the rate in effect on 
December 31, 2004.                                                      
(f) Security considered to be illiquid. The aggregate market value of these     
  securities considered illiquid at December 31, 2004 was $46,657,917, which
represented 2.49% of the Fund's Net Assets.                             
(g) In accordance with the procedures established by the Board of Trustees, the 
 foreign security is fair valued using adjusted closing market prices. The
   market value of this security at December 31, 2004 represented 1.94% of the
Fund's Total Investments. See Note 1A.                                  
(h) In accordance with the procedures established by the Board of Trustees,     
   security fair valued based on an evaluated quote provided by an independent
   pricing service. The aggregate market value of these securities at December
31, 2004 was $497,865,734, which represented 22.83% of the Fund's Total 
Investments. See Note 1A.                                               
(i) A portion of the principal balance was pledged as collateral to cover margin
requirements for open futures contracts. See Note 1K and Note 9.        
(j) Perpetual bond with no specified maturity date.                             
(k) Interest rate is redetermined semi-annually. Rate shown is the rate in      
effect on December 31, 2004.                                            
(l) Principal and interest payments are secured by bond insurance provided by   
 one of the following companies: Ambac Assurance Corp., Financial Guaranty
 Insurance Co., Financial Security Assurance Inc., or MBIA Insurance Corp.
(m) Zero coupon bond issued at a discount. The interest rate shown represents   
   the current yield on December 31, 2004. Bond will convert to a fixed coupon
rate at a specified future date.                                        
(n) Step coupon bond at issue. The interest rate represents the coupon rate at  
which the bond will accrue at a specified future date.                  
(o) Security purchased on forward commitment basis. This security is subject to 
dollar roll transactions. See Note 1G.                                  
(p) Security is traded on a discount basis. The interest rate shown represents  
the discount rate at the time of purchase by the Fund.                  
(q) Interest rate is redetermined monthly. Rate shown is the rate in effect on  
December 31, 2004.                                                      
(r) The money market fund and the Fund are affiliated by having the same        
investment advisor. See Note 3.                                         
(s) The security has been segregated to satisfy the forward commitment to return
the cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned. See Note 8.                 

See accompanying notes which are an integral part of the financial statements.  

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STATEMENT OF ASSETS AND LIABILITIES                                             

December 31, 2004                                                               

                                                                [Download Table]
                                                             
ASSETS:                                                      

Investments, at market value (cost                           
  $1,760,597,128)*                            $1,938,266,426 
------------------------------------------------------------ 
Investments in affiliated money market funds                 
  (cost $242,170,792)                            242,170,792 
============================================================ 
  Total investments (cost $2,002,767,920)      2,180,437,218 
============================================================ 
Cash                                                  48,740 
------------------------------------------------------------ 
Foreign currencies, at market value (cost                    
  $61)                                                    74 
------------------------------------------------------------ 
Receivables for:                                             
  Investments sold                                34,642,388 
------------------------------------------------------------ 
  Variation margin                                   231,360 
------------------------------------------------------------ 
  Fund shares sold                                   896,040 
------------------------------------------------------------ 
  Dividends and interest                           7,924,723 
------------------------------------------------------------ 
  Investments matured (Note 11)                    1,535,737 
------------------------------------------------------------ 
  Principal paydowns                                 211,796 
------------------------------------------------------------ 
Investment for trustee deferred compensation                 
  and retirement plans                               198,595 
------------------------------------------------------------ 
Other assets                                          42,274 
============================================================ 
    Total assets                               2,226,168,945 
____________________________________________________________ 
============================================================ 

LIABILITIES:                                                 

Payables for:                                                
  Investments purchased                           98,246,293 
------------------------------------------------------------ 
  Fund shares reacquired                          13,131,602 
------------------------------------------------------------ 
  Trustee deferred compensation and                          
    retirement plans                                 306,986 
------------------------------------------------------------ 
  Collateral upon return of securities                       
    loaned                                       242,170,792 
------------------------------------------------------------ 
Accrued distribution fees                            750,548 
------------------------------------------------------------ 
Accrued transfer agent fees                          580,773 
------------------------------------------------------------ 
Accrued operating expenses                           259,437 
============================================================ 
    Total liabilities                            355,446,431 
============================================================ 
Net assets applicable to shares outstanding   $1,870,722,514 
____________________________________________________________ 
============================================================ 

NET ASSETS CONSIST OF:                                       

Shares of beneficial interest                 $2,360,571,857 
------------------------------------------------------------ 
Undistributed net investment income (loss)        (5,141,012)
------------------------------------------------------------ 
Undistributed net realized gain (loss) from                  
  investment securities, foreign currencies                  
  and futures contracts                         (663,161,487)
------------------------------------------------------------ 
Unrealized appreciation of investment                        
  securities, foreign currencies and futures                 
  contracts                                      178,453,156 
============================================================ 
                                              $1,870,722,514 
____________________________________________________________ 
============================================================ 

NET ASSETS:                                                  

Class A                                       $1,049,415,157 
____________________________________________________________ 
============================================================ 
Class B                                       $  604,378,457 
____________________________________________________________ 
============================================================ 
Class C                                       $  211,297,376 
____________________________________________________________ 
============================================================ 
Class R                                       $    5,620,985 
____________________________________________________________ 
============================================================ 
Institutional Class                           $       10,539 
____________________________________________________________ 
============================================================ 

SHARES OUTSTANDING, $0.01 PAR VALUE PER                      
  SHARE, UNLIMITED NUMBER OF SHARES                          
  AUTHORIZED:                                                

Class A                                           41,473,872 
____________________________________________________________ 
============================================================ 
Class B                                           23,938,724 
____________________________________________________________ 
============================================================ 
Class C                                            8,356,529 
____________________________________________________________ 
============================================================ 
Class R                                              221,893 
____________________________________________________________ 
============================================================ 
Institutional Class                                    416.3 
____________________________________________________________ 
============================================================ 
Class A:                                                     
  Net asset value per share                   $        25.30 
------------------------------------------------------------ 
  Offering price per share:                                  
    (Net asset value of $25.30 divided by                    
      95.25%)                                 $        26.56 
____________________________________________________________ 
============================================================ 
Class B:                                                     
  Net asset value and offering price per                     
    share                                     $        25.25 
____________________________________________________________ 
============================================================ 
Class C:                                                     
  Net asset value and offering price per                     
    share                                     $        25.29 
____________________________________________________________ 
============================================================ 
Class R:                                                     
  Net asset value and offering price per                     
    share                                     $        25.33 
____________________________________________________________ 
============================================================ 
Institutional Class:                                         
  Net asset value and offering price per                     
    share                                     $        25.32 
____________________________________________________________ 
============================================================ 

* At December 31, 2004, securities with an aggregate market value of            
$236,707,159 were on loan to brokers.                                       

See accompanying notes which are an integral part of the financial statements.  

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STATEMENT OF OPERATIONS                                                         

For the year ended December 31, 2004                                            

                                                                [Download Table]
                                                                           
INVESTMENT INCOME:                                                         

Interest                                                      $ 30,801,224 
-------------------------------------------------------------------------- 
Dividends (net of foreign withholding tax of $285,253)          19,345,706 
-------------------------------------------------------------------------- 
Dividends from affiliated money market funds (including                    
  securities lending income of $323,468*)                          323,468 
========================================================================== 
    Total investment income                                     50,470,398 
========================================================================== 

EXPENSES:                                                                  

Advisory fees                                                   10,703,307 
-------------------------------------------------------------------------- 
Administrative services fees                                       458,536 
-------------------------------------------------------------------------- 
Custodian fees                                                     302,990 
-------------------------------------------------------------------------- 
Distribution fees:                                                         
  Class A                                                        2,887,535 
-------------------------------------------------------------------------- 
  Class B                                                        6,710,792 
-------------------------------------------------------------------------- 
  Class C                                                        2,349,482 
-------------------------------------------------------------------------- 
  Class R                                                           23,049 
-------------------------------------------------------------------------- 
Transfer agent fees -- Class A, B, C and R                       4,790,611 
-------------------------------------------------------------------------- 
Transfer agent fees -- Institutional Class                              23 
-------------------------------------------------------------------------- 
Trustees' fees and retirement benefits                              68,735 
-------------------------------------------------------------------------- 
Other                                                              742,795 
========================================================================== 
    Total expenses                                              29,037,855 
========================================================================== 
Less: Fees waived, expenses reimbursed and expense offset                  
  arrangement                                                     (258,923)
========================================================================== 
    Net expenses                                                28,778,932 
========================================================================== 
Net investment income                                           21,691,466 
========================================================================== 

REALIZED AND UNREALIZED GAIN FROM INVESTMENT SECURITIES,                   
  FOREIGN CURRENCIES AND FUTURES CONTRACTS:                                

Net realized gain from:                                                    
  Investment securities                                         90,280,637 
-------------------------------------------------------------------------- 
  Foreign currencies                                                 7,933 
-------------------------------------------------------------------------- 
  Futures contracts                                              1,430,062 
========================================================================== 
                                                                91,718,632 
========================================================================== 
Change in net unrealized appreciation of:                                  
  Investment securities                                         25,925,592 
-------------------------------------------------------------------------- 
  Foreign currencies                                                44,599 
-------------------------------------------------------------------------- 
  Futures contracts                                                783,890 
========================================================================== 
                                                                26,754,081 
========================================================================== 
Net gain from investment securities, foreign currencies and                
  futures contracts                                            118,472,713 
========================================================================== 
Net increase in net assets resulting from operations          $140,164,179 
__________________________________________________________________________ 
========================================================================== 

* Dividends from affiliated money market funds are net of income rebate paid to 
securities lending counterparties.                                          

See accompanying notes which are an integral part of the financial statements.  

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STATEMENT OF CHANGES IN NET ASSETS                                              

For the years ended December 31, 2004 and 2003                                  

                                                        [Enlarge/Download Table]

                                                                   2004              2003      
---------------------------------------------------------------------------------------------- 
                                                                                               
OPERATIONS:                                                                                    

  Net investment income                                       $   21,691,466    $   30,431,107 
---------------------------------------------------------------------------------------------- 
  Net realized gain from investment securities, foreign                                        
    currencies and futures contracts                              91,718,632       107,782,700 
---------------------------------------------------------------------------------------------- 
  Change in net unrealized appreciation of investment                                          
    securities, foreign currencies, futures contracts and                                      
    option contracts                                              26,754,081       228,117,385 
============================================================================================== 
    Net increase in net assets resulting from operations         140,164,179       366,331,192 
============================================================================================== 
Distributions to shareholders from net investment income:                                      
  Class A                                                        (20,418,776)      (26,240,036)
---------------------------------------------------------------------------------------------- 
  Class B                                                         (6,979,759)       (8,673,183)
---------------------------------------------------------------------------------------------- 
  Class C                                                         (2,425,648)       (3,288,903)
---------------------------------------------------------------------------------------------- 
  Class R                                                            (75,777)          (48,722)
---------------------------------------------------------------------------------------------- 
  Institutional Class                                                   (220)             (209)
============================================================================================== 
    Decrease in net assets resulting from distributions          (29,900,180)      (38,251,053)
============================================================================================== 
Share transactions-net:                                                                        
  Class A                                                       (310,464,020)     (325,786,055)
---------------------------------------------------------------------------------------------- 
  Class B                                                       (170,136,078)     (127,772,946)
---------------------------------------------------------------------------------------------- 
  Class C                                                        (65,588,422)      (75,676,154)
---------------------------------------------------------------------------------------------- 
  Class R                                                          1,510,478         3,149,619 
---------------------------------------------------------------------------------------------- 
  Institutional Class                                                    220               209 
============================================================================================== 
    Net increase (decrease) in net assets resulting from                                       
     share transactions                                         (544,677,822)     (526,085,327)
============================================================================================== 
    Net increase (decrease) in net assets                       (434,413,823)     (198,005,188)
============================================================================================== 

NET ASSETS:                                                                                    

  Beginning of year                                            2,305,136,337     2,503,141,525 
============================================================================================== 
  End of year (including undistributed net investment income                                   
    (loss) of $(5,141,012) and $(2,977,290), respectively)    $1,870,722,514    $2,305,136,337 
______________________________________________________________________________________________ 
============================================================================================== 

See accompanying notes which are an integral part of the financial statements.  

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NOTES TO FINANCIAL STATEMENTS                                                   

December 31, 2004                                                               

NOTE 1--SIGNIFICANT ACCOUNTING POLICIES                                         

AIM Balanced Fund (the "Fund") is a series portfolio of AIM Funds Group (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 nine separate portfolios,    
each authorized to issue an unlimited number of shares of beneficial interest.  
The Fund currently offers multiple classes of shares. Matters affecting each    
portfolio or class will be voted on exclusively by the shareholders of such     
portfolio or class. The assets, liabilities and operations of each portfolio are
accounted for separately. Information presented in these financial statements   
pertains only to the Fund.                                                      

The Fund's investment objective is to achieve as high a total return as 
possible, consistent with preservation of capital. Each company listed in the   
Schedule of Investments is organized in the United States of America unless     
otherwise noted.                                                                

   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. However, the Fund has not had prior claims or losses pursuant to these
contracts.                                                                      

The preparation of financial statements in conformity with accounting   
principles generally accepted in the United States of America requires          
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported 
amounts of revenues and expenses during the reporting period. Actual results    
could differ from those estimates. The following is a summary of the significant
accounting policies followed by the Fund in the preparation of its financial    
statements.                                                                     

A.   SECURITY VALUATIONS -- Securities, including restricted securities, are    
valued according to the following policy.                             

      A security listed or traded on an exchange (except convertible bonds) is
 valued at its last sales price as of the close of the customary trading
session on the exchange where the security is principally traded, or  
lacking any sales on a particular day, the security is valued at the  
     closing bid price on that day. Each security traded in the over-the-counter
   market (but not securities reported on the NASDAQ National Market System)
    is valued on the basis of prices furnished by independent pricing services
or market makers. Each security reported on the NASDAQ National Market
  System is valued at the NASDAQ Official Closing Price ("NOCP") as of the
  close of the customary trading session on the valuation date or absent a
NOCP, at the closing bid price.                                       

  Futures contracts are valued at the final settlement price set by an
     exchange on which they are principally traded. Listed options are valued at
     the mean between the last bid and the ask prices from the exchange on which
   they are principally traded. Options not listed on an exchange are valued
   by an independent source at the mean between the last bid and ask prices.
   For purposes of determining net asset value per share, futures and option
contracts generally will be valued 15 minutes after the close of the  
customary trading session of the New York Stock Exchange ("NYSE").    

    Investments in open-end registered investment companies and closed-end
     registered investment companies that do not trade on an exchange are valued
at the end of day net asset value per share. Investments in closed-end
     registered investment companies that trade on an exchange are valued at the
  last sales price as of the close of the customary trading session on the
exchange where the security is principally traded.                    

     Debt obligations (including convertible bonds) are fair valued using an
evaluated quote provided by an independent pricing service. Evaluated 
    quotes provided by the pricing service may be determined without exclusive
reliance on quoted prices, and may reflect appropriate factors such as
institution-size trading in similar groups of securities, developments
related to specific securities, dividend rate, yield, quality, type of
    issue, coupon rate, maturity, individual trading characteristics and other
    market data. Short-term obligations having 60 days or less to maturity and
 commercial paper are valued at amortized cost which approximates market
value.                                                                

     Securities for which market prices are not provided by any of the above
   methods are valued based upon quotes furnished by independent sources and
  are valued at the last bid price in the case of equity securities and in
the case of debt obligations, the mean between the last bid and asked 
prices.                                                               

     Foreign securities (including foreign exchange contracts) are converted
into U.S. dollar amounts using the applicable exchange rates as of the
close of the NYSE. Generally, trading in foreign securities is        
     substantially completed each day at various times prior to the close of the
   NYSE. The values of such securities used in computing the net asset value
of the Fund's shares are determined as of the close of the respective 
   markets. Events affecting the values of such foreign securities may occur
 between the times at which the particular foreign market closes and the
close of the customary trading session of the NYSE which would not    
   ordinarily be reflected in the computation of the Fund's net asset value.
    If the event is likely to have affected the closing price of the security,
  the security will be valued at fair value in good faith using procedures
     approved by the Board of Trustees. Adjustments to closing prices to reflect
fair value may also be based on a screening process of an independent 
  pricing service to indicate the degree of certainty, based on historical
data, that the closing price in the principal market where a foreign  
security trades is not the current market value as of the close of the
    NYSE. Foreign securities meeting the approved degree of certainty that the
price is not reflective of current market value will be priced at the 
 indication of fair value from the independent pricing service. Multiple
     factors may be considered by the independent pricing service in determining
   adjustments to reflect fair value and may include information relating to
sector indices, ADRs, domestic and foreign index futures and          
exchange-traded funds.                                                

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     Securities for which market quotations are not readily available or are
     unreliable are valued at fair value as determined in good faith by or under
  the supervision of the Trust's officers following procedures approved by
the Board of Trustees. Issuer specific events, market trends, bid/ask 
  quotes of brokers and information providers and other market data may be
     reviewed in the course of making a good faith determination of a security's
fair value.                                                           

B.   SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions   
    are accounted for on a trade date basis. Realized gains or losses on sales
are computed on the basis of specific identification of the securities
sold. Interest income is recorded on the accrual basis from settlement
  date. Dividend income is recorded on the ex-dividend date. Bond premiums
and discounts are amortized and/or accreted for financial reporting   
purposes.                                                             

     Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased 
  and/or a reduction of proceeds on a sale of securities. Such transaction
 costs are included in the determination of realized and unrealized gain
   (loss) from investment securities reported in the Statement of Operations
    and the Statement of Changes in Net Assets and the realized and unrealized
 net gains (losses) on securities per share in the Financial Highlights.
   Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These   
transaction costs are not considered operating expenses and are not   
    reflected in net investment income reported in the Statement of Operations
  and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation  
arrangements between the Fund and the advisor.                        

     The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.     

C.   DISTRIBUTIONS -- Distributions from income are declared and paid quarterly 
and are recorded on ex-dividend date. Distributions from net realized 
capital gain, if any, are generally paid annually and recorded on     
    ex-dividend date. The Fund may elect to use a portion of the proceeds from
redemptions as distributions for federal income tax purposes.         

D.   FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of
Subchapter M of the Internal Revenue Code necessary to qualify as a   
   regulated investment company and, as such, will not be subject to federal
  income taxes on otherwise taxable income (including net realized capital
 gain) which is distributed to shareholders. Therefore, no provision for
federal income taxes is recorded in the financial statements.         

E.   EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular    
 class of the Fund are charged to the operations of such class. Transfer
agency fees and expenses and other shareholder recordkeeping fees and 
     expenses attributable to the Institutional Class are charged to such class.
    Transfer agency fees and expenses and other shareholder recordkeeping fees
and expenses relating to all other classes are allocated among those  
classes based on relative net assets. All other expenses are allocated
among the classes based on relative net assets.                       

F.   REPURCHASE AGREEMENTS -- The Fund may enter into repurchase agreements.    
     Collateral on repurchase agreements, including the Fund's pro-rata interest
   in joint repurchase agreements, is taken into possession by the Fund upon
    entering into the repurchase agreement. Eligible securities for collateral
  are U.S. Government Securities, U.S. Government Agency Securities and/or
    Investment Grade Debt Securities. Collateral consisting of U.S. Government
    Securities and U.S. Government Agency Securities is marked to market daily
to ensure its market value is at least 102% of the sales price of the 
repurchase agreement. Collateral consisting of Investment Grade Debt  
     Securities is marked to market daily to ensure its market value is at least
 105% of the sales price of the repurchase agreement. The investments in
some repurchase agreements, pursuant to an exemptive order from the   
  Securities and Exchange Commission, are through participation with other
mutual funds, private accounts and certain non-registered investment  
companies managed by the investment advisor or its affiliates ("Joint 
   repurchase agreements"). If the seller of a repurchase agreement fails to
    repurchase the security in accordance with the terms of the agreement, the
 Fund might incur expenses in enforcing its rights, and could experience
 losses, including a decline in the value of the underlying security and
loss of income.                                                       

G.   DOLLAR ROLL TRANSACTIONS -- The Fund may engage in dollar roll transactions
    with respect to mortgage-backed securities issued by GNMA, FNMA and FHLMC.
 In a dollar roll transaction, the Fund sells a mortgage-backed security
held in the Fund to a financial institution such as a bank or         
broker-dealer, and simultaneously agrees to purchase a substantially  
   similar security (same type, coupon and maturity) from the institution at
    an agreed upon price and future date. The mortgage-backed securities to be
 purchased will bear the same interest rate as those sold, but generally
will be collateralized by different pools of mortgages with different 
prepayment histories. The difference between the selling price and the
    future purchase price is generally amortized to income between the date of
   the sell and the future purchase date. During the period between the sale
and purchase, the Fund will not be entitled to receive interest and   
     principal payments on securities sold. Proceeds of the sale may be invested
    in short-term instruments, and the income from these investments, together
    with any additional fee income received on the sale, could generate income
for the Fund exceeding the yield on the security sold. Dollar roll    
    transactions are considered borrowings under the 1940 Act. At the time the
    Fund enters into the dollar roll, it will segregate liquid assets having a
dollar value equal to the purchase price.                             

    Dollar roll transactions involve the risk that the market value of the
securities retained by the Fund may decline below the price of the    
  securities that the Fund has sold but is obligated to purchase under the
agreement. In the event that the buyer of securities in a dollar roll 
  transaction files for bankruptcy or becomes insolvent, the Fund's use of
  the proceeds from the sale of the securities may be restricted pending a
  determination by the other party, or its trustee or receiver, whether to
     enforce the Fund's obligation to purchase the securities. The return earned
     by the Fund with the proceeds of the dollar roll transaction may not exceed
transaction costs.                                                    

H.   FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of
  the NYSE based on quotations posted by banks and major currency dealers.
Portfolio securities and other assets and liabilities denominated in  
foreign currencies are translated into U.S. dollar amounts at date of 
valuation. Purchases and sales of portfolio securities (net of foreign
taxes withheld on disposition) and income items denominated in foreign
    currencies are translated into U.S. dollar amounts on the respective dates
    of such transactions. The Fund does not separately account for the portion

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 of the results of operations resulting from changes in foreign exchange
  rates on investments and the fluctuations arising from changes in market
prices of securities held. The combined results of changes in foreign 
    exchange rates and the fluctuation of market prices on investments (net of
   estimated foreign tax withholding) are included with the net realized and
  unrealized gain or loss from investments in the Statement of Operations.
Reported net realized foreign currency gains or losses arise from, (i)
     sales of foreign currencies, (ii) currency gains or losses realized between
  the trade and settlement dates on securities transactions, and (iii) the
difference between the amounts of dividends, interest, and foreign    
withholding taxes recorded on the Fund's books and the U.S. dollar    
     equivalent of the amounts actually received or paid. Net unrealized foreign
   currency gains and losses arise from changes in the fair values of assets
     and liabilities, other than investments in securities at fiscal period end,
resulting from changes in exchange rates.                             

I.   FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation 
to purchase or sell a specific currency for an agreed-upon price at a 
     future date. The Fund may enter into a foreign currency contract to attempt
   to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency   
  contract for the purchase or sale of a security denominated in a foreign
    currency in order to "lock in" the U.S. dollar price of that security. The
     Fund could be exposed to risk if counterparties to the contracts are unable
to meet the terms of their contracts or if the value of the foreign   
currency changes unfavorably.                                         

J.   COVERED CALL OPTIONS -- The Fund may write call options, on a covered      
  basis; that is, the Fund will own the underlying security. When the Fund
  writes a covered call option, an amount equal to the premium received by
     the Fund is recorded as an asset and an equivalent liability. The amount of
 the liability is subsequently "marked-to-market" to reflect the current
   market value of the option written. The current market value of a written
    option is the mean between the last bid and asked prices on that day. If a
  written call option expires on the stipulated expiration date, or if the
   Fund enters into a closing purchase transaction, the Fund realizes a gain
     (or a loss if the closing purchase transaction exceeds the premium received
    when the option was written) without regard to any unrealized gain or loss
 on the underlying security, and the liability related to such option is
     extinguished. If a written option is exercised, the Fund realizes a gain or
 a loss from the sale of the underlying security and the proceeds of the
    sale are increased by the premium originally received. A risk in writing a
 call option is that the Fund gives up the opportunity for profit if the
market price of the security increases and the option is exercised.   

K.   FUTURES CONTRACTS -- The Fund may purchase or sell futures contracts as a  
hedge against changes in market conditions. Initial margin deposits   
required upon entering into futures contracts are satisfied by the    
 segregation of specific securities as collateral for the account of the
 broker (the Fund's agent in acquiring the futures position). During the
period the futures contracts are open, changes in the value of the    
contracts are recognized as unrealized gains or losses by "marking to 
  market" on a daily basis to reflect the market value of the contracts at
the end of each day's trading. Variation margin payments are made or  
  received depending upon whether unrealized gains or losses are incurred.
    When the contracts are closed, the Fund recognizes a realized gain or loss
    equal to the difference between the proceeds from, or cost of, the closing
   transaction and the Fund's basis in the contract. If the Fund were unable
 to liquidate a futures contract and/or enter into an offsetting closing
transaction, the Fund would continue to be subject to market risk with
respect to the value of the contracts and continue to be required to  
maintain the margin deposits on the futures contracts.                

NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES                         

The Trust has entered into a master investment advisory agreement with A I M    
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,   
the Fund pays an advisory fee to AIM at the annual rate of 0.75% of the first   
$150 million of the Fund's average daily net assets, plus 0.50% of the Fund's   
average daily net assets in excess of $150 million. AIM has voluntarily agreed  
to waive advisory fees of the Fund in the amount of 25% of the advisory fee AIM 
receives from the affiliated money market funds on investments by the Fund in   
such affiliated money market funds (excluding investments made in affiliated    
money market funds with cash collateral from securities loaned by the Fund).    
Voluntary fee waivers or reimbursements may be modified or discontinued at any  
time upon consultation with the Board of Trustees without further notice to     
investors. For the year ended December 31, 2004, AIM waived fees of $3,064.     

   For the year ended December 31, 2004, at the request of the Trustees of the
Trust, AMVESCAP PLC ("AMVESCAP") agreed to reimburse $228,813 of expenses       
incurred by the Fund related to market timing matters in the AIM Funds,         
including legal, audit, shareholder servicing, communication and trustee        
expenses. These expenses along with the related expense reimbursement, are      
included in the Statement of Operations.                                        

  The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing    
accounting services to the Fund. For the year ended December 31, 2004, AIM was  
paid $458,536 for such services.                                                

    The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay AIM Investment Services, Inc. ("AISI") a fee for providing transfer agency  
and shareholder services to the Fund and reimburse AISI for certain expenses    
incurred by AISI in the course of providing such services. For the Institutional
Class, the transfer agent has contractually agreed to reimburse class specific  
transfer agent fees and expenses to the extent necessary to limit transfer agent
fees to 0.10% of the average net assets. For the year ended December 31, 2004,  
the Fund paid AISI $4,790,611 for Class A, Class B, Class C and Class R shares  
and $10 for Institutional Class shares after AISI reimbursed fees for the       
Institutional Class shares of $13. AISI may make payments to intermediaries that
provide omnibus account services, sub-accounting services and/or networking     
services.                                                                       

The Trust has entered into master distribution agreements with A I M    
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the     
Class A, Class B, Class C, Class R and Institutional Class shares of the Fund.  
The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with      
respect to the Fund's Class A, Class B, Class C and Class R shares (collectively
the "Plans"). The Fund, pursuant to the Plans, pays AIM Distributors            
compensation at the annual rate of 0.25% of the Fund's average daily net assets 
of Class A shares, 1.00% of the average daily net assets of Class B and         

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Class C shares and 0.50% of the average daily net assets of Class R shares. Of  
these amounts, up to 0.25% of the average daily net assets of the Class A, Class
B, Class C or Class R shares may be paid to furnish continuing personal         
shareholder services to customers who purchase and own shares of such classes.  
Any amounts not paid as a service fee under the Plans would constitute an       
asset-based sales charge. NASD Rules also impose a cap on the total sales       
charges, including asset-based sales charges that may be paid by any class of   
shares of the Fund. Pursuant to the Plans, for the year ended December 31, 2004,
the Class A, Class B, Class C and Class R shares paid $2,887,535, $6,710,792,   
$2,349,482 and $23,049, respectively.                                           

  Front-end sales commissions and contingent deferred sales charges ("CDSC")
(collectively the "sales charges") are not recorded as expenses of the Fund.    
Front-end sales commissions are deducted from proceeds from the sales of Fund   
shares prior to investment in Class A shares of the Fund. CDSC are deducted from
redemption proceeds prior to remittance to the shareholder. During year ended   
December 31, 2004, AIM Distributors advised the Fund that it retained $164,698  
in front-end sales commissions from the sale of Class A shares and $39,022,     
$70,788, $11,262 and $0 from Class A, Class B, Class C and Class R shares,      
respectively, for CDSC imposed upon redemptions by shareholders.                

Certain officers and trustees of the Trust are officers and directors of
AIM, AISI and/or AIM Distributors.                                              

NOTE 3--INVESTMENTS IN AFFILIATES                                               

The Fund is permitted, pursuant to an exemptive order from the Securities and   
Exchange Commission ("SEC"), to invest cash collateral from securities lending  
transactions in affiliated money market funds. The Fund and the money market    
funds below have the same investment advisor and therefore, are considered to be
affiliated. The tables below show the transactions in and earnings from         
investments in affiliated money market funds for the year ended December 31,    
2004.                                                                           

INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:            

                                                        [Enlarge/Download Table]

                                                                               UNREALIZED                                           
                            MARKET VALUE      PURCHASES        PROCEEDS       APPRECIATION    MARKET VALUE    DIVIDEND    REALIZED  
FUND                          12/31/03         AT COST        FROM SALES     (DEPRECIATION)     12/31/04      INCOME*    GAIN (LOSS)
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                    
Liquid Assets Portfolio-                                                                                                            
  Institutional Class       $ 60,195,599    $494,830,149    $(433,940,352)       $   --       $121,085,396    $162,566     $   --   
------------------------------------------------------------------------------------------------------------------------------------
STIC Prime Portfolio-                                                                                                               
  Institutional Class         60,195,599     493,356,038     (432,466,241)           --        121,085,396    160,902          --   
====================================================================================================================================
  Total                     $120,391,198    $988,186,187    $(866,406,593)       $   --       $242,170,792    $323,468     $   --   
____________________________________________________________________________________________________________________________________
====================================================================================================================================

* Dividend income is net of income rebate paid to securities lending            
counterparties.                                                             

NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS                             

The Fund is permitted to purchase or sell securities from or to certain other   
AIM Funds under specified conditions outlined in procedures adopted by the Board
of Trustees of the Trust. The procedures have been designed to ensure that any  
purchase or sale of securities by the Fund from or to another fund or portfolio 
that is or could be considered an affiliate by virtue of having a common        
investment advisor (or affiliated investment advisors), common Trustees and/or  
common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined   
under the procedures each transaction is effected at the current market price.  
Pursuant to these procedures, during the year ended December 31, 2004, the Fund 
engaged in purchases and sales of securities of $13,409,798 and $11,680,665,    
respectively.                                                                   

NOTE 5--EXPENSE OFFSET ARRANGEMENT                                              

The expense offset arrangement is comprised of transfer agency credits which    
result from balances in Demand Deposit Accounts (DDA) used by the transfer agent
for clearing shareholder transactions. For the year ended December 31, 2004, the
Fund received credits in transfer agency fees of $27,033 under an expense offset
arrangement, which resulted in a reduction of the Fund's total expenses of      
$27,033.                                                                        

NOTE 6--TRUSTEES' FEES                                                          

Trustees' fees represent remuneration paid to each Trustee of the Trust who is  
not an "interested person" of AIM. Trustees have the option to defer            
compensation payable by the Trust. Those Trustees who defer compensation have   
the option to select various AIM Funds in which their deferral accounts shall be
deemed to be invested.                                                          

Current Trustees are eligible to participate in a retirement plan that  
provides for benefits to be paid upon retirement to Trustees over a period of   
time based on the number of years of service. The Fund may have certain former  
Trustees that also participate in a retirement plan and receive benefits under  
such plan.                                                                      

  Obligations under the deferred compensation and retirement plans represent
unsecured claims against the general assets of the Fund.                        

   During the year ended December 31, 2004, the Fund paid legal fees of $7,707
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.          

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NOTE 7--BORROWINGS                                                              

Pursuant to an exemptive order from the SEC, the Fund may participate in an     
interfund lending facility that AIM has established for temporary borrowings by 
the AIM Funds. An interfund loan will be made under this facility only if the   
loan rate (an average of the rate available on bank loans and the rate available
on investments in overnight repurchase agreements) is favorable to both the     
lending fund and the borrowing fund. A loan will be secured by collateral if the
Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total    
assets. To the extent that the loan is required to be secured by collateral, the
collateral is marked to market daily to ensure that the market value is at least
102% of the outstanding principal value of the loan.                            

The Fund is a participant in an uncommitted unsecured revolving credit  
facility with State Street Bank and Trust Company ("SSB"). The Fund may borrow  
up to the lesser of (i) $125,000,000, or (ii) the limits set by its prospectus  
for borrowings. The Fund and other funds advised by AIM which are parties to the
credit facility can borrow on a first come, first served basis. Principal on    
each loan outstanding shall bear interest at the bid rate quoted by SSB at the  
time of the request for the loan.                                               

During the year ended December 31, 2004, the Fund did not borrow or lend
under the interfund lending facility or borrow under the uncommitted unsecured  
revolving credit facility.                                                      

Additionally, the Fund is permitted to temporarily carry a negative or  
overdrawn balance in its account with SSB, the custodian bank. To compensate the
custodian bank for such overdrafts, the overdrawn Fund may either (i) leave     
funds in the account so the custodian can be compensated by earning the         
additional interest; or (ii) compensate by paying the custodian bank. In either 
case, the custodian bank will be compensated at an amount equal to the Federal  
Funds rate plus 100 basis points.                                               

NOTE 8--PORTFOLIO SECURITIES LOANED                                             

The Fund may lend portfolio securities having a market value up to one-third of 
the Fund's total assets. Such loans are secured by collateral equal to no less  
than the market value of the loaned securities determined daily. Such collateral
will be cash or debt securities issued or guaranteed by the U.S. Government or  
any of its agencies. Cash collateral received in connection with these loans is 
invested in short-term money market instruments or affiliated money market      
funds. It is the Fund's policy to obtain additional collateral from or return   
excess collateral to the borrower by the end of the next business day, following
the valuation date of the securities loaned. Therefore, the value of the        
collateral held may be temporarily less than the value of the securities on     
loan. Lending securities entails a risk of loss to the Fund if and to the extent
that the market value of the securities loaned were to increase and the borrower
did not increase the collateral accordingly, and the borrower fails to return   
the securities. The Fund could also experience delays and costs in gaining      
access to the collateral. The Fund bears the risk of any deficiency in the      
amount of the collateral available for return to the borrower due to a loss on  
the collateral invested.                                                        

At December 31, 2004, securities with an aggregate value of $236,707,159
were on loan to brokers. The loans were secured by cash collateral of           
$242,170,792, received by the Fund and subsequently invested in affiliated money
market funds. For the year ended December 31, 2004, the Fund received dividends 
on cash collateral net of income rebate paid to counterparties of $323,468 for  
securities lending transactions.                                                

NOTE 9--FUTURES CONTRACTS                                                       

On December 31, 2004, $4,150,000 principal amount of corporate obligations were 
pledged as collateral to cover margin requirements for open futures contracts.  

                                                        [Enlarge/Download Table]

                                             OPEN FUTURES CONTRACTS AT PERIOD END                                             
------------------------------------------------------------------------------------------------------------------------------
                                                                                                                  UNREALIZED  
                                                               NO. OF          MONTH/            MARKET          APPRECIATION 
CONTRACT                                                      CONTRACTS      COMMITMENT          VALUE          (DEPRECIATION)
------------------------------------------------------------------------------------------------------------------------------
                                                                                                                              
U.S. Treasury 2 Year Notes                                        335        Mar-05/Long      $ 70,213,906         $ 98,528   
------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury 5 Year Notes                                      1,075        Mar-05/Long       117,746,094          711,482   
------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury 10 Year Notes                                        85        Mar-05/Long         9,514,688          (53,550)  
------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury 30 Year Bond                                         14        Mar-05/Long         1,575,000           27,430   
==============================================================================================================================
                                                                                              $199,049,688         $783,890   
______________________________________________________________________________________________________________________________
==============================================================================================================================

NOTE 10--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS         

DISTRIBUTIONS TO SHAREHOLDERS:                                                  

The tax character of distributions paid during the years ended December 31, 2004
and 2003 was as follows:                                                        

                                                        [Enlarge/Download Table]

                                                                 2004           2003    
----------------------------------------------------------------------------------------
                                                                                        
Distributions paid from ordinary income                       $29,900,180    $38,251,053
________________________________________________________________________________________
========================================================================================

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TAX COMPONENTS OF NET ASSETS:                                                   

As of December 31, 2004, the components of net assets on a tax basis were as    
follows:                                                                        

                                                                [Download Table]

                                                                     2004      
------------------------------------------------------------------------------ 
                                                                               
Undistributed ordinary income                                   $      875,650 
------------------------------------------------------------------------------ 
Unrealized appreciation -- investments                             151,278,938 
------------------------------------------------------------------------------ 
Temporary book/tax differences                                        (215,634)
------------------------------------------------------------------------------ 
Capital loss carryforward                                         (641,788,297)
------------------------------------------------------------------------------ 
Shares of beneficial interest                                    2,360,571,857 
============================================================================== 
Total net assets                                                $1,870,722,514 
______________________________________________________________________________ 
============================================================================== 

The difference between book-basis and tax-basis unrealized appreciation 
(depreciation) is due to differences in the timing of recognition of gains and  
losses on investments for tax and book purposes. The Fund's unrealized          
appreciation (depreciation) difference is attributable primarily to losses on   
wash sales, bond premium amortization and the treatment of defaulted bonds. The 
tax-basis unrealized appreciation on investments amount includes appreciation   
(depreciation) on foreign currencies of $(32).                                  

The temporary book/tax differences are a result of timing differences   
between book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of the trustee deferral of compensation and 
retirement plan expenses, bond premium amortization and the treatment of        
defaulted bonds.                                                                

   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 $86,385,387 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 December 31, 2004 which expires as   
follows:                                                                        

                                                                [Download Table]

                                  CAPITAL LOSS 
EXPIRATION                        CARRYFORWARD*
-----------------------------------------------
                                               
December 31, 2009                 $107,895,455 
-----------------------------------------------
December 31, 2010                  533,892,842 
===============================================
Total capital loss carryforward   $641,788,297 
_______________________________________________
===============================================

* Capital loss carryforward as of the date listed above is reduced for          
limitations, if any, to the extent required by the Internal Revenue Code.   

NOTE 11--INVESTMENT SECURITIES                                                  

The aggregate amount of investment securities (other than short-term securities 
and money market funds) purchased and sold by the Fund during the year ended    
December 31, 2004 was $784,347,274 and $1,435,293,929, respectively.            

   Receivable for investments matured represents the estimated proceeds to the
Fund by Candescent Technologies Corp., which is in default with respect to the  
principal payments on $25,012,000 par value, Senior Unsecured Subordinated      
Debentures, 8.00%, which was due May 1, 2003. This estimate was determined in   
accordance with the fair valuation procedures authorized by the Board of        
Trustees.                                                                       

                                                                [Download Table]

UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
------------------------------------------------------------------------------
                                                                              
Aggregate unrealized appreciation of investment securities       $184,437,932 
------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities      (33,158,962)
==============================================================================
Net unrealized appreciation of investment securities             $151,278,970 
______________________________________________________________________________
==============================================================================
Cost of investments for tax purposes is $2,029,158,248.                       

NOTE 12--RECLASSIFICATION OF PERMANENT DIFFERENCES                              

Primarily as a result of differing book/tax treatment of foreign currency       
transactions, paydowns on mortgage-backed securities and bond premium           
amortization, on December 31, 2004, undistributed net investment income was     
increased by $6,044,992 and undistributed net realized gain was decreased by    
$6,044,996 and shares of beneficial interest increased by $4. This              
reclassification had no effect on the net assets of the Fund.                   

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NOTE 13--SHARE INFORMATION                                                      

The Fund currently offers five different classes of shares: Class A shares,     
Class B shares, Class C shares, Class R shares and Institutional Class shares.  
Class A shares are sold with a front-end sales charge. Class B shares and Class 
C shares are sold with CDSC. Class R shares and Institutional Class shares are  
sold at net asset value. Under certain circumstances, Class A shares and Class R
shares are subject to CDSC. Generally, Class B shares will automatically convert
to Class A shares eight years after the end of the calendar month of purchase.  

                                                        [Enlarge/Download Table]

                                                CHANGES IN SHARES OUTSTANDING(a)                                                 
-------------------------------------------------------------------------------------------------------------------------------- 
                                                                                   YEAR ENDED DECEMBER 31,                       
                                                              ------------------------------------------------------------------ 
                                                                           2004                                2003              
                                                              ------------------------------      ------------------------------ 
                                                                SHARES            AMOUNT            SHARES            AMOUNT     
-------------------------------------------------------------------------------------------------------------------------------- 
                                                                                                                                 
Sold:                                                                                                                            
  Class A                                                       6,838,794      $ 166,219,511       14,724,408      $ 317,421,511 
-------------------------------------------------------------------------------------------------------------------------------- 
  Class B                                                       1,882,739         45,641,148        2,822,623         61,571,171 
-------------------------------------------------------------------------------------------------------------------------------- 
  Class C                                                         657,550         15,991,892        1,078,856         23,496,738 
-------------------------------------------------------------------------------------------------------------------------------- 
  Class R                                                         114,119          2,778,219          184,779          4,039,188 
-------------------------------------------------------------------------------------------------------------------------------- 
  Institutional Class                                                  --                 --               --                 -- 
================================================================================================================================ 
Issued as reinvestment of dividends:                                                                                             
  Class A                                                         797,987         19,482,748        1,155,459         25,548,489 
-------------------------------------------------------------------------------------------------------------------------------- 
  Class B                                                         261,464          6,372,168          362,180          7,982,445 
-------------------------------------------------------------------------------------------------------------------------------- 
  Class C                                                          89,256          2,177,540          134,213          2,951,526 
-------------------------------------------------------------------------------------------------------------------------------- 
  Class R                                                           3,073             75,238            2,176             48,722 
-------------------------------------------------------------------------------------------------------------------------------- 
  Institutional Class                                                   9                220                9                209 
================================================================================================================================ 
Automatic conversion of Class B shares to Class A shares:                                                                        
  Class A                                                       2,252,935         54,796,120        1,104,079         24,477,117 
-------------------------------------------------------------------------------------------------------------------------------- 
  Class B                                                      (2,259,121)       (54,796,120)      (1,106,931)       (24,477,117)
================================================================================================================================ 
Reacquired:                                                                                                                      
  Class A                                                     (22,639,799)      (550,962,399)     (31,672,931)      (693,233,172)
-------------------------------------------------------------------------------------------------------------------------------- 
  Class B                                                      (6,917,270)      (167,353,274)      (8,005,292)      (172,849,445)
-------------------------------------------------------------------------------------------------------------------------------- 
  Class C                                                      (3,452,796)       (83,757,854)      (4,686,941)      (102,124,418)
-------------------------------------------------------------------------------------------------------------------------------- 
  Class R                                                         (54,447)        (1,342,979)         (41,885)          (938,291)
-------------------------------------------------------------------------------------------------------------------------------- 
  Institutional Class                                                  --                 --               --                 -- 
================================================================================================================================ 
                                                              (22,425,507)     $(544,677,822)     (23,945,198)     $(526,085,327)
________________________________________________________________________________________________________________________________ 
================================================================================================================================ 

(a) There is one entity that is a record owner of more than 5% of the           
  outstanding shares of the Fund and it owns 7% of the outstanding shares of
 the Fund. AIM has an agreement with this entity to sell shares. The Fund,
AIM and/or AIM affiliates may make payments to this entity, which is    
 considered to be related to the Fund, for providing services to the Fund,
AIM and/or AIM affiliates including but not limited to services such as 
  securities brokerage, distribution, third party record keeping and account
 servicing. The Trust has no knowledge as to whether all or any portion of
  the shares owned of record by this shareholder is also owned beneficially.

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NOTE 14--FINANCIAL HIGHLIGHTS                                                   

The following schedule presents financial highlights for a share of the Fund    
outstanding throughout the periods indicated.                                   

                                                        [Enlarge/Download Table]

                                                                                        CLASS A                                     
                                                       --------------------------------------------------------------------------   
                                                                                YEAR ENDED DECEMBER 31,                             
                                                       --------------------------------------------------------------------------   
                                                          2004               2003          2002          2001             2000      
---------------------------------------------------------------------------------------------------------------------------------   
                                                                                                                                    
Net asset value, beginning of period                   $    23.93         $    20.81    $    25.94    $    30.10       $    32.69   
---------------------------------------------------------------------------------------------------------------------------------   
Income from investment operations:                                                                                                  
  Net investment income                                      0.32               0.35(a)       0.49(a)       0.71(a)(b)       0.92(a)
---------------------------------------------------------------------------------------------------------------------------------   
  Net gains (losses) on securities (both realized and                                                                               
    unrealized)                                              1.49               3.20         (5.09)        (4.14)           (2.23)  
=================================================================================================================================   
    Total from investment operations                         1.81               3.55         (4.60)        (3.43)           (1.31)  
=================================================================================================================================   
Less distributions:                                                                                                                 
  Dividends from net investment income                      (0.44)             (0.43)        (0.53)        (0.73)           (0.79)  
---------------------------------------------------------------------------------------------------------------------------------   
  Distributions from net realized gains                        --                 --            --            --            (0.49)  
=================================================================================================================================   
    Total distributions                                     (0.44)             (0.43)        (0.53)        (0.73)           (1.28)  
=================================================================================================================================   
Net asset value, end of period                         $    25.30         $    23.93    $    20.81    $    25.94       $    30.10   
_________________________________________________________________________________________________________________________________   
=================================================================================================================================   
Total return(c)                                              7.65%             17.23%       (17.85)%      (11.36)%          (4.18)% 
_________________________________________________________________________________________________________________________________   
=================================================================================================================================   
Ratios/supplemental data:                                                                                                           
Net assets, end of period (000s omitted)               $1,049,415         $1,297,378    $1,434,164    $2,284,776       $2,507,641   
_________________________________________________________________________________________________________________________________   
=================================================================================================================================   
Ratio of expenses to average net assets                      1.07%(d)(e)        1.10%         1.06%         1.01%            0.96%  
=================================================================================================================================   
Ratio of net investment income to average net assets         1.38%(d)           1.60%         2.11%         2.60%(b)         2.80%  
_________________________________________________________________________________________________________________________________   
=================================================================================================================================   
Portfolio turnover rate                                        39%               114%           78%           73%              55%  
_________________________________________________________________________________________________________________________________   
=================================================================================================================================   

(a)  Calculated using average shares outstanding.                               
(b)  As required, effective January 1, 2001, the Fund adopted the provisions    
of the AICPA Audit and Accounting Guide for Investment Companies and  
  began amortizing premiums on debt securities. Had the Fund not amortized
premiums on debt securities, the net investment income per share would
have been $0.73 and the ratio of net investment income to average net 
assets would have been 2.67%. In accordance with the AICPA Audit and  
Accounting Guide for Investment Companies, Per share and ratios for   
 periods prior to January 1, 2001 have not been restated to reflect this
change in presentation.                                               
(c)  Includes adjustments in accordance with accounting principles generally    
accepted in the United States of America and as such, the net asset   
 value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for  
shareholder transactions. Does not include sales charges.             
(d)  Ratios are based on average daily net assets of $1,155,013,999.            
(e)  After fee waivers and/or expense reimbursements. Ratio of expenses to      
  average net assets prior to fee waivers and/or expense reimbursements is
1.08%.                                                                

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NOTE 14--FINANCIAL HIGHLIGHTS (CONTINUED)                                       

                                                        [Enlarge/Download Table]

                                                                                           CLASS B                                  
                                                             --------------------------------------------------------------------   
                                                                                   YEAR ENDED DECEMBER 31,                          
                                                             --------------------------------------------------------------------   
                                                               2004             2003        2002         2001             2000      
---------------------------------------------------------------------------------------------------------------------------------   
                                                                                                                                    
Net asset value, beginning of period                         $  23.87         $  20.77    $  25.88    $    30.01       $    32.61   
---------------------------------------------------------------------------------------------------------------------------------   
Income from investment operations:                                                                                                  
  Net investment income                                          0.14             0.19(a)     0.31(a)       0.50(a)(b)       0.66(a)
---------------------------------------------------------------------------------------------------------------------------------   
  Net gains (losses) on securities (both realized and                                                                               
    unrealized)                                                  1.50             3.17       (5.06)        (4.11)           (2.23)  
=================================================================================================================================   
    Total from investment operations                             1.64             3.36       (4.75)        (3.61)           (1.57)  
=================================================================================================================================   
Less distributions:                                                                                                                 
  Dividends from net investment income                          (0.26)           (0.26)      (0.36)        (0.52)           (0.54)  
---------------------------------------------------------------------------------------------------------------------------------   
  Distributions from net realized gains                            --               --          --            --            (0.49)  
=================================================================================================================================   
    Total distributions                                         (0.26)           (0.26)      (0.36)        (0.52)           (1.03)  
=================================================================================================================================   
Net asset value, end of period                               $  25.25         $  23.87    $  20.77    $    25.88       $    30.01   
_________________________________________________________________________________________________________________________________   
=================================================================================================================================   
Total return(c)                                                  6.91%           16.29%     (18.46)%      (12.01)%          (4.93)% 
_________________________________________________________________________________________________________________________________   
=================================================================================================================================   
Ratios/supplemental data:                                                                                                           
Net assets, end of period (000s omitted)                     $604,378         $739,424    $766,330    $1,176,679       $1,358,823   
_________________________________________________________________________________________________________________________________   
=================================================================================================================================   
Ratio of expenses to average net assets                          1.82%(d)(e)      1.85%       1.81%         1.76%            1.73%  
=================================================================================================================================   
Ratio of net investment income to average net assets             0.63%(d)         0.85%       1.36%         1.86%(b)         2.03%  
_________________________________________________________________________________________________________________________________   
=================================================================================================================================   
Portfolio turnover rate                                            39%             114%         78%           73%              55%  
_________________________________________________________________________________________________________________________________   
=================================================================================================================================   

(a)  Calculated using average shares outstanding.                               
(b)  As required, effective January 1, 2001, the Fund adopted the provisions    
of the AICPA Audit and Accounting Guide for Investment Companies and  
  began amortizing premiums on debt securities. Had the Fund not amortized
premiums on debt securities, the net investment income per share would
have been $0.52 and the ratio of net investment income to average net 
assets would have been 1.93%. In accordance with the AICPA Audit and  
Accounting Guide for Investment Companies, per share and ratios for   
 periods prior to January 1, 2001 have not been restated to reflect this
change in presentation.                                               
(c)  Includes adjustments in accordance with accounting principles generally    
accepted in the United States of America and as such, the net asset   
 value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for  
shareholder transactions. Does not include sales charges.             
(d)  Ratios are based on average daily net assets of $671,079,230.              
(e)  After fee waivers and/or expense reimbursements. Ratio of expenses to      
  average net assets prior to fee waivers and/or expense reimbursements is
1.83%.                                                                

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NOTE 14--FINANCIAL HIGHLIGHTS (CONTINUED)                                       

                                                        [Enlarge/Download Table]

                                                                                          CLASS C                                
                                                              ----------------------------------------------------------------   
                                                                                  YEAR ENDED DECEMBER 31,                        
                                                              ----------------------------------------------------------------   
                                                                2004             2003        2002        2001           2000     
------------------------------------------------------------------------------------------------------------------------------   
                                                                                                                                 
Net asset value, beginning of period                          $  23.91         $  20.80    $  25.92    $  30.05       $  32.65   
------------------------------------------------------------------------------------------------------------------------------   
Income from investment operations:                                                                                               
  Net investment income                                           0.14             0.19(a)     0.31(a)     0.50(a)(b)     0.66(a)
------------------------------------------------------------------------------------------------------------------------------   
  Net gains (losses) on securities (both realized and                                                                            
    unrealized)                                                   1.50             3.18       (5.07)      (4.11)         (2.23)  
==============================================================================================================================   
    Total from investment operations                              1.64             3.37       (4.76)      (3.61)         (1.57)  
==============================================================================================================================   
Less distributions:                                                                                                              
  Dividends from net investment income                           (0.26)           (0.26)      (0.36)      (0.52)         (0.54)  
------------------------------------------------------------------------------------------------------------------------------   
  Distributions from net realized gains                             --               --          --          --          (0.49)  
==============================================================================================================================   
    Total distributions                                          (0.26)           (0.26)      (0.36)      (0.52)         (1.03)  
==============================================================================================================================   
Net asset value, end of period                                $  25.29         $  23.91    $  20.80    $  25.92       $  30.05   
______________________________________________________________________________________________________________________________   
==============================================================================================================================   
Total return(c)                                                   6.90%           16.32%     (18.46)%    (11.99)%        (4.93)% 
______________________________________________________________________________________________________________________________   
==============================================================================================================================   
Ratios/supplemental data:                                                                                                        
Net assets, end of period (000s omitted)                      $211,297         $264,513    $302,346    $483,644       $365,510   
______________________________________________________________________________________________________________________________   
==============================================================================================================================   
Ratio of expenses to average net assets                           1.82%(d)(e)      1.85%       1.81%       1.76%          1.73%  
==============================================================================================================================   
Ratio of net investment income to average net assets              0.63%(d)         0.85%       1.36%       1.85%(b)       2.03%  
______________________________________________________________________________________________________________________________   
==============================================================================================================================   
Portfolio turnover rate                                             39%             114%         78%         73%            55%  
______________________________________________________________________________________________________________________________   
==============================================================================================================================   

(a)  Calculated using average shares outstanding.                               
(b)  As required, effective January 1, 2001, the Fund adopted the provisions    
of the AICPA Audit and Accounting Guide for Investment Companies and  
  began amortizing premiums on debt securities. Had the Fund not amortized
premiums on debt securities, the net investment income per share would
have been $0.52 and the ratio of net investment income to average net 
assets would have been 1.92%. In accordance with the AICPA Audit and  
Accounting Guide for Investment Companies, per share and ratios for   
 periods prior to January 1, 2001 have not been restated to reflect this
change in presentation.                                               
(c)  Includes adjustments in accordance with accounting principles generally    
accepted in the United States of America and as such, the net asset   
 value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for  
shareholder transactions. Does not include sales charges.             
(d)  Ratios are based on average daily net assets of $234,948,213.              
(e)  After fee waivers and/or expense reimbursements. Ratio of expenses to      
  average net assets prior to fee waivers and/or expense reimbursements is
1.83%.                                                                

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NOTE 14--FINANCIAL HIGHLIGHTS (CONTINUED)                                       

                                                        [Enlarge/Download Table]

                                                                             CLASS R                 
                                                              -------------------------------------- 
                                                                                       JUNE 3, 2002  
                                                                   YEAR ENDED           (DATE SALES  
                                                                  DECEMBER 31,         COMMENCED) TO 
                                                              ---------------------    DECEMBER 31,  
                                                               2004           2003         2002      
---------------------------------------------------------------------------------------------------- 
                                                                                                     
Net asset value, beginning of period                          $23.95         $20.83       $ 23.73    
---------------------------------------------------------------------------------------------------- 
Income from investment operations:                                                                   
  Net investment income                                         0.29           0.30(a)       0.22(a) 
---------------------------------------------------------------------------------------------------- 
  Net gains (losses) on securities (both realized and                                                
    unrealized)                                                 1.47           3.19         (2.78)   
==================================================================================================== 
    Total from investment operations                            1.76           3.49         (2.56)   
==================================================================================================== 
Less distributions from net investment income                  (0.38)         (0.37)        (0.34)   
==================================================================================================== 
Net asset value, end of period                                $25.33         $23.95       $ 20.83    
____________________________________________________________________________________________________ 
==================================================================================================== 
Total return(b)                                                 7.43%         16.92%       (10.82)%  
____________________________________________________________________________________________________ 
==================================================================================================== 
Ratios/supplemental data:                                                                            
Net assets, end of period (000s omitted)                      $5,621         $3,812       $   293    
____________________________________________________________________________________________________ 
==================================================================================================== 
Ratio of expenses to average net assets                         1.32%(c)(d)    1.35%         1.33%(e)
==================================================================================================== 
Ratio of net investment income to average net assets            1.13%(c)       1.35%         1.83%(e)
____________________________________________________________________________________________________ 
==================================================================================================== 
Portfolio turnover rate(f)                                        39%           114%           78%   
____________________________________________________________________________________________________ 
==================================================================================================== 

(a)  Calculated using average shares outstanding.                               
(b)  Includes adjustments in accordance with accounting principles generally    
accepted in the United States of America and as such, the net asset   
 value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for  
  shareholder transactions. Not annualized for periods less than one year.
(c)  Ratios are based on average daily net assets of $4,609,890.                
(d)  After fee waivers and/or expense reimbursements. Ratio of expenses to      
  average net assets prior to fee waivers and/or expense reimbursements is
1.33%.                                                                
(e)  Annualized.                                                                
(f)  Not annualized for periods less than one year.                             

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NOTE 14--FINANCIAL HIGHLIGHTS (CONTINUED)                                       

                                                        [Enlarge/Download Table]

                                                                      INSTITUTIONAL CLASS          
                                                              ------------------------------------ 
                                                                                       MARCH 15,   
                                                                                         2002      
                                                                  YEAR ENDED          (DATE SALES  
                                                                 DECEMBER 31,        COMMENCED) TO 
                                                              -------------------    DECEMBER 31,  
                                                               2004         2003         2002      
-------------------------------------------------------------------------------------------------- 
                                                                                                   
Net asset value, beginning of period                          $23.94       $20.82       $ 25.81    
-------------------------------------------------------------------------------------------------- 
Income from investment operations:                                                                 
  Net investment income                                         0.43         0.44(a)       0.44(a) 
-------------------------------------------------------------------------------------------------- 
  Net gains (losses) on securities (both realized and                                              
    unrealized)                                                 1.49         3.20         (4.83)   
================================================================================================== 
    Total from investment operations                            1.92         3.64         (4.39)   
================================================================================================== 
Less dividends from net investment income                      (0.54)       (0.52)        (0.60)   
================================================================================================== 
Net asset value, end of period                                $25.32       $23.94       $ 20.82    
__________________________________________________________________________________________________ 
================================================================================================== 
Total return(b)                                                 8.10%       17.71%       (17.16)%  
__________________________________________________________________________________________________ 
================================================================================================== 
Ratios/supplemental data:                                                                          
Net assets, end of period (000s omitted)                      $   11       $   10       $     8    
__________________________________________________________________________________________________ 
================================================================================================== 
Ratio of expenses to average net assets:                                                           
  With fee waivers and/or expense reimbursements                0.68%(c)     0.68%         0.67%(d)
-------------------------------------------------------------------------------------------------- 
  Without fee waivers and/or expense reimbursements             0.83%(c)     1.13%         0.80%(d)
================================================================================================== 
Ratio of net investment income to average net assets            1.77%(c)     2.02%         2.50%(d)
__________________________________________________________________________________________________ 
================================================================================================== 
Portfolio turnover rate(e)                                        39%         114%           78%   
__________________________________________________________________________________________________ 
================================================================================================== 

(a)  Calculated using average shares outstanding.                               
(b)  Includes adjustments in accordance with accounting principles generally    
accepted in the United States of America and as such, the net asset   
 value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for  
  shareholder transactions. Not annualized for periods less than one year.
(c)  Ratios are based on average daily net assets of $9,981.                    
(d)  Annualized.                                                                
(e)  Not annualized for periods less than one year.                             

NOTE 15--LEGAL PROCEEDINGS                                                      

Terms used in the Legal Proceedings Note are defined terms solely for the       
purpose of this note.                                                           

SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING         

On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment
advisor to certain AIM Funds) and A I M Advisors, Inc. ("AIM") (the Fund's      
investment advisor) reached final settlements with certain regulators, including
without limitation the Securities and Exchange Commission ("SEC"), the New York 
Attorney General ("NYAG") and the Colorado Attorney General ("COAG"), to resolve
civil enforcement actions and investigations related to market timing activity  
and related issues in the AIM Funds, including those formerly advised by IFG.   
These regulators alleged, in substance, that IFG and AIM failed to disclose in  
the prospectuses for the AIM Funds that they advised and to the independent     
directors/trustees of such Funds that they had entered into certain arrangements
permitting market timing of such Funds, thereby breaching their fiduciary duties
to such Funds. As a result of the foregoing, the regulators alleged that IFG and
AIM breached various Federal and state securities, business and consumer        
protection laws. On the same date, A I M Distributors, Inc. ("ADI") (the        
distributor of the retail AIM Funds) reached a final settlement with the SEC to 
resolve an investigation relating to market timing activity and related issues  
in the AIM Funds. The SEC also alleged that ADI violated various Federal        
securities laws. The SEC also has settled related market timing enforcement     
actions brought against certain former officers and employees of IFG.           

  Under the terms of the settlements, IFG agreed to pay a total of $325 million,
of which $110 million is civil penalties. Of this $325 million total payment,   
half has been paid and the remaining half will be paid on or before December 31,
2005. AIM and ADI agreed to pay a total of $50 million, of which $30 million is 
civil penalties, all of which has been paid. The entire $325 million IFG        
settlement payment will be made available for distribution to the shareholders  
of those AIM Funds that IFG formerly advised that were harmed by market timing  
activity, and the entire $50 million settlement payment by AIM and ADI will be  
made available for distribution to the shareholders of those AIM Funds advised  
by AIM that were harmed by market timing activity, all as to be determined by an
independent distribution consultant. The settlement payments will be distributed
in accordance with a methodology to be determined by the independent            
distribution consultant, in consultation with AIM and the independent trustees  
of the AIM Funds and acceptable to the staff of the SEC. Under the settlements  
with the NYAG and COAG, AIM has agreed to reduce management fees on certain     
equity and balanced AIM Funds by $15 million per year for the next five years,  
based upon effective fee rates and assets under management as of July 1, 2004,  
and not to increase certain management fees.                                    

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NOTE 15--LEGAL PROCEEDINGS (CONTINUED)                                          

Under the terms of the settlements, AIM will make certain governance and    
compliance reforms, including maintaining an internal controls committee and    
retaining an independent compliance consultant and a corporate ombudsman. Also, 
commencing in 2007 and at least once every other year thereafter, AIM will      
undergo a compliance review by an independent third party. In addition, under   
the terms of the settlements, AIM has undertaken to cause the AIM Funds to      
operate in accordance with certain governance policies and practices, including 
retaining a full-time independent senior officer whose duties will include      
monitoring compliance and managing the process by which proposed management fees
to be charged the AIM Funds are negotiated. Also, commencing in 2008 and not    
less than every fifth calendar year thereafter, the AIM Funds will hold         
shareholder meetings at which their Boards of Trustees will be elected.         

At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"), 
the parent company of IFG and AIM, has agreed to pay expenses incurred by such  
Funds related to market timing matters.                                         

 The SEC has also settled market timing enforcement actions against Raymond R.
Cunningham (the former president and chief executive officer of IFG and a former
member of the board of directors of the AIM Funds formerly advised by IFG),     
Timothy J. Miller (the former chief investment officer and a former portfolio   
manager for IFG), Thomas A. Kolbe (the former national sales manager of IFG) and
Michael D. Legoski (a former assistant vice president in IFG's sales            
department). As part of these settlements, the SEC ordered these individuals to 
pay restitution and civil penalties in various amounts and prohibited them from 
associating with, or serving as an officer or director of, an investment        
advisor, broker, dealer and/or investment company, as applicable, for certain   
periods of time.                                                                

 The payments made in connection with the above-referenced settlements by IFG,
AIM and ADI will total approximately $375 million (not including AIM's agreement
to reduce management fees on certain equity and balanced AIM Funds by $15       
million per year for the next five years, based upon effective fee rates and    
assets under management as of July 1, 2004). The manner in which the settlement 
payments will be distributed is unknown at the present time and will be         
determined by an independent distribution consultant appointed under the        
settlement agreements. Therefore, management of AIM and the Fund are unable at  
the present time to estimate the impact, if any, that the distribution of the   
settlement payments may have on the Fund or whether such distribution will have 
an impact on the Fund's financial statements in the future.                     

  At the present time, management of AIM and the Fund are unable to estimate the
impact, if any, that the outcome of the Regulatory Inquiries and Pending        
Litigation described below may have on AIM, ADI or the Fund.                    

REGULATORY INQUIRIES AND PENDING LITIGATION                                     

The mutual fund industry as a whole is currently subject to regulatory      
inquiries and litigation related to a wide range of issues. These issues        
include, among others, market timing activity, late trading, fair value pricing,
excessive or improper advisory and/or distribution fees, mutual fund sales      
practices, including but not limited to revenue sharing and directed-brokerage  
arrangements, investments in securities of other registered investment          
companies, contractual plans, issues related to Section 529 college savings     
plans, procedures for locating lost security holders and participation in class 
action settlements.                                                             

As described more fully below, IFG and AIM are the subject of a number of   
ongoing regulatory inquiries and civil lawsuits related to one or more of the   
issues currently being scrutinized by various Federal and state regulators,     
including but not limited to those issues described above. Additional regulatory
actions and/or civil lawsuits related to the above or other issues may be filed 
against the AIM Funds, IFG, AIM and/or related entities and individuals in the  
future. Additional regulatory inquiries related to the above or other issues    
also may be received by the AIM Funds, IFG, AIM and/or related entities and     
individuals in the future.                                                      

Ongoing Regulatory Inquiries Concerning IFG and AIM                             

IFG, certain related entities, certain of their current and former officers 
and/or certain of the AIM Funds formerly advised by IFG have received regulatory
inquiries in the form of subpoenas or other oral or written requests for        
information and/or documents related to one or more of the following issues,    
some of which concern one or more such Funds: market timing activity, late      
trading, fair value pricing, excessive or improper advisory and/or distribution 
fees, mutual fund sales practices, including revenue sharing and                
directed-brokerage arrangements, and investments in securities of other         
registered investment companies. These regulators include the SEC, the NASD,    
Inc. ("NASD"), the Florida Department of Financial Services, the Attorney       
General of the State of West Virginia, the West Virginia Securities Commission  
and the Bureau of Securities of the State of New Jersey. IFG and certain of     
these other parties also have received more limited inquiries from the United   
States Department of Labor ("DOL") and the United States Attorney's Office for  
the Southern District of New York, some of which concern one or more of the AIM 
Funds formerly advised by IFG. IFG is providing full cooperation with respect to
these inquiries.                                                                

AIM, certain related entities, certain of their current and former officers 
and/or certain of the AIM Funds have received regulatory inquiries in the form  
of subpoenas or other oral or written requests for information and/or documents 
related to one or more of the following issues, some of which concern one or    
more AIM Funds: market timing activity, late trading, fair value pricing,       
excessive or improper advisory and/or distribution fees, mutual fund sales      
practices, including revenue sharing and directed-brokerage arrangements,       
investments in securities of other registered investment companies, contractual 
plans, issues related to Section 529 college savings plans and procedures for   
locating lost securityholders. These regulators include the SEC, the NASD, the  
Department of Banking for the State of Connecticut, the Attorney General of the 
State of West Virginia, the West Virginia Securities Commission and the Bureau  
of Securities of the State of New Jersey. AIM and certain of these other parties
also have received more limited inquiries from the SEC, the NASD, the DOL, the  
Internal Revenue Service, the United States Attorney's Office for the Southern  
District of New York, the United States Attorney's Office for the Central       
District of California, the United States Attorney's Office for the District of 
Massachusetts, the Massachusetts Securities Division, the U.S. Postal           

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NOTE 15--LEGAL PROCEEDINGS (CONTINUED)                                          

Inspection Service and the Commodity Futures Trading Commission, some of which  
concern one or more AIM Funds. AIM is providing full cooperation with respect to
these inquiries.                                                                

Private Civil Actions Alleging Market Timing                                    

Multiple civil lawsuits, including purported class action and shareholder   
derivative suits, have been filed against various parties (including, depending 
on the lawsuit, certain AIM Funds, IFG, AIM, AIM Management, AMVESCAP, certain  
related entities, certain of their current and former officers and/or certain   
unrelated third parties) making allegations that are similar in many respects to
those in the settled regulatory actions brought by the SEC, the NYAG and the    
COAG concerning market timing activity in the AIM Funds. These lawsuits allege a
variety of theories of recovery, including but not limited to: (i) violation of 
various provisions of the Federal and state securities laws; (ii) violation of  
various provisions of ERISA; (iii) breach of fiduciary duty; and/or (iv) breach 
of contract. These lawsuits were initiated in both Federal and state courts and 
seek such remedies as compensatory damages; restitution; injunctive relief;     
disgorgement of management fees; imposition of a constructive trust; removal of 
certain directors and/or employees; various corrective measures under ERISA;    
rescission of certain Funds' advisory agreements; interest; and attorneys' and  
experts' fees.                                                                  

 All lawsuits based on allegations of market timing, late trading, and related
issues have been transferred to the United States District Court for the        
District of Maryland (the "MDL Court") for consolidated or coordinated pre-trial
proceedings. Pursuant to an Order of the MDL Court, plaintiffs consolidated     
their claims for pre-trial purposes into three amended complaints against       
various AIM- and IFG-related parties: (i) a Consolidated Amended Class Action   
Complaint purportedly brought on behalf of shareholders of the AIM Funds; (ii) a
Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of 
the AIM Funds and fund registrants; and (iii) an Amended Class Action Complaint 
for Violations of the Employee Retirement Income Securities Act ("ERISA")       
purportedly brought on behalf of participants in AMVESCAP's 401(k) plan. The    
plaintiffs in one of the underlying lawsuits continue to seek remand of their   
lawsuit to state court.                                                         

Private Civil Actions Alleging Improper Use of Fair Value Pricing               

Multiple civil class action lawsuits have been filed against various parties
(including, depending on the lawsuit, certain AIM Funds, IFG and/or AIM)        
alleging that certain AIM Funds inadequately employed fair value pricing. These 
lawsuits allege a variety of theories of recovery, including but not limited to:
(i) violations of various provisions of the Federal securities laws; (ii) common
law breach of duty; and (iii) common law negligence and gross negligence. These 
lawsuits have been filed in both Federal and state courts and seek such remedies
as compensatory and punitive damages; interest; and attorneys' fees and costs.  

Private Civil Actions Alleging Excessive Advisory and/or Distribution Fees      

Multiple civil lawsuits, including purported class action and shareholder   
derivative suits, have been filed against various parties (including, depending 
on the lawsuit, IFG, AIM, INVESCO Institutional (N.A.), Inc. ("IINA"), ADI      
and/or INVESCO Distributors, Inc. ("INVESCO Distributors")) alleging that the   
defendants charged excessive advisory and/or distribution fees and failed to    
pass on to shareholders the perceived savings generated by economies of scale.  
Certain of these lawsuits also allege that the defendants adopted unlawful      
distribution plans. These lawsuits allege a variety of theories of recovery,    
including but not limited to: (i) violation of various provisions of the Federal
securities laws; (ii) breach of fiduciary duty; and/or (iii) breach of contract.
These lawsuits have been filed in Federal courts and seek such remedies as      
damages; injunctive relief; rescission of certain Funds' advisory agreements and
distribution plans; interest; prospective relief in the form of reduced fees;   
and attorneys' and experts' fees. All of these lawsuits have been transferred to
the United States District Court for the Southern District of Texas, Houston    
Division by order of the applicable United States District Court in which they  
were initially filed. The plaintiff in one of these lawsuits has challenged this
order.                                                                          

Private Civil Actions Alleging Improper Charging of Distribution Fees on Limited
Offering Funds or Share Classes                                                 

Multiple civil lawsuits, including shareholder derivative suits, have been  
filed against various parties (including, depending on the lawsuit, IFG, AIM,   
ADI and/or certain of the trustees of the AIM Funds) alleging that the          
defendants breached their fiduciary duties by charging distribution fees while  
funds and/or specific share classes were closed generally to new investors      
and/or while other share classes of the same fund were not charged the same     
distribution fees. These lawsuits allege a variety of theories of recovery,     
including but not limited to: (i) violation of various provisions of the Federal
securities laws; and (ii) breach of fiduciary duty. These lawsuits have been    
filed in Federal courts and seek such remedies as damages; injunctive relief;   
and attorneys' and experts' fees.                                               

Private Civil Actions Alleging Improper Mutual Fund Sales Practices and         
Directed-Brokerage Arrangements                                                 

Multiple civil lawsuits, including purported class action and shareholder   
derivative suits, have been filed against various parties (including, depending 
on the lawsuit, AIM Management, IFG, AIM, AIM Investment Services, Inc. ("AIS") 
and/or certain of the trustees of the AIM Funds) alleging that the defendants   
improperly used the assets of the AIM Funds to pay brokers to aggressively      
promote the sale of the AIM Funds over other mutual funds and that the          
defendants concealed such payments from investors by disguising them as         
brokerage commissions. These lawsuits allege a variety of theories of recovery, 
including but not limited to: (i) violation of various provisions of the Federal
securities laws; (ii) breach of fiduciary duty; and (iii) aiding and abetting a 
breach of fiduciary duty. These lawsuits have been filed in Federal courts and  
seek such remedies as compensatory and punitive damages; rescission of certain  
Funds' advisory agreements and distribution plans and recovery of all fees paid;
an accounting of all fund-related fees, commissions and soft dollar payments;   
restitution of all unlawfully or discriminatorily obtained fees and charges; and
attorneys' and experts' fees.                                                   

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NOTE 15--LEGAL PROCEEDINGS (CONTINUED)                                          

Private Civil Action Alleging Failure to Ensure Participation in Class Action   
Settlements                                                                     

A civil lawsuit, purporting to be a class action lawsuit, has been filed    
against AIM, IINA, A I M Capital Management, Inc. and the trustees of the AIM   
Funds alleging that the defendants breached their fiduciary duties by failing to
ensure that the AIM Funds participated in class action settlements in which the 
AIM Funds were eligible to participate. This lawsuit alleges as theories of     
recovery: (i) violation of various provisions of the Federal securities laws;   
(ii) common law breach of fiduciary duty; and (iii) common law negligence. This 
lawsuit has been filed in Federal court and seeks such remedies as compensatory 
and punitive damages; forfeiture of all commissions and fees paid by the class  
of plaintiffs; and costs and attorneys' fees.                                   
*                                       *                                      *
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

As a result of the matters discussed above, investors in the AIM Funds might
react by redeeming their investments. This might require the Funds to sell      
investments to provide for sufficient liquidity and could also have an adverse  
effect on the investment performance of the Funds.                              

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                         

To the Board of Trustees and Shareholders of                                    
AIM Basic Balanced 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 Basic Balanced Fund (one of the
funds constituting AIM Funds Group hereafter referred to as the "Fund") at      
December 31, 2004, the results of its operations for the year then ended, the   
changes in its net assets for each of the two years in the period then ended and
the financial highlights for each of the periods indicated in conformity with   
accounting principles generally accepted in the United States of America. These 
financial statements and financial highlights (hereafter referred to as         
"financial statements") are the responsibility of the Fund's management; our    
responsibility is to express an opinion on these financial statements based on  
our audits. We conducted our audits of these financial statements in accordance 
with the standards of the Public Company Accounting Oversight Board (United     
States). Those standards require that we plan and perform the audit to obtain   
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting 
the amounts and disclosures in the financial statements, assessing the          
accounting principles used and significant estimates made by management, and    
evaluating the overall financial statement presentation. We believe that our    
audits, which included confirmation of securities at December 31, 2004 by       
correspondence with the custodian and brokers, provide a reasonable basis for   
our opinion.                                                                    

/S/ PRICEWATERHOUSECOOPERS LLP                                                  

February 18, 2005                                                               
Houston, Texas                                                                  

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FINANCIALS                                                                      

SCHEDULE OF INVESTMENTS                                                         

December 31, 2004                                                               

                                                                [Download Table]

                                                                  MARKET   
                                                 SHARES           VALUE    
---------------------------------------------------------------------------
                                                                           
STOCKS & OTHER EQUITY INTERESTS-66.09%                                     

ADVERTISING-2.80%                                                          

Interpublic Group of Cos., Inc. (The)(a)          168,000      $  2,251,200
---------------------------------------------------------------------------
Omnicom Group Inc.                                 31,900         2,689,808
===========================================================================
                                                                  4,941,008
===========================================================================

AEROSPACE & DEFENSE-1.03%                                                  

Honeywell International Inc.                       51,500         1,823,615
===========================================================================

ALUMINUM-0.90%                                                             

Alcoa Inc.                                         50,900         1,599,278
===========================================================================

APPAREL RETAIL-1.17%                                                       

Gap, Inc. (The)                                    97,800         2,065,536
===========================================================================

ASSET MANAGEMENT & CUSTODY BANKS-1.54%                                     

Bank of New York Co., Inc. (The)                   81,200         2,713,704
===========================================================================

BUILDING PRODUCTS-2.37%                                                    

American Standard Cos. Inc.(a)                     35,800         1,479,256
---------------------------------------------------------------------------
Masco Corp.                                        74,000         2,703,220
===========================================================================
                                                                  4,182,476
===========================================================================

COMMUNICATIONS EQUIPMENT-0.64%                                             

Motorola, Inc.                                     66,300         1,140,360
===========================================================================

CONSTRUCTION & FARM MACHINERY & HEAVY                                      
  TRUCKS-0.50%                                                             

Deere & Co.                                        11,900           885,360
===========================================================================

CONSUMER ELECTRONICS-2.08%                                                 

Koninklijke (Royal) Philips Electronics                                    
  N.V.-New York Shares (Netherlands)               58,700         1,555,550
---------------------------------------------------------------------------
Sony Corp.-ADR (Japan)                             54,500         2,123,320
===========================================================================
                                                                  3,678,870
===========================================================================

DATA PROCESSING & OUTSOURCED SERVICES-2.90%                                

Ceridian Corp.(a)                                  88,300         1,614,124
---------------------------------------------------------------------------
First Data Corp.                                   82,600         3,513,804
===========================================================================
                                                                  5,127,928
===========================================================================

DEPARTMENT STORES-0.85%                                                    

May Department Stores Co. (The)                    51,100         1,502,340
===========================================================================

DIVERSIFIED CHEMICALS-0.52%                                                

Dow Chemical Co. (The)                             18,500           915,935
===========================================================================

DIVERSIFIED COMMERCIAL SERVICES-1.77%                                      

Cendant Corp.                                     133,600         3,123,568
===========================================================================

ENVIRONMENTAL SERVICES-1.97%                                               

Waste Management, Inc.                            116,100         3,476,034
===========================================================================

                                                                [Download Table]

                                                                  MARKET   
                                                 SHARES           VALUE    
---------------------------------------------------------------------------
                                                                           

FOOD RETAIL-1.97%                                                          

Kroger Co. (The)(a)                               120,400      $  2,111,816
---------------------------------------------------------------------------
Safeway Inc.(a)                                    69,000         1,362,060
===========================================================================
                                                                  3,473,876
===========================================================================

GENERAL MERCHANDISE STORES-1.67%                                           

Target Corp.                                       56,700         2,944,431
===========================================================================

HEALTH CARE DISTRIBUTORS-3.80%                                             

Cardinal Health, Inc.                              78,300         4,553,145
---------------------------------------------------------------------------
McKesson Corp.                                     69,000         2,170,740
===========================================================================
                                                                  6,723,885
===========================================================================

HEALTH CARE EQUIPMENT-1.33%                                                

Baxter International Inc.                          50,500         1,744,270
---------------------------------------------------------------------------
Waters Corp.(a)                                    12,800           598,912
===========================================================================
                                                                  2,343,182
===========================================================================

HEALTH CARE FACILITIES-1.17%                                               

HCA, Inc.                                          51,800         2,069,928
===========================================================================

HEALTH CARE SERVICES-0.31%                                                 

IMS Health Inc.                                    24,000           557,040
===========================================================================

INDUSTRIAL CONGLOMERATES-4.13%                                             

General Electric Co.                               70,300         2,565,950
---------------------------------------------------------------------------
Tyco International Ltd. (Bermuda)                 132,600         4,739,124
===========================================================================
                                                                  7,305,074
===========================================================================

INDUSTRIAL MACHINERY-1.53%                                                 

Illinois Tool Works Inc.                           29,100         2,696,988
===========================================================================

INSURANCE BROKERS-0.59%                                                    

Aon Corp.                                          43,500         1,037,910
===========================================================================

INTEGRATED OIL & GAS-0.11%                                                 

Shell Frontier Oil & Gas Inc.-Series B, 2.91%                              
  Floating Rate Pfd(b)                                  2           200,000
===========================================================================

INVESTMENT BANKING & BROKERAGE-2.77%                                       

Merrill Lynch & Co., Inc.                          39,000         2,331,030
---------------------------------------------------------------------------
Morgan Stanley                                     46,200         2,565,024
===========================================================================
                                                                  4,896,054
===========================================================================

MANAGED HEALTH CARE-1.89%                                                  

WellPoint Inc.(a)                                  29,100         3,346,500
===========================================================================

MOVIES & ENTERTAINMENT-1.66%                                               

Walt Disney Co. (The)                             105,500         2,932,900
===========================================================================

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                                                                [Download Table]

                                                                  MARKET   
                                                 SHARES           VALUE    
---------------------------------------------------------------------------
                                                                           

MULTI-LINE INSURANCE-1.00%                                                 

Hartford Financial Services Group, Inc. (The)      25,500      $  1,767,405
===========================================================================

OIL & GAS DRILLING-2.03%                                                   

Pride International, Inc.(a)                       43,100           885,274
---------------------------------------------------------------------------
Transocean Inc. (Cayman Islands)(a)                63,700         2,700,243
===========================================================================
                                                                  3,585,517
===========================================================================

OIL & GAS EQUIPMENT & SERVICES-2.54%                                       

Halliburton Co.                                    85,000         3,335,400
---------------------------------------------------------------------------
Schlumberger Ltd. (Netherlands)                    17,100         1,144,845
===========================================================================
                                                                  4,480,245
===========================================================================

OTHER DIVERSIFIED FINANCIAL SERVICES-4.53%                                 

ABN AMRO XVIII Custodial Receipts-Series                                   
  MM18, 2.79% Floating Rate Pfd. (Acquired                                 
  09/10/04-09/13/04; Cost $199,995)(c)(d)(e)            2           200,000
---------------------------------------------------------------------------
Citigroup Inc.                                     70,200         3,382,236
---------------------------------------------------------------------------
JPMorgan Chase & Co.                               96,928         3,781,161
---------------------------------------------------------------------------
Zurich RegCaPS Funding Trust III, 2.75%                                    
  Floating Rate Pfd. (Acquired 06/03/04-                                   
  09/28/04; Cost $635,805)(b)(d)(e)                   650           641,550
===========================================================================
                                                                  8,004,947
===========================================================================

PACKAGED FOODS & MEATS-1.05%                                               

Kraft Foods Inc.-Class A                           51,900         1,848,159
===========================================================================

PHARMACEUTICALS-4.96%                                                      

Pfizer Inc.                                        95,500         2,567,995
---------------------------------------------------------------------------
Sanofi-Aventis S.A. (France)(a)(f)                 49,212         3,926,609
---------------------------------------------------------------------------
Wyeth                                              53,200         2,265,788
===========================================================================
                                                                  8,760,392
===========================================================================

PROPERTY & CASUALTY INSURANCE-1.50%                                        

ACE Ltd. (Cayman Islands)                          62,100         2,654,775
===========================================================================

SYSTEMS SOFTWARE-2.21%                                                     

Computer Associates International, Inc.           125,900         3,910,454
===========================================================================

THRIFTS & MORTGAGE FINANCE-2.30%                                           

Fannie Mae                                         50,100         3,567,621
---------------------------------------------------------------------------
Fannie Mae-Series J, 4.72% Pfd(g)                   4,850           244,925
---------------------------------------------------------------------------
Fannie Mae-Series K, 3.00% Pfd(g)                   4,850           245,380
===========================================================================
                                                                  4,057,926
===========================================================================
    Total Stocks & Other Equity Interests                                  
      (Cost $94,667,867)                                        116,773,600
===========================================================================


                                               PRINCIPAL                   
                                                 AMOUNT                    
                                                                           
BONDS & NOTES-15.95%                                                       

ADVERTISING-0.03%                                                          

Interpublic Group of Cos., Inc. (The), Sr.                                 
  Unsec. Notes, 7.88%, 10/15/05(g)             $   48,000            49,521
===========================================================================

                                                                [Download Table]
---------------------------------------------------------------------------

                                               PRINCIPAL          MARKET   
                                                 AMOUNT           VALUE    
                                                                           

AEROSPACE & DEFENSE-0.02%                                                  

Lockheed Martin Corp.-Series A, Medium Term                                
  Notes, 8.66%, 11/30/06(g)                    $   35,000      $     38,289
===========================================================================

AUTO PARTS & EQUIPMENT-0.08%                                               

Lear Corp.-Series B, Sr. Unsec. Gtd Notes,                                 
  7.96%, 05/15/05(g)                              145,000           147,968
===========================================================================

AUTOMOBILE MANUFACTURERS-0.12%                                             

DaimlerChrysler N.A. Holding Corp., Unsec.                                 
  Gtd. Global Notes, 7.40%, 01/20/05(g)           110,000           110,245
---------------------------------------------------------------------------
General Motors Corp., Unsec. Global Notes,                                 
  6.25%, 05/01/05(g)                              100,000           100,945
===========================================================================
                                                                    211,190
===========================================================================

BROADCASTING & CABLE TV-1.08%                                              

Continental Cablevision, Inc., Sr. Unsec.                                  
  Deb.,                                                                    
  8.88%, 09/15/05(g)                              500,000           518,950
---------------------------------------------------------------------------
  9.50%, 08/01/13(g)                              100,000           106,645
---------------------------------------------------------------------------
Cox Communications, Inc., Unsec. Notes,                                    
  6.88%, 06/15/05(g)                               65,000            66,105
---------------------------------------------------------------------------
Cox Radio, Inc., Sr. Unsec. Notes, 6.63%,                                  
  02/15/06(g)                                      75,000            77,321
---------------------------------------------------------------------------
Lenfest Communications, Inc., Sr. Unsec.                                   
  Notes, 8.38%, 11/01/05(g)                       120,000           125,490
---------------------------------------------------------------------------
TCI Communications, Inc.,                                                  
  Sr. Notes, 7.25%, 08/01/05(g)                   175,000           179,195
---------------------------------------------------------------------------
  Sr. Unsec. Notes, 8.00%, 08/01/05(g)            125,000           128,524
---------------------------------------------------------------------------
Time Warner Cos., Inc.,                                                    
  Sr. Unsec. Gtd. Deb., 7.57%, 02/01/24(g)         65,000            76,461
---------------------------------------------------------------------------
  Unsec. Deb., 9.15%, 02/01/23(g)                 350,000           467,939
---------------------------------------------------------------------------
  Unsec. Notes, 7.75%, 06/15/05(g)                150,000           153,076
===========================================================================
                                                                  1,899,706
===========================================================================

CONSUMER FINANCE-3.59%                                                     

Associates Corp. of North America, Sr. Global                              
  Deb., 6.95%, 11/01/18(g)                        175,000           202,986
---------------------------------------------------------------------------
Capital One Bank, Sr. Global Notes, 8.25%,                                 
  06/15/05(g)                                     325,000           332,208
---------------------------------------------------------------------------
Capital One Capital I, Sub. Floating Rate                                  
  Bonds, 3.71%, 02/01/27 (Acquired 09/16/04;                               
  Cost $433,245)(b)(d)(e)(g)                      425,000           432,085
---------------------------------------------------------------------------
Capital One Financial Corp.,                                               
  Sr. Unsec. Notes, 7.25%, 05/01/06(g)            275,000           288,128
---------------------------------------------------------------------------
  Unsec. Notes, 7.13%, 08/01/08(g)                150,000           164,296
---------------------------------------------------------------------------
Ford Motor Credit Co.,                                                     
  Global Notes, 7.60%, 08/01/05(g)                600,000           613,674
---------------------------------------------------------------------------
  Notes, 6.75%, 05/15/05(g)                       300,000           303,762
---------------------------------------------------------------------------
  Unsec. Floating Rate Global Notes, 2.31%,                                
    04/28/05(b)(g)                                350,000           349,877
---------------------------------------------------------------------------
  Unsec. Global Notes,                                                     
    6.50%, 01/25/07(g)                            200,000           208,070
---------------------------------------------------------------------------
    6.88%, 02/01/06(g)                            450,000           464,008
---------------------------------------------------------------------------
    7.50%, 03/15/05(g)                            275,000           277,467
---------------------------------------------------------------------------
  Unsec. Notes, 7.75%, 03/15/05(g)                370,000           373,415
---------------------------------------------------------------------------

   FS-30

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                                               PRINCIPAL          MARKET   
                                                 AMOUNT           VALUE    
---------------------------------------------------------------------------
                                                                           
CONSUMER FINANCE-(CONTINUED)                                               

General Motors Acceptance Corp., Floating                                  
  Rate Medium Term Notes,                                                  
    4.23%, 05/19/05(b)(g)                      $  550,000      $    551,947
---------------------------------------------------------------------------
    4.44%, 03/04/05(b)(g)                         625,000           626,344
---------------------------------------------------------------------------
  Global Notes,                                                            
    4.50%, 07/15/06(g)                            190,000           190,410
---------------------------------------------------------------------------
    7.50%, 07/15/05(g)                            100,000(h)        102,122
---------------------------------------------------------------------------
  Medium Term Notes,                                                       
    4.15%, 02/07/05(g)                            150,000           150,169
---------------------------------------------------------------------------
    5.25%, 05/16/05(g)                            405,000           407,835
---------------------------------------------------------------------------
  Unsec. Unsub. Global Notes, 6.75%,                                       
    01/15/06(g)                                   300,000(h)        307,914
===========================================================================
                                                                  6,346,717
===========================================================================

DIVERSIFIED BANKS-1.67%                                                    

AB Spintab (Sweden), Bonds, 7.50% (Acquired                                
  02/12/04; Cost $245,524)(d)(g)(i)               220,000           233,684
---------------------------------------------------------------------------
American Savings Bank, Notes, 6.63%, 02/15/06                              
  (Acquired 03/05/03; Cost $27,726)(d)(e)(g)       25,000            25,721
---------------------------------------------------------------------------
Banco Nacional de Comercio Exterior S.N.C.                                 
  (Mexico), Notes, 3.88%, 01/21/09 (Acquired                               
  02/25/04; Cost $98,375)(d)(e)(g)                100,000            96,381
---------------------------------------------------------------------------
BankBoston Capital Trust IV, Gtd. Floating                                 
  Rate Notes, 3.04%, 06/08/28(b)(g)               250,000           241,402
---------------------------------------------------------------------------
Barclays Bank PLC (United Kingdom), Bonds,                                 
  8.55% (Acquired 11/05/03; Cost                                           
  $123,064)(d)(g)(i)                              100,000           121,188
---------------------------------------------------------------------------
Centura Capital Trust I, Gtd. Notes, 8.85%,                                
  06/01/27 (Acquired 05/22/03; Cost                                        
  $75,926)(d)(e)(g)                                60,000            70,801
---------------------------------------------------------------------------
Chohung Bank (South Korea), Unsec. Sub.                                    
  Second Tier Notes, 11.50%, 04/01/10                                      
  (Acquired 07/01/04; Cost $266,173)(d)(e)(g)     250,000           254,740
---------------------------------------------------------------------------
Corporacion Andina de Fomento (Venezuela),                                 
  Unsec. Global Notes, 6.88%, 03/15/12(g)         150,000           167,397
---------------------------------------------------------------------------
  Unsec. Yankee Notes, 8.88%, 06/01/05(g)         200,000           204,376
---------------------------------------------------------------------------
Daiwa P.B. Ltd. (Cayman Islands), Gtd. Sub.                                
  Floating Rate Medium Term Euro Notes,                                    
  3.09%(j)(i)                                     100,000            99,000
---------------------------------------------------------------------------
Danske Bank A/S (Denmark), First Tier Bonds,                               
  5.91% (Acquired 06/07/04; Cost                                           
  $100,000)(d)(g)(i)                              100,000           106,039
---------------------------------------------------------------------------
HSBC Capital Funding L.P. (United Kingdom),                                
  Gtd. Bonds, 4.61% (Acquired 11/05/03; Cost                               
  $46,626)(d)(g)(i)                                50,000            47,438
---------------------------------------------------------------------------
Lloyds Bank PLC-Series 1, Unsec. Sub. Euro                                 
  Dollar Notes, 2.94%(g)(i)(j)                    140,000           124,862
---------------------------------------------------------------------------
National Bank of Canada (Canada), Floating                                 
  Rate Euro Deb., 2.13%, 08/29/87(g)(j)            80,000            65,855
---------------------------------------------------------------------------
National Westminster Bank PLC (United                                      
  Kingdom)-Series B, Unsec. Sub. Floating                                  
  Rate Euro Notes, 2.13%(g)(i)(j)                 150,000           132,425
---------------------------------------------------------------------------
NBD Bank N.A. Michigan, Unsec. Sub. Deb.,                                  
  8.25%, 11/01/24(g)                              100,000           130,513
---------------------------------------------------------------------------

                                                                [Download Table]
---------------------------------------------------------------------------

                                               PRINCIPAL          MARKET   
                                                 AMOUNT           VALUE    
                                                                           
DIVERSIFIED BANKS-(CONTINUED)                                              

RBS Capital Trust I, Bonds, 4.71%(g)(i)        $   50,000      $     47,869
---------------------------------------------------------------------------
Wells Fargo & Co., Sr. Unsec. Global Notes,                                
  3.75%, 10/15/07(g)                              275,000           276,282
---------------------------------------------------------------------------
Wells Fargo Bank, N.A., Unsec. Sub. Global                                 
  Notes, 7.80%, 06/15/10(g)                       250,000           255,750
---------------------------------------------------------------------------
Woori Bank (South Korea), Unsec. Sub. Second                               
  Tier Notes, 11.75%, 03/01/10 (Acquired                                   
  07/01/04; Cost $264,725)(d)(e)(g)               250,000           256,550
===========================================================================
                                                                  2,958,273
===========================================================================

DIVERSIFIED CAPITAL MARKETS-0.13%                                          

UBS Preferred Funding Trust I, Gtd. Global                                 
  Bonds, 8.62%(g)(i)                              185,000           221,758
===========================================================================

ELECTRIC UTILITIES-0.58%                                                   

AmerenEnergy Generating Co.-Series C, Sr.                                  
  Unsec. Global Notes, 7.75%, 11/01/05(g)          20,000            20,777
---------------------------------------------------------------------------
Consolidated Edison Co. of New York-Series                                 
  96A, Unsec. Deb., 7.75%, 06/01/26(g)             55,000            59,851
---------------------------------------------------------------------------
Kansas City Power & Light Co., Sr. Unsec.                                  
  Notes, 7.13%, 12/15/05(g)                       350,000           362,418
---------------------------------------------------------------------------
MidAmerican Energy Holdings Co., Sr. Unsec.                                
  Notes, 7.23%, 09/15/05(g)                       300,000           307,902
---------------------------------------------------------------------------
Pacific Gas & Electric Co., First Mortgage                                 
  Floating Rate Notes, 2.72%, 04/03/06(b)(g)       87,000            87,078
---------------------------------------------------------------------------
Yorkshire Power Finance (Cayman Islands)-                                  
  Series B, Sr. Unsec. Gtd. Unsub. Global                                  
  Notes, 6.50%, 02/25/08(g)                       175,000           184,804
===========================================================================
                                                                  1,022,830
===========================================================================

FOOD RETAIL-0.06%                                                          

Safeway Inc., Sr. Unsec. Notes, 2.50%,                                     
  11/01/05(g)                                     100,000            99,343
===========================================================================

GAS UTILITIES-0.32%                                                        

CenterPoint Energy Resources Corp., Unsec.                                 
  Deb., 6.50%, 02/01/08(g)                        165,000           176,824
---------------------------------------------------------------------------
Columbia Energy Group-Series C, Notes, 6.80%,                              
  11/28/05(g)                                     225,000           231,732
---------------------------------------------------------------------------
NiSource Capital Markets, Inc., Medium Term                                
  Notes, 7.68%, 04/15/05(g)                       150,000           151,920
===========================================================================
                                                                    560,476
===========================================================================

HOMEBUILDING-0.43%                                                         

D.R. Horton, Inc., Sr. Unsec. Notes, 7.88%,                                
  08/15/11(g)                                     200,000           230,250
---------------------------------------------------------------------------
Lennar Corp.-Series B, Sr. Unsec. Gtd. Global                              
  Notes, 9.95%, 05/01/10(g)                       275,000           294,888
---------------------------------------------------------------------------
Pulte Homes, Inc., Unsec. Gtd. Notes, 7.30%,                               
  10/24/05(g)                                     150,000           154,338
---------------------------------------------------------------------------
Ryland Group, Inc. (The), Sr. Unsec. Unsub.                                
  Notes, 9.75%, 09/01/10(g)                        75,000            81,746
===========================================================================
                                                                    761,222
===========================================================================

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                                               PRINCIPAL       MARKET   
                                                 AMOUNT        VALUE    
------------------------------------------------------------------------
                                                                        

INDUSTRIAL CONGLOMERATES-0.25%                                          

Tyco International Group S.A. (Luxembourg),                             
  Unsec. Unsub. Gtd. Yankee Notes, 6.38%,                               
  06/15/05(g)                                  $  375,000   $    380,636
------------------------------------------------------------------------
URC Holdings Corp., Sr. Notes, 7.88%,                                   
  06/30/06 (Acquired 10/08/03; Cost                                     
  $56,614)(d)(e)(g)                                50,000         53,237
========================================================================
                                                                 433,873
========================================================================

INTEGRATED OIL & GAS-0.31%                                              

Amerada Hess Corp., Unsec. Notes, 7.13%,                                
  03/15/33(g)                                     150,000        165,122
------------------------------------------------------------------------
ConocoPhillips, Unsec. Deb., 7.13%,                                     
  03/15/28(g)                                     100,000        107,458
------------------------------------------------------------------------
Husky Oil Ltd. (Canada), Yankee Bonds, 8.90%,                           
  08/15/28(g)                                     200,000        228,020
------------------------------------------------------------------------
Repsol International Finance B.V.                                       
  (Netherlands), Unsec. Gtd. Global Notes,                              
  7.45%, 07/15/05(g)                               45,000         46,162
========================================================================
                                                                 546,762
========================================================================

INTEGRATED TELECOMMUNICATION SERVICES-1.67%                             

Deutsche Telekom International Finance B.V.                             
  (Netherlands), Unsec. Unsub. Gtd. Global                              
  Bonds, 8.25%, 06/15/05(g)                       350,000        358,211
------------------------------------------------------------------------
France Telecom S.A. (France), Sr. Unsec.                                
  Global Notes, 8.50%, 03/01/31(g)                 60,000         81,419
------------------------------------------------------------------------
SBC Communications Inc., Notes, 4.21%,                                  
  06/05/05 (Acquired 12/10/04; Cost                                     
  $100,602)(d)(e)(g)                              100,000        100,585
------------------------------------------------------------------------
Southwestern Bell Telephone Co.-Series B,                               
  Medium Term Notes, 6.25%, 07/07/05(g)           100,000        101,623
------------------------------------------------------------------------
Sprint Capital Corp.,                                                   
  Sr. Unsec. Gtd. Global Notes, 7.13%,                                  
  01/30/06(g)                                     275,000        286,047
------------------------------------------------------------------------
  Unsec. Gtd. Global Notes, 7.90%,                                      
  03/15/05(g)                                     480,000        485,054
------------------------------------------------------------------------
Sprint Corp., Deb., 9.25%, 04/15/22(g)             90,000        119,930
------------------------------------------------------------------------
TELUS Corp. (Canada), Yankee Notes,                                     
  7.50%, 06/01/07(g)                              250,000        271,683
------------------------------------------------------------------------
  8.00%, 06/01/11(g)                               60,000         71,093
------------------------------------------------------------------------
Verizon California Inc.-Series F, Unsec.                                
  Deb., 6.75%, 05/15/27(g)                        100,000        104,107
------------------------------------------------------------------------
Verizon Communications Inc.,                                            
  Unsec. Deb.,                                                          
    6.36%, 04/15/06(g)                            400,000        415,184
------------------------------------------------------------------------
    8.75%, 11/01/21(g)                             85,000        107,369
------------------------------------------------------------------------
  Unsec. Gtd. Deb., 6.94%, 04/15/28(g)            125,000        139,570
------------------------------------------------------------------------
Verizon Florida Inc.-Series F, Sr. Unsec.                               
  Deb., 6.13%, 01/15/13(g)                        200,000        213,126
------------------------------------------------------------------------
Verizon Virginia Inc.-Series A, Unsec. Global                           
  Deb., 4.63%, 03/15/13(g)                        100,000         97,847
========================================================================
                                                               2,952,848
========================================================================

                                                                [Download Table]
------------------------------------------------------------------------

                                               PRINCIPAL       MARKET   
                                                 AMOUNT        VALUE    
                                                                        

INVESTMENT BANKING & BROKERAGE-0.10%                                    

Lehman Brothers Inc.,                                                   
  Sr. Sub. Deb., 11.63%, 05/15/05(g)           $   75,000   $     77,158
------------------------------------------------------------------------
  Sr. Unsec. Sub. Notes, 7.63%, 06/01/06(g)        50,000         53,001
------------------------------------------------------------------------
Merrill Lynch & Co., Inc.-Series B, Medium                              
  Term Notes, 4.54%, 03/08/05(g)                   40,000         40,163
========================================================================
                                                                 170,322
========================================================================

LIFE & HEALTH INSURANCE-0.20%                                           

Prudential Holdings, LLC-Series B, Bonds,                               
  7.25%, 12/18/23 (Acquired                                             
  01/22/04-01/29/04; Cost $324,231)(d)(g)(k)      275,000        328,028
------------------------------------------------------------------------
ReliaStar Financial Corp., Unsec. Notes,                                
  8.00%, 10/30/06(g)                               25,000         26,989
========================================================================
                                                                 355,017
========================================================================

MOVIES & ENTERTAINMENT-0.20%                                            

Time Warner Inc., Sr. Unsec. Gtd. Global                                
  Notes, 5.63%, 05/01/05(g)                       350,000        353,112
========================================================================

MULTI-UTILITIES & UNREGULATED POWER-0.07%                               

Dominion Resources, Inc.-Series B, Sr. Unsec.                           
  Unsub. Global Notes, 7.63%, 07/15/05(g)         125,000        128,136
========================================================================

MUNICIPALITIES-0.59%                                                    

Chicago (City of), Illinois O'Hare                                      
  International Airport; Refunding Taxable                              
  General Airport Third Lien Series 2004 E                              
  RB, 3.88%, 01/01/08(g)(k)                       350,000        350,728
------------------------------------------------------------------------
Industry (City of), California Urban                                    
  Development Agency (Project 3); Taxable                               
  Allocation Series 2003 Bonds, 6.10%,                                  
  05/01/24(g)(k)                                  150,000        154,500
------------------------------------------------------------------------
Phoenix (City of), Arizona Civic Improvement                            
  Corp.; Taxable Rental Car Facility                                    
  Series 2004 RB,                                                       
  3.69%, 07/01/07(g)(k)                            80,000         80,132
------------------------------------------------------------------------
  4.21%, 07/01/08(g)(k)                           100,000        100,750
------------------------------------------------------------------------
Sacramento (County of), California; Taxable                             
  Pension Funding Series 2004 C-1 RB, 0.27%,                            
  07/10/30(g)(k)(l)                               375,000        355,125
========================================================================
                                                               1,041,235
========================================================================

OIL & GAS EXPLORATION & PRODUCTION-0.34%                                

Pemex Project Funding Master Trust, Unsec.                              
  Gtd. Unsub. Global Notes,                                             
  7.38%, 12/15/14(g)                              300,000        332,850
------------------------------------------------------------------------
  8.63%, 02/01/22(g)                              225,000        261,608
========================================================================
                                                                 594,458
========================================================================

OTHER DIVERSIFIED FINANCIAL SERVICES-0.77%                              

General Electric Capital Corp.-Series A,                                
  Medium Term Global Notes, 2.85%,                                      
  01/30/06(g)                                      20,000         19,951
------------------------------------------------------------------------
Heller Financial, Inc., Sr. Unsec. Global                               
  Notes, 8.00%, 06/15/05(g)                       100,000        102,320
------------------------------------------------------------------------

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                                               PRINCIPAL       MARKET   
                                                 AMOUNT        VALUE    
------------------------------------------------------------------------
                                                                        
OTHER DIVERSIFIED FINANCIAL SERVICES-(CONTINUED)                        

ING Capital Funding Trust III, Gtd. Global                              
  Bonds, 8.44%(g)(i)                           $  125,000   $    149,075
------------------------------------------------------------------------
Mizuho JGB Investment LLC-Series A, Bonds,                              
  9.87% (Acquired 06/16/04; Cost                                        
  $141,406)(d)(g)(i)                              125,000        144,864
------------------------------------------------------------------------
Pemex Finance Ltd. (Cayman Islands),                                    
  Sr. Unsec. Global Notes, 8.02%, 05/15/07(g)     125,000        132,310
------------------------------------------------------------------------
  Series 1999-2, Class A1, Global Bonds,                                
    9.69%, 08/15/09(g)                            171,000        191,691
------------------------------------------------------------------------
Premium Asset Trust-Series 2004-04, Sr.                                 
  Notes, 4.13%, 03/12/09 (Acquired 03/04/04;                            
  Cost $249,833)(d)(e)(g)                         250,000        244,698
------------------------------------------------------------------------
Regional Diversified Funding (Cayman                                    
  Islands), Sr. Notes, 9.25%, 03/15/30                                  
  (Acquired 09/22/04; Cost $282,629)(d)(e)(g)     238,889        284,603
------------------------------------------------------------------------
UFJ Finance Aruba AEC (Aruba), Gtd. Sub.                                
  Second Tier Euro Bonds, 8.75%(g)(i)              75,000         83,808
========================================================================
                                                               1,353,320
========================================================================

PACKAGED FOODS & MEATS-0.07%                                            

Nabisco, Inc., Notes, 6.38%, 02/01/05(g)          125,000        125,821
========================================================================

PROPERTY & CASUALTY INSURANCE-0.35%                                     

FGIC Corp., Sr. Unsec. Unsub. Notes, 6.00%,                             
  01/15/34 (Acquired 12/07/04; Cost                                     
  $177,749)(d)(e)(g)                              175,000        181,111
------------------------------------------------------------------------
First American Capital Trust I, Gtd. Notes,                             
  8.50%, 04/15/12(g)                              325,000        369,236
------------------------------------------------------------------------
Oil Insurance Ltd. (Bermuda), Unsec. Sub.                               
  Deb., 5.15%, 08/15/33 (Acquired 03/23/04;                             
  Cost $78,743)(d)(e)(g)                           75,000         75,689
========================================================================
                                                                 626,036
========================================================================

REAL ESTATE-0.39%                                                       

CarrAmerica Realty Corp., Sr. Unsec. Gtd.                               
  Notes, 6.63%, 03/01/05(g)                        50,000         50,292
------------------------------------------------------------------------
EOP Operating L.P., Sr. Unsec. Notes, 6.63%,                            
  02/15/05(g)                                     200,000        200,876
------------------------------------------------------------------------
Health Care Property Investors, Inc., Sr.                               
  Unsec. Notes, 6.88%, 06/08/05(g)                150,000        152,417
------------------------------------------------------------------------
HRPT Properties Trust, Sr. Unsec. Notes,                                
  6.70%, 02/23/05(g)                              125,000        125,673
------------------------------------------------------------------------
Spieker Properties, Inc., Medium Term Notes,                            
  8.00%, 07/19/05(g)                               50,000         51,283
------------------------------------------------------------------------
Spieker Properties, L.P., Unsec. Unsub.                                 
  Notes, 6.88%, 02/01/05(g)                       100,000        100,306
========================================================================
                                                                 680,847
========================================================================

REAL ESTATE MANAGEMENT & DEVELOPMENT-0.04%                              

Southern Investments UK PLC (United Kingdom),                           
  Sr. Unsec. Unsub. Yankee Notes, 6.80%,                                
  12/01/06(g)                                      75,000         78,817
========================================================================

                                                                [Download Table]
------------------------------------------------------------------------

                                               PRINCIPAL       MARKET   
                                                 AMOUNT        VALUE    
                                                                        

REGIONAL BANKS-1.15%                                                    

Cullen/Frost Capital Trust I, Unsec. Sub.                               
  Floating Rate Notes, 3.95%, 03/01/34(b)(g)   $  325,000   $    336,908
------------------------------------------------------------------------
Greater Bay Bancorp-Series B, Sr. Notes,                                
  5.25%, 03/31/08(g)                              350,000        352,534
------------------------------------------------------------------------
PNC Capital Trust C, Gtd. Floating Rate                                 
  Notes, 2.97%, 06/01/28(b)(g)                    175,000        166,201
------------------------------------------------------------------------
Popular North America, Inc., Gtd. Notes,                                
  4.70%, 06/30/09(g)                              325,000        331,578
------------------------------------------------------------------------
Santander Financial Issuances (Cayman                                   
  Islands), Sec. Sub. Floating Rate Euro                                
  Notes, 2.87%(g)(i)(j)                           750,000        745,610
------------------------------------------------------------------------
TCF Financial Corp., Sub. Notes, 5.00%,                                 
  06/15/14(g)                                     100,000        101,746
========================================================================
                                                               2,034,577
========================================================================

RESTAURANTS-0.03%                                                       

McDonald's Corp., Unsec. Deb., 7.05%,                                   
  11/15/25(g)                                      55,000         58,338
========================================================================

SOVEREIGN DEBT-0.59%                                                    

Japan Bank for International Cooperation                                
  (Japan), Unsec. Gtd. Euro Bonds, 6.50%,                               
  10/06/05(g)                                     100,000        102,599
------------------------------------------------------------------------
New Brunswick (Province of) (Canada), Sec.                              
  Yankee Deb., 6.75%, 08/15/13(g)                  40,000         46,664
------------------------------------------------------------------------
Quebec (Province of) (Canada), Sr. Unsec.                               
  Unsub. Global Deb., 5.75%, 02/15/09(g)           55,000         59,024
------------------------------------------------------------------------
Russian Federation (Russia),                                            
  Unsec. Unsub. Bonds,                                                  
    5.00%, 03/31/30 (Acquired 05/18/04, Cost                            
    $103,572)(d)(g)                               115,000        118,841
------------------------------------------------------------------------
    8.75%, 07/24/05 (Acquired 09/10/04-                                 
    12/03/04; Cost $181,963)(d)(g)                175,000        179,900
------------------------------------------------------------------------
  Unsec. Unsub. Euro Bonds-REGS,                                        
    8.75%, 07/24/05 (Acquired 05/14/04; Cost                            
    $184,888)(d)(g)                               175,000        180,058
------------------------------------------------------------------------
    10.00%, 06/26/07 (Acquired 05/14/04-                                
    05/18/04; Cost $157,706)(d)(g)                140,000        158,564
------------------------------------------------------------------------
United Mexican States (Mexico)-Series A,                                
  Medium Term Global Notes,                                             
  6.63%, 03/03/15(g)                               60,000         64,386
------------------------------------------------------------------------
  7.50%, 04/08/33(g)                              120,000        129,138
========================================================================
                                                               1,039,174
========================================================================

THRIFTS & MORTGAGE FINANCE-0.11%                                        

Greenpoint Capital Trust I, Gtd. Sub. Notes,                            
  9.10%, 06/01/27(g)                               75,000         88,730
------------------------------------------------------------------------
Washington Mutual Finance Corp., Sr. Unsec.                             
  Notes, 8.25%, 06/15/05(g)                       100,000        102,418
========================================================================
                                                                 191,148
========================================================================

TOBACCO-0.15%                                                           

Altria Group, Inc.,                                                     
  Sr. Unsec. Notes, 7.00%, 11/04/13(g)             40,000         43,279
------------------------------------------------------------------------
  Unsec. Global Notes, 7.00%, 07/15/05(g)         200,000        203,958
------------------------------------------------------------------------
  Unsec. Notes, 6.38%, 02/01/06(g)                 20,000         20,529
========================================================================
                                                                 267,766
========================================================================

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                                               PRINCIPAL       MARKET   
                                                 AMOUNT        VALUE    
------------------------------------------------------------------------
                                                                        

TRUCKING-0.09%                                                          

Roadway Corp., Sr. Unsec. Gtd. Global Notes,                            
  8.25%, 12/01/08(g)                           $  150,000   $    167,018
========================================================================

WIRELESS TELECOMMUNICATION SERVICES-0.37%                               

AT&T Wireless Services Inc., Sr. Unsec.                                 
  Unsub. Global Notes, 6.88%, 04/18/05(g)         200,000        202,216
------------------------------------------------------------------------
TeleCorp PCS, Inc., Sr. Unsec. Gtd. Sub.                                
  Global Notes, 10.63%, 07/15/10(g)               420,000        459,480
========================================================================
                                                                 661,696
========================================================================
    Total Bonds & Notes (Cost $28,084,250)                    28,177,614
========================================================================

U.S. MORTGAGE-BACKED SECURITIES-8.10%                                   

FEDERAL HOME LOAN MORTGAGE CORP.                                        
  (FHLMC)-2.88%                                                         

Pass Through Ctfs.,                                                     
  6.50%, 01/01/16 to 08/01/29(g)                  100,196        105,568
------------------------------------------------------------------------
  6.00%, 03/01/17 to 11/01/33(g)                1,714,523      1,778,672
------------------------------------------------------------------------
  5.50%, 12/01/17 to 12/01/33(g)                1,144,266      1,166,380
------------------------------------------------------------------------
  4.50%, 10/01/18(g)                              355,851        355,621
------------------------------------------------------------------------
  7.00%, 07/01/29 to 06/01/32(g)                  293,660        311,335
------------------------------------------------------------------------
  7.50%, 11/01/30 to 12/01/30(g)                   19,391         20,791
------------------------------------------------------------------------
  5.00%, 10/01/33(g)                              416,383        414,491
------------------------------------------------------------------------
Pass Through Ctfs., TBA,                                                
  5.00%, 01/01/15(m)                              924,000        938,657
========================================================================
                                                               5,091,515
========================================================================

FEDERAL NATIONAL MORTGAGE ASSOCIATION                                   
  (FNMA)-4.22%                                                          

Pass Through Ctfs.,                                                     
  7.50%, 11/01/15 to 05/01/32(g)                   95,262        102,042
------------------------------------------------------------------------
  7.00%, 02/01/16 to 03/01/32(g)                  169,559        179,846
------------------------------------------------------------------------
  6.50%, 10/01/16 to 09/01/34(g)                1,643,060      1,725,924
------------------------------------------------------------------------
  6.00%, 05/01/17 to 07/01/17(g)                  589,576        618,339
------------------------------------------------------------------------
  5.00%, 02/01/18(g)                               18,568         18,889
------------------------------------------------------------------------
  8.00%, 10/01/30(g)                               17,694         19,192
------------------------------------------------------------------------
  5.50%, 06/01/33 to 11/01/33(g)                  299,748        304,662
------------------------------------------------------------------------
Pass Through Ctfs., TBA,                                                
  5.00%, 01/01/20 to 01/01/35(m)                1,210,520      1,220,855
------------------------------------------------------------------------
  5.50%, 01/01/20 to 01/01/35(m)                1,994,234      2,046,822
------------------------------------------------------------------------
  6.00%, 01/01/35(m)                            1,171,300      1,211,414
========================================================================
                                                               7,447,985
========================================================================

GOVERNMENT NATIONAL MORTGAGE ASSOCIATION                                
  (GNMA)-1.00%                                                          

Pass Through Ctfs.,                                                     
  7.50%, 06/15/23 to 10/15/31(g)                   67,864         73,196
------------------------------------------------------------------------
  8.50%, 02/15/25(g)                               35,448         38,873
------------------------------------------------------------------------
  8.00%, 08/15/25(g)                               17,904         19,530
------------------------------------------------------------------------
  7.00%, 02/15/31 to 05/15/32(g)                  174,644        185,679
------------------------------------------------------------------------

                                                                [Download Table]
------------------------------------------------------------------------

                                               PRINCIPAL       MARKET   
                                                 AMOUNT        VALUE    
                                                                        
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION-(CONTINUED)                    

Pass Through Ctfs.,                                                     
  6.50%, 05/15/31 to 12/15/33(g)               $  376,742   $    397,003
------------------------------------------------------------------------
  6.00%, 12/15/31 to 02/15/33(g)                  597,397        619,880
------------------------------------------------------------------------
  5.50%, 09/15/33 to 02/15/34(g)                  429,358        438,947
========================================================================
                                                               1,773,108
========================================================================
    Total U.S. Mortgage-Backed Securities                               
      (Cost $14,255,013)                                      14,312,608
========================================================================

U.S. GOVERNMENT AGENCY SECURITIES-5.34%                                 

FEDERAL HOME LOAN BANK (FHLB)-4.91%                                     

Unsec. Disc. Notes,                                                     
  1.25%, 01/03/05(n)                            8,670,000      8,669,398
========================================================================

FEDERAL NATIONAL MORTGAGE ASSOCIATION                                   
  (FNMA)-0.43%                                                          

Unsec. Floating Rate Global Notes,                                      
  3.68%, 02/17/09(g)(o)                           460,000        464,315
------------------------------------------------------------------------
Unsec. Global Notes,                                                    
  3.38%, 12/15/08(g)                              300,000        296,211
========================================================================
                                                                 760,526
========================================================================
    Total U.S. Government Agency Securities                             
      (Cost $9,419,513)                                        9,429,924
========================================================================

ASSET-BACKED SECURITIES-1.39%                                           

OTHER DIVERSIFIED FINANCIAL SERVICES--1.14%                             

Citicorp Lease-Series 1999-1, Pass Through                              
  Ctfs., Class A1, 7.22%, 06/15/05 (Acquired                            
  05/08/02-                                                             
    02/25/04; Cost $480,954)(d)(g)                450,014        458,227
------------------------------------------------------------------------
  Class A2, 8.04%, 12/15/19 (Acquired                                   
    08/20/02; Cost $166,614)(d)(g)                150,000        178,771
------------------------------------------------------------------------
Patrons' Legacy,                                                        
  Series 2003-III, Ctfs., 5.65%, 01/17/17                               
  (Acquired 11/04/04; Cost $512,705)(d)(e)        500,000        508,681
------------------------------------------------------------------------
  Series 2004-I, Ctfs., 6.67%, 02/04/17                                 
  (Acquired 04/30/04; Cost $500,000)(d)(e)        500,000        509,701
------------------------------------------------------------------------
PLC Trust 2003-1, Sec. Notes, 2.71%, 03/31/06                           
  (Acquired 03/23/04; Cost $116,625)(d)(e)(g)     111,655        111,218
------------------------------------------------------------------------
Twin Reefs Pass-Through Trust, Floating Rate                            
  Pass Through Ctfs., 3.37% (Acquired                                   
  12/07/04; Cost $200,000)(d)(e)(g)(i)(o)         200,000        201,138
------------------------------------------------------------------------
Yorkshire Power Pass-Through Asset Trust                                
  (Cayman Islands)-Series 2000-1, Pass                                  
  Through Ctfs., 8.25%, 02/15/05 (Acquired                              
  11/12/03; Cost $53,400)(d)(e)(g)                 50,000         50,274
========================================================================
                                                               2,018,010
========================================================================

PROPERTY & CASUALTY INSURANCE-0.13%                                     

North Front Pass-Through Trust, Bonds, 5.81%,                           
  12/15/24 (Acquired 12/08/04; Cost                                     
  $225,748)(d)(e)(g)                              225,000        229,484
========================================================================

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                                               PRINCIPAL       MARKET   
                                                 AMOUNT        VALUE    
------------------------------------------------------------------------
                                                                        

THRIFTS & MORTGAGE FINANCE-0.12%                                        

Sovereign Bank-Class A-1, Pass Through Ctfs.,                           
  10.20%, 06/30/05 (Acquired 09/22/04; Cost                             
  $227,097)(d)(e)(g)                           $  195,064   $    200,860
========================================================================
    Total Asset-Backed Securities (Cost                                 
      $2,426,908)                                              2,448,354
========================================================================

U.S. TREASURY SECURITIES-5.46%                                          

U.S. TREASURY NOTES-4.16%                                               

2.50%, 09/30/06(g)                                600,000        594,846
------------------------------------------------------------------------
6.50%, 10/15/06(g)                              2,500,000      2,650,400
------------------------------------------------------------------------
3.50%, 11/15/06 to 11/15/09(g)                  1,100,000      1,100,265
------------------------------------------------------------------------
3.13%, 10/15/08(g)                                760,000        751,921
------------------------------------------------------------------------
4.75%, 11/15/08(g)                              2,100,000      2,200,401
------------------------------------------------------------------------
5.00%, 02/15/11(g)                                 50,000         53,219
========================================================================
                                                               7,351,052
========================================================================

                                                                [Download Table]
------------------------------------------------------------------------ 

                                               PRINCIPAL       MARKET    
                                                 AMOUNT        VALUE     
                                                                         

U.S. TREASURY BONDS-1.19%                                                

7.25%, 05/15/16 to 08/15/22(g)                 $1,000,000   $  1,265,722 
------------------------------------------------------------------------ 
7.50%, 11/15/16(g)                                160,000        204,525 
------------------------------------------------------------------------ 
5.38%, 02/15/31(g)                                595,000        643,159 
======================================================================== 
                                                               2,113,406 
======================================================================== 

U.S. TREASURY STRIPS-0.11%                                               

3.03%, 02/15/07(g)(n)                             200,000        187,782 
======================================================================== 
    Total U.S. Treasury Securities (Cost                                 
      $9,672,462)                                              9,652,240 
======================================================================== 
TOTAL INVESTMENTS-102.33% (Cost $158,526,013)                180,794,340 
======================================================================== 
OTHER ASSETS LESS LIABILITIES-(2.33%)                         (4,116,913)
======================================================================== 
NET ASSETS-100.00%                                          $176,677,427 
________________________________________________________________________ 
======================================================================== 

Investment Abbreviations:                                                       

                                                                [Download Table]
                                                                      
ADR     - American Depositary Receipt                                 
Ctfs    - Certificates                                                
Deb.    - Debentures                                                  
Disc.   - Discounted                                                  
Gtd.    - Guaranteed                                                  
Pfd.    - Preferred                                                   
RB      - Revenue Bonds                                               
REGS    - Regulation S                                                
Sec.    - Secured                                                     
Sr.     - Senior                                                      
STRIPS  - Separately Traded Registered Interest and Principal Security
Sub.    - Subordinated                                                
TBA     - To Be Announced                                             
Unsec.  - Unsecured                                                   
Unsub.  - Unsubordinated                                              

Notes to Schedule of Investments:                                               

(a) Non-income producing security.                                              
(b) Interest rate is redetermined quarterly. Rate shown is the rate in effect on
December 31, 2004.                                                      
(c) Interest rate is redetermined annually. Rate shown is the rate in effect on 
December 31, 2004.                                                      
(d) Security not registered under the Securities Act of 1933, as amended (e.g., 
the security was purchased in a Rule 144A transaction or a Regulation D 
   transaction). The security may be resold only pursuant to an exemption from
registration under the 1933 Act, typically to qualified institutional   
  buyers. The Fund has no rights to demand registration of these securities.
The aggregate market value of these securities at December 31, 2004 was 
$6,984,710 which represented 3.95% of the Fund's Net Assets. Unless     
otherwise indicated, these securities are not considered to be illiquid.
(e) Security considered to be illiquid. The aggregate market value of these     
 securities considered illiquid at December 31, 2004 was $4,729,108, which
represented 2.68% of the Fund's Net Assets.                             
(f) In accordance with the procedures established by the Board of Trustees, the 
 foreign security is fair valued using adjusted closing market prices. The
    market value of this security at December 31, 2004 represented 2.17 % of the
Fund's Total Investments. See Note 1A.                                  
(g) In accordance with the procedures established by the Board of Trustees,     
   security fair valued based on an evaluated quote provided by an independent
   pricing service. The aggregate market value of these securities at December
31, 2004 was $49,306,517, which represented 27.27% of the Fund's Total  
Investments. See Note 1A.                                               
(h) A portion of the principal balance was pledged as collateral to cover margin
requirements for open futures contracts. See Note 1I and Note 7.        
(i) Perpetual bond with no specified maturity date.                             
(j) Interest rate is redetermined semi-annually. Rate shown is the rate in      
effect on December 31, 2004.                                            
(k) Principal and interest payments are secured by bond insurance provided by   
   one of the following companies: Financial Guaranty Insurance Co., Financial
Security Assurance Inc., or MBIA Insurance Corp.                        
(l) Zero coupon bond issued at a discount. The interest rate shown represents   
   the current yield on December 31, 2004. Bond will convert to a fixed coupon
rate at a specific future date.                                         
(m) Security purchased on forward commitment basis. This security is subject to 
dollar roll transactions. See Note 1F.                                  
(n) Security traded on a discount basis. The interest rate shown represents the 
discount rate at the time of purchase by the Fund.                      
(o) Interest rate is redetermined monthly. Rate shown is the rate in effect on  
December 31, 2004.                                                      

See accompanying notes which are an integral part of the financial statements.  

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STATEMENT OF ASSETS AND LIABILITIES                                             

December 31, 2004                                                               

                                                                [Download Table]
                                                            
ASSETS:                                                     

Investments, at market value (cost                          
  $158,526,013)                                $180,794,340 
----------------------------------------------------------- 
Cash                                                  5,044 
----------------------------------------------------------- 
Receivables for:                                            
  Investments sold                                1,292,519 
----------------------------------------------------------- 
  Variation margin                                   16,828 
----------------------------------------------------------- 
  Fund shares sold                                  126,374 
----------------------------------------------------------- 
  Dividends and interest                            764,644 
----------------------------------------------------------- 
  Principal paydowns                                 20,449 
----------------------------------------------------------- 
Investment for trustee deferred compensation                
  and retirement plans                               14,393 
----------------------------------------------------------- 
Other assets                                         22,312 
=========================================================== 
  Total assets                                  183,056,903 
___________________________________________________________ 
=========================================================== 

LIABILITIES:                                                

Payables for:                                               
  Investments purchased                           5,844,826 
----------------------------------------------------------- 
  Fund shares reacquired                            277,086 
----------------------------------------------------------- 
  Trustee deferred compensation and                         
    retirement plans                                 18,052 
----------------------------------------------------------- 
Accrued distribution fees                           107,326 
----------------------------------------------------------- 
Accrued transfer agent fees                          85,508 
----------------------------------------------------------- 
Accrued operating expenses                           46,678 
=========================================================== 
  Total liabilities                               6,379,476 
=========================================================== 
Net assets applicable to shares outstanding    $176,677,427 
___________________________________________________________ 
=========================================================== 

NET ASSETS CONSIST OF:                                      

Shares of beneficial interest                  $154,792,290 
----------------------------------------------------------- 
Undistributed net investment income                  38,788 
----------------------------------------------------------- 
Undistributed net realized gain (loss) from                 
  investment securities, foreign currencies                 
  and futures contracts                            (471,776)
----------------------------------------------------------- 
Unrealized appreciation of investment                       
  securities and futures contracts               22,318,125 
=========================================================== 
                                               $176,677,427 
___________________________________________________________ 
=========================================================== 

NET ASSETS:                                                 

Class A                                        $ 68,951,179 
___________________________________________________________ 
=========================================================== 
Class B                                        $ 79,967,801 
___________________________________________________________ 
=========================================================== 
Class C                                        $ 27,728,863 
___________________________________________________________ 
=========================================================== 
Class R                                        $     18,972 
___________________________________________________________ 
=========================================================== 
Institutional Class                            $     10,612 
___________________________________________________________ 
=========================================================== 

SHARES OUTSTANDING, $0.01 PAR VALUE PER                     
  SHARE, UNLIMITED NUMBER OF SHARES                         
  AUTHORIZED:                                               

Class A                                           5,815,514 
___________________________________________________________ 
=========================================================== 
Class B                                           6,754,534 
___________________________________________________________ 
=========================================================== 
Class C                                           2,340,704 
___________________________________________________________ 
=========================================================== 
Class R                                               1,598 
___________________________________________________________ 
=========================================================== 
Institutional Class                                     895 
___________________________________________________________ 
=========================================================== 
Class A:                                                    
  Net asset value per share                    $      11.86 
----------------------------------------------------------- 
  Offering price per share:                                 
    (Net asset value of $11.86 divided by                   
      95.25%)                                  $      12.45 
___________________________________________________________ 
=========================================================== 
Class B:                                                    
  Net asset value and offering price per                    
    share                                      $      11.84 
___________________________________________________________ 
=========================================================== 
Class C:                                                    
  Net asset value and offering price per                    
    share                                      $      11.85 
___________________________________________________________ 
=========================================================== 
Class R:                                                    
  Net asset value and offering price per                    
    share                                      $      11.87 
___________________________________________________________ 
=========================================================== 
Institutional Class:                                        
  Net asset value and offering price per                    
    share                                      $      11.86 
___________________________________________________________ 
=========================================================== 

See accompanying notes which are an integral part of the financial statements.  

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STATEMENT OF OPERATIONS                                                         

For the year ended December 31, 2004                                            

                                                                [Download Table]
                                                                          
INVESTMENT INCOME:                                                        

Interest                                                      $ 2,180,680 
------------------------------------------------------------------------- 
Dividends (net of foreign withholding tax of $19,571)           1,533,906 
========================================================================= 
    Total investment income                                     3,714,586 
========================================================================= 

EXPENSES:                                                                 

Advisory fees                                                   1,094,829 
------------------------------------------------------------------------- 
Administrative services fees                                       50,000 
------------------------------------------------------------------------- 
Custodian fees                                                     32,443 
------------------------------------------------------------------------- 
Distribution fees:                                                        
  Class A                                                         217,699 
------------------------------------------------------------------------- 
  Class B                                                         796,944 
------------------------------------------------------------------------- 
  Class C                                                         265,274 
------------------------------------------------------------------------- 
  Class R                                                              35 
------------------------------------------------------------------------- 
Transfer agent fees -- Class A, B, C, and R                       493,477 
------------------------------------------------------------------------- 
Transfer agent fees--Institutional Class                                7 
------------------------------------------------------------------------- 
Trustees' fees and retirement benefits                             17,423 
------------------------------------------------------------------------- 
Other                                                             240,236 
========================================================================= 
    Total expenses                                              3,208,367 
========================================================================= 
Less: Fees waived, expenses reimbursed and expense offset                 
  arrangement                                                     (37,052)
========================================================================= 
    Net expenses                                                3,171,315 
========================================================================= 
Net investment income                                             543,271 
========================================================================= 

REALIZED AND UNREALIZED GAIN FROM INVESTMENT SECURITIES,                  
  FOREIGN CURRENCIES AND FUTURES CONTRACTS:                               

Net realized gain from:                                                   
  Investment securities                                         8,095,387 
------------------------------------------------------------------------- 
  Foreign currencies                                                3,430 
------------------------------------------------------------------------- 
  Futures contracts                                               165,646 
========================================================================= 
                                                                8,264,463 
========================================================================= 
Change in net unrealized appreciation of:                                 
  Investment securities                                         1,548,687 
------------------------------------------------------------------------- 
  Futures contracts                                                49,798 
========================================================================= 
                                                                1,598,485 
========================================================================= 
Net gain from investment securities, foreign currencies and               
  futures contracts                                             9,862,948 
========================================================================= 
Net increase in net assets resulting from operations          $10,406,219 
_________________________________________________________________________ 
========================================================================= 

See accompanying notes which are an integral part of the financial statements.  

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STATEMENT OF CHANGES IN NET ASSETS                                              

For the years ended December 31, 2004 and 2003                                  

                                                        [Enlarge/Download Table]

                                                                  2004            2003     
------------------------------------------------------------------------------------------ 
                                                                                           
OPERATIONS:                                                                                

  Net investment income                                       $    543,271    $     43,727 
------------------------------------------------------------------------------------------ 
  Net realized gain from investment securities, foreign                                    
    currencies and futures contracts                             8,264,463         204,356 
------------------------------------------------------------------------------------------ 
  Change in net unrealized appreciation of investment                                      
    securities and futures contracts                             1,598,485      24,575,727 
========================================================================================== 
    Net increase in net assets resulting from operations        10,406,219      24,823,810 
========================================================================================== 
Distributions to shareholders from net investment income:                                  
  Class A                                                         (518,829)       (252,338)
------------------------------------------------------------------------------------------ 
  Class B                                                         (130,939)        (76,078)
------------------------------------------------------------------------------------------ 
  Class C                                                          (44,341)        (23,549)
------------------------------------------------------------------------------------------ 
  Class R                                                              (56)             -- 
------------------------------------------------------------------------------------------ 
  Institutional Class                                                 (108)             -- 
========================================================================================== 
    Total distributions from net investment income                (694,273)       (351,965)
========================================================================================== 
Distributions to shareholders from net realized gains:                                     
  Class A                                                       (1,852,910)             -- 
------------------------------------------------------------------------------------------ 
  Class B                                                       (2,168,137)             -- 
------------------------------------------------------------------------------------------ 
  Class C                                                         (738,028)             -- 
------------------------------------------------------------------------------------------ 
  Class R                                                             (292)             -- 
------------------------------------------------------------------------------------------ 
  Institutional Class                                                 (285)             -- 
========================================================================================== 
    Total distributions from net realized gains                 (4,759,652)             -- 
========================================================================================== 
    Decrease in net assets resulting from distributions         (5,453,925)       (351,965)
========================================================================================== 
Share transactions-net:                                                                    
  Class A                                                       13,392,670      12,879,782 
------------------------------------------------------------------------------------------ 
  Class B                                                        1,380,840      16,497,602 
------------------------------------------------------------------------------------------ 
  Class C                                                        2,153,156       5,182,557 
------------------------------------------------------------------------------------------ 
  Class R                                                           18,638              -- 
------------------------------------------------------------------------------------------ 
  Institutional Class                                               10,394              -- 
========================================================================================== 
    Net increase in net assets resulting from share                                        
     transactions                                               16,955,698      34,559,941 
========================================================================================== 
    Net increase in net assets                                  21,907,992      59,031,786 
========================================================================================== 

NET ASSETS:                                                                                

  Beginning of year                                            154,769,435      95,737,649 
========================================================================================== 
  End of year (including undistributed net investment income                               
    (loss) of $38,788 and $(9,211), respectively)             $176,677,427    $154,769,435 
__________________________________________________________________________________________ 
========================================================================================== 

See accompanying notes which are an integral part of the financial statements.  

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NOTES TO FINANCIAL STATEMENTS                                                   

December 31, 2004                                                               

NOTE 1--SIGNIFICANT ACCOUNTING POLICIES                                         

AIM Basic Balanced Fund (the "Fund") is a series portfolio of AIM Funds Group   
(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 nine separate portfolios,    
each authorized to issue an unlimited number of shares of beneficial interest.  
The Fund currently offers multiple classes of shares. Matters affecting each    
portfolio or class will be voted on exclusively by the shareholders of such     
portfolio or class. The assets, liabilities and operations of each portfolio are
accounted for separately. Information presented in these financial statements   
pertains only to the Fund.                                                      

  The Fund's investment objective is long-term growth of capital and current
income. Each company listed in the Schedule of Investments is organized in the  
United States of America unless otherwise noted.                                

   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. However, the Fund has not had prior claims or losses pursuant to these
contracts.                                                                      

The preparation of financial statements in conformity with accounting   
principles generally accepted in the United States of America requires          
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported 
amounts of revenues and expenses during the reporting period. Actual results    
could differ from those estimates. The following is a summary of the significant
accounting policies followed by the Fund in the preparation of its financial    
statements.                                                                     

A.   SECURITY VALUATIONS -- Securities, including restricted securities, are    
valued according to the following policy.                             

      A security listed or traded on an exchange (except convertible bonds) is
 valued at its last sales price as of the close of the customary trading
session on the exchange where the security is principally traded, or  
lacking any sales on a particular day, the security is valued at the  
     closing bid price on that day. Each security traded in the over-the-counter
   market (but not securities reported on the NASDAQ National Market System)
    is valued on the basis of prices furnished by independent pricing services
or market makers. Each security reported on the NASDAQ National Market
  System is valued at the NASDAQ Official Closing Price ("NOCP") as of the
  close of the customary trading session on the valuation date or absent a
NOCP, at the closing bid price.                                       

  Futures contracts are valued at the final settlement price set by an
     exchange on which they are principally traded. Listed options are valued at
     the mean between the last bid and the ask prices from the exchange on which
   they are principally traded. Options not listed on an exchange are valued
   by an independent source at the mean between the last bid and ask prices.
   For purposes of determining net asset value per share, futures and option
contracts generally will be valued 15 minutes after the close of the  
customary trading session of the New York Stock Exchange ("NYSE").    

    Investments in open-end registered investment companies and closed-end
     registered investment companies that do not trade on an exchange are valued
at the end of day net asset value per share. Investments in closed-end
     registered investment companies that trade on an exchange are valued at the
  last sales price as of the close of the customary trading session on the
exchange where the security is principally traded.                    

     Debt obligations (including convertible bonds) are fair valued using an
evaluated quote provided by an independent pricing service. Evaluated 
    quotes provided by the pricing service may be determined without exclusive
reliance on quoted prices, and may reflect appropriate factors such as
institution-size trading in similar groups of securities, developments
related to specific securities, dividend rate, yield, quality, type of
    issue, coupon rate, maturity, individual trading characteristics and other
    market data. Short-term obligations having 60 days or less to maturity and
 commercial paper are valued at amortized cost which approximates market
value.                                                                

     Securities for which market prices are not provided by any of the above
   methods are valued based upon quotes furnished by independent sources and
  are valued at the last bid price in the case of equity securities and in
the case of debt obligations, the mean between the last bid and asked 
prices.                                                               

     Foreign securities (including foreign exchange contracts) are converted
into U.S. dollar amounts using the applicable exchange rates as of the
close of the NYSE. Generally, trading in foreign securities is        
     substantially completed each day at various times prior to the close of the
   NYSE. The values of such securities used in computing the net asset value
of the Fund's shares are determined as of the close of the respective 
   markets. Events affecting the values of such foreign securities may occur
 between the times at which the particular foreign market closes and the
close of the customary trading session of the NYSE which would not    
   ordinarily be reflected in the computation of the Fund's net asset value.
    If the event is likely to have affected the closing price of the security,
  the security will be valued at fair value in good faith using procedures
     approved by the Board of Trustees. Adjustments to closing prices to reflect
fair value may also be based on a screening process of an independent 
  pricing service to indicate the degree of certainty, based on historical
data, that the closing price in the principal market where a foreign  
security trades is not the current market value as of the close of the
    NYSE. Foreign securities meeting the approved degree of certainty that the
price is not reflective of current market value will be priced at the 
 indication of fair value from the independent pricing service. Multiple
     factors may be considered by the independent pricing service in determining
   adjustments to reflect fair value and may include information relating to
sector indices, ADRs, domestic and foreign index futures and          
exchange-traded funds.                                                

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     Securities for which market quotations are not readily available or are
     unreliable are valued at fair value as determined in good faith by or under
  the supervision of the Trust's officers following procedures approved by
the Board of Trustees. Issuer specific events, market trends, bid/ask 
  quotes of brokers and information providers and other market data may be
     reviewed in the course of making a good faith determination of a security's
fair value.                                                           

B.   SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions   
    are accounted for on a trade date basis. Realized gains or losses on sales
are computed on the basis of specific identification of the securities
sold. Interest income is recorded on the accrual basis from settlement
  date. Dividend income is recorded on the ex-dividend date. Bond premiums
and discounts are amortized and/or accreted for financial reporting   
purposes.                                                             

     Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased 
  and/or a reduction of proceeds on a sale of securities. Such transaction
 costs are included in the determination of realized and unrealized gain
   (loss) from investment securities reported in the Statement of Operations
    and the Statement of Changes in Net Assets and the realized and unrealized
 net gains (losses) on securities per share in the Financial Highlights.
   Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These   
transaction costs are not considered operating expenses and are not   
    reflected in net investment income reported in the Statement of Operations
  and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation  
arrangements between the Fund and the advisor.                        

     The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.     

C.   DISTRIBUTIONS -- Distributions from income are declared and paid quarterly 
and are recorded on ex-dividend date. Distributions from net realized 
capital gain, if any, are generally paid annually and recorded on     
    ex-dividend date. The Fund may elect to use a portion of the proceeds from
redemptions as distributions for federal income tax purposes.         

D.   FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of
Subchapter M of the Internal Revenue Code necessary to qualify as a   
   regulated investment company and, as such, will not be subject to federal
  income taxes on otherwise taxable income (including net realized capital
 gain) which is distributed to shareholders. Therefore, no provision for
federal income taxes is recorded in the financial statements.         

E.   EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular    
 class of the Fund are charged to the operations of such class. Transfer
agency fees and expenses and other shareholder recordkeeping fees and 
     expenses attributable to the Institutional Class are charged to such class.
    Transfer agency fees and expenses and other shareholder recordkeeping fees
and expenses relating to all other classes are allocated among those  
classes based on relative net assets. All other expenses are allocated
among the classes based on relative net assets.                       

F.   DOLLAR ROLL TRANSACTIONS -- The Fund may engage in dollar roll transactions
    with respect to mortgage-backed securities issued by GNMA, FNMA and FHLMC.
 In a dollar roll transaction, the Fund sells a mortgage-backed security
held in the Fund to a financial institution such as a bank or         
broker-dealer, and simultaneously agrees to purchase a substantially  
   similar security (same type, coupon and maturity) from the institution at
    an agreed upon price and future date. The mortgage-backed securities to be
 purchased will bear the same interest rate as those sold, but generally
will be collateralized by different pools of mortgages with different 
prepayment histories. The difference between the selling price and the
    future purchase price is generally amortized to income between the date of
   the sell and the future purchase date. During the period between the sale
and purchase, the Fund will not be entitled to receive interest and   
     principal payments on securities sold. Proceeds of the sale may be invested
    in short-term instruments, and the income from these investments, together
    with any additional fee income received on the sale, could generate income
for the Fund exceeding the yield on the security sold. Dollar roll    
    transactions are considered borrowings under the 1940 Act. At the time the
    Fund enters into the dollar roll, it will segregate liquid assets having a
dollar value equal to the purchase price.                             

    Dollar roll transactions involve the risk that the market value of the
securities retained by the Fund may decline below the price of the    
  securities that the Fund has sold but is obligated to purchase under the
agreement. In the event that the buyer of securities in a dollar roll 
  transaction files for bankruptcy or becomes insolvent, the Fund's use of
  the proceeds from the sale of the securities may be restricted pending a
  determination by the other party, or its trustee or receiver, whether to
     enforce the Fund's obligation to purchase the securities. The return earned
     by the Fund with the proceeds of the dollar roll transaction may not exceed
transaction costs.                                                    

G.   FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of
  the NYSE based on quotations posted by banks and major currency dealers.
Portfolio securities and other assets and liabilities denominated in  
foreign currencies are translated into U.S. dollar amounts at date of 
valuation. Purchases and sales of portfolio securities (net of foreign
taxes withheld on disposition) and income items denominated in foreign
    currencies are translated into U.S. dollar amounts on the respective dates
    of such transactions. The Fund does not separately account for the portion
 of the results of operations resulting from changes in foreign exchange
  rates on investments and the fluctuations arising from changes in market
prices of securities held. The combined results of changes in foreign 
    exchange rates and the fluctuation of market prices on investments (net of
   estimated foreign tax withholding) are included with the net realized and
  unrealized gain or loss from investments in the Statement of Operations.
Reported net realized foreign currency gains or losses arise from, (i)
     sales of foreign currencies, (ii) currency gains or losses realized between
  the trade and settlement dates on securities transactions, and (iii) the
difference between the amounts of dividends, interest, and foreign    
withholding taxes recorded on the Fund's books and the U.S. dollar    
     equivalent of the amounts actually received or paid. Net unrealized foreign
   currency gains and losses arise from changes in the fair values of assets
     and liabilities, other than investments in securities at fiscal period end,
resulting from changes in exchange rates.                             

H.   FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation 
to purchase or sell a specific currency for an agreed-upon price at a 
     future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the          

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 relationship between currencies. The Fund may also enter into a foreign
   currency contract for the purchase or sale of a security denominated in a
foreign currency in order to "lock in" the U.S. dollar price of that  
security. The Fund could be exposed to risk if counterparties to the  
   contracts are unable to meet the terms of their contracts or if the value
of the foreign currency changes unfavorably.                          

I.   FUTURES CONTRACTS -- The Fund may purchase or sell futures contracts as a  
hedge against changes in market conditions. Initial margin deposits   
required upon entering into futures contracts are satisfied by the    
 segregation of specific securities as collateral for the account of the
 broker (the Fund's agent in acquiring the futures position). During the
period the futures contracts are open, changes in the value of the    
contracts are recognized as unrealized gains or losses by "marking to 
  market" on a daily basis to reflect the market value of the contracts at
the end of each day's trading. Variation margin payments are made or  
  received depending upon whether unrealized gains or losses are incurred.
    When the contracts are closed, the Fund recognizes a realized gain or loss
    equal to the difference between the proceeds from, or cost of, the closing
   transaction and the Fund's basis in the contract. If the Fund were unable
 to liquidate a futures contract and/or enter into an offsetting closing
transaction, the Fund would continue to be subject to market risk with
respect to the value of the contracts and continue to be required to  
maintain the margin deposits on the futures contracts.                

NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES                         

The Trust has entered into a master investment advisory agreement with A I M    
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,   
the Fund pays an advisory fee to AIM at the annual rate of 0.65% of the first $1
billion of the Fund's average daily net assets, plus 0.60% of the next $4       
billion of the Fund's average daily net assets, plus 0.55% of the Fund's average
daily net assets in excess of $5 billion. Effective January 1, 2005 through     
December 31, 2009, AIM has contractually agreed to waive advisory fees to the   
extent necessary so that the advisory fees payable by the Fund (based on the    
Fund's average daily net assets) do not exceed the annual rate of 0.62% of the  
first $250 million, plus 0.605% of the next $250 million, plus 0.59% of the next
$500 million, plus 0.575% of the next $1.5 billion, plus 0.56% of the next $2.5 
billion, plus 0.545% of the next $2.5 billion, plus 0.53% of the next $2.5      
billion, plus 0.515% of the Fund's average daily net assets in excess of $10    
billion. AIM has voluntarily agreed to waive advisory fees and/or reimburse     
expenses to the extent necessary to limit total annual operating expenses       
(excluding certain items discussed below) of Class A, Class B, Class C, Class R 
and Institutional Class shares to 1.50%, 2.15%, 2.15%, 1.65% and 1.15% of       
average daily net assets, respectively. In determining the advisor's obligation 
to waive advisory fees and/or reimburse expenses, the following expenses are not
taken into account, and could cause the total annual fund operating expenses to 
exceed the limits stated above: (i) interest; (ii) taxes; (iii) dividend expense
on short sales; (iv) extraordinary items (these are expenses that are not       
anticipated to arise from the Fund's day-to-day operations), or items designated
as such by the Fund's Board of Trustees; (v) expenses related to a merger or    
reorganization, as approved by the Fund's Board of Trustees; and (vi) expenses  
that the Fund has incurred but did not actually pay because of an expense offset
arrangement. Currently, the only expense offset arrangements from which the Fund
benefits are in the form of credits that the Fund receives from banks where the 
Fund or its transfer agent has deposit accounts in which it holds uninvested    
cash. Those credits are used to pay certain expenses incurred by the Fund. AIM  
did not waive fees and/or reimburse expenses during the period under this       
expense limitation. Further, AIM has voluntarily agreed to waive advisory fees  
of the Fund in the amount of 25% of the advisory fee AIM receives from the      
affiliated money market funds on investments by the Fund in such affiliated     
money market funds. Voluntary fee waivers or reimbursements may be modified or  
discontinued at any time upon consultation with the Board of Trustees without   
further notice to investors. For the year ended December 31, 2004, AIM waived   
fees of $292.                                                                   

   For the year ended December 31, 2004, at the request of the Trustees of the
Trust, AMVESCAP PLC ("AMVESCAP") agreed to reimburse $34,433 of expenses        
incurred by the Fund in connection with matters related to recently settled     
regulatory actions and investigations concerning market timing activity in the  
AIM Funds, including legal, audit, shareholder servicing, communication and     
trustee expenses. These expenses along with the related expense reimbursement,  
are included in the Statement of Operations.                                    

  The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing    
accounting services to the Fund. For the year ended December 31, 2004, AIM was  
paid $50,000 for such services.                                                 

    The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay AIM Investment Services, Inc. ("AISI") a fee for providing transfer agency  
and shareholder services to the Fund and reimburse AISI for certain expenses    
incurred by AISI in the course of providing such services. For the Institutional
Class, the transfer agent has contractually agreed to reimburse class specific  
transfer agent fees and expenses to the extent necessary to limit transfer agent
fees to 0.10% of the average net assets. AISI did not reimburse fees during the 
period under this expense limitation. For the year ended December 31, 2004, the 
Fund paid AISI $493,477 for Class A, Class B, Class C and Class R shares and $7 
for Institutional Class shares. AISI may make payments to intermediaries that   
provide omnibus account services, sub-accounting services and/or networking     
services.                                                                       

The Trust has entered into master distribution agreements with A I M    
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the     
Class A, Class B, Class C, Class R and Institutional Class shares of the Fund.  
The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with      
respect to the Fund's Class A, Class B, Class C and Class R shares (collectively
the "Plans"). The Fund, pursuant to the Plans, pays AIM Distributors            
compensation at the annual rate of 0.35% of the Fund's average daily net assets 
of Class A shares, 1.00% of the average daily net assets of Class B and Class C 
shares and 0.50% of the average daily net assets of Class R shares. Of these    
amounts, up to 0.25% of the average daily net assets of the Class A, Class B,   
Class C or Class R shares may be paid to furnish continuing personal shareholder
services to customers who purchase and own shares of such classes. Any amounts  
not paid as a service fee under the Plans would constitute an asset-based sales 
charge. NASD Rules also impose a cap on the total sales charges, including      
asset-based sales charges that may be paid by any class of shares of the Fund.  
Pursuant to the Plans, for the year ended December 31, 2004, the Class A, Class 
B, Class C and Class R shares paid $217,699, $796,944, $265,274 and $35,        
respectively.                                                                   

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  Front-end sales commissions and contingent deferred sales charges ("CDSC")
(collectively the "sales charges") are not recorded as expenses of the Fund.    
Front-end sales commissions are deducted from proceeds from the sales of Fund   
shares prior to investment in Class A shares of the Fund. CDSC are deducted from
redemption proceeds prior to remittance to the shareholder. During the year     
ended December 31, 2004, AIM Distributors advised the Fund that it retained     
$44,826 in front-end sales commissions from the sale of Class A shares and $24, 
$8,790, $2,603 and $0 from Class A, Class B, Class C and Class R shares,        
respectively, for CDSC imposed upon redemptions by shareholders.                

Certain officers and trustees of the Trust are officers and directors of
AIM, AISI and/or AIM Distributors.                                              

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, during the year ended December 31, 2004, the Fund 
engaged in purchases and sales of securities of $784,320 and $854,856,          
respectively.                                                                   

NOTE 4--EXPENSE OFFSET ARRANGEMENT                                              

The expense offset arrangement is comprised of transfer agency credits which    
result from balances in Demand Deposit Accounts (DDA) used by the transfer agent
for clearing shareholder transactions. For the year ended December 31, 2004, the
Fund received credits in transfer agency fees of $2,327 under an expense offset 
arrangement, which resulted in a reduction of the Fund's total expenses of      
$2,327.                                                                         

NOTE 5--TRUSTEES' FEES                                                          

Trustees' fees represent remuneration paid to each Trustee of the Trust who is  
not an "interested person" of AIM. Trustees have the option to defer            
compensation payable by the Trust. Those Trustees who defer compensation have   
the option to select various AIM Funds in which their deferral accounts shall be
deemed to be invested.                                                          

Current Trustees are eligible to participate in a retirement plan that  
provides for benefits to be paid upon retirement to Trustees over a period of   
time based on the number of years of service. The Fund may have certain former  
Trustees that also participate in a retirement plan and receive benefits under  
such plan.                                                                      

  Obligations under the deferred compensation and retirement plans represent
unsecured claims against the general assets of the Fund.                        

   During the year ended December 31, 2004, the Fund paid legal fees of $3,004
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Independent Trustees. A member of that firm is a Trustee of the Trust.          

NOTE 6--BORROWINGS                                                              

Pursuant to an exemptive order from the SEC, the Fund may participate in an     
interfund lending facility that AIM has established for temporary borrowings by 
the AIM Funds. An interfund loan will be made under this facility only if the   
loan rate (an average of the rate available on bank loans and the rate available
on investments in overnight repurchase agreements) is favorable to both the     
lending fund and the borrowing fund. A loan will be secured by collateral if the
Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total    
assets. To the extent that the loan is required to be secured by collateral, the
collateral is marked to market daily to ensure that the market value is at least
102% of the outstanding principal value of the loan.                            

The Fund is a participant in an uncommitted unsecured revolving credit  
facility with State Street Bank and Trust Company ("SSB"). The Fund may borrow  
up to the lesser of (i) $125,000,000, or (ii) the limits set by its prospectus  
for borrowings. The Fund and other funds advised by AIM which are parties to the
credit facility can borrow on a first come, first served basis. Principal on    
each loan outstanding shall bear interest at the bid rate quoted by SSB at the  
time of the request for the loan.                                               

During the year ended December 31, 2004, the Fund did not borrow or lend
under the interfund lending facility or borrow under the uncommitted unsecured  
revolving credit facility.                                                      

Additionally, the Fund is permitted to temporarily carry a negative or  
overdrawn balance in its account with SSB, the custodian bank. To compensate the
custodian bank for such overdrafts, the overdrawn Fund may either (i) leave     
funds in the account so the custodian can be compensated by earning the         
additional interest; or (ii) compensate by paying the custodian bank. In either 
case, the custodian bank will be compensated at an amount equal to the Federal  
Funds rate plus 100 basis points.                                               

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NOTE 7--FUTURES CONTRACTS                                                       

On December 31, 2004, $400,000 principal amount of investment grade corporate   
securities were pledged as collateral to cover margin requirements for open     
futures contracts.                                                              

                                                        [Enlarge/Download Table]

OPEN FUTURES CONTRACTS AT PERIOD END                                                                                   
-----------------------------------------------------------------------------------------------------------------------
                                                                                                           UNREALIZED  
                                                              NUMBER OF      MONTH/         MARKET        APPRECIATION 
CONTRACT                                                      CONTRACTS    COMMITMENT        VALUE       (DEPRECIATION)
-----------------------------------------------------------------------------------------------------------------------
                                                                                                                       
U. S. Treasury 2 Year Notes                                      29        Mar-05/Long    $ 6,078,219       $ 7,652    
-----------------------------------------------------------------------------------------------------------------------
U. S. Treasury 5 Year Notes                                      63        Mar-05/Long      6,900,469        43,982    
-----------------------------------------------------------------------------------------------------------------------
U.S. Treasury 10 Year Notes                                       9        Mar-05/Long      1,007,437        (5,670)   
-----------------------------------------------------------------------------------------------------------------------
U.S. Treasury 30 Year Bonds                                       2        Mar-05/Long        225,000         3,834    
=======================================================================================================================
                                                                                          $14,211,125       $49,798    
_______________________________________________________________________________________________________________________
=======================================================================================================================

NOTE 8--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS          

DISTRIBUTIONS TO SHAREHOLDERS:                                                  

The tax character of distributions paid during the years ended December 31, 2004
and 2003 was as follows:                                                        

                                                                [Download Table]

                                                                 2004         2003  
------------------------------------------------------------------------------------
                                                                                    
Distributions paid from:                                                            
  Ordinary income                                             $  694,273    $351,965
------------------------------------------------------------------------------------
  Long-term capital gain                                       4,759,652          --
====================================================================================
Total distributions                                           $5,453,925    $351,965
____________________________________________________________________________________
====================================================================================

TAX COMPONENTS OF NET ASSETS:                                                   

As of December 31, 2004, the components of net assets on a tax basis were as    
follows:                                                                        

                                                                [Download Table]

                                                                  2004     
-------------------------------------------------------------------------- 
                                                                           
Undistributed ordinary income                                 $     53,848 
-------------------------------------------------------------------------- 
Unrealized appreciation -- investments                          22,152,211 
-------------------------------------------------------------------------- 
Temporary book/tax differences                                     (15,060)
-------------------------------------------------------------------------- 
Post-October capital loss deferral                                (305,862)
-------------------------------------------------------------------------- 
Shares of beneficial interest                                  154,792,290 
========================================================================== 
Total net assets                                              $176,677,427 
__________________________________________________________________________ 
========================================================================== 

The difference between book-basis and tax-basis unrealized appreciation 
(depreciation) is due to differences in the timing of recognition of gains and  
losses on investments for tax and book purposes. The Fund's unrealized          
appreciation (depreciation) difference is attributable primarily to losses on   
wash sales and the tax recognition of unrealized gains and losses on certain    
future contracts.                                                               

The temporary book/tax differences are a result of timing differences   
between book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of the trustee deferral of compensation and 
retirement plan expenses.                                                       

The Fund utilized $3,344,634 of capital loss carryforward in the current
period to offset net realized capital gain for federal income tax purposes. The 
fund did not have a capital loss carryforward as of December 31, 2004.          

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NOTE 9--INVESTMENT SECURITIES                                                   

The aggregate amount of investment securities (other than short-term securities 
and money market funds) purchased and sold by the Fund during the year ended    
December 31, 2004 was $111,987,123 and $102,680,901, respectively.              

                                                                [Download Table]

UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS 
-------------------------------------------------------------------------------
                                                                               
Aggregate unrealized appreciation of investment securities        $24,552,170  
-------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities       (2,399,959) 
===============================================================================
Net unrealized appreciation of investment securities              $22,152,211  
_______________________________________________________________________________
===============================================================================
Cost of investments for tax purposes is $158,642,129.                          

NOTE 10--RECLASSIFICATION OF PERMANENT DIFFERENCES                              

Primarily as a result of differing book/tax treatment of distributions, foreign 
currency transactions and paydowns on mortgage-backed securities on December 31,
2004, undistributed net investment income (loss) was increased by $199,001 and  
undistributed net realized gain (loss) decreased by $555,344 and shares of      
beneficial interest was increased by 356,343. This reclassification had no      
effect on the net assets of the Fund.                                           

NOTE 11--SHARE INFORMATION                                                      

The Fund currently offers five different classes of shares: Class A shares,     
Class B shares, Class C shares, Class R shares and Institutional Class shares.  
Class A shares are sold with a front-end sales charge. Class B shares and Class 
C shares are sold with CDSC. Class R shares and Institutional Class shares are  
sold at net asset value. Under certain circumstances, Class A shares and Class R
shares are subject to CDSC. Generally, Class B shares will automatically convert
to Class A shares eight years after the end of the calendar month of purchase.  

                                                        [Enlarge/Download Table]

                                           CHANGES IN SHARES OUTSTANDING                                             
-------------------------------------------------------------------------------------------------------------------- 
                                                                             YEAR ENDED DECEMBER 31,                 
                                                              ------------------------------------------------------ 
                                                                        2004                         2003            
                                                              -------------------------    ------------------------- 
                                                                SHARES        AMOUNT         SHARES        AMOUNT    
-------------------------------------------------------------------------------------------------------------------- 
                                                                                                                     
Sold:                                                                                                                
  Class A                                                      1,841,128    $21,407,747     2,121,267    $21,472,774 
-------------------------------------------------------------------------------------------------------------------- 
  Class B                                                      2,136,603     24,825,439     3,415,758     34,619,858 
-------------------------------------------------------------------------------------------------------------------- 
  Class C                                                        849,151      9,883,030     1,191,376     12,127,632 
-------------------------------------------------------------------------------------------------------------------- 
  Class R(a)                                                       1,570         18,300            --             -- 
-------------------------------------------------------------------------------------------------------------------- 
  Institutional Class(a)                                             861         10,000            --             -- 
==================================================================================================================== 
Issued as reinvestment of dividends:                                                                                 
  Class A                                                        192,162      2,246,590        23,304        235,426 
-------------------------------------------------------------------------------------------------------------------- 
  Class B                                                        184,791      2,174,085         7,181         68,294 
-------------------------------------------------------------------------------------------------------------------- 
  Class C                                                         62,525        731,457         2,103         20,060 
-------------------------------------------------------------------------------------------------------------------- 
  Class R(a)                                                          29            348            --             -- 
-------------------------------------------------------------------------------------------------------------------- 
  Institutional Class(a)                                              34            394            --             -- 
==================================================================================================================== 
Automatic conversion of Class B shares to Class A shares:                                                            
  Class A                                                        547,870      6,394,392       298,876      3,122,514 
-------------------------------------------------------------------------------------------------------------------- 
  Class B                                                       (548,916)    (6,394,392)     (299,162)    (3,122,514)
==================================================================================================================== 
Reacquired:                                                                                                          
  Class A                                                     (1,432,534)   (16,656,059)   (1,204,717)   (11,950,932)
-------------------------------------------------------------------------------------------------------------------- 
  Class B                                                     (1,661,318)   (19,224,292)   (1,513,543)   (15,068,036)
-------------------------------------------------------------------------------------------------------------------- 
  Class C                                                       (727,975)    (8,461,331)     (698,766)    (6,965,135)
-------------------------------------------------------------------------------------------------------------------- 
  Class R(a)                                                          (1)           (10)           --             -- 
==================================================================================================================== 
                                                               1,445,980    $16,955,698     3,343,677    $34,559,941 
____________________________________________________________________________________________________________________ 
==================================================================================================================== 

(a)Class R shares and Institutional Class shares commenced sales on April       
30, 2004.                                                             

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NOTE 12--FINANCIAL HIGHLIGHTS                                                   

The following schedule presents financial highlights for a share of the Fund    
outstanding throughout the periods indicated.                                   

                                                        [Enlarge/Download Table]

                                                                                     CLASS A                        
                                                              ------------------------------------------------------
                                                                                                  SEPTEMBER 28, 2001
                                                                                                   (DATE OPERATIONS 
                                                                  YEAR ENDED DECEMBER 31,           COMMENCED) TO   
                                                              --------------------------------       DECEMBER 31,   
                                                               2004          2003       2002             2001       
--------------------------------------------------------------------------------------------------------------------
                                                                                                                    
Net asset value, beginning of period                          $ 11.50       $  9.46    $ 10.75         $ 10.00      
--------------------------------------------------------------------------------------------------------------------
Income from investment operations:                                                                                  
  Net investment income                                          0.08          0.05       0.11(a)         0.03(a)   
--------------------------------------------------------------------------------------------------------------------
  Net gains (losses) on securities (both realized and                                                               
    unrealized)                                                  0.71          2.05      (1.28)           0.76      
====================================================================================================================
    Total from investment operations                             0.79          2.10      (1.17)           0.79      
====================================================================================================================
Less distributions:                                                                                                 
  Dividends from net investment income                          (0.10)        (0.06)     (0.12)          (0.04)     
--------------------------------------------------------------------------------------------------------------------
  Distributions from net realized gains                         (0.33)           --         --              --      
====================================================================================================================
    Total distributions                                         (0.43)        (0.06)     (0.12)          (0.04)     
====================================================================================================================
Net asset value, end of period                                $ 11.86       $ 11.50    $  9.46         $ 10.75      
____________________________________________________________________________________________________________________
====================================================================================================================
Total return(b)                                                  6.89%        22.35%    (10.97)%          7.94%     
____________________________________________________________________________________________________________________
====================================================================================================================
Ratios/supplemental data:                                                                                           
Net assets, end of period (000s omitted)                      $68,951       $53,675    $32,414         $10,753      
____________________________________________________________________________________________________________________
====================================================================================================================
Ratio of expenses to average net assets:                                                                            
  With fee waivers and/or expense reimbursements                 1.47%(c)      1.50%      1.48%           1.43%(d)  
--------------------------------------------------------------------------------------------------------------------
  Without fee waivers and/or expense reimbursements              1.49%(c)      1.57%      1.67%           2.89%(d)  
====================================================================================================================
Ratio of net investment income to average net assets             0.73%(c)      0.46%      1.15%           1.16%(d)  
____________________________________________________________________________________________________________________
====================================================================================================================
Portfolio turnover rate(e)                                         64%           51%        42%              7%     
____________________________________________________________________________________________________________________
====================================================================================================================

(a)  Calculated using average shares outstanding.                               
(b)  Includes adjustments in accordance with accounting principles generally    
accepted in the United States of America and as such, the net asset   
 value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for  
shareholder transactions. Does not include sales charges and is not   
annualized for periods less than one year.                            
(c)  Ratios are based on average daily net assets of $62,199,733.               
(d)  Annualized.                                                                
(e)  Not annualized for periods less than one year.                             

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                                                        [Enlarge/Download Table]

                                                                                     CLASS B                        
                                                              ------------------------------------------------------
                                                                                                  SEPTEMBER 28, 2001
                                                                                                   (DATE OPERATIONS 
                                                                  YEAR ENDED DECEMBER 31,           COMMENCED) TO   
                                                              --------------------------------       DECEMBER 31,   
                                                               2004          2003       2002             2001       
--------------------------------------------------------------------------------------------------------------------
                                                                                                                    
Net asset value, beginning of period                          $ 11.49       $  9.46    $ 10.75         $ 10.00      
--------------------------------------------------------------------------------------------------------------------
Income from investment operations:                                                                                  
  Net investment income (loss)                                   0.01         (0.02)      0.05(a)         0.01(a)   
--------------------------------------------------------------------------------------------------------------------
  Net gains (losses) on securities (both realized and                                                               
    unrealized)                                                  0.69          2.06      (1.29)           0.77      
====================================================================================================================
    Total from investment operations                             0.70          2.04      (1.24)           0.78      
====================================================================================================================
Less distributions:                                                                                                 
  Dividends from net investment income                          (0.02)        (0.01)     (0.05)          (0.03)     
--------------------------------------------------------------------------------------------------------------------
  Distributions from net realized gains                         (0.33)           --         --              --      
====================================================================================================================
    Total distributions                                         (0.35)        (0.01)     (0.05)          (0.03)     
====================================================================================================================
Net asset value, end of period                                $ 11.84       $ 11.49    $  9.46         $ 10.75      
____________________________________________________________________________________________________________________
====================================================================================================================
Total return(b)                                                  6.12%        21.64%    (11.56)%          7.76%     
____________________________________________________________________________________________________________________
====================================================================================================================
Ratios/supplemental data:                                                                                           
Net assets, end of period (000s omitted)                      $79,968       $76,304    $47,597         $16,067      
____________________________________________________________________________________________________________________
====================================================================================================================
Ratio of expenses to average net assets:                                                                            
  With fee waivers and/or expense reimbursements                 2.12%(c)      2.15%      2.13%           2.08%(d)  
--------------------------------------------------------------------------------------------------------------------
  Without fee waivers and/or expense reimbursements              2.14%(c)      2.22%      2.32%           3.54%(d)  
====================================================================================================================
Ratio of net investment income (loss) to average net assets      0.08%(c)     (0.19)%     0.50%           0.52%(d)  
____________________________________________________________________________________________________________________
====================================================================================================================
Portfolio turnover rate(e)                                         64%           51%        42%              7%     
____________________________________________________________________________________________________________________
====================================================================================================================

(a)  Calculated using average shares outstanding.                               
(b)  Includes adjustments in accordance with accounting principles generally    
accepted in the United States of America and as such, the net asset   
 value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for  
shareholder transactions. Does not include sales charges and is not   
annualized for periods less than one year.                            
(c)  Ratios are based on average net assets of $79,694,417.                     
(d)  Annualized.                                                                
(e)  Not annualized for periods less than one year.                             

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                                                        [Enlarge/Download Table]

                                                                                     CLASS C                        
                                                              ------------------------------------------------------
                                                                                                  SEPTEMBER 28, 2001
                                                                                                   (DATE OPERATIONS 
                                                                  YEAR ENDED DECEMBER 31,           COMMENCED) TO   
                                                              --------------------------------       DECEMBER 31,   
                                                               2004          2003       2002             2001       
--------------------------------------------------------------------------------------------------------------------
                                                                                                                    
Net asset value, beginning of period                          $ 11.49       $  9.46    $ 10.75          $10.00      
--------------------------------------------------------------------------------------------------------------------
Income from investment operations:                                                                                  
  Net investment income (loss)                                   0.01         (0.02)      0.05(a)         0.01(a)   
--------------------------------------------------------------------------------------------------------------------
  Net gains (losses) on securities (both realized and                                                               
    unrealized)                                                  0.70          2.06      (1.29)           0.77      
====================================================================================================================
    Total from investment operations                             0.71          2.04      (1.24)           0.78      
====================================================================================================================
Less distributions:                                                                                                 
  Dividends from net investment income                          (0.02)        (0.01)     (0.05)          (0.03)     
--------------------------------------------------------------------------------------------------------------------
  Distributions from net realized gains                         (0.33)           --         --              --      
====================================================================================================================
    Total distributions                                         (0.35)        (0.01)     (0.05)          (0.03)     
====================================================================================================================
Net asset value, end of period                                $ 11.85       $ 11.49    $  9.46          $10.75      
____________________________________________________________________________________________________________________
====================================================================================================================
Total return(b)                                                  6.21%        21.64%    (11.57)%          7.76%     
____________________________________________________________________________________________________________________
====================================================================================================================
Ratios/supplemental data:                                                                                           
Net assets, end of period (000s omitted)                      $27,729       $24,790    $15,727          $5,168      
____________________________________________________________________________________________________________________
====================================================================================================================
Ratio of expenses to average net assets:                                                                            
  With fee waivers and/or expense reimbursements                 2.12%(c)      2.15%      2.13%           2.08%(d)  
--------------------------------------------------------------------------------------------------------------------
  Without fee waivers and/or expense reimbursements              2.14%(c)      2.22%      2.32%           3.54%(d)  
====================================================================================================================
Ratio of net investment income (loss) to average net assets      0.08%(c)     (0.19)%     0.50%           0.52%(d)  
____________________________________________________________________________________________________________________
====================================================================================================================
Portfolio turnover rate(e)                                         64%           51%        42%              7%     
____________________________________________________________________________________________________________________
====================================================================================================================

(a)  Calculated using average shares outstanding.                               
(b)  Includes adjustments in accordance with accounting principles generally    
accepted in the United States of America and as such, the net asset   
 value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for  
shareholder transactions. Does not include sales charges and is not   
annualized for periods less than one year.                            
(c)  Ratios are based on average net assets of $26,527,387.                     
(d)  Annualized.                                                                
(e)  Not annualized for periods less than one year.                             

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                                                                [Download Table]

                                                                   CLASS R    
                                                                --------------
                                                                APRIL 30, 2004
                                                                 (DATE SALES  
                                                                COMMENCED) TO 
                                                                 DECEMBER 31, 
                                                                     2004     
------------------------------------------------------------------------------
                                                                              
Net asset value, beginning of period                                $11.61    
------------------------------------------------------------------------------
Income from investment operations:                                            
  Net investment income                                               0.05(a) 
------------------------------------------------------------------------------
  Net gains on securities (both realized and unrealized)              0.60    
==============================================================================
    Total from investment operations                                  0.65    
==============================================================================
Less distributions:                                                           
  Dividends from net investment income                               (0.06)   
------------------------------------------------------------------------------
  Distributions from net realized gains                              (0.33)   
==============================================================================
    Total distributions                                              (0.39)   
==============================================================================
Net asset value, end of period                                      $11.87    
______________________________________________________________________________
==============================================================================
Total return(b)                                                       5.68%   
______________________________________________________________________________
==============================================================================
Ratios/supplemental data:                                                     
Net assets, end of period (000s omitted)                            $   19    
______________________________________________________________________________
==============================================================================
Ratio of expenses to average net assets:                                      
  With fee waivers and/or expense reimbursements                      1.62%(c)
------------------------------------------------------------------------------
  Without fee waivers and/or expense reimbursements                   1.64%(c)
==============================================================================
Ratio of net investment income to average net assets                  0.58%(c)
______________________________________________________________________________
==============================================================================
Portfolio turnover rate(d)                                              64%   
______________________________________________________________________________
==============================================================================

(a)  Calculated using average shares outstanding.                               
(b)  Includes adjustments in accordance with accounting principles generally    
accepted in the United States of America and as such, the net asset   
value for financial reporting purposes and the return based upon that 
net asset value may differ from the net asset value and return for    
  shareholder transactions. Not annualized for periods less than one year.
(c)  Ratios are annualized and based on average daily net assets of $10,434.    
(d)  Not annualized for periods less than one year.                             

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                                                                [Download Table]

                                                                INSTITUTIONAL CLASS
                                                                -------------------
                                                                  APRIL 30, 2004   
                                                                    (DATE SALES    
                                                                   COMMENCED) TO   
                                                                   DECEMBER 31,    
                                                                       2004        
-----------------------------------------------------------------------------------
                                                                                   
Net asset value, beginning of period                                  $11.61       
-----------------------------------------------------------------------------------
Income from investment operations:                                                 
  Net investment income                                                 0.10(a)    
-----------------------------------------------------------------------------------
  Net gains on securities (both realized and unrealized)                0.61       
===================================================================================
    Total from investment operations                                    0.71       
===================================================================================
Less distributions:                                                                
  Dividends from net investment income                                 (0.13)      
-----------------------------------------------------------------------------------
  Distributions from net realized gains                                (0.33)      
===================================================================================
    Total distributions                                                (0.46)      
===================================================================================
Net asset value, end of period                                        $11.86       
___________________________________________________________________________________
===================================================================================
Total return(b)                                                         6.15%      
___________________________________________________________________________________
===================================================================================
Ratios/supplemental data:                                                          
Net assets, end of period (000s omitted)                              $   11       
___________________________________________________________________________________
===================================================================================
Ratio of expenses to average net assets:                                           
  With fee waivers and/or expense reimbursements                        0.93%(c)   
-----------------------------------------------------------------------------------
  Without fee waivers and/or expense reimbursements                     0.95%(c)   
===================================================================================
Ratio of net investment income to average net assets                    1.27%(c)   
___________________________________________________________________________________
===================================================================================
Portfolio turnover rate(d)                                                64%      
___________________________________________________________________________________
===================================================================================

(a)  Calculated using average shares outstanding.                               
(b)  Includes adjustments in accordance with accounting principles generally    
accepted in the United States of America and as such, the net asset   
value for financial reporting purposes and the return based upon that 
net asset value may differ from the net asset value and return for    
  shareholder transactions. Not annualized for periods less than one year.
(c)  Ratios are annualized and based on average net assets of $10,030.          
(d)  Not annualized for periods less than one year.                             

NOTE 13--LEGAL PROCEEDINGS                                                      

Terms used in the Legal Proceedings Note are defined terms solely for the       
purpose of this note.                                                           

Settled Enforcement Actions and Investigations Related to Market Timing         

    On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment
advisor to certain AIM Funds) and A I M Advisors, Inc. ("AIM") (the Fund's      
investment advisor) reached final settlements with certain regulators, including
without limitation the Securities and Exchange Commission ("SEC"), the New York 
Attorney General ("NYAG") and the Colorado Attorney General ("COAG"), to resolve
civil enforcement actions and investigations related to market timing activity  
and related issues in the AIM Funds, including those formerly advised by IFG.   
These regulators alleged, in substance, that IFG and AIM failed to disclose in  
the prospectuses for the AIM Funds that they advised and to the independent     
directors/trustees of such Funds that they had entered into certain arrangements
permitting market timing of such Funds, thereby breaching their fiduciary duties
to such Funds. As a result of the foregoing, the regulators alleged that IFG and
AIM breached various Federal and state securities, business and consumer        
protection laws. On the same date, A I M Distributors, Inc. ("ADI") (the        
distributor of the retail AIM Funds) reached a final settlement with the SEC to 
resolve an investigation relating to market timing activity and related issues  
in the AIM Funds. The SEC also alleged that ADI violated various Federal        
securities laws. The SEC also has settled related market timing enforcement     
actions brought against certain former officers and employees of IFG.           

Under the terms of the settlements, IFG agreed to pay a total of $325   
million, of which $110 million is civil penalties. Of this $325 million total   
payment, half has been paid and the remaining half will be paid on or before    
December 31, 2005. AIM and ADI agreed to pay a total of $50 million, of which   
$30 million is civil penalties, all of which has been paid. The entire $325     
million IFG settlement payment will be made available for distribution to the   
shareholders of those AIM Funds that IFG formerly advised that were harmed by   
market timing activity, and the entire $50 million settlement payment by AIM and
ADI will be made available for distribution to the shareholders of those AIM    
Funds advised by AIM that were harmed by market timing activity, all as to be   
determined by an independent distribution consultant. The settlement payments   
will be distributed in accordance with a methodology to be determined by the    
independent distribution consultant, in consultation with AIM and the           
independent trustees of the AIM Funds and acceptable to the staff of the SEC.   
Under the settlements with the NYAG and COAG, AIM has agreed to reduce          
management fees on certain                                                      

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equity and balanced AIM Funds by $15 million per year for the next five years,  
based upon effective fee rates and assets under management as of July 1, 2004,  
and not to increase certain management fees.                                    

Under the terms of the settlements, AIM will make certain governance and
compliance reforms, including maintaining an internal controls committee and    
retaining an independent compliance consultant and a corporate ombudsman. Also, 
commencing in 2007 and at least once every other year thereafter, AIM will      
undergo a compliance review by an independent third party. In addition, under   
the terms of the settlements, AIM has undertaken to cause the AIM Funds to      
operate in accordance with certain governance policies and practices, including 
retaining a full-time independent senior officer whose duties will include      
monitoring compliance and managing the process by which proposed management fees
to be charged the AIM Funds are negotiated. Also, commencing in 2008 and not    
less than every fifth calendar year thereafter, the AIM Funds will hold         
shareholder meetings at which their Boards of Trustees will be elected.         

   At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"),
the parent company of IFG and AIM, has agreed to pay expenses incurred by such  
Funds related to market timing matters.                                         

  The SEC has also settled market timing enforcement actions against Raymond
R. Cunningham (the former president and chief executive officer of IFG and a    
former member of the board of directors of the AIM Funds formerly advised by    
IFG), Timothy J. Miller (the former chief investment officer and a former       
portfolio manager for IFG), Thomas A. Kolbe (the former national sales manager  
of IFG) and Michael D. Legoski (a former assistant vice president in IFG's sales
department). As part of these settlements, the SEC ordered these individuals to 
pay restitution and civil penalties in various amounts and prohibited them from 
associating with, or serving as an officer or director of, an investment        
advisor, broker, dealer and/or investment company, as applicable, for certain   
periods of time.                                                                

The payments made in connection with the above-referenced settlements by
IFG, AIM and ADI will total approximately $375 million (not including AIM's     
agreement to reduce management fees on certain equity and balanced AIM Funds by 
$15 million per year for the next five years, based upon effective fee rates and
assets under management as of July 1, 2004). The manner in which the settlement 
payments will be distributed is unknown at the present time and will be         
determined by an independent distribution consultant to be appointed under the  
settlement agreements. Therefore, management of AIM and the Fund are unable at  
the present time to estimate the impact, if any, that the distribution of the   
settlement amounts may have on the Fund or whether such distribution will have  
an impact on the Fund's financial statements in the future.                     

  At the present time, management of AIM and the Fund are unable to estimate
the impact, if any, that the outcome of the Regulatory Inquiries and Pending    
Litigation described below may have on AIM, ADI or the Fund.                    

REGULATORY INQUIRIES AND PENDING LITIGATION                                     

The mutual fund industry as a whole is currently subject to regulatory  
inquiries and litigation related to a wide range of issues. These issues        
include, among others, market timing activity, late trading, fair value pricing,
excessive or improper advisory and/or distribution fees, mutual fund sales      
practices, including but not limited to revenue sharing and directed-brokerage  
arrangements, investments in securities of other registered investment          
companies, contractual plans, issues related to Section 529 college savings     
plans, procedures for locating lost security holders and participation in class 
action settlements.                                                             

 As described more fully below, IFG and AIM are the subject of a number of
ongoing regulatory inquiries and civil lawsuits related to one or more of the   
issues currently being scrutinized by various Federal and state regulators,     
including but not limited to those issues described above. Additional regulatory
actions and/or civil lawsuits related to the above or other issues may be filed 
against the AIM Funds, IFG, AIM and/or related entities and individuals in the  
future. Additional regulatory inquiries related to the above or other issues    
also may be received by the AIM Funds, IFG, AIM and/or related entities and     
individuals in the future.                                                      

Ongoing Regulatory Inquiries Concerning IFG and AIM                             

   IFG, certain related entities, certain of their current and former officers
and/or certain of the AIM Funds formerly advised by IFG have received regulatory
inquiries in the form of subpoenas or other oral or written requests for        
information and/or documents related to one or more of the following issues,    
some of which concern one or more such Funds: market timing activity, late      
trading, fair value pricing, excessive or improper advisory and/or distribution 
fees, mutual fund sales practices, including revenue sharing and                
directed-brokerage arrangements, and investments in securities of other         
registered investment companies. These regulators include the SEC, the NASD,    
Inc. ("NASD"), the Florida Department of Financial Services, the Attorney       
General of the State of West Virginia, the West Virginia Securities Commission  
and the Bureau of Securities of the State of New Jersey. IFG and certain of     
these other parties also have received more limited inquiries from the United   
States Department of Labor ("DOL") and the United States Attorney's Office for  
the Southern District of New York, some of which concern one or more of the AIM 
Funds formerly advised by IFG. IFG is providing full cooperation with respect to
these inquiries.                                                                

   AIM, certain related entities, certain of their current and former officers
and/or certain of the AIM Funds have received regulatory inquiries in the form  
of subpoenas or other oral or written requests for information and/or documents 
related to one or more of the following issues, some of which concern one or    
more AIM Funds: market timing activity, late trading, fair value pricing,       
excessive or improper advisory and/or distribution fees, mutual fund sales      
practices, including revenue sharing and directed-brokerage arrangements,       
investments in securities of other registered investment companies, contractual 
plans, issues related to Section 529 college savings plans and procedures for   
locating lost securityholders. These regulators include the SEC, the NASD, the  
Department of Banking for the State of Connecticut, the Attorney General of the 
State of West Virginia, the West Virginia Securities Commission and the Bureau  
of Securities of the State of New Jersey. AIM and certain of these other parties
also have received more limited inquiries from the SEC, the NASD,               

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the DOL, the Internal Revenue Service, the United States Attorney's Office for  
the Southern District of New York, the United States Attorney's Office for the  
Central District of California, the United States Attorney's Office for the     
District of Massachusetts, the Massachusetts Securities Division, the U.S.      
Postal Inspection Service and the Commodity Futures Trading Commission, some of 
which concern one or more AIM Funds. AIM is providing full cooperation with     
respect to these inquiries.                                                     

Private Civil Actions Alleging Market Timing                                    

 Multiple civil lawsuits, including purported class action and shareholder
derivative suits, have been filed against various parties (including, depending 
on the lawsuit, certain AIM Funds, IFG, AIM, AIM Management, AMVESCAP PLC       
("AMVESCAP"), the parent company of IFG and AIM, certain related entities,      
certain of their current and former officers and/or certain unrelated third     
parties) making allegations that are similar in many respects to those in the   
settled regulatory actions brought by the SEC, the NYAG and the COAG concerning 
market timing activity in the AIM Funds. These lawsuits allege a variety of     
theories of recovery, including but not limited to: (i) violation of various    
provisions of the Federal and state securities laws; (ii) violation of various  
provisions of ERISA; (iii) breach of fiduciary duty; and/or (iv) breach of      
contract. These lawsuits were initiated in both Federal and state courts and    
seek such remedies as compensatory damages; restitution; injunctive relief;     
disgorgement of management fees; imposition of a constructive trust; removal of 
certain directors and/or employees; various corrective measures under ERISA;    
rescission of certain Funds' advisory agreements; interest; and attorneys' and  
experts' fees.                                                                  

All lawsuits based on allegations of market timing, late trading, and   
related issues have been transferred to the United States District Court for the
District of Maryland (the "MDL Court") for consolidated or coordinated pre-trial
proceedings. Pursuant to an Order of the MDL Court, plaintiffs consolidated     
their claims for pre-trial purposes into three amended complaints against       
various AIM- and IFG-related parties: (i) a Consolidated Amended Class Action   
Complaint purportedly brought on behalf of shareholders of the AIM Funds; (ii) a
Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of 
the AIM Funds and fund registrants; and (iii) an Amended Class Action Complaint 
for Violations of the Employee Retirement Income Securities Act ("ERISA")       
purportedly brought on behalf of participants in AMVESCAP's 401(k) plan. The    
plaintiffs in one of the underlying lawsuits continue to seek remand of their   
lawsuit to state court.                                                         

Private Civil Actions Alleging Improper Use of Fair Value Pricing               

    Multiple civil class action lawsuits have been filed against various parties
(including, depending on the lawsuit, certain AIM Funds, IFG and/or AIM)        
alleging that certain AIM Funds inadequately employed fair value pricing. These 
lawsuits allege a variety of theories of recovery, including but not limited to:
(i) violations of various provisions of the Federal securities laws; (ii) common
law breach of duty; and (iii) common law negligence and gross negligence. These 
lawsuits have been filed in both Federal and state courts and seek such remedies
as compensatory and punitive damages; interest; and attorneys' fees and costs.  

Private Civil Actions Alleging Excessive Advisory and/or Distribution Fees      

 Multiple civil lawsuits, including purported class action and shareholder
derivative suits, have been filed against various parties (including, depending 
on the lawsuit, IFG, AIM, INVESCO Institutional (N.A.), Inc. ("IINA"), ADI      
and/or INVESCO Distributors, Inc. ("INVESCO Distributors")) alleging that the   
defendants charged excessive advisory and/or distribution fees and failed to    
pass on to shareholders the perceived savings generated by economies of scale.  
Certain of these lawsuits also allege that the defendants adopted unlawful      
distribution plans. These lawsuits allege a variety of theories of recovery,    
including but not limited to: (i) violation of various provisions of the Federal
securities laws; (ii) breach of fiduciary duty; and/or (iii) breach of contract.
These lawsuits have been filed in Federal courts and seek such remedies as      
damages; injunctive relief; rescission of certain Funds' advisory agreements and
distribution plans; interest; prospective relief in the form of reduced fees;   
and attorneys' and experts' fees. All of these lawsuits have been transferred to
the United States District Court for the Southern District of Texas, Houston    
Division by order of the applicable United States District Court in which they  
were initially filed. The plaintiff in one of these lawsuits has challenged this
order.                                                                          

Private Civil Actions Alleging Improper Charging of Distribution Fees on Limited
Offering Funds or Share Classes                                                 

  Multiple civil lawsuits, including shareholder derivative suits, have been
filed against various parties (including, depending on the lawsuit, IFG, AIM,   
ADI and/or certain of the trustees of the AIM Funds) alleging that the          
defendants breached their fiduciary duties by charging distribution fees while  
funds and/or specific share classes were closed generally to new investors      
and/or while other share classes of the same fund were not charged the same     
distribution fees. These lawsuits allege a variety of theories of recovery,     
including but not limited to: (i) violation of various provisions of the Federal
securities laws; and (ii) breach of fiduciary duty. These lawsuits have been    
filed in Federal courts and seek such remedies as damages; injunctive relief;   
and attorneys' and experts' fees.                                               

Private Civil Actions Alleging Improper Mutual Fund Sales Practices and         
Directed-Brokerage Arrangements                                                 

 Multiple civil lawsuits, including purported class action and shareholder
derivative suits, have been filed against various parties (including, depending 
on the lawsuit, AIM Management, IFG, AIM, AIM Investment Services, Inc. ("AIS") 
and/or certain of the trustees of the AIM Funds) alleging that the defendants   
improperly used the assets of the AIM Funds to pay brokers to aggressively      
promote the sale of the AIM Funds over other mutual funds and that the          
defendants concealed such payments from investors by disguising them as         
brokerage commissions. These lawsuits allege a variety of theories of recovery, 
including but not limited to: (i) violation of various provisions of the Federal
securities laws; (ii) breach of fiduciary duty; and (iii) aiding and abetting a 
breach of fiduciary duty. These lawsuits have been filed in Federal courts and  
seek such remedies as compensatory and punitive damages;                        

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rescission of certain Funds' advisory agreements and distribution plans and     
recovery of all fees paid; an accounting of all fund-related fees, commissions  
and soft dollar payments; restitution of all unlawfully or discriminatorily     
obtained fees and charges; and attorneys' and experts' fees.                    

Private Civil Action Alleging Failure to Ensure Participation in Class Action   
Settlements                                                                     

A civil lawsuit, purporting to be a class action lawsuit, has been filed
against AIM, IINA, A I M Capital Management, Inc. and the trustees of the AIM   
Funds alleging that the defendants breached their fiduciary duties by failing to
ensure that the AIM Funds participated in class action settlements in which the 
AIM Funds were eligible to participate. This lawsuit alleges as theories of     
recovery: (i) violation of various provisions of the Federal securities laws;   
(ii) common law breach of fiduciary duty; and (iii) common law negligence. This 
lawsuit has been filed in Federal court and seeks such remedies as compensatory 
and punitive damages; forfeiture of all commissions and fees paid by the class  
of plaintiffs; and costs and attorneys' fees.                                   
*                                       *                                      *
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

    As a result of the matters discussed above, investors in the AIM Funds might
react by redeeming their investments. This might require the Funds to sell      
investments to provide for sufficient liquidity and could also have an adverse  
effect on the investment performance of the Funds.                              

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                         

To the Board of Trustees and Shareholders of                                    
AIM European Small Company 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 Small Company Fund    
(one of the funds constituting AIM Funds Group hereafter referred to as the     
"Fund") at December 31, 2004, the results of its operations for the year then   
ended, the changes in its net assets for each of the two years in the period    
then ended and the financial highlights for each of the periods indicated, in   
conformity with accounting principles generally accepted in the United States of
America. These financial statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of the Fund's management;  
our responsibility is to express an opinion on these financial statements based 
on our audits. We conducted our audits of these financial statements in         
accordance with the standards of the Public Company Accounting Oversight Board  
(United States). Those standards require that we plan and perform the audit to  
obtain reasonable assurance about whether the financial statements are free of  
material misstatement. An audit includes examining, on a test basis, evidence   
supporting the amounts and disclosures in the financial statements, assessing   
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our    
audits, which included confirmation of securities at December 31, 2004 by       
correspondence with the custodian and brokers, provide a reasonable basis for   
our opinion.                                                                    

/S/ PRICEWATERHOUSECOOPERS LLP                                                  

February 18, 2005                                                               
Houston, Texas                                                                  

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FINANCIALS                                                                      

SCHEDULE OF INVESTMENTS                                                         

December 31, 2004                                                               

                                                                [Download Table]

                                                               MARKET   
                                                 SHARES        VALUE    
------------------------------------------------------------------------
                                                                        
FOREIGN STOCKS & OTHER EQUITY                                           
  INTERESTS-89.30%                                                      

AUSTRIA-1.57%                                                           

Andritz A.G. (Industrial Machinery)(a)             44,460   $  3,376,725
========================================================================

BELGIUM-4.42%                                                           

EVS Broadcast Equipment S.A. (Communications                            
  Equipment)(a)(b)                                 55,100      6,031,952
------------------------------------------------------------------------
Option N.V. (Communications                                             
  Equipment)(a)(b)(c)                              56,570      2,027,750
------------------------------------------------------------------------
Van De Velde N.V. (Apparel, Accessories &                               
  Luxury Goods)(a)                                  9,200      1,457,770
========================================================================
                                                               9,517,472
========================================================================

BERMUDA-0.70%                                                           

Central European Media Enterprises Ltd.-Class                           
  A (Broadcasting & Cable TV)(c)                   38,570      1,503,536
========================================================================

DENMARK-0.61%                                                           

Topdanmark A.S. (Multi-Line Insurance)(a)(c)       16,760      1,319,484
========================================================================

FINLAND-1.20%                                                           

Marimekko Oyj (Apparel, Accessories & Luxury                            
  Goods)(a)                                        65,600      1,304,141
------------------------------------------------------------------------
Nokian Renkaat Oyj (Tires & Rubber)(a)              8,500      1,284,644
========================================================================
                                                               2,588,785
========================================================================

FRANCE-11.82%                                                           

Alten (IT Consulting & Other Services)(a)(c)       79,696      1,769,884
------------------------------------------------------------------------
Beneteau (Leisure Products)(a)                     27,530      2,325,803
------------------------------------------------------------------------
Camaieu (Apparel Retail)(a)                        12,227      1,213,948
------------------------------------------------------------------------
Eiffage S.A. (Construction & Engineering)                               
  (Acquired 03/03/04-12/28/04; Cost                                     
  $2,500,405)(a)(d)                                27,680      3,198,401
------------------------------------------------------------------------
Elior (Restaurants)(a)                            206,700      2,350,114
------------------------------------------------------------------------
Eramet SLN (Diversified Metals & Mining)            9,300        835,143
------------------------------------------------------------------------
Euler Hermes S.A. (Property & Casualty                                  
  Insurance)(a)                                    35,050      2,414,310
------------------------------------------------------------------------
Imerys S.A. (Construction Materials)(a)            10,660        892,706
------------------------------------------------------------------------
Neopost S.A. (Office Electronics)(a)               29,800      2,311,840
------------------------------------------------------------------------
Norbert Dentressangle (Air Freight &                                    
  Logistics)                                       15,240        843,461
------------------------------------------------------------------------
SMOBY S.A. (Leisure Products)                       7,200        781,344
------------------------------------------------------------------------
Spir Communication (Publishing)(b)                 11,680      2,286,278
------------------------------------------------------------------------
TRIGANO (Leisure Products)(a)                      27,400      2,262,714
------------------------------------------------------------------------
U10 (Home Furnishings)                             27,900      1,979,364
========================================================================
                                                              25,465,310
========================================================================

GERMANY-10.39%                                                          

Bijou Brigitte Modische Accessoires A.G.                                
  (Apparel, Accessories & Luxury Goods)(a)         25,390      3,362,755
------------------------------------------------------------------------

                                                                [Download Table]

                                                               MARKET   
                                                 SHARES        VALUE    
------------------------------------------------------------------------
                                                                        
GERMANY-(CONTINUED)                                                     

CENTROTEC Sustainable A.G. (Commodity                                   
  Chemicals)(c)                                   106,100   $  3,054,081
------------------------------------------------------------------------
CTS Eventim A.G. (Movies &                                              
  Entertainment)(a)(c)                             78,700      1,900,543
------------------------------------------------------------------------
DIS Deutscher Industrie Service A.G.                                    
  (Employment Services)(c)                         34,110      1,337,209
------------------------------------------------------------------------
Gfk A.G. (Diversified Commercial Services)(a)      18,324        714,127
------------------------------------------------------------------------
Grenkeleasing A.G. (Specialized Finance)(a)        41,710      1,985,541
------------------------------------------------------------------------
Puma A.G. Rudolf Dassler Sport (Footwear)                               
  (Acquired 07/26/01-08/02/01; Cost                                     
  $115,336)(a)(c)(d)                                6,670      1,832,097
------------------------------------------------------------------------
Rheinmetall A.G.-Pfd. (Industrial                                       
  Conglomerates)(a)                                62,360      3,251,085
------------------------------------------------------------------------
Techem A.G. (Diversified Commercial                                     
  Services)(c)                                     97,794      3,548,590
------------------------------------------------------------------------
Telegate A.G. (Diversified Commercial                                   
  Services)(a)(c)                                  75,130      1,407,030
========================================================================
                                                              22,393,058
========================================================================

GREECE-2.53%                                                            

Athens Stock Exchange S.A. (Specialized                                 
  Finance)(a)(c)                                   88,362        910,399
------------------------------------------------------------------------
Germanos S.A. (Computer & Electronics                                   
  Retail)(a)                                       21,300        629,347
------------------------------------------------------------------------
Jumbo S.A. (Leisure Products)(a)                  260,000      2,016,078
------------------------------------------------------------------------
Titan Cement Co. S.A. (Construction                                     
  Materials)(a)                                    64,500      1,907,275
========================================================================
                                                               5,463,099
========================================================================

IRELAND-3.34%                                                           

Anglo Irish Bank Corp. PLC (Diversified                                 
  Banks)(a)                                        79,040      1,916,787
------------------------------------------------------------------------
Depfa Bank PLC (Diversified Banks)(a)              75,130      1,260,909
------------------------------------------------------------------------
Grafton Group PLC (Trading Companies &                                  
  Distributors)(c)(e)                             125,990      1,367,243
------------------------------------------------------------------------
Paddy Power PLC (Casinos & Gaming)(a)              93,500      1,373,854
------------------------------------------------------------------------
Qualceram Shires PLC (Home Furnishings)           241,567        448,929
------------------------------------------------------------------------
Trintech Group PLC-ADR (Internet Software &                             
  Services)(c)                                    142,200        826,182
========================================================================
                                                               7,193,904
========================================================================

ITALY-3.69%                                                             

Cementir S.p.A. (Construction Materials)          397,600      2,098,050
------------------------------------------------------------------------
Davide Campari-Milano S.p.A. (Distillers &                              
  Vintners)(a)                                     24,800      1,595,205
------------------------------------------------------------------------
Lottomatica S.p.A. (Casinos & Gaming)(a)           56,800      2,071,584
------------------------------------------------------------------------
Marzotto S.p.A. (Apparel, Accessories &                                 
  Luxury Goods)(a)                                112,000      2,192,117
========================================================================
                                                               7,956,956
========================================================================

LUXEMBOURG-0.42%                                                        

SBS Broadcasting S.A. (Broadcasting & Cable                             
  TV)(c)                                           22,550        907,186
========================================================================

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                                                                [Download Table]

                                                               MARKET   
                                                 SHARES        VALUE    
------------------------------------------------------------------------
                                                                        

NETHERLANDS-10.77%                                                      

Aalberts Industries N.V. (Industrial                                    
  Conglomerates)(a)                                75,034   $  3,624,065
------------------------------------------------------------------------
Accell Group N.V. (Leisure Products)              120,375      2,563,632
------------------------------------------------------------------------
Airspray N.V. (Metal & Glass Containers)(a)        19,800        505,813
------------------------------------------------------------------------
Axalto Holding N.V. (Computer Storage &                                 
  Peripherals)(b)(c)                               49,700      1,291,056
------------------------------------------------------------------------
Beter Bed Holding N.V. (Specialty Stores)          88,250      1,704,686
------------------------------------------------------------------------
Brunel International N.V. (Employment                                   
  Services)(a)                                    169,700      2,061,936
------------------------------------------------------------------------
Eriks Group N.V.-Dutch Ctfs. (Trading                                   
  Companies & Distributors)(a)                     30,700      1,766,370
------------------------------------------------------------------------
Koninklijke BAM Groep N.V. (Construction &                              
  Engineering)(a)                                  62,800      3,146,482
------------------------------------------------------------------------
OPG Groep N.V.-Dutch Ctfs. (Health Care                                 
  Distributors)(a)                                 18,630      1,083,141
------------------------------------------------------------------------
Randstad Holding N.V. (Employment                                       
  Services)(a)                                     13,800        540,957
------------------------------------------------------------------------
Roto Smeets de Boer N.V. (Commercial                                    
  Printing)                                        21,300      1,002,603
------------------------------------------------------------------------
Stork N.V. (Industrial Machinery)(a)               58,330      2,002,261
------------------------------------------------------------------------
Univar N.V. (Trading Companies &                                        
  Distributors)(a)                                 70,300      1,929,354
========================================================================
                                                              23,222,356
========================================================================

NORWAY-6.73%                                                            

Aktiv Kapital A.S.A. (Specialized Finance)(b)     147,495      3,281,826
------------------------------------------------------------------------
Ekornes A.S.A. (Home Furnishings)(a)               26,680        578,841
------------------------------------------------------------------------
Expert A.S.A (Computer & Electronics                                    
  Retail)(a)                                      186,640      1,768,122
------------------------------------------------------------------------
Schibsted A.S.A. (Publishing)(a)                   72,000      2,035,086
------------------------------------------------------------------------
Smedvig A.S.A.-Class A (Oil & Gas                                       
  Drilling)(a)(b)                                 146,890      2,468,772
------------------------------------------------------------------------
SuperOffice A.S.A (Application Software)(a)       338,700      1,449,670
------------------------------------------------------------------------
TGS Nopec Geophysical Co. A.S.A. (Oil & Gas                             
  Equipment & Services)(a)(c)                     115,040      2,928,514
========================================================================
                                                              14,510,831
========================================================================

PORTUGAL-0.72%                                                          

SonaeCom, SGPS, S.A. (Wireless                                          
  Telecommunication Services)(a)(c)               301,900      1,553,380
========================================================================

SPAIN-2.04%                                                             

Corporacion Mapfre S.A. (Multi-Line                                     
  Insurance)(a)                                   122,970      1,807,272
------------------------------------------------------------------------
Enagas (Gas Utilities) (Acquired 07/20/04-                              
  11/30/04; Cost $846,161)(a)(d)                   71,400      1,178,625
------------------------------------------------------------------------
Gestevision Telecinco S.A. (Movies &                                    
  Entertainment) (Acquired 06/23/04; Cost                               
  $332,856)(c)(d)                                  27,100        558,034
------------------------------------------------------------------------
Miquel y Costas & Miquel, S.A. (Paper                                   
  Products)(a)                                     17,698        849,882
========================================================================
                                                               4,393,813
========================================================================

SWEDEN-0.98%                                                            

Elanders A.B.-Class B (Publishing)(a)             131,500      2,117,479
========================================================================

SWITZERLAND-7.17%                                                       

Amazys Holding A.G. (Diversified Commercial                             
  Services)(a)(c)                                  94,400      5,119,211
------------------------------------------------------------------------

                                                                [Download Table]

                                                               MARKET   
                                                 SHARES        VALUE    
------------------------------------------------------------------------
                                                                        
SWITZERLAND-(CONTINUED)                                                 

Leica Geosystems A.G. (Electronic Equipment                             
  Manufacturers)(a)(c)                              8,900   $  2,726,235
------------------------------------------------------------------------
Mobilezone Holding A.G. (Industrial                                     
  Machinery)(a)(c)                                622,400      2,276,715
------------------------------------------------------------------------
Quadrant A.G. (Specialty Chemicals)(a)(c)          16,700      1,362,175
------------------------------------------------------------------------
Rieter Holding A.G. (Auto Parts &                                       
  Equipment)(a)                                     3,400        981,439
------------------------------------------------------------------------
SAIA-Burgess Electronics A.G. (Electronic                               
  Equipment & Manufacturers)(a)                     2,580      1,535,133
------------------------------------------------------------------------
Saurer A.G. (Industrial Machinery)(a)(c)           24,800      1,452,113
========================================================================
                                                              15,453,021
========================================================================

UNITED KINGDOM-20.20%                                                   

Admiral Group PLC (Property & Casualty                                  
  Insurance) (Acquired 09/23/04-12/29/04;                               
  Cost $1,016,419)(c)(d)                          188,600      1,166,838
------------------------------------------------------------------------
Albemarle & Bond Holdings PLC (Consumer                                 
  Finance)(a)                                     356,400        883,352
------------------------------------------------------------------------
Balfour Beatty PLC (Construction &                                      
  Engineering)(a)                                 349,530      2,110,094
------------------------------------------------------------------------
Belhaven Group PLC (The) (Brewers)(a)             165,310      1,347,499
------------------------------------------------------------------------
Cattles PLC (Consumer Finance)                    197,680      1,391,772
------------------------------------------------------------------------
Dawson Holdings PLC (Distributors)                309,930      1,010,768
------------------------------------------------------------------------
Domino Printing Sciences PLC (Industrial                                
  Machinery)(a)                                   319,010      1,553,265
------------------------------------------------------------------------
Enterprise Inns PLC (Restaurants)(a)               70,820      1,076,834
------------------------------------------------------------------------
Findel PLC (Catalog Retail)(a)                    128,400      1,167,828
------------------------------------------------------------------------
Haynes Publishing Group PLC (Publishing)           29,300        208,199
------------------------------------------------------------------------
Homeserve PLC (Diversified Commercial                                   
  Services)                                       171,000      2,499,714
------------------------------------------------------------------------
Hornby PLC (Leisure Products)                     210,810      1,060,586
------------------------------------------------------------------------
Inchcape PLC (Distributors)                        22,670        850,232
------------------------------------------------------------------------
Intertek Group PLC (Diversified Commercial                              
  Services)(a)                                    130,800      1,765,513
------------------------------------------------------------------------
Johnston Press PLC (Publishing)(a)                 85,410        886,868
------------------------------------------------------------------------
Kensington Group PLC (Thrifts & Mortgage                                
  Finance)(a)                                      78,490        720,906
------------------------------------------------------------------------
Kier Group PLC (Construction &                                          
  Engineering)(a)                                  93,081      1,256,687
------------------------------------------------------------------------
Lambert Howarth Group PLC (Footwear)(a)           140,850        809,118
------------------------------------------------------------------------
Mayborn Group PLC (Household Products)            215,400      1,066,116
------------------------------------------------------------------------
McBride PLC (Household Products)(a)               645,830      1,745,676
------------------------------------------------------------------------
nCipher PLC (Internet Software &                                        
  Services)(a)(c)                                 207,500        833,676
------------------------------------------------------------------------
NDS Group PLC-ADR (Application                                          
  Software)(b)(c)                                  57,900      1,973,174
------------------------------------------------------------------------
Punch Taverns PLC (Restaurants)(a)                102,100      1,350,797
------------------------------------------------------------------------
Savills PLC (Other Diversified Financial                                
  Services)                                       152,545      1,524,667
------------------------------------------------------------------------
SCi Entertainment Group PLC (Home                                       
  Entertainment Software)(a)(c)                   370,200      1,698,566
------------------------------------------------------------------------
ScS Upholstery PLC (Specialty Stores)(a)          134,400        899,278
------------------------------------------------------------------------
Sportingbet PLC (Casinos & Gaming)(a)(c)        1,381,830      5,008,430
------------------------------------------------------------------------
T&F Informa PLC (Publishing)                      243,150      1,760,883
------------------------------------------------------------------------

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                                                                [Download Table]

                                                               MARKET   
                                                 SHARES        VALUE    
------------------------------------------------------------------------
                                                                        
UNITED KINGDOM-(CONTINUED)                                              

Ultra Electronics Holdings PLC (Aerospace &                             
  Defense)(a)                                     130,000   $  1,720,564
------------------------------------------------------------------------
Warner Chilcott PLC (Pharmaceuticals)              36,020        594,267
------------------------------------------------------------------------
WS Atkins PLC (Diversified Commercial                                   
  Services)(a)                                    117,195      1,605,122
========================================================================
                                                              43,547,289
========================================================================
    Total Foreign Stocks & Other Equity                                 
      Interests (Cost $142,762,050)                          192,483,684
========================================================================

MONEY MARKET FUNDS-10.91%                                               

Liquid Assets Portfolio-Institutional                                   
  Class(f)                                     11,751,393     11,751,393
------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(f)    11,751,393     11,751,393
========================================================================
    Total Money Market Funds (Cost                                      
      $23,502,786)                                            23,502,786
========================================================================
TOTAL INVESTMENTS-100.21% (excluding                                    
  investments purchased with cash collateral                            
  from securities loaned) (Cost $166,264,836)                215,986,470
========================================================================

                                                                [Download Table]

                                                               MARKET    
                                                 SHARES        VALUE     
------------------------------------------------------------------------ 
                                                                         

INVESTMENTS PURCHASED WITH CASH COLLATERAL                               
  FROM SECURITIES LOANED                                                 

MONEY MARKET FUNDS-3.11%                                                 

STIC Prime Portfolio-Institutional                                       
  Class(f)(g)                                   6,708,522   $  6,708,522 
======================================================================== 
    Total Money Market Funds (purchased with                             
      cash collateral from securities loaned)                            
      (Cost $6,708,522)                                        6,708,522 
======================================================================== 
TOTAL INVESTMENTS-103.32% (Cost $172,973,358)                222,694,992 
======================================================================== 
OTHER ASSETS LESS LIABILITIES-(3.32%)                         (7,157,296)
======================================================================== 
NET ASSETS-100.00%                                          $215,537,696 
________________________________________________________________________ 
======================================================================== 

Investment Abbreviations:                                                       

                                                                [Download Table]
                                    
ADR    - American Depositary Receipt
Ctfs.  - Certificates               
Pfd.   - Preferred                  

Notes to Schedule of Investments:                                               

(a) In accordance with the procedures established by the Board of Trustees, the 
 foreign security is fair valued using adjusted closing market prices. The
aggregate market value of these securities at December 31, 2004 was     
   $145,158,034, which represented 65.18% of the Fund's Total Investments. See
Note 1A.                                                                
(b) All or a portion of this security has been pledged as collateral for        
securities lending transactions at December 31, 2004.                   
(c) Non-income producing security.                                              
(d) Security not registered under the Securities Act of 1933, as amended (e.g., 
the security was purchased in a Rule 144A transaction or a Regulation D 
   transaction). The security may be resold only pursuant to an exemption from
registration under the 1933 Act, typically to qualified institutional   
  buyers. The Fund has no rights to demand registration of these securities.
The aggregate market value of these securities at December 31, 2004 was 
$7,933,995, which represented 3.68% of the Fund's Net Assets. Unless    
otherwise indicated these securities are not considered to be illiquid. 
(e) Each unit represents one ordinary share, one ordinary C share and nine      
ordinary A shares.                                                      
(f) The money market fund and the Fund are affiliated by having the same        
investment advisor. See Note 3.                                         
(g) The security has been segregated to satisfy the forward commitment to return
the cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned. See Note 7.                 

See accompanying notes which are an integral part of the financial statements.  

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STATEMENT OF ASSETS AND LIABILITIES                                             

December 31, 2004                                                               

                                                                [Download Table]
                                                            
ASSETS:                                                     

Investments, at market value (cost                          
  $142,762,050)*                               $192,483,684 
----------------------------------------------------------- 
Investments in affiliated money market funds                
  (cost $30,211,308)                             30,211,308 
=========================================================== 
    Total investments (cost $172,973,358)       222,694,992 
=========================================================== 
Foreign currencies, at market value (cost                   
  $823,450)                                         814,315 
----------------------------------------------------------- 
Receivables for:                                            
  Investments sold                                   86,870 
----------------------------------------------------------- 
  Fund shares sold                                3,159,770 
----------------------------------------------------------- 
  Dividends                                         236,703 
----------------------------------------------------------- 
Investment for trustee deferred compensation                
  and retirement plans                               22,138 
----------------------------------------------------------- 
Other assets                                         20,354 
=========================================================== 
    Total assets                                227,035,142 
___________________________________________________________ 
=========================================================== 

LIABILITIES:                                                

Payables for:                                               
  Investments purchased                           4,223,600 
----------------------------------------------------------- 
  Fund shares reacquired                            368,660 
----------------------------------------------------------- 
  Trustee deferred compensation and                         
    retirement plans                                 23,336 
----------------------------------------------------------- 
  Collateral upon return of securities loaned     6,708,522 
----------------------------------------------------------- 
Accrued distribution fees                            83,447 
----------------------------------------------------------- 
Accrued transfer agent fees                          20,242 
----------------------------------------------------------- 
Accrued operating expenses                           69,639 
=========================================================== 
    Total liabilities                            11,497,446 
=========================================================== 
Net assets applicable to shares outstanding    $215,537,696 
___________________________________________________________ 
=========================================================== 

NET ASSETS CONSIST OF:                                      

Shares of beneficial interest                  $165,713,286 
----------------------------------------------------------- 
Undistributed net investment income (loss)         (236,487)
----------------------------------------------------------- 
Undistributed net realized gain from                        
  investment securities and foreign                         
  currencies                                        327,868 
----------------------------------------------------------- 
Unrealized appreciation of investment                       
  securities and foreign currencies              49,733,029 
=========================================================== 
                                               $215,537,696 
___________________________________________________________ 
=========================================================== 

NET ASSETS:                                                 

Class A                                        $161,014,083 
___________________________________________________________ 
=========================================================== 
Class B                                        $ 26,540,253 
___________________________________________________________ 
=========================================================== 
Class C                                        $ 27,983,360 
___________________________________________________________ 
=========================================================== 

SHARES OUTSTANDING, $0.01 PAR VALUE PER                     
  SHARE, UNLIMITED NUMBER OF SHARES                         
  AUTHORIZED:                                               

Class A                                           9,505,585 
___________________________________________________________ 
=========================================================== 
Class B                                           1,606,100 
___________________________________________________________ 
=========================================================== 
Class C                                           1,693,355 
___________________________________________________________ 
=========================================================== 
Class A:                                                    
  Net asset value per share                    $      16.94 
----------------------------------------------------------- 
  Offering price per share:                                 
    (Net asset value of $16.94 divided by                   
      94.50%)                                  $      17.93 
___________________________________________________________ 
=========================================================== 
Class B:                                                    
  Net asset value and offering price per                    
    share                                      $      16.52 
___________________________________________________________ 
=========================================================== 
Class C:                                                    
  Net asset value and offering price per                    
    share                                      $      16.53 
___________________________________________________________ 
=========================================================== 

* At December 31, 2004, securities with an aggregate market value of $6,429,276 
were on loan to brokers.                                                    

See accompanying notes which are an integral part of the financial statements.  

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STATEMENT OF OPERATIONS                                                         

For the year ended December 31, 2004                                            

                                                                [Download Table]
                                                                          
INVESTMENT INCOME:                                                        

Dividends (net of foreign withholding tax of $193,594)        $ 1,418,314 
------------------------------------------------------------------------- 
Dividends from affiliated money market funds (including                   
  securities lending income of $18,766*)                          110,766 
------------------------------------------------------------------------- 
Interest                                                            1,412 
========================================================================= 
    Total investment income                                     1,530,492 
========================================================================= 

EXPENSES:                                                                 

Advisory fees                                                     898,035 
------------------------------------------------------------------------- 
Administrative services fees                                       50,000 
------------------------------------------------------------------------- 
Custodian fees                                                    210,426 
------------------------------------------------------------------------- 
Distribution fees:                                                        
  Class A                                                         240,353 
------------------------------------------------------------------------- 
  Class B                                                         149,573 
------------------------------------------------------------------------- 
  Class C                                                         109,003 
------------------------------------------------------------------------- 
Transfer agent fees                                               233,338 
------------------------------------------------------------------------- 
Trustees' fees and retirement benefits                             15,192 
------------------------------------------------------------------------- 
Other                                                             183,285 
========================================================================= 
    Total expenses                                              2,089,205 
========================================================================= 
Less: Fees waived, expenses reimbursed and expense offset                 
    arrangement                                                   (28,066)
========================================================================= 
    Net expenses                                                2,061,139 
========================================================================= 
Net investment income (loss)                                     (530,647)
========================================================================= 

REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT                       
  SECURITIES AND FOREIGN CURRENCIES:                                      

Net realized gain (loss) from:                                            
  Investment securities                                         8,993,440 
------------------------------------------------------------------------- 
  Foreign currencies                                              (80,044)
========================================================================= 
                                                                8,913,396 
========================================================================= 
Change in net unrealized appreciation of:                                 
  Investment securities                                        32,238,896 
------------------------------------------------------------------------- 
  Foreign currencies                                                8,702 
========================================================================= 
                                                               32,247,598 
========================================================================= 
Net gain from investment securities and foreign currencies     41,160,994 
========================================================================= 
Net increase in net assets resulting from operations          $40,630,347 
_________________________________________________________________________ 
========================================================================= 

* Dividends from affiliated money market funds are net of income rebate paid to 
securities lending counterparties.                                          

See accompanying notes which are an integral part of the financial statements.  

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STATEMENT OF CHANGES IN NET ASSETS                                              

For the years ended December 31, 2004 and 2003                                  

                                                        [Enlarge/Download Table]

                                                              2004               2003     
----------------------------------------------------------------------------------------- 
                                                                                          
OPERATIONS:                                                                               

  Net investment income (loss)                                $   (530,647)   $  (157,442)
----------------------------------------------------------------------------------------- 
  Net realized gain from investment securities, foreign                                   
    currencies and futures contracts                             8,913,396      4,332,482 
----------------------------------------------------------------------------------------- 
  Change in net unrealized appreciation of investment                                     
    securities and foreign currencies                           32,247,598     14,544,576 
========================================================================================= 
    Net increase in net assets resulting from operations        40,630,347     18,719,616 
========================================================================================= 
Distributions to shareholders from net investment income:                                 
  Class A                                                               --       (110,677)
----------------------------------------------------------------------------------------- 
Distributions to shareholders from net realized gains:                                    
  Class A                                                       (3,080,881)            -- 
----------------------------------------------------------------------------------------- 
  Class B                                                         (546,917)            -- 
----------------------------------------------------------------------------------------- 
  Class C                                                         (546,069)            -- 
========================================================================================= 
    Decrease in net assets resulting from distributions         (4,173,867)      (110,677)
========================================================================================= 
Share transactions-net:                                                                   
  Class A                                                       92,344,444     14,779,957 
----------------------------------------------------------------------------------------- 
  Class B                                                       11,576,871        653,971 
----------------------------------------------------------------------------------------- 
  Class C                                                       17,295,575      2,479,060 
========================================================================================= 
    Net increase in net assets resulting from share                                       
     transactions                                              121,216,890     17,912,988 
========================================================================================= 
    Net increase in net assets                                 157,673,370     36,521,927 
========================================================================================= 

NET ASSETS:                                                                               

  Beginning of year                                             57,864,326     21,342,399 
========================================================================================= 
  End of year (including undistributed net investment income                              
    (loss) of $(236,487) and $(15,872), respectively)         $215,537,696    $57,864,326 
_________________________________________________________________________________________ 
========================================================================================= 

See accompanying notes which are an integral part of the financial statements.  

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NOTES TO FINANCIAL STATEMENTS                                                   

December 31, 2004                                                               

NOTE 1--SIGNIFICANT ACCOUNTING POLICIES                                         

AIM European Small Company Fund (the "Fund") is a series portfolio of AIM Funds 
Group (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 nine separate portfolios,    
each authorized to issue an unlimited number of shares of beneficial interest.  
The Fund currently offers multiple classes of shares. Matters affecting each    
portfolio or class will be voted on exclusively by the shareholders of such     
portfolio or class. The assets, liabilities and operations of each portfolio are
accounted for separately. Information presented in these financial statements   
pertains only to the Fund.                                                      

  The Fund's investment objective is to achieve long-term growth of capital.
Companies are listed in the Schedule of Investments based on the country in     
which they are organized.                                                       

   Under the Trust's organizational documents, 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. However, the Fund has not had prior claims or losses pursuant to these
contracts.                                                                      

The preparation of financial statements in conformity with accounting   
principles generally accepted in the United States of America requires          
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported 
amounts of revenues and expenses during the reporting period. Actual results    
could differ from those estimates. The following is a summary of the significant
accounting policies followed by the Fund in the preparation of its financial    
statements.                                                                     

A.   SECURITY VALUATIONS -- Securities, including restricted securities, are    
valued according to the following policy.                             

      A security listed or traded on an exchange (except convertible bonds) is
 valued at its last sales price as of the close of the customary trading
session on the exchange where the security is principally traded, or  
lacking any sales on a particular day, the security is valued at the  
     closing bid price on that day. Each security traded in the over-the-counter
   market (but not securities reported on the NASDAQ National Market System)
    is valued on the basis of prices furnished by independent pricing services
or market makers. Each security reported on the NASDAQ National Market
  System is valued at the NASDAQ Official Closing Price ("NOCP") as of the
  close of the customary trading session on the valuation date or absent a
NOCP, at the closing bid price.                                       

  Futures contracts are valued at the final settlement price set by an
     exchange on which they are principally traded. Listed options are valued at
     the mean between the last bid and the ask prices from the exchange on which
   they are principally traded. Options not listed on an exchange are valued
   by an independent source at the mean between the last bid and ask prices.
   For purposes of determining net asset value per share, futures and option
contracts generally will be valued 15 minutes after the close of the  
customary trading session of the New York Stock Exchange ("NYSE").    

    Investments in open-end registered investment companies and closed-end
     registered investment companies that do not trade on an exchange are valued
at the end of day net asset value per share. Investments in closed-end
     registered investment companies that trade on an exchange are valued at the
  last sales price as of the close of the customary trading session on the
exchange where the security is principally traded.                    

     Debt obligations (including convertible bonds) are fair valued using an
evaluated quote provided by an independent pricing service. Evaluated 
    quotes provided by the pricing service may be determined without exclusive
reliance on quoted prices, and may reflect appropriate factors such as
institution-size trading in similar groups of securities, developments
related to specific securities, dividend rate, yield, quality, type of
    issue, coupon rate, maturity, individual trading characteristics and other
    market data. Short-term obligations having 60 days or less to maturity and
 commercial paper are valued at amortized cost which approximates market
value.                                                                

     Securities for which market prices are not provided by any of the above
   methods are valued based upon quotes furnished by independent sources and
  are valued at the last bid price in the case of equity securities and in
the case of debt obligations, the mean between the last bid and asked 
prices.                                                               

     Foreign securities (including foreign exchange contracts) are converted
into U.S. dollar amounts using the applicable exchange rates as of the
close of the NYSE. Generally, trading in foreign securities is        
     substantially completed each day at various times prior to the close of the
   NYSE. The values of such securities used in computing the net asset value
of the Fund's shares are determined as of the close of the respective 
   markets. Events affecting the values of such foreign securities may occur
 between the times at which the particular foreign market closes and the
close of the customary trading session of the NYSE which would not    
   ordinarily be reflected in the computation of the Fund's net asset value.
    If the event is likely to have affected the closing price of the security,
  the security will be valued at fair value in good faith using procedures
     approved by the Board of Trustees. Adjustments to closing prices to reflect
fair value may also be based on a screening process of an independent 
  pricing service to indicate the degree of certainty, based on historical
data, that the closing price in the principal market where a foreign  
security trades is not the current market value as of the close of the
    NYSE. Foreign securities meeting the approved degree of certainty that the
price is not reflective of current market value will be priced at the 
 indication of fair value from the independent pricing service. Multiple
     factors may be considered by the independent pricing service in determining
   adjustments to reflect fair value and may include information relating to
sector indices, ADRs, domestic and foreign index futures and          
exchange-traded funds.                                                

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     Securities for which market quotations are not readily available or are
     unreliable are valued at fair value as determined in good faith by or under
  the supervision of the Trust's officers following procedures approved by
the Board of Trustees. Issuer specific events, market trends, bid/ask 
  quotes of brokers and information providers and other market data may be
     reviewed in the course of making a good faith determination of a security's
fair value.                                                           

B.   SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions   
    are accounted for on a trade date basis. Realized gains or losses on sales
are computed on the basis of specific identification of the securities
sold. Interest income is recorded on the accrual basis from settlement
date. Dividend income is recorded on the ex-dividend date.            

     Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased 
  and/or a reduction of proceeds on a sale of securities. Such transaction
 costs are included in the determination of realized and unrealized gain
   (loss) from investment securities reported in the Statement of Operations
    and the Statement of Changes in Net Assets and the realized and unrealized
 net gains (losses) on securities per share in the Financial Highlights.
   Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These   
transaction costs are not considered operating expenses and are not   
    reflected in net investment income reported in the Statement of Operations
  and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation  
arrangements between the Fund and the advisor.                        

     The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.     

C.   DISTRIBUTIONS -- Distributions from income and net realized capital gain,  
   if any, are generally paid annually and recorded on ex-dividend date. The
Fund may elect to use a portion of the proceeds from redemptions as   
distributions for federal income tax purposes.                        

D.   FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of
Subchapter M of the Internal Revenue Code necessary to qualify as a   
   regulated investment company and, as such, will not be subject to federal
  income taxes on otherwise taxable income (including net realized capital
 gain) which is distributed to shareholders. Therefore, no provision for
federal income taxes is recorded in the financial statements.         

E.   EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular    
 class of the Fund and which are directly attributable to that class are
   charged to the operations of such class. All other expenses are allocated
among the classes based on relative net assets.                       

F.   REDEMPTION FEES -- The Fund has instituted a 2% redemption fee on certain  
share classes that is to be retained by the Fund to offset transaction
costs and other expenses associated with short-term redemptions and   
  exchanges. The fee, subject to certain exceptions, is imposed on certain
redemptions, including exchanges of shares held less than 30 days. The
redemption fee is accounted for as an addition to shares of beneficial
    interest by the Fund and is allocated among the share classes based on the
relative net assets of each class.                                    

G.   FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of
  the NYSE based on quotations posted by banks and major currency dealers.
Portfolio securities and other assets and liabilities denominated in  
foreign currencies are translated into U.S. dollar amounts at date of 
valuation. Purchases and sales of portfolio securities (net of foreign
taxes withheld on disposition) and income items denominated in foreign
    currencies are translated into U.S. dollar amounts on the respective dates
    of such transactions. The Fund does not separately account for the portion
 of the results of operations resulting from changes in foreign exchange
  rates on investments and the fluctuations arising from changes in market
prices of securities held. The combined results of changes in foreign 
    exchange rates and the fluctuation of market prices on investments (net of
   estimated foreign tax withholding) are included with the net realized and
  unrealized gain or loss from investments in the Statement of Operations.
Reported net realized foreign currency gains or losses arise from, (i)
     sales of foreign currencies, (ii) currency gains or losses realized between
  the trade and settlement dates on securities transactions, and (iii) the
difference between the amounts of dividends, interest, and foreign    
withholding taxes recorded on the Fund's books and the U.S. dollar    
     equivalent of the amounts actually received or paid. Net unrealized foreign
   currency gains and losses arise from changes in the fair values of assets
     and liabilities, other than investments in securities at fiscal period end,
resulting from changes in exchange rates.                             

H.   FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation 
to purchase or sell a specific currency for an agreed-upon price at a 
     future date. The Fund may enter into a foreign currency contract to attempt
   to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency   
  contract for the purchase or sale of a security denominated in a foreign
    currency in order to "lock in" the U.S. dollar price of that security. The
     Fund could be exposed to risk if counterparties to the contracts are unable
to meet the terms of their contracts or if the value of the foreign   
currency changes unfavorably.                                         

I.   FUTURES CONTRACTS -- The Fund may purchase or sell futures contracts as a  
hedge against changes in market conditions. Initial margin deposits   
required upon entering into futures contracts are satisfied by the    
 segregation of specific securities as collateral for the account of the
 broker (the Fund's agent in acquiring the futures position). During the
period the futures contracts are open, changes in the value of the    
contracts are recognized as unrealized gains or losses by "marking to 
  market" on a daily basis to reflect the market value of the contracts at
the end of each day's trading. Variation margin payments are made or  
  received depending upon whether unrealized gains or losses are incurred.
    When the contracts are closed, the Fund recognizes a realized gain or loss
    equal to the difference between the proceeds from, or cost of, the closing
   transaction and the Fund's basis in the contract. If the Fund were unable
 to liquidate a futures contract and/or enter into an offsetting closing
transaction, the Fund would continue to be subject to market risk with
respect to the value of the contracts and continue to be required to  
maintain the margin deposits on the futures contracts.                

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NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES                         

The Trust has entered into a master investment advisory agreement with A I M    
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,   
the Fund pays an advisory fee to AIM at the annual rate of 0.95% of the Fund's  
average daily net assets. Effective January 1, 2005 through June 30, 2006, AIM  
has contractually agreed to waive advisory fees to the extent that the advisory 
fees payable by the Fund (based on the Fund's average daily net assets) do not  
exceed the annual rate of 0.935% of the first $250 million, plus 0.91% of the   
next $250 million, plus 0.885% of the next $500 million, plus 0.86% of the next 
$1.5 billion, plus 0.835% of the next $2.5 billion, plus 0.81% of the next $2.5 
billion, plus 0.785% of the next $2.5 billion, plus 0.76% of the Fund's average 
daily net assets in excess of $10 billion. AIM has contractually agreed to waive
advisory fees and/or reimburse expenses to the extent necessary to limit total  
annual operating expenses (excluding certain items discussed below) of Class A, 
Class B and Class C shares to 2.00%, 2.65% and 2.65% of average daily net       
assets, respectively, through December 31, 2005. In determining the advisor's   
obligation to waive advisory fees and/or reimburse expenses, the following      
expenses are not taken into account, and could cause the total annual fund      
operating expenses to exceed the limits stated above: (i) interest; (ii) taxes; 
(iii) dividend expense on short sales; (iv) extraordinary items (these are      
expenses that are not anticipated to arise from the Fund's day-to-day           
operations), or items designated as such by the Fund's Board of Trustees; (v)   
expenses related to a merger or reorganization, as approved by the Fund's Board 
of Trustees; and (vi) expenses that the Fund has incurred but did not actually  
pay because of an expense offset arrangement. Currently, the only expense offset
arrangements from which the Fund benefits are in the form of credits that the   
Fund receives from banks where the Fund or its transfer agent has deposit       
accounts in which it holds uninvested cash. Those credits are used to pay       
certain expenses incurred by the Fund. Further, AIM has voluntarily agreed to   
waive advisory fees of the Fund in the amount of 25% of the advisory fee AIM    
receives from the affiliated money market funds on investments by the Fund in   
such affiliated money market funds (excluding investments made in affiliated    
money market funds with cash collateral from securities loaned by the Fund).    
Voluntary fee waivers or reimbursements may be modified or discontinued at any  
time upon consultation with the Board of Trustees without further notice to     
investors. For the year ended December 31, 2004, AIM waived fees of $908.       

   For the year ended December 31, 2004, at the request of the Trustees of the
Trust, AMVESCAP PLC ("AMVESCAP") agreed to assume $26,041 of expenses incurred  
by the Fund in connection with matters related to recently settled regulatory   
actions and investigations concerning market timing activity in the AIM Funds,  
including legal, audit, shareholder servicing, communication and trustee        
expenses. These expenses along with the related expense reimbursement are       
included in the Statement of Operations.                                        

  The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing    
accounting services to the Fund. For the year ended December 31, 2004, AIM was  
paid $50,000 for such services.                                                 

    The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay AIM Investment Services, Inc. ("AISI") a fee for providing transfer agency  
and shareholder services to the Fund and reimburse AISI for certain expenses    
incurred by AISI in the course of providing such services. For the year ended   
December 31, 2004, the Fund paid AISI $233,338. AISI may make payments to       
intermediaries that provide omnibus account services, sub-accounting services   
and/or networking services.                                                     

The Trust has entered into master distribution agreements with A I M    
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the     
Class A, Class B and Class C shares of the Fund. The Trust has adopted plans    
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A,   
Class B and Class C shares (collectively the "Plans"). The Fund, pursuant to the
Plans, pays AIM Distributors compensation at the annual rate of 0.35% of the    
Fund's average daily net assets of Class A shares and 1.00% of the average daily
net assets of Class B and Class C shares. Of these amounts, up to 0.25% of the  
average daily net assets of the Class A, Class B or Class C shares may be paid  
to furnish continuing personal shareholder services to customers who purchase   
and own shares of such classes. Any amounts not paid as a service fee under the 
Plans would constitute an asset-based sales charge. NASD Rules also impose a cap
on the total sales charges, including asset-based sales charges that may be paid
by any class of shares of the Fund. Pursuant to the Plans, for the year ended   
December 31, 2004, the Class A, Class B and Class C shares paid $240,353,       
$149,573 and $109,003, respectively.                                            

  Front-end sales commissions and contingent deferred sales charges ("CDSC")
(collectively the "sales charges") are not recorded as expenses of the Fund.    
Front-end sales commissions are deducted from proceeds from the sales of Fund   
shares prior to investment in Class A shares of the Fund. CDSC are deducted from
redemption proceeds prior to remittance to the shareholder. During the year     
ended December 31, 2004, AIM Distributors advised the Fund that it retained     
$90,095 in front-end sales commissions from the sale of Class A shares and      
$7,935, $28,316 and $19,975 from Class A, Class B and Class C shares,           
respectively, for CDSC imposed upon redemptions by shareholders.                

Certain officers and trustees of the Trust are officers and directors of
AIM, AISI and/or AIM Distributors.                                              

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NOTE 3--INVESTMENTS IN AFFILIATES                                               

The Fund is permitted, pursuant to an exemptive order from the Securities and   
Exchange Commission ("SEC"), to invest daily available cash balances and cash   
collateral from securities lending transactions in affiliated money market      
funds. The Fund and the money market funds below have the same investment       
advisor and therefore, are considered to be affiliated. The tables below show   
the transactions in and earnings from investments in affiliated money market    
funds for the year ended December 31, 2004.                                     

INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:                                   

                                                        [Enlarge/Download Table]

                                                                         UNREALIZED                                               
                 MARKET VALUE       PURCHASES          PROCEEDS         APPRECIATION     MARKET VALUE     DIVIDEND      REALIZED  
FUND               12/31/03          AT COST          FROM SALES       (DEPRECIATION)      12/31/04        INCOME      GAIN (LOSS)
----------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                  
Liquid Assets                                                                                                                     
  Portfolio-                                                                                                                      
  Institutional                                                                                                                   
  Class           $1,498,588       $ 43,099,555      $(32,846,750)         $   --         $11,751,393     $ 45,937       $   --   
----------------------------------------------------------------------------------------------------------------------------------
STIC Prime                                                                                                                        
  Portfolio-                                                                                                                      
  Institutional                                                                                                                   
  Class            1,498,588         43,099,555       (32,846,750)             --          11,751,393       46,063           --   
==================================================================================================================================
  Subtotal        $2,997,176       $ 86,199,110      $(65,693,500)         $   --         $23,502,786     $ 92,000       $   --   
==================================================================================================================================

INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:            

                                                        [Enlarge/Download Table]

                                                                         UNREALIZED                                               
                 MARKET VALUE       PURCHASES          PROCEEDS         APPRECIATION     MARKET VALUE     DIVIDEND      REALIZED  
FUND               12/31/03          AT COST          FROM SALES       (DEPRECIATION)      12/31/04        INCOME*     GAIN (LOSS)
----------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                  
Liquid Assets                                                                                                                     
  Portfolio-                                                                                                                      
  Institutional                                                                                                                   
  Class           $  117,600       $ 13,052,504      $(13,170,104)         $   --         $        --     $  7,861       $   --   
----------------------------------------------------------------------------------------------------------------------------------
STIC Prime                                                                                                                        
  Portfolio-                                                                                                                      
  Institutional                                                                                                                   
  Class                   --         13,453,434        (6,744,912)             --           6,708,522       10,905           --   
==================================================================================================================================
  Subtotal        $  117,600       $ 26,505,938      $(19,915,016)         $   --         $ 6,708,522     $ 18,766       $   --   
==================================================================================================================================
  Total           $3,114,776       $112,705,048      $(85,608,516)         $   --         $30,211,308     $110,766       $   --   
__________________________________________________________________________________________________________________________________
==================================================================================================================================

* Dividend income is net of income rebate paid to securities lending            
counterparties.                                                             

NOTE 4--EXPENSE OFFSET ARRANGEMENT                                              

The expense offset arrangement is comprised of transfer agency credits which    
result from balances in Demand Deposit Accounts (DDA) used by the transfer agent
for clearing shareholder transactions. For the year ended December 31, 2004, the
Fund received credits in transfer agency fees of $1,117 under an expense offset 
arrangement, which resulted in a reduction of the Fund's total expenses of      
$1,117.                                                                         

NOTE 5--TRUSTEES' FEES                                                          

Trustees' fees represent remuneration paid to each Trustee of the Trust who is  
not an "interested person" of AIM. Trustees have the option to defer            
compensation payable by the Trust. Those Trustees who defer compensation have   
the option to select various AIM Funds in which their deferral accounts shall be
deemed to be invested.                                                          

Current Trustees are eligible to participate in a retirement plan that  
provides for benefits to be paid upon retirement to Trustees over a period of   
time based on the number of years of service. The Fund may have certain former  
Trustees that also participate in a retirement plan and receive benefits under  
such plan.                                                                      

  Obligations under the deferred compensation and retirement plans represent
unsecured claims against the general assets of the Fund.                        

   During the year ended December 31, 2004, the Fund paid legal fees of $2,792
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Independent Trustees. A member of that firm is a Trustee of the Trust.          

NOTE 6--BORROWINGS                                                              

Pursuant to an exemptive order from the SEC, the Fund may participate in an     
interfund lending facility that AIM has established for temporary borrowings by 
the AIM Funds. An interfund loan will be made under this facility only if the   
loan rate (an average of the rate available on bank loans and the rate available
on investments in overnight repurchase agreements) is favorable to both the     
lending fund and the borrowing fund. A loan will be secured by collateral if the
Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total    
assets. To the extent that the loan is required to be secured by collateral, the
collateral is marked to market daily to ensure that the market value is at least
102% of the outstanding principal value of the loan.                            

The Fund is a participant in an uncommitted unsecured revolving credit  
facility with State Street Bank and Trust Company ("SSB"). The Fund may borrow  
up to the lesser of (i) $125,000,000, or (ii) the limits set by its prospectus  
for borrowings. The Fund and other funds advised by AIM which are parties to the
credit facility can borrow on a first come, first served basis. Principal on    
each loan outstanding shall bear interest at the bid rate quoted by SSB at the  
time of the request for the loan.                                               

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During the year ended December 31, 2004, the Fund did not borrow or lend
under the interfund lending facility or borrow under the uncommitted unsecured  
revolving credit facility.                                                      

Additionally, the Fund is permitted to temporarily carry a negative or  
overdrawn balance in its account with SSB, the custodian bank. To compensate the
custodian bank for such overdrafts, the overdrawn Fund may either (i) leave     
funds in the account so the custodian can be compensated by earning the         
additional interest; or (ii) compensate by paying the custodian bank. In either 
case, the custodian bank will be compensated at an amount equal to the Federal  
Funds rate plus 100 basis points.                                               

NOTE 7--PORTFOLIO SECURITIES LOANED                                             

The Fund may lend portfolio securities having a market value up to one-third of 
the Fund's total assets. Such loans are secured by collateral equal to no less  
than the market value of the loaned securities determined daily. Such collateral
will be cash or debt securities issued or guaranteed by the U.S. Government or  
any of its agencies. Cash collateral received in connection with these loans is 
invested in short-term money market instruments or affiliated money market      
funds. It is the Fund's policy to obtain additional collateral from or return   
excess collateral to the borrower by the end of the next business day, following
the valuation date of the securities loaned. Therefore, the value of the        
collateral held may be temporarily less than the value of the securities on     
loan. Lending securities entails a risk of loss to the Fund if and to the extent
that the market value of the securities loaned were to increase and the borrower
did not increase the collateral accordingly, and the borrower fails to return   
the securities. The Fund could also experience delays and costs in gaining      
access to the collateral. The Fund bears the risk of any deficiency in the      
amount of the collateral available for return to the borrower due to a loss on  
the collateral invested.                                                        

   At December 31, 2004, securities with an aggregate value of $6,429,276 were
on loan to brokers. The loans were secured by cash collateral of $6,708,522     
received by the Fund and subsequently invested in an affiliated money market    
fund. For the year ended December 31, 2004, the Fund received dividends on cash 
collateral net of income rebate paid to counterparties of $18,766 for securities
lending transactions.                                                           

NOTE 8--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS          

DISTRIBUTIONS TO SHAREHOLDERS:                                                  

The tax character of distributions paid during the years ended December 31, 2004
and 2003 was as follows:                                                        

                                                                [Download Table]

                                                                 2004         2003  
------------------------------------------------------------------------------------
                                                                                    
Distributions paid from:                                                            
  Ordinary income                                             $       --    $110,677
------------------------------------------------------------------------------------
  Long-term capital gain                                       4,173,867          --
====================================================================================
Total distributions                                           $4,173,867    $110,677
____________________________________________________________________________________
====================================================================================

TAX COMPONENTS OF NET ASSETS:                                                   

As of December 31, 2004, the components of net assets on a tax basis were as    
follows:                                                                        

                                                                [Download Table]

                                                                  2004     
-------------------------------------------------------------------------- 
                                                                           
Undistributed long-term gain                                  $    479,850 
-------------------------------------------------------------------------- 
Unrealized appreciation -- investments                          49,465,308 
-------------------------------------------------------------------------- 
Temporary book/tax differences                                     (20,378)
-------------------------------------------------------------------------- 
Post-October capital loss deferral                                (100,370)
-------------------------------------------------------------------------- 
Shares of beneficial interest                                  165,713,286 
========================================================================== 
Total net assets                                              $215,537,696 
__________________________________________________________________________ 
========================================================================== 

The difference between book-basis and tax-basis unrealized appreciation 
(depreciation) is due to differences in the timing of recognition of gains and  
losses on investments for tax and book purposes. The Fund's unrealized          
appreciation (depreciation) difference is attributable primarily to losses on   
wash sales and the treatment of unrealized gains on Passive Foreign Investment  
Companies. The tax-basis unrealized appreciation on investments amount includes 
appreciation on foreign currencies of $11,395.                                  

The temporary book/tax differences are a result of timing differences   
between book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of the trustee deferral of compensation and 
retirement plan expenses and the deferral of Post-October currency losses.      

The Fund utilized $3,967,289 of capital loss carryforward in the current
period to offset net realized capital gain for federal income tax purposes.     

The Fund had no capital loss carryforward as of December 31, 2004.      

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NOTE 9--INVESTMENT SECURITIES                                                   

The aggregate amount of investment securities (other than short-term securities 
and money market funds) purchased and sold by the Fund during the year ended    
December 31, 2004 was $161,328,684 and $64,411,400, respectively.               

                                                                [Download Table]

UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS 
-------------------------------------------------------------------------------
                                                                               
Aggregate unrealized appreciation of investment securities        $49,615,166  
-------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities         (161,253) 
===============================================================================
Net unrealized appreciation of investment securities              $49,453,913  
_______________________________________________________________________________
===============================================================================
Cost of investments for tax purposes is $173,241,079.                          

NOTE 10--RECLASSIFICATION OF PERMANENT DIFFERENCES                              

Primarily as a result of differing book/tax treatment of foreign currency       
transactions and net operating losses, on December 31, 2004, undistributed net  
investment income was increased by $310,032, undistributed net realized gain    
(loss) was decreased by $372,720 and shares of beneficial interest increased by 
$62,688. This reclassification had no effect on the net assets of the Fund.     

NOTE 11--SHARE INFORMATION                                                      

The Fund currently offers three different classes of shares: Class A shares,    
Class B shares and Class C shares. Class A shares are sold with a front-end     
sales charge. Class B shares and Class C shares are sold with CDSC. Under       
certain circumstances, Class A shares are subject to CDSC. Generally, Class B   
shares will automatically convert to Class A shares eight years after the end of
the calendar month of purchase.                                                 

                                                        [Enlarge/Download Table]

                                           CHANGES IN SHARES OUTSTANDING(a)                                            
---------------------------------------------------------------------------------------------------------------------- 
                                                                              YEAR ENDED DECEMBER 31,                  
                                                              -------------------------------------------------------- 
                                                                         2004                          2003            
                                                              --------------------------    -------------------------- 
                                                                SHARES         AMOUNT         SHARES         AMOUNT    
---------------------------------------------------------------------------------------------------------------------- 
                                                                                                                       
Sold:                                                                                                                  
  Class A                                                      8,997,539    $131,434,386     7,437,349    $ 64,909,222 
---------------------------------------------------------------------------------------------------------------------- 
  Class B                                                      1,319,808      18,281,471       355,346       3,473,696 
---------------------------------------------------------------------------------------------------------------------- 
  Class C                                                      1,884,423      26,702,122     2,260,834      19,474,776 
====================================================================================================================== 
Issued as reinvestment of dividends:                                                                                   
  Class A                                                        155,210       2,553,215         6,582          76,679 
---------------------------------------------------------------------------------------------------------------------- 
  Class B                                                         32,458         521,266            --              -- 
---------------------------------------------------------------------------------------------------------------------- 
  Class C                                                         30,938         496,866            --              -- 
====================================================================================================================== 
Automatic conversion of Class B shares to Class A shares:                                                              
  Class A                                                         73,593       1,053,339        24,199         222,934 
---------------------------------------------------------------------------------------------------------------------- 
  Class B                                                        (75,184)     (1,053,339)      (24,613)       (222,934)
====================================================================================================================== 
Reacquired:(b)                                                                                                         
  Class A                                                     (3,215,160)    (42,696,496)   (5,818,558)    (50,428,878)
---------------------------------------------------------------------------------------------------------------------- 
  Class B                                                       (466,157)     (6,172,527)     (317,658)     (2,596,791)
---------------------------------------------------------------------------------------------------------------------- 
  Class C                                                       (758,107)     (9,903,413)   (2,007,635)    (16,995,716)
====================================================================================================================== 
                                                               7,979,361    $121,216,890     1,915,846    $ 17,912,988 
______________________________________________________________________________________________________________________ 
====================================================================================================================== 

(a) There is one entity that is an owner of more than 5% of the outstanding     
 shares of the Fund and owns 8% of the outstanding shares of the Fund. The
  Fund, AIM and or AIM affiliates may make payments to these entities, which
    are considered to be related, for providing services to the Fund, AIM and/or
AIM affiliates including but not limited to services such as, securities
  brokerage, distribution, third party record keeping and account servicing.
 The Trust has no knowledge as to whether all or any portion of the shares
owned of record are also owned beneficially.                            
(b) Amount is net of redemption fees of $21,001, $4,574 and $3,333 for Class A, 
Class B and Class C shares for 2004, respectively.                      

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NOTE 12--FINANCIAL HIGHLIGHTS                                                   

The following schedule presents financial highlights for a share of the Fund    
outstanding throughout the periods indicated.                                   

                                                        [Enlarge/Download Table]

                                                                                         CLASS A                                 
                                                        -------------------------------------------------------------------------
                                                                                                                 AUGUST 31, 2000 
                                                                                                                 (DATE OPERATIONS
                                                                     YEAR ENDED DECEMBER 31,                      COMMENCED) TO  
                                                        --------------------------------------------------         DECEMBER 31,  
                                                          2004          2003           2002          2001              2000      
---------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                 
Net asset value, beginning of period                    $  12.05       $  7.37        $  7.19       $ 9.17            $10.00     
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:                                                                                               
  Net investment income (loss)                             (0.05)(a)     (0.03)(a)      (0.04)(a)    (0.05)(a)         (0.04)(a) 
---------------------------------------------------------------------------------------------------------------------------------
  Net gains (losses) on securities (both realized and                                                                            
    unrealized)                                             5.30          4.74           0.22        (1.93)            (0.74)    
=================================================================================================================================
    Total from investment operations                        5.25          4.71           0.18        (1.98)            (0.78)    
=================================================================================================================================
Less distributions:                                                                                                              
  Dividends from net investment income                        --         (0.03)            --           --             (0.05)    
---------------------------------------------------------------------------------------------------------------------------------
  Distributions from net realized gains                    (0.36)           --             --           --                --     
=================================================================================================================================
Redemption fees added to shares of beneficial interest      0.00            --             --           --                --     
=================================================================================================================================
    Total distributions                                    (0.36)        (0.03)            --           --             (0.05)    
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Net asset value, end of period                          $  16.94       $ 12.05        $  7.37       $ 7.19            $ 9.17     
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b)                                            43.67%        63.96%          2.50%      (21.59)%           (7.84)%   
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:                                                                                                        
Net assets, end of period (000s omitted)                $161,014       $42,103        $13,597       $6,969            $8,606     
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:                                                                                         
  With fee waivers and/or expense reimbursements            2.00%(c)      2.00%          2.01%        2.01%             2.07%(d) 
---------------------------------------------------------------------------------------------------------------------------------
  Without fee waivers and/or expense reimbursements         2.03%(c)      2.68%          3.05%        4.65%             6.28%(d) 
=================================================================================================================================
Ratio of net investment income (loss) to average net                                                                             
  assets                                                   (0.38)%(c)    (0.28)%        (0.51)%      (0.61)%           (1.28)%(d)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e)                                    71%          130%           119%         152%               25%    
_________________________________________________________________________________________________________________________________
=================================================================================================================================

(a)  Calculated using average shares outstanding.                               
(b)  Includes adjustments in accordance with accounting principles generally    
accepted in the United States of America and as such, the net asset   
 value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for  
shareholder transactions. Does not include sales charges and is not   
annualized for periods less than one year.                            
(c)  Ratios are based on average daily net assets of $68,672,362.               
(d)  Annualized.                                                                
(e)  Not annualized for periods less than one year.                             

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NOTE 12--FINANCIAL HIGHLIGHTS (CONTINUED)                                       

                                                        [Enlarge/Download Table]

                                                                                          CLASS B                                
                                                           ----------------------------------------------------------------------
                                                                                                                 AUGUST 31, 2000 
                                                                                                                 (DATE OPERATIONS
                                                                       YEAR ENDED DECEMBER 31,                    COMMENCED) TO  
                                                           -----------------------------------------------         DECEMBER 31,  
                                                            2004           2003         2002         2001              2000      
---------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                 
Net asset value, beginning of period                       $ 11.84        $ 7.27       $ 7.15       $ 9.17            $10.00     
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:                                                                                               
  Net investment income (loss)                               (0.14)(a)     (0.08)(a)    (0.09)(a)    (0.10)(a)         (0.06)(a) 
---------------------------------------------------------------------------------------------------------------------------------
  Net gains (losses) on securities (both realized and                                                                            
    unrealized)                                               5.18          4.65         0.21        (1.92)            (0.74)    
=================================================================================================================================
    Total from investment operations                          5.04          4.57         0.12        (2.02)            (0.80)    
=================================================================================================================================
Less distributions:                                                                                                              
  Dividends from net investment income                          --            --           --           --             (0.03)    
---------------------------------------------------------------------------------------------------------------------------------
  Distributions from net realized gains                      (0.36)           --           --           --                --     
=================================================================================================================================
Redemption fees added to shares of beneficial interest        0.00            --           --           --                --     
=================================================================================================================================
    Total distributions                                      (0.36)           --           --           --             (0.03)    
=================================================================================================================================
Net asset value, end of period                             $ 16.52        $11.84       $ 7.27       $ 7.15            $ 9.17     
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b)                                              42.67%        62.86%        1.68%      (22.03)%           (7.99)%   
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:                                                                                                        
Net assets, end of period (000s omitted)                   $26,540        $9,415       $5,689       $2,330            $2,851     
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:                                                                                         
  With fee waivers and/or expense reimbursements              2.65%(c)      2.65%        2.66%        2.71%             2.77%(d) 
---------------------------------------------------------------------------------------------------------------------------------
  Without fee waivers and/or expense reimbursements           2.68%(c)      3.33%        3.70%        5.36%             6.98%(d) 
=================================================================================================================================
Ratio of net investment income (loss) to average net                                                                             
  assets                                                     (1.03)%(c)    (0.93)%      (1.16)%      (1.31)%           (1.98)%(d)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e)                                      71%          130%         119%         152%               25%    
_________________________________________________________________________________________________________________________________
=================================================================================================================================

(a)  Calculated using average shares outstanding.                               
(b)  Includes adjustments in accordance with accounting principles generally    
accepted in the United States of America and as such, the net asset   
 value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for  
shareholder transactions. Does not include sales charges and is not   
annualized for periods less than one year.                            
(c)  Ratios are based on average daily net assets of $14,957,335.               
(d)  Annualized.                                                                
(e)  Not annualized for periods less than one year.                             

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NOTE 12--FINANCIAL HIGHLIGHTS (CONTINUED)                                       

                                                        [Enlarge/Download Table]

                                                                                          CLASS C                                
                                                           ----------------------------------------------------------------------
                                                                                                                 AUGUST 31, 2000 
                                                                                                                 (DATE OPERATIONS
                                                                       YEAR ENDED DECEMBER 31,                    COMMENCED) TO  
                                                           -----------------------------------------------         DECEMBER 31,  
                                                            2004           2003         2002         2001              2000      
---------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                 
Net asset value, beginning of period                       $ 11.84        $ 7.27       $ 7.14       $ 9.17            $10.00     
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:                                                                                               
  Net investment income (loss)                               (0.14)(a)     (0.09)(a)    (0.09)(a)    (0.10)(a)         (0.06)(a) 
---------------------------------------------------------------------------------------------------------------------------------
  Net gains (losses) on securities (both realized and                                                                            
    unrealized)                                               5.19          4.66         0.22        (1.93)            (0.74)    
=================================================================================================================================
    Total from investment operations                          5.05          4.57         0.13        (2.03)            (0.80)    
=================================================================================================================================
Less distributions:                                                                                                              
  Dividends from net investment income                          --            --           --           --             (0.03)    
---------------------------------------------------------------------------------------------------------------------------------
  Distributions from net realized gains                      (0.36)           --           --           --                --     
=================================================================================================================================
Redemption fees added to shares of beneficial interest        0.00            --           --           --                --     
=================================================================================================================================
    Total distributions                                      (0.36)           --           --           --             (0.03)    
=================================================================================================================================
Net asset value, end of period                             $ 16.53        $11.84       $ 7.27       $ 7.14            $ 9.17     
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b)                                              42.75%        62.86%        1.82%      (22.14)%           (7.99)%   
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:                                                                                                        
Net assets, end of period (000s omitted)                   $27,983        $6,346       $2,057       $1,091            $1,073     
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:                                                                                         
  With fee waivers and/or expense reimbursements              2.65%(c)      2.65%        2.66%        2.71%             2.77%(d) 
---------------------------------------------------------------------------------------------------------------------------------
  Without fee waivers and/or expense reimbursements           2.68%(c)      3.33%        3.70%        5.36%             6.98%(d) 
=================================================================================================================================
Ratio of net investment income (loss) to average net                                                                             
  assets                                                     (1.03)%(c)    (0.93)%      (1.16)%      (1.31)%           (1.98)%(d)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e)                                      71%          130%         119%         152%               25%    
_________________________________________________________________________________________________________________________________
=================================================================================================================================

(a)  Calculated using average shares outstanding.                               
(b)  Includes adjustments in accordance with accounting principles generally    
accepted in the United States of America and as such, the net asset   
 value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for  
shareholder transactions. Does not include sales charges and is not   
annualized for periods less than one year.                            
(c)  Ratios are based on average daily net assets of $10,900,283.               
(d)  Annualized.                                                                
(e)  Not annualized for periods less than one year.                             

NOTE 13--LEGAL PROCEEDINGS                                                      

Terms used in the Legal Proceedings Note are defined terms solely for the       
purpose of this note.                                                           

Settled Enforcement Actions and Investigations Related to Market Timing         

    On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment
advisor to certain AIM Funds) and A I M Advisors, Inc. ("AIM") (the Fund's      
investment advisor) reached final settlements with certain regulators, including
without limitation the Securities and Exchange Commission ("SEC"), the New York 
Attorney General ("NYAG") and the Colorado Attorney General ("COAG"), to resolve
civil enforcement actions and investigations related to market timing activity  
and related issues in the AIM Funds, including those formerly advised by IFG.   
These regulators alleged, in substance, that IFG and AIM failed to disclose in  
the prospectuses for the AIM Funds that they advised and to the independent     
directors/trustees of such Funds that they had entered into certain arrangements
permitting market timing of such Funds, thereby breaching their fiduciary duties
to such Funds. As a result of the foregoing, the regulators alleged that IFG and
AIM breached various Federal and state securities, business and consumer        
protection laws. On the same date, A I M Distributors, Inc. ("ADI") (the        
distributor of the retail AIM Funds) reached a final settlement with the SEC to 
resolve an investigation relating to market timing activity and related issues  
in the AIM Funds. The SEC also alleged that ADI violated various Federal        
securities laws. The SEC also has settled related market timing enforcement     
actions brought against certain former officers and employees of IFG.           

Under the terms of the settlements, IFG agreed to pay a total of $325   
million, of which $110 million is civil penalties. Of this $325 million total   
payment, half has been paid and the remaining half will be paid on or before    
December 31, 2005. AIM and ADI agreed to pay a total of $50 million, of which   
$30 million is civil penalties, all of which has been paid. The entire $325     
million IFG settlement payment will be made available for distribution to the   
shareholders of those AIM Funds that IFG formerly advised that were harmed by   
market timing activity, and the entire $50 million settlement payment by AIM and
ADI will be made available for distribution to the shareholders of those AIM    
Funds advised by AIM that were harmed by market timing activity, all as to be   
determined by an independent distribution consultant. The settlement payments   
will be distributed in accordance with a methodology to be determined by the    
independent distribution consultant, in consultation with AIM and the           
independent trustees of the AIM Funds and acceptable to the staff of the SEC.   
Under the settlements with the NYAG and COAG, AIM has agreed to reduce          
management fees on certain equity and balanced AIM Funds by $15 million per year
for the next five years, based upon effective fee rates and assets under        
management as of July 1, 2004, and not to increase certain management fees.     

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NOTE 13--LEGAL PROCEEDINGS (CONTINUED)                                          

Under the terms of the settlements, AIM will make certain governance and
compliance reforms, including maintaining an internal controls committee and    
retaining an independent compliance consultant and a corporate ombudsman. Also, 
commencing in 2007 and at least once every other year thereafter, AIM will      
undergo a compliance review by an independent third party. In addition, under   
the terms of the settlements, AIM has undertaken to cause the AIM Funds to      
operate in accordance with certain governance policies and practices, including 
retaining a full-time independent senior officer whose duties will include      
monitoring compliance and managing the process by which proposed management fees
to be charged the AIM Funds are negotiated. Also, commencing in 2008 and not    
less than every fifth calendar year thereafter, the AIM Funds will hold         
shareholder meetings at which their Boards of Trustees will be elected.         

   At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"),
the parent company of IFG and AIM, has agreed to pay expenses incurred by such  
Funds related to market timing matters.                                         

  The SEC has also settled market timing enforcement actions against Raymond
R. Cunningham (the former president and chief executive officer of IFG and a    
former member of the board of directors of the AIM Funds formerly advised by    
IFG), Timothy J. Miller (the former chief investment officer and a former       
portfolio manager for IFG), Thomas A. Kolbe (the former national sales manager  
of IFG) and Michael D. Legoski (a former assistant vice president in IFG's sales
department). As part of these settlements, the SEC ordered these individuals to 
pay restitution and civil penalties in various amounts and prohibited them from 
associating with, or serving as an officer or director of, an investment        
advisor, broker, dealer and/or investment company, as applicable, for certain   
periods of time.                                                                

The payments made in connection with the above-referenced settlements by
IFG, AIM and ADI will total approximately $375 million (not including AIM's     
agreement to reduce management fees on certain equity and balanced AIM Funds by 
$15 million per year for the next five years, based upon effective fee rates and
assets under management as of July 1, 2004). The manner in which the settlement 
payments will be distributed is unknown at the present time and will be         
determined by an independent distribution consultant to be appointed under the  
settlement agreements. Therefore, management of AIM and the Fund are unable at  
the present time to estimate the impact, if any, that the distribution of the   
settlement amounts may have on the Fund or whether such distribution will have  
an impact on the Fund's financial statements in the future.                     

  At the present time, management of AIM and the Fund are unable to estimate
the impact, if any, that the outcome of the Regulatory Inquires and Pending     
Litigation described below may have on AIM, ADI or the Fund.                    

Regulatory Inquiries and Pending Litigation                                     

The mutual fund industry as a whole is currently subject to regulatory  
inquiries and litigation related to a wide range of issues. These issues        
include, among others, market timing activity, late trading, fair value pricing,
excessive or improper advisory and/or distribution fees, mutual fund sales      
practices, including but not limited to revenue sharing and directed-brokerage  
arrangements, investments in securities of other registered investment          
companies, contractual plans, issues related to Section 529 college savings     
plans, procedures for locating lost security holders and participation in class 
action settlements.                                                             

 As described more fully below, IFG and AIM are the subject of a number of
ongoing regulatory inquiries and civil lawsuits related to one or more of the   
issues currently being scrutinized by various Federal and state regulators,     
including but not limited to those issues described above. Additional regulatory
actions and/or civil lawsuits related to the above or other issues may be filed 
against the AIM Funds, IFG, AIM and/or related entities and individuals in the  
future. Additional regulatory inquiries related to the above or other issues    
also may be received by the AIM Funds, IFG, AIM and/or related entities and     
individuals in the future.                                                      

Ongoing Regulatory Inquiries Concerning IFG and AIM                             

   IFG, certain related entities, certain of their current and former officers
and/or certain of the AIM Funds formerly advised by IFG have received regulatory
inquiries in the form of subpoenas or other oral or written requests for        
information and/or documents related to one or more of the following issues,    
some of which concern one or more such Funds: market timing activity, late      
trading, fair value pricing, excessive or improper advisory and/or distribution 
fees, mutual fund sales practices, including revenue sharing and                
directed-brokerage arrangements, and investments in securities of other         
registered investment companies. These regulators include the SEC, the NASD,    
Inc. ("NASD"), the Florida Department of Financial Services, the Attorney       
General of the State of West Virginia, the West Virginia Securities Commission  
and the Bureau of Securities of the State of New Jersey. IFG and certain of     
these other parties also have received more limited inquiries from the United   
States Department of Labor ("DOL") and the United States Attorney's Office for  
the Southern District of New York, some of which concern one or more of the AIM 
Funds formerly advised by IFG. IFG is providing full cooperation with respect to
these inquiries.                                                                

   AIM, certain related entities, certain of their current and former officers
and/or certain of the AIM Funds have received regulatory inquiries in the form  
of subpoenas or other oral or written requests for information and/or documents 
related to one or more of the following issues, some of which concern one or    
more AIM Funds: market timing activity, late trading, fair value pricing,       
excessive or improper advisory and/or distribution fees, mutual fund sales      
practices, including revenue sharing and directed-brokerage arrangements,       
investments in securities of other registered investment companies, contractual 
plans, issues related to Section 529 college savings plans and procedures for   
locating lost securityholders. These regulators include the SEC, the NASD, the  
Department of Banking for the State of Connecticut, the Attorney General of the 
State of West Virginia, the West Virginia Securities Commission and the Bureau  
of Securities of the State of New Jersey. AIM and certain of these other parties
also have received more limited inquiries from the SEC, the NASD, the DOL, the  
Internal Revenue Service, the United States Attorney's Office for the Southern  
District of New York, the United States Attorney's Office for the Central       
District of California, the United States Attorney's Office for the District of 
Massachusetts, the Massachusetts Securities Division, the U.S. Postal Inspection
Service and the Commodity Futures Trading Commission, some of which concern one 
or more AIM Funds. AIM is providing full cooperation with respect to these      
inquiries.                                                                      

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NOTE 13--LEGAL PROCEEDINGS (CONTINUED)                                          

Private Civil Actions Alleging Market Timing                                    

 Multiple civil lawsuits, including purported class action and shareholder
derivative suits, have been filed against various parties (including, depending 
on the lawsuit, certain AIM Funds, IFG, AIM, AIM Management, AMVESCAP PLC       
("AMVESCAP"), the parent company of IFG and AIM, certain related entities,      
certain of their current and former officers and/or certain unrelated third     
parties) making allegations that are similar in many respects to those in the   
settled regulatory actions brought by the SEC, the NYAG and the COAG concerning 
market timing activity in the AIM Funds. These lawsuits allege a variety of     
theories of recovery, including but not limited to: (i) violation of various    
provisions of the Federal and state securities laws; (ii) violation of various  
provisions of ERISA; (iii) breach of fiduciary duty; and/or (iv) breach of      
contract. These lawsuits were initiated in both Federal and state courts and    
seek such remedies as compensatory damages; restitution; injunctive relief;     
disgorgement of management fees; imposition of a constructive trust; removal of 
certain directors and/or employees; various corrective measures under ERISA;    
rescission of certain Funds' advisory agreements; interest; and attorneys' and  
experts' fees.                                                                  

All lawsuits based on allegations of market timing, late trading, and   
related issues have been transferred to the United States District Court for the
District of Maryland (the "MDL Court") for consolidated or coordinated pre-trial
proceedings. Pursuant to an Order of the MDL Court, plaintiffs consolidated     
their claims for pre-trial purposes into three amended complaints against       
various AIM- and IFG-related parties: (i) a Consolidated Amended Class Action   
Complaint purportedly brought on behalf of shareholders of the AIM Funds; (ii) a
Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of 
the AIM Funds and fund registrants; and (iii) an Amended Class Action Complaint 
for Violations of the Employee Retirement Income Securities Act ("ERISA")       
purportedly brought on behalf of participants in AMVESCAP's 401(k) plan. The    
plaintiffs in one of the underlying lawsuits continue to seek remand of their   
lawsuit to state court.                                                         

Private Civil Actions Alleging Improper Use of Fair Value Pricing               

    Multiple civil class action lawsuits have been filed against various parties
(including, depending on the lawsuit, certain AIM Funds, IFG and/or AIM)        
alleging that certain AIM Funds inadequately employed fair value pricing. These 
lawsuits allege a variety of theories of recovery, including but not limited to:
(i) violations of various provisions of the Federal securities laws; (ii) common
law breach of duty; and (iii) common law negligence and gross negligence. These 
lawsuits have been filed in both Federal and state courts and seek such remedies
as compensatory and punitive damages; interest; and attorneys' fees and costs.  

Private Civil Actions Alleging Excessive Advisory and/or Distribution Fees      

 Multiple civil lawsuits, including purported class action and shareholder
derivative suits, have been filed against various parties (including, depending 
on the lawsuit, IFG, AIM, INVESCO Institutional (N.A.), Inc. ("IINA"), ADI      
and/or INVESCO Distributors, Inc. ("INVESCO Distributors")) alleging that the   
defendants charged excessive advisory and/or distribution fees and failed to    
pass on to shareholders the perceived savings generated by economies of scale.  
Certain of these lawsuits also allege that the defendants adopted unlawful      
distribution plans. These lawsuits allege a variety of theories of recovery,    
including but not limited to: (i) violation of various provisions of the Federal
securities laws; (ii) breach of fiduciary duty; and/or (iii) breach of contract.
These lawsuits have been filed in Federal courts and seek such remedies as      
damages; injunctive relief; rescission of certain Funds' advisory agreements and
distribution plans; interest; prospective relief in the form of reduced fees;   
and attorneys' and experts' fees. All of these lawsuits have been transferred to
the United States District Court for the Southern District of Texas, Houston    
Division by order of the applicable United States District Court in which they  
were initially filed. The plaintiff in one of these lawsuits has challenged this
order.                                                                          

Private Civil Actions Alleging Improper Charging of Distribution Fees on Limited
Offering Funds or Share Classes                                                 

  Multiple civil lawsuits, including shareholder derivative suits, have been
filed against various parties (including, depending on the lawsuit, IFG, AIM,   
ADI and/or certain of the trustees of the AIM Funds) alleging that the          
defendants breached their fiduciary duties by charging distribution fees while  
funds and/or specific share classes were closed generally to new investors      
and/or while other share classes of the same fund were not charged the same     
distribution fees. These lawsuits allege a variety of theories of recovery,     
including but not limited to: (i) violation of various provisions of the Federal
securities laws; and (ii) breach of fiduciary duty. These lawsuits have been    
filed in Federal courts and seek such remedies as damages; injunctive relief;   
and attorneys' and experts' fees.                                               

Private Civil Actions Alleging Improper Mutual Fund Sales Practices and         
Directed-Brokerage Arrangements                                                 

 Multiple civil lawsuits, including purported class action and shareholder
derivative suits, have been filed against various parties (including, depending 
on the lawsuit, AIM Management, IFG, AIM, AIM Investment Services, Inc. ("AIS") 
and/or certain of the trustees of the AIM Funds) alleging that the defendants   
improperly used the assets of the AIM Funds to pay brokers to aggressively      
promote the sale of the AIM Funds over other mutual funds and that the          
defendants concealed such payments from investors by disguising them as         
brokerage commissions. These lawsuits allege a variety of theories of recovery, 
including but not limited to: (i) violation of various provisions of the Federal
securities laws; (ii) breach of fiduciary duty; and (iii) aiding and abetting a 
breach of fiduciary duty. These lawsuits have been filed in Federal courts and  
seek such remedies as compensatory and punitive damages; rescission of certain  
Funds' advisory agreements and distribution plans and recovery of all fees paid;
an accounting of all fund-related fees, commissions and soft dollar payments;   
restitution of all unlawfully or discriminatorily obtained fees and charges; and
attorneys' and experts' fees.                                                   

Private Civil Action Alleging Failure to Ensure Participation in Class Action   
Settlements                                                                     

A civil lawsuit, purporting to be a class action lawsuit, has been filed
against AIM, IINA, A I M Capital Management, Inc. and the trustees of the AIM   
Funds alleging that the defendants breached their fiduciary duties by failing to
ensure that the AIM Funds participated in class action settlements in which the 
AIM Funds were eligible to participate. This lawsuit alleges as theories of     
recovery: (i) violation of various provisions of the Federal securities laws;   
(ii) common law breach of fiduciary duty; and (iii) common law negligence. This 
lawsuit has been filed in Federal court and seeks such remedies as compensatory 
and punitive damages; forfeiture of all commissions and fees paid by the class  
of plaintiffs; and costs and attorneys' fees.                                   
*                                       *                                      *
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

    As a result of the matters discussed above, investors in the AIM Funds might
react by redeeming their investments. This might require the Funds to sell      
investments to provide for sufficient liquidity and could also have an adverse  
effect on the investment performance of the Funds.                              

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                         

To the Board of Trustees and Shareholders of                                    
AIM Global Value 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 Value Fund (one of the  
funds constituting AIM Funds Group hereafter referred to as the "Fund") at      
December 31, 2004, the results of its operations for the year then ended, the   
changes in its net assets for each of the two years in the period then ended and
the financial highlights for each of the periods indicated, in conformity with  
accounting principles generally accepted in the United States of America. These 
financial statements and financial highlights (hereafter referred to as         
"financial statements") are the responsibility of the Fund's management; our    
responsibility is to express an opinion on these financial statements based on  
our audits. We conducted our audits of these financial statements in accordance 
with the standards of the Public Company Accounting Oversight Board (United     
States). Those standards require that we plan and perform the audit to obtain   
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting 
the amounts and disclosures in the financial statements, assessing the          
accounting principles used and significant estimates made by management, and    
evaluating the overall financial statement presentation. We believe that our    
audits, which included confirmation of securities at December 31, 2004 by       
correspondence with the custodian and brokers, provide a reasonable basis for   
our opinion.                                                                    

/S/ PRICEWATERHOUSECOOPERS LLP                                                  

February 18, 2005                                                               
Houston, Texas                                                                  

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FINANCIALS                                                                      

SCHEDULE OF INVESTMENTS                                                         

December 31, 2004                                                               

                                                                [Download Table]


                                                              MARKET   
                                                 SHARES        VALUE   
-----------------------------------------------------------------------
                                                                       
FOREIGN STOCKS & OTHER EQUITY                                          
  INTERESTS-46.04%                                                     

AUSTRALIA-3.48%                                                        

BHP Billiton Ltd. (Diversified Metals &                                
  Mining)(a)                                       55,000   $   658,780
-----------------------------------------------------------------------
Macarthur Coal Ltd. (Diversified Metals &                              
  Mining)                                         577,100     1,801,577
=======================================================================
                                                              2,460,357
=======================================================================

CANADA-22.65%                                                          

ACE Aviation Holdings Inc.-Class A                                     
  (Airlines)(b)                                    14,100       417,069
-----------------------------------------------------------------------
American Gold Capital Corp. (Precious Metals                           
  & Minerals)(b)                                  200,000       149,769
-----------------------------------------------------------------------
Barrick Gold Corp. (Gold)                          41,000       993,020
-----------------------------------------------------------------------
Bema Gold Corp. (Gold)(b)                          85,700       261,696
-----------------------------------------------------------------------
BMTC Group, Inc.-Class A (Specialty Stores)       131,900     1,393,793
-----------------------------------------------------------------------
Cameco Corp. (Diversified Metals & Mining)         39,900     1,392,690
-----------------------------------------------------------------------
Canadian Natural Resources Ltd. (Oil & Gas                             
  Exploration & Production)                        17,000       724,924
-----------------------------------------------------------------------
E-L Financial Corp. Ltd. (Multi-Line                                   
  Insurance)                                        2,512       705,977
-----------------------------------------------------------------------
Energy Savings Income Fund-Units (Gas                                  
  Utilities)                                       25,800       413,238
-----------------------------------------------------------------------
Entree Gold Inc. (Precious Metals &                                    
  Minerals)(b)                                    500,000       603,237
-----------------------------------------------------------------------
Fording Canadian Coal Trust-Units                                      
  (Diversified Metals & Mining)                    27,200     2,097,287
-----------------------------------------------------------------------
Gold Reserve Inc. (Diversified Metals &                                
  Mining)(b)                                       53,400       236,376
-----------------------------------------------------------------------
Imperial Oil Ltd. (Integrated Oil & Gas)            8,500       503,203
-----------------------------------------------------------------------
ING Canada Inc. (Property & Casualty                                   
  Insurance)(b)                                    25,300       617,001
-----------------------------------------------------------------------
ING Canada Inc. (Property & Casualty                                   
  Insurance) (Acquired 12/09/04; Cost                                  
  $252,292)(b)(c)                                  11,800       287,771
-----------------------------------------------------------------------
Kinross Gold Corp. (Gold)(b)                       52,600       369,821
-----------------------------------------------------------------------
Novicourt Inc. (Diversified Metals & Mining)       64,500       101,431
-----------------------------------------------------------------------
Penn West Petroleum Ltd. (Oil & Gas                                    
  Exploration & Production)                         3,400       224,196
-----------------------------------------------------------------------
Placer Dome Inc. (Gold)                            21,800       409,572
-----------------------------------------------------------------------
Rothmans, Inc. (Tobacco)                           23,800       790,132
-----------------------------------------------------------------------
Stornoway Diamond Corp. (Precious Metal &                              
  Minerals)(b)                                    260,000       389,400
-----------------------------------------------------------------------
Teck Cominco Ltd.-Class B (Diversified Metals                          
  & Mining)                                        39,700     1,219,556
-----------------------------------------------------------------------
TimberWest Forest Corp.-Units (Forest                                  
  Products)(d)                                     44,200       554,592
-----------------------------------------------------------------------
United Corporations Ltd. (Asset Management &                           
  Custody Banks)                                   10,000       368,182
-----------------------------------------------------------------------
Westaim Corp. (The) (Industrial                                        
  Conglomerates)(b)                               275,700       699,659
-----------------------------------------------------------------------
Western Silver Corp. (Diversified Metals &                             
  Mining)(b)                                       12,500       112,951
=======================================================================
                                                             16,036,543
=======================================================================

                                                                [Download Table]
                                                              MARKET   
                                                 SHARES        VALUE   
-----------------------------------------------------------------------


                                                                       

FINLAND-1.56%                                                          

Nokia Oyj-ADR (Communications Equipment)           30,300   $   474,801
-----------------------------------------------------------------------
UPM-Kymmene Oyj (Paper Products)(a)                28,400       627,376
=======================================================================
                                                              1,102,177
=======================================================================

GERMANY-1.32%                                                          

Bayerische Motoren Werke A.G. (Automobile                              
  Manufacturers)(a)                                20,700       932,734
=======================================================================

HONG KONG-1.57%                                                        

Cheung Kong (Holdings) Ltd. (Real Estate                               
  Management & Development)(a)                     65,000       648,574
-----------------------------------------------------------------------
Henderson Land Development Co. Ltd. (Real                              
  Estate Management & Development)(a)              89,000       462,716
=======================================================================
                                                              1,111,290
=======================================================================

JAPAN-0.86%                                                            

Honda Motor Co., Ltd. (Automobile                                      
  Manufacturers)(a)                                11,600       606,706
=======================================================================

MEXICO-0.33%                                                           

Grupo Aeroportuario del Sureste S.A. de                                
  C.V.-ADR (Airport Services)                       8,700       237,945
=======================================================================

NETHERLANDS-1.25%                                                      

Akzo Nobel N.V. (Diversified Chemicals)(a)          5,900       250,817
-----------------------------------------------------------------------
TPG N.V. (Air Freight & Logistics)(a)              23,500       636,838
=======================================================================
                                                                887,655
=======================================================================

PERU-1.33%                                                             

Compania de Minas Buenaventura S.A.-ADR                                
  (Precious Metals & Materials)                    41,000       938,900
=======================================================================

SWITZERLAND-1.12%                                                      

Nestle S.A. (Packaged Foods & Meats)(a)             3,050       793,978
=======================================================================

TAIWAN-0.28%                                                           

President Chain Store Corp. (Food Retail)(a)      122,590       197,559
=======================================================================

UNITED KINGDOM-10.29%                                                  

Diageo PLC (Distillers & Vintners)(a)              28,600       408,174
-----------------------------------------------------------------------
GlaxoSmithKline PLC-ADR (Pharmaceuticals)          12,800       606,592
-----------------------------------------------------------------------
HSBC Holdings PLC (Diversified Banks)(a)           25,000       420,869
-----------------------------------------------------------------------
HSBC Holdings PLC (Diversified Banks)(a)           20,800       354,892
-----------------------------------------------------------------------
Man Group PLC (Asset Management & Custody                              
  Banks)(a)                                        35,260       994,255
-----------------------------------------------------------------------
Pan-Ocean Energy Corp. Ltd. (Oil & Gas                                 
  Exploration & Production)(b)                    120,500     2,410,301
-----------------------------------------------------------------------
Randgold Resources Ltd.-ADR (Gold)(b)              32,700       372,780
-----------------------------------------------------------------------
Severn Trent PLC (Water Utilities)(a)              45,110       835,592
-----------------------------------------------------------------------
Standard Chartered PLC (Diversified Banks)(a)      13,000       241,130
-----------------------------------------------------------------------

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                                                                [Download Table]


                                                              MARKET   
                                                 SHARES        VALUE   
-----------------------------------------------------------------------
                                                                       
UNITED KINGDOM-(CONTINUED)                                             

Unilever PLC (Packaged Foods & Meats)(a)           65,000   $   637,176
=======================================================================
                                                              7,281,761
=======================================================================
    Total Foreign Stocks & Other Equity                                
      Interests (Cost $26,039,182)                           32,587,605
=======================================================================

DOMESTIC COMMON STOCKS & OTHER EQUITY                                  
  INTERESTS-20.30%                                                     

APPAREL, ACCESSORIES & LUXURY GOODS-0.59%                              

Jones Apparel Group, Inc.                          11,500       420,555
=======================================================================

DIVERSIFIED BANKS-0.31%                                                

Wells Fargo & Co.                                   3,500       217,525
=======================================================================

GOLD-0.93%                                                             

Newmont Mining Corp.                               14,800       657,268
=======================================================================

INDUSTRIAL CONGLOMERATES-0.95%                                         

Walter Industries, Inc.                            20,000       674,600
=======================================================================

INSURANCE BROKERS-0.85%                                                

Marsh & McLennan Cos., Inc.(e)                     18,300       602,070
=======================================================================

INTEGRATED OIL & GAS-0.89%                                             

Murphy Oil Corp.                                    7,800       627,510
=======================================================================

INTEGRATED TELECOMMUNICATION SERVICES-1.93%                            

ALLTEL Corp.                                       11,200       658,112
-----------------------------------------------------------------------
CenturyTel, Inc.                                   20,000       709,400
=======================================================================
                                                              1,367,512
=======================================================================

INVESTMENT BANKING & BROKERAGE-0.32%                                   

Merrill Lynch & Co., Inc.                           3,800       227,126
=======================================================================

INVESTMENT COMPANIES -- EXCHANGE TRADED                                
  FUNDS-0.91%                                                          

iShares MSCI Emerging Markets Index                 3,200       645,920
=======================================================================

MOVIES & ENTERTAINMENT-0.45%                                           

Walt Disney Co. (The)                              11,500       319,700
=======================================================================

OIL & GAS EXPLORATION & PRODUCTION-2.78%                               

BP Prudhoe Bay Royalty Trust                       11,000       531,300
-----------------------------------------------------------------------
Devon Energy Corp.(e)                              25,000       973,000
-----------------------------------------------------------------------
EOG Resources, Inc.                                 6,500       463,840
=======================================================================
                                                              1,968,140
=======================================================================

PACKAGED FOODS & MEATS-1.41%                                           

Kraft Foods Inc.-Class A                           11,600       413,076
-----------------------------------------------------------------------
Lancaster Colony Corp.                             13,600       583,032
=======================================================================
                                                                996,108
=======================================================================

                                                                [Download Table]
                                                              MARKET   
                                                 SHARES        VALUE   
-----------------------------------------------------------------------


                                                                       

PHARMACEUTICALS-3.00%                                                  

Bristol-Myers Squibb Co.                            4,400   $   112,728
-----------------------------------------------------------------------
Merck & Co. Inc.                                   46,600     1,497,724
-----------------------------------------------------------------------
Schering-Plough Corp.                              24,700       515,736
=======================================================================
                                                              2,126,188
=======================================================================

RAILROADS-0.59%                                                        

Union Pacific Corp.                                 6,200       416,950
=======================================================================

REAL ESTATE-0.19%                                                      

Rayonier Inc.                                       2,760       134,992
=======================================================================

REAL ESTATE MANAGEMENT & DEVELOPMENT-0.57%                             

Tejon Ranch Co.(b)                                 10,000       408,000
=======================================================================

REGIONAL BANKS-0.61%                                                   

Commerce Bancshares, Inc.                           4,515       226,653
-----------------------------------------------------------------------
North Fork Bancorp., Inc.                           7,050       203,392
=======================================================================
                                                                430,045
=======================================================================

SYSTEMS SOFTWARE-1.12%                                                 

Microsoft Corp.                                    29,600       790,616
=======================================================================

THRIFTS & MORTGAGE FINANCE-1.90%                                       

Brookline Bancorp, Inc.                            13,400       218,688
-----------------------------------------------------------------------
First Financial Holdings, Inc.                      6,800       222,632
-----------------------------------------------------------------------
Washington Mutual, Inc.                            14,800       625,744
-----------------------------------------------------------------------
WSFS Financial Corp.                                4,600       277,472
=======================================================================
                                                              1,344,536
=======================================================================
    Total Domestic Common Stocks & Other                               
      Equity Interests (Cost $13,021,865)                    14,375,361
=======================================================================


                                               PRINCIPAL               
                                                 AMOUNT                
                                                                       
U.S. TREASURY NOTES-4.22%                                              

1.63%, 04/30/05(f)                             $  500,000       498,850
-----------------------------------------------------------------------
1.25%, 05/31/05(f)                                500,000       497,675
-----------------------------------------------------------------------
1.13%, 06/30/05(f)                                500,000       496,600
-----------------------------------------------------------------------
1.50%, 07/31/05(f)                                500,000       496,915
-----------------------------------------------------------------------
2.00%, 08/31/05(f)                                500,000       498,085
-----------------------------------------------------------------------
1.63%, 09/30/05(f)                                500,000       496,290
=======================================================================
    Total U.S. Treasury Notes (Cost                                    
      $3,004,731)                                             2,984,415
=======================================================================


                                                  PAR                  
                                                 (000)                 
                                                                       
REPURCHASE AGREEMENTS-7.20%                                            

Barclays Capital Inc.-New York Branch (United                          
  Kingdom) 2.25%, 01/03/05 (Cost                                       
  $5,100,000)(g)                                    5,100     5,100,000
=======================================================================



                                                                       

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                                                                [Download Table]
                                                                       

MONEY MARKET FUNDS-21.79%                                              

Liquid Assets Portfolio-Institutional                                  
  Class(h)                                      7,712,432   $ 7,712,432
-----------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(h)     7,712,432     7,712,432
=======================================================================
    Total Money Market Funds (Cost                                     
      $15,424,864)                                           15,424,864
=======================================================================
TOTAL INVESTMENTS-99.55% (Cost $62,590,642)                  70,472,245
=======================================================================
OTHER ASSETS LESS LIABILITIES-0.45%                             315,810
=======================================================================
NET ASSETS-100.00%                                          $70,788,055
_______________________________________________________________________
=======================================================================

Investment Abbreviations:                                                       

                                                                [Download Table]
                                  
ADR  - American Depositary Receipt

Notes to Schedule of Investments:                                               

(a) In accordance with the procedures established by the Board of Trustees, the 
 foreign security is fair valued using adjusted closing market prices. The
aggregate market value of these securities at December 31, 2004 was     
 $9,708,166, which represented 13.78% of the Fund's Total Investments. See
Note 1A.                                                                
(b) Non-income producing security.                                              
(c) Security not registered under the Securities Act of 1933, as amended (e.g., 
the security was purchased in a Rule 144A transaction or a Regulation D 
   transaction). The security may be resold only pursuant to an exemption from
registration under the 1933 Act, typically to qualified institutional   
  buyers. The Fund has no rights to demand registration of these securities.
   The market value of this security at December 31, 2004 represented 0.41% of
the Fund's Net Assets. This security is considered to be illiquid.      
(d) Each unit represents one common share, one hundred preferred shares and one 
subordinate note receipt.                                               
(e) A portion of this security is subject to call options written. See Note 1J  
and Note 7.                                                             
(f) In accordance with the procedures established by the Board of Trustees,     
   security fair valued based on an evaluated quote provided by an independent
   pricing service. The aggregate market value of these securities at December
31, 2004 was $2,984,415, which represented 4.23% of the Fund's Total    
Investments. See Note 1A.                                               
(g) Joint repurchase agreement entered into 12/31/04 with an aggregate maturing 
value of $222,145,241. Collateralized by $224,956,000 U.S. Government   
  obligations, 0% to 5.80% due 04/19/05 to 09/02/08 with an aggregate market
    value at 12/31/04 of $226,545,690. The amount to be received upon repurchase
by the Fund is $5,100,956.                                              
(h) The money market fund and the Fund are affiliated by having the same        
investment advisor. See Note 3.                                         

See accompanying notes which are an integral part of the financial statements.  

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STATEMENT OF ASSETS AND LIABILITIES                                             

December 31, 2004                                                               

                                                                [Download Table]
                                                            
ASSETS:                                                     

Investments, at market value (cost                          
  $47,165,778)                                  $55,047,381 
----------------------------------------------------------- 
Investments in affiliated money market funds                
  (cost $15,424,864)                             15,424,864 
=========================================================== 
    Total investments (cost $62,590,642)         70,472,245 
=========================================================== 
Foreign currencies, at market value (cost                   
  $24,762)                                           25,878 
----------------------------------------------------------- 
Receivables for:                                            
  Fund shares sold                                  442,573 
----------------------------------------------------------- 
  Dividends and interest                            130,727 
----------------------------------------------------------- 
  Amount due from advisor                             4,707 
----------------------------------------------------------- 
Investment for trustee deferred compensation                
  and retirement plans                               17,235 
----------------------------------------------------------- 
Other assets                                         23,059 
=========================================================== 
    Total assets                                 71,116,424 
___________________________________________________________ 
=========================================================== 

LIABILITIES:                                                

Payables for:                                               
  Fund shares reacquired                            124,860 
----------------------------------------------------------- 
  Options written, at market value (premiums                
    received $81,729)                                93,830 
----------------------------------------------------------- 
  Trustee deferred compensation and retirement              
    plans                                            17,442 
----------------------------------------------------------- 
Accrued distribution fees                            37,342 
----------------------------------------------------------- 
Accrued transfer agent fees                          13,413 
----------------------------------------------------------- 
Accrued operating expenses                           41,482 
=========================================================== 
    Total liabilities                               328,369 
=========================================================== 
Net assets applicable to shares outstanding     $70,788,055 
___________________________________________________________ 
=========================================================== 

NET ASSETS CONSIST OF:                                      

Shares of beneficial interest                   $63,139,205 
----------------------------------------------------------- 
Undistributed net investment income (loss)         (176,123)
----------------------------------------------------------- 
Undistributed net realized gain from                        
  investment securities, foreign currencies                 
  and foreign currency contracts                    (46,308)
----------------------------------------------------------- 
Unrealized appreciation of investment                       
  securities, foreign currencies and option                 
  contracts                                       7,871,281 
=========================================================== 
                                                $70,788,055 
___________________________________________________________ 
=========================================================== 

NET ASSETS:                                                 

Class A                                         $36,091,824 
___________________________________________________________ 
=========================================================== 
Class B                                         $24,675,494 
___________________________________________________________ 
=========================================================== 
Class C                                         $10,020,737 
___________________________________________________________ 
=========================================================== 

SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE,              
  UNLIMITED NUMBER OF SHARES AUTHORIZED:                    

Class A                                           2,716,812 
___________________________________________________________ 
=========================================================== 
Class B                                           1,894,720 
___________________________________________________________ 
=========================================================== 
Class C                                             768,908 
___________________________________________________________ 
=========================================================== 
Class A:                                                    
  Net asset value per share                     $     13.28 
----------------------------------------------------------- 
  Offering price per share:                                 
    (Net asset value of $13.28 divided                      
      by 94.50%)                                $     14.05 
___________________________________________________________ 
=========================================================== 
Class B:                                                    
  Net asset value per share and offering price              
    per share                                   $     13.02 
___________________________________________________________ 
=========================================================== 
Class C:                                                    
  Net asset value per share and offering price              
    per share                                   $     13.03 
___________________________________________________________ 
=========================================================== 

See accompanying notes which are an integral part of the financial statements.  

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STATEMENT OF OPERATIONS                                                         

For the year ended December 31, 2004                                            

                                                                [Download Table]
                                                                         
INVESTMENT INCOME:                                                       

Dividends (net of foreign withholding tax of $40,524)         $  624,281 
------------------------------------------------------------------------ 
Dividends from affiliated money market funds                      98,332 
------------------------------------------------------------------------ 
Interest                                                          45,472 
======================================================================== 
    Total investment income                                      768,085 
======================================================================== 

EXPENSES:                                                                

Advisory fees                                                    310,539 
------------------------------------------------------------------------ 
Administrative services fees                                      50,000 
------------------------------------------------------------------------ 
Custodian fees                                                    30,160 
------------------------------------------------------------------------ 
Distribution fees:                                                       
  Class A                                                         62,525 
------------------------------------------------------------------------ 
  Class B                                                        130,059 
------------------------------------------------------------------------ 
  Class C                                                         56,638 
------------------------------------------------------------------------ 
Transfer agent fees                                              121,092 
------------------------------------------------------------------------ 
Trustees' fees and retirement benefits                            13,669 
------------------------------------------------------------------------ 
Professional fees                                                 52,733 
------------------------------------------------------------------------ 
Other                                                             96,553 
======================================================================== 
    Total expenses                                               923,968 
======================================================================== 
Less: Fees waived, expenses reimbursed and expense offset                
  arrangements                                                   (70,824)
======================================================================== 
    Net expenses                                                 853,144 
======================================================================== 
Net investment income (loss)                                     (85,059)
======================================================================== 

REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT                      
  SECURITIES, FOREIGN CURRENCIES, FOREIGN CURRENCY CONTRACTS             
  AND OPTION CONTRACTS:                                                  

Net realized gain (loss) from:                                           
  Investment securities                                        2,140,772 
------------------------------------------------------------------------ 
  Foreign currencies                                              10,829 
------------------------------------------------------------------------ 
  Foreign currency contracts                                    (135,587)
======================================================================== 
                                                               2,016,014 
======================================================================== 
Change in net unrealized appreciation (depreciation) of:                 
  Investment securities                                        5,432,029 
------------------------------------------------------------------------ 
  Foreign currencies                                                (289)
------------------------------------------------------------------------ 
  Option contracts written                                       (12,101)
======================================================================== 
                                                               5,419,639 
======================================================================== 
Net gain from investment securities, foreign currencies,                 
  foreign currency contracts and option contracts              7,435,653 
======================================================================== 
Net increase in net assets resulting from operations          $7,350,594 
________________________________________________________________________ 
======================================================================== 

See accompanying notes which are an integral part of the financial statements.  

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STATEMENT OF CHANGES IN NET ASSETS                                              

For the years ended December 31, 2004 and 2003                                  

                                                        [Enlarge/Download Table]

                                                                 2004           2003     
---------------------------------------------------------------------------------------- 
                                                                                         
OPERATIONS:                                                                              

  Net investment income (loss)                                $   (85,059)   $   (26,446)
---------------------------------------------------------------------------------------- 
  Net realized gain from investment securities, foreign                                  
    currencies, foreign currency contracts and option                                    
    contracts                                                   2,016,014      3,340,092 
---------------------------------------------------------------------------------------- 
  Change in net unrealized appreciation of investment                                    
    securities, foreign currencies, foreign currency                                     
    contracts and option contracts                              5,419,639        760,584 
======================================================================================== 
    Net increase in net assets resulting from operations        7,350,594      4,074,230 
======================================================================================== 
Distributions to shareholders from net investment income:                                
  Class A                                                         (71,026)       (66,253)
---------------------------------------------------------------------------------------- 
  Class B                                                          (7,630)       (20,575)
---------------------------------------------------------------------------------------- 
  Class C                                                          (3,042)        (8,358)
======================================================================================== 
    Total distributions from net investment income                (81,698)       (95,186)
======================================================================================== 
Distributions to shareholders from net realized gains:                                   
  Class A                                                      (1,209,975)       (96,651)
---------------------------------------------------------------------------------------- 
  Class B                                                        (845,773)       (77,081)
---------------------------------------------------------------------------------------- 
  Class C                                                        (337,438)       (31,309)
======================================================================================== 
    Total distributions from net realized gains                (2,393,186)      (205,041)
======================================================================================== 
    Decrease in net assets resulting from distributions        (2,474,884)      (300,227)
======================================================================================== 
Share transactions-net:                                                                  
  Class A                                                      24,355,657      1,096,605 
---------------------------------------------------------------------------------------- 
  Class B                                                      15,906,396      1,052,199 
---------------------------------------------------------------------------------------- 
  Class C                                                       6,451,669        481,030 
======================================================================================== 
    Net increase in net assets resulting from share                                      
     transactions                                              46,713,722      2,629,834 
======================================================================================== 
    Net increase in net assets                                 51,589,432      6,403,837 
======================================================================================== 

NET ASSETS:                                                                              

  Beginning of year                                            19,198,623     12,794,786 
======================================================================================== 
  End of year (including undistributed net investment income                             
    (loss) of $(176,123) and $(102,604), respectively)        $70,788,055    $19,198,623 
________________________________________________________________________________________ 
======================================================================================== 

See accompanying notes which are an integral part of the financial statements.  

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NOTES TO FINANCIAL STATEMENTS                                                   

December 31, 2004                                                               

NOTE 1--SIGNIFICANT ACCOUNTING POLICIES                                         

AIM Global Value Fund (the "Fund") is a series portfolio of AIM Funds Group (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 nine separate portfolios,    
each authorized to issue an unlimited number of shares of beneficial interest.  
The Fund currently offers multiple classes of shares. Matters affecting each    
portfolio or class will be voted on exclusively by the shareholders of such     
portfolio or class. The assets, liabilities and operations of each portfolio are
accounted for separately. Information presented in these financial statements   
pertains only to the Fund.                                                      

  The Fund's investment objective is to achieve long-term growth of capital.
Companies are listed in the Schedule of Investments based on the country in     
which they are organized.                                                       

   Under the Trust's organizational documents, 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. However, the Fund has not had prior claims or losses pursuant to these
contracts.                                                                      

The preparation of financial statements in conformity with accounting   
principles generally accepted in the United States of America requires          
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported 
amounts of revenues and expenses during the reporting period. Actual results    
could differ from those estimates. The following is a summary of the significant
accounting policies followed by the Fund in the preparation of its financial    
statements.                                                                     

A.   SECURITY VALUATIONS -- Securities, including restricted securities, are    
valued according to the following policy.                             

      A security listed or traded on an exchange (except convertible bonds) is
 valued at its last sales price as of the close of the customary trading
session on the exchange where the security is principally traded, or  
lacking any sales on a particular day, the security is valued at the  
     closing bid price on that day. Each security traded in the over-the-counter
   market (but not securities reported on the NASDAQ National Market System)
    is valued on the basis of prices furnished by independent pricing services
or market makers. Each security reported on the NASDAQ National Market
  System is valued at the NASDAQ Official Closing Price ("NOCP") as of the
  close of the customary trading session on the valuation date or absent a
NOCP, at the closing bid price.                                       

  Futures contracts are valued at the final settlement price set by an
     exchange on which they are principally traded. Listed options are valued at
     the mean between the last bid and the ask prices from the exchange on which
   they are principally traded. Options not listed on an exchange are valued
   by an independent source at the mean between the last bid and ask prices.
   For purposes of determining net asset value per share, futures and option
contracts generally will be valued 15 minutes after the close of the  
customary trading session of the New York Stock Exchange ("NYSE").    

    Investments in open-end registered investment companies and closed-end
     registered investment companies that do not trade on an exchange are valued
at the end of day net asset value per share. Investments in closed-end
     registered investment companies that trade on an exchange are valued at the
  last sales price as of the close of the customary trading session on the
exchange where the security is principally traded.                    

     Debt obligations (including convertible bonds) are fair valued using an
evaluated quote provided by an independent pricing service. Evaluated 
    quotes provided by the pricing service may be determined without exclusive
reliance on quoted prices, and may reflect appropriate factors such as
institution-size trading in similar groups of securities, developments
related to specific securities, dividend rate, yield, quality, type of
    issue, coupon rate, maturity, individual trading characteristics and other
    market data. Short-term obligations having 60 days or less to maturity and
 commercial paper are valued at amortized cost which approximates market
value.                                                                

     Securities for which market prices are not provided by any of the above
   methods are valued based upon quotes furnished by independent sources and
  are valued at the last bid price in the case of equity securities and in
the case of debt obligations, the mean between the last bid and asked 
prices.                                                               

     Foreign securities (including foreign exchange contracts) are converted
into U.S. dollar amounts using the applicable exchange rates as of the
close of the NYSE. Generally, trading in foreign securities is        
     substantially completed each day at various times prior to the close of the
   NYSE. The values of such securities used in computing the net asset value
of the Fund's shares are determined as of the close of the respective 
   markets. Events affecting the values of such foreign securities may occur
 between the times at which the particular foreign market closes and the
close of the customary trading session of the NYSE which would not    
   ordinarily be reflected in the computation of the Fund's net asset value.
    If the event is likely to have affected the closing price of the security,
  the security will be valued at fair value in good faith using procedures
     approved by the Board of Trustees. Adjustments to closing prices to reflect
fair value may also be based on a screening process of an independent 
  pricing service to indicate the degree of certainty, based on historical
data, that the closing price in the principal market where a foreign  
security trades is not the current market value as of the close of the
    NYSE. Foreign securities meeting the approved degree of certainty that the
price is not reflective of current market value will be priced at the 
 indication of fair value from the independent pricing service. Multiple
     factors may be considered by the independent pricing service in determining
   adjustments to reflect fair value and may include information relating to
sector indices, ADRs, domestic and foreign index futures and          
exchange-traded funds.                                                

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     Securities for which market quotations are not readily available or are
     unreliable are valued at fair value as determined in good faith by or under
  the supervision of the Trust's officers following procedures approved by
the Board of Trustees. Issuer specific events, market trends, bid/ask 
  quotes of brokers and information providers and other market data may be
     reviewed in the course of making a good faith determination of a security's
fair value.                                                           

B.   SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions   
    are accounted for on a trade date basis. Realized gains or losses on sales
are computed on the basis of specific identification of the securities
sold. Interest income is recorded on the accrual basis from settlement
date. Dividend income is recorded on the ex-dividend date.            

     Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased 
   and/or a reduction of proceeds on a sale of securities.' Such transaction
 costs are included in the determination of realized and unrealized gain
   (loss) from investment securities reported in the Statement of Operations
    and the Statement of Changes in Net Assets and the realized and unrealized
 net gains (losses) on securities per share in the Financial Highlights.
   Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These   
transaction costs are not considered operating expenses and are not   
    reflected in net investment income reported in the Statement of Operations
  and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation  
arrangements between the Fund and the advisor.                        

     The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.     

C.   DISTRIBUTIONS -- Distributions from income and net realized capital gain,  
   if any, are generally paid annually and recorded on ex-dividend date. The
Fund may elect to use a portion of the proceeds from redemptions as   
distributions for federal income tax purposes.                        

D.   FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of
Subchapter M of the Internal Revenue Code necessary to qualify as a   
   regulated investment company and, as such, will not be subject to federal
  income taxes on otherwise taxable income (including net realized capital
 gain) which is distributed to shareholders. Therefore, no provision for
federal income taxes is recorded in the financial statements.         

E.   EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular    
 class of the Fund and which are directly attributable to that class are
   charged to the operations of such class. All other expenses are allocated
among the classes based on relative net assets.                       

F.   REPURCHASE AGREEMENTS -- The Fund may enter into repurchase agreements.    
     Collateral on repurchase agreements, including the Fund's pro-rata interest
   in joint repurchase agreements, is taken into possession by the Fund upon
    entering into the repurchase agreement. Eligible securities for collateral
  are U.S. Government Securities, U.S. Government Agency Securities and/or
    Investment Grade Debt Securities. Collateral consisting of U.S. Government
    Securities and U.S. Government Agency Securities is marked to market daily
to ensure its market value is at least 102% of the sales price of the 
repurchase agreement. Collateral consisting of Investment Grade Debt  
     Securities is marked to market daily to ensure its market value is at least
 105% of the sales price of the repurchase agreement. The investments in
some repurchase agreements, pursuant to an exemptive order from the   
  Securities and Exchange Commission, are through participation with other
mutual funds, private accounts and certain non-registered investment  
companies managed by the investment advisor or its affiliates ("Joint 
   repurchase agreements"). If the seller of a repurchase agreement fails to
    repurchase the security in accordance with the terms of the agreement, the
 Fund might incur expenses in enforcing its rights, and could experience
 losses, including a decline in the value of the underlying security and
loss of income.                                                       

G.   REDEMPTION FEES -- The Fund has instituted a 2% redemption fee on certain  
share classes that is to be retained by the Fund to offset transaction
costs and other expenses associated with short-term redemptions and   
  exchanges. The fee, subject to certain exceptions, is imposed on certain
redemptions, including exchanges of shares held less than 30 days. The
redemption fee is accounted for as an addition to shares of beneficial
    interest by the Fund and is allocated among the share classes based on the
relative net assets of each class.                                    

H.   FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of
  the NYSE based on quotations posted by banks and major currency dealers.
Portfolio securities and other assets and liabilities denominated in  
foreign currencies are translated into U.S. dollar amounts at date of 
valuation. Purchases and sales of portfolio securities (net of foreign
taxes withheld on disposition) and income items denominated in foreign
    currencies are translated into U.S. dollar amounts on the respective dates
    of such transactions. The Fund does not separately account for the portion
 of the results of operations resulting from changes in foreign exchange
  rates on investments and the fluctuations arising from changes in market
prices of securities held. The combined results of changes in foreign 
    exchange rates and the fluctuation of market prices on investments (net of
   estimated foreign tax withholding) are included with the net realized and
  unrealized gain or loss from investments in the Statement of Operations.
Reported net realized foreign currency gains or losses arise from, (i)
     sales of foreign currencies, (ii) currency gains or losses realized between
  the trade and settlement dates on securities transactions, and (iii) the
difference between the amounts of dividends, interest, and foreign    
withholding taxes recorded on the Fund's books and the U.S. dollar    
     equivalent of the amounts actually received or paid. Net unrealized foreign
   currency gains and losses arise from changes in the fair values of assets
     and liabilities, other than investments in securities at fiscal period end,
resulting from changes in exchange rates.                             

I.   FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation 
to purchase or sell a specific currency for an agreed-upon price at a 
     future date. The Fund may enter into a foreign currency contract to attempt
   to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency   
  contract for the purchase or sale of a security denominated in a foreign
    currency in order to "lock in" the U.S. dollar price of that security. The
     Fund could be exposed to risk if counterparties to the contracts are unable
to meet the terms of their contracts or if the value of the foreign   
currency changes unfavorably.                                         

J.   COVERED CALL OPTIONS -- The Fund may write call options, on a covered      
  basis; that is, the Fund will own the underlying security. When the Fund
  writes a covered call option, an amount equal to the premium received by
the Fund is recorded as an asset and an equivalent liability. The     

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   amount of the liability is subsequently "marked-to-market" to reflect the
   current market value of the option written. The current market value of a
  written option is the mean between the last bid and asked prices on that
     day. If a written call option expires on the stipulated expiration date, or
     if the Fund enters into a closing purchase transaction, the Fund realizes a
 gain (or a loss if the closing purchase transaction exceeds the premium
     received when the option was written) without regard to any unrealized gain
or loss on the underlying security, and the liability related to such 
     option is extinguished. If a written option is exercised, the Fund realizes
    a gain or a loss from the sale of the underlying security and the proceeds
 of the sale are increased by the premium originally received. A risk in
    writing a call option is that the Fund gives up the opportunity for profit
    if the market price of the security increases and the option is exercised.

NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES                         

The Trust has entered into a master investment advisory agreement with A I M    
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,   
the Fund pays an advisory fee to AIM at the annual rate of 0.85% of the first $1
billion of the Fund's average daily net assets, plus 0.80% of the Fund's average
daily net assets in excess of $1 billion. Effective January 1, 2005 through June
30, 2006, AIM has contractually agreed to waive advisory fees to the extent     
necessary so that the advisory fees payable by the Fund (based on the Fund's    
average daily net assets) do not exceed the annual rate of 0.80% of the first   
$250 million, plus 0.78% of the next $250 million, plus 0.76% of the next $500  
million, plus 0.74% of the next $1.5 billion, plus 0.72% of the next $2.5       
billion, plus 0.70% of the next $2.5 billion, plus 0.68% of the next $2.5       
billion, plus 0.66% of the Fund's average daily net assets in excess of $10     
billion. AIM has contractually agreed to waive advisory fees and/or reimburse   
expenses to the extent necessary to limit total annual operating expenses       
(excluding certain items discussed below) of Class A, Class B and Class C shares
to 2.00%, 2.65% and 2.65% of average daily net assets, respectively, through    
December 31, 2005. In determining the advisor's obligation to waive advisory    
fees and/or reimburse expenses, the following expenses are not taken into       
account, and could cause the total annual fund operating expenses to exceed the 
limit stated above: (i) interest; (ii) taxes; (iii) dividend expense on short   
sales; (iv) extraordinary items (these are expenses that are not anticipated to 
arise from the Fund's day-to-day operations), or items designated as such by the
Fund's Board of Trustees; (v) expenses related to a merger or reorganization, as
approved by the Fund's Board of Trustees; and (vi) expenses that the Fund has   
incurred but did not actually pay because of an expense offset arrangement.     
Currently, the only expense offset arrangements from which the Fund benefits are
in the form of credits that the Fund receives from banks where the Fund or its  
transfer agent has deposit accounts in which it holds uninvested cash. Those    
credits are used to pay certain expenses incurred by the Fund. Further, AIM has 
voluntarily agreed to waive advisory fees of the Fund in the amount of 25% of   
the advisory fee AIM receives from the affiliated money market funds on         
investments by the Fund in such affiliated money market funds. Voluntary fee    
waivers or reimbursements may be modified or discontinued at any time upon      
consultation with the Board of Trustees without further notice to investors. For
the year ended December 31, 2004, AIM waived fees of $49,124.                   

   For the year ended December 31, 2004, at the request of the Trustees of the
Trust, AMVESCAP PLC ("AMVESCAP") agreed to reimburse $21,226 of expenses        
incurred by the Fund in connection with matters related to recently settled     
regulatory actions and investigations concerning market timing activity in the  
AIM Funds, including legal, audit, shareholder servicing, communication and     
trustee expenses. These expenses along with the related expense reimbursement,  
are included in the Statement of Operations.                                    

  The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing    
accounting services to the Fund. Pursuant to such agreement for the year ended  
December 31, 2004, AIM was paid $50,000.                                        

    The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay AIM Investment Services, Inc. ("AISI") a fee for providing transfer agency  
and shareholder services to the Fund and reimburse AISI for certain expenses    
incurred by AISI in the course of providing such services. For the year ended   
December 31, 2004, the Fund paid AISI $121,092. AISI may make payments to       
intermediaries that provide omnibus account services, sub-accounting services   
and/or networking services.                                                     

The Trust has entered into master distribution agreements with A I M    
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the     
Class A, Class B and Class C shares of the Fund. The Trust has adopted plans    
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A,   
Class B and Class C shares (collectively the "Plans"). The Fund, pursuant to the
Plans, pays AIM Distributors compensation at the annual rate of 0.35% of the    
Fund's average daily net assets of Class A shares and 1.00% of the average daily
net assets of Class B and Class C shares. Of these amounts, up to 0.25% of the  
average daily net assets of the Class A, Class B or Class C shares may be paid  
to furnish continuing personal shareholder services to customers who purchase   
and own shares of such classes. Any amounts not paid as a service fee under the 
Plans would constitute an asset-based sales charge. NASD Rules also impose a cap
on the total sales charges, including asset-based sales charges that may be paid
by any class of shares of the Fund. AIM Distributors did not reimburse fees     
during the period under this expense limitation. Pursuant to the Plans, for the 
year ended December 31, 2004, the Class A, Class B and Class C shares paid      
$62,525, $130,059 and $56,638, respectively.                                    

  Front-end sales commissions and contingent deferred sales charges ("CDSC")
(collectively the "sales charges") are not recorded as expenses of the Fund.    
Front-end sales commissions are deducted from proceeds from the sales of Fund   
shares prior to investment in Class A shares of the Fund. CDSC are deducted from
redemption proceeds prior to remittance to the shareholder. During year ended   
December 31, 2004, AIM Distributors advised the Fund that it retained $35,815 in
front-end sales commissions from the sale of Class A shares and $0, $807 and    
$367 from Class A, Class B and Class C shares, respectively, for CDSC imposed   
upon redemptions by shareholders.                                               

Certain officers and trustees of the Trust are officers and directors of
AIM, AISI and/or AIM Distributors.                                              

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NOTE 3--INVESTMENTS IN AFFILIATES                                               

The Fund is permitted, pursuant to an exemptive order from the Securities and   
Exchange Commission ("SEC") and approved procedures by the Board of Trustees, to
invest daily available cash balances in affiliated money market funds. The Fund 
and the money market funds below have the same investment advisor and therefore,
are considered to be affiliated. The table below shows the transactions in and  
earnings from investments in affiliated money market funds for the year ended   
December 31, 2004.                                                              

INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:                                   

                                                        [Enlarge/Download Table]

                                                                        UNREALIZED                                               
                 MARKET VALUE       PURCHASES          PROCEEDS        APPRECIATION     MARKET VALUE     DIVIDEND      REALIZED  
FUND               12/31/03          AT COST          FROM SALES      (DEPRECIATION)      12/31/04        INCOME      GAIN (LOSS)
---------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                 
Liquid Assets                                                                                                                    
  Portfolio-                                                                                                                     
  Institutional                                                                                                                  
  Class            $178,736        $18,243,208       $(10,709,512)        $   --         $ 7,712,432      $49,282       $   --   
---------------------------------------------------------------------------------------------------------------------------------
STIC Prime                                                                                                                       
  Portfolio-                                                                                                                     
  Institutional                                                                                                                  
  Class             178,736         18,243,208        (10,709,512)            --           7,712,432       49,050           --   
=================================================================================================================================
  Total            $357,472        $36,486,416       $(21,419,024)        $   --         $15,424,864      $98,332       $   --   
_________________________________________________________________________________________________________________________________
=================================================================================================================================

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 December 31, 2004, the Fund received credits in transfer agency fees of   
$470 and credits in custodian fees of $4 under expense offset arrangements,     
which resulted in a reduction of the Fund's total expenses of $474.             

NOTE 5--TRUSTEES' FEES                                                          

Trustees' fees represent remuneration paid to each Trustee of the Trust who is  
not an "interested person" of AIM. Trustees have the option to defer            
compensation payable by the Trust. Those Trustees who defer compensation have   
the option to select various AIM Funds in which their deferral accounts shall be
deemed to be invested.                                                          

Current Trustees are eligible to participate in a retirement plan that  
provides for benefits to be paid upon retirement to Trustees over a period of   
time based on the number of years of service. The Fund may have certain former  
Trustees that also participate in a retirement plan and receive benefits under  
such plan.                                                                      

  Obligations under the deferred compensation and retirement plans represent
unsecured claims against the general assets of the Fund.                        

   During the year ended December 31, 2004, the Fund paid legal fees of $2,689
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Independent Trustees. A member of that firm is a Trustee of the Trust.          

NOTE 6--BORROWINGS                                                              

Pursuant to an exemptive order from the SEC, the Fund may participate in an     
interfund lending facility that AIM has established for temporary borrowings by 
the AIM Funds. An interfund loan will be made under this facility only if the   
loan rate (an average of the rate available on bank loans and the rate available
on investments in overnight repurchase agreements) is favorable to both the     
lending fund and the borrowing fund. A loan will be secured by collateral if the
Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total    
assets. To the extent that the loan is required to be secured by collateral, the
collateral is marked to market daily to ensure that the market value is at least
102% of the outstanding principal value of the loan.                            

The Fund is a participant in an uncommitted unsecured revolving credit  
facility with State Street Bank and Trust Company ("SSB"). The Fund may borrow  
up to the lesser of (i) $125,000,000, or (ii) the limits set by its prospectus  
for borrowings. The Fund and other funds advised by AIM which are parties to the
credit facility can borrow on a first come, first served basis. Principal on    
each loan outstanding shall bear interest at the bid rate quoted by SSB at the  
time of the request for the loan.                                               

During the year ended December 31, 2004, the Fund did not borrow or lend
under the interfund lending facility or borrow under the uncommitted unsecured  
revolving credit facility.                                                      

Additionally, the Fund is permitted to temporarily carry a negative or  
overdrawn balance in its account with SSB, the custodian bank. To compensate the
custodian bank for such overdrafts, the overdrawn Fund may either (i) leave     
funds in the account so the custodian can be compensated by earning the         
additional interest; or (ii) compensate by paying the custodian bank. In either 
case, the custodian bank will be compensated at an amount equal to the Federal  
Funds rate plus 100 basis points.                                               

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NOTE 7--OPTION CONTRACTS WRITTEN                                                

                                                                [Download Table]

                          TRANSACTIONS DURING THE PERIOD                           
-----------------------------------------------------------------------------------
                                                              CALL OPTION CONTRACTS
                                                              ---------------------
                                                              NUMBER OF    PREMIUMS
                                                              CONTRACTS    RECEIVED
-----------------------------------------------------------------------------------
                                                                                   
Beginning of year                                                 --       $    -- 
-----------------------------------------------------------------------------------
Written                                                          433        81,729 
===================================================================================
End of year                                                      433       $81,729 
___________________________________________________________________________________
===================================================================================

                                                        [Enlarge/Download Table]

                                           OPEN CALL OPTIONS WRITTEN AT PERIOD END                                            
------------------------------------------------------------------------------------------------------------------------------
                                                                                                DECEMBER 31,                  
                                                                                                    2004          UNREALIZED  
                                                 CONTRACT    STRIKE    NUMBER OF    PREMIUMS       MARKET        APPRECIATION 
                                                  MONTH      PRICE     CONTRACTS    RECEIVED       VALUE        (DEPRECIATION)
------------------------------------------------------------------------------------------------------------------------------
                                                                                                                              
Devon Energy Corp.                                Apr-05      $40         250       $52,999       $46,250         $   6,749   
------------------------------------------------------------------------------------------------------------------------------
Marsh & McLennan Cos., Inc.                       Jan-05      $35         183        28,730        47,580           (18,850)  
==============================================================================================================================
                                                                          433       $81,729       $93,830         $ (12,101)  
______________________________________________________________________________________________________________________________
==============================================================================================================================

NOTE 8--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS          

DISTRIBUTIONS TO SHAREHOLDERS:                                                  

The tax character of distributions paid during the years ended December 31, 2004
and 2003 was as follows:                                                        

                                                                [Download Table]

                                                                 2004         2003  
------------------------------------------------------------------------------------
                                                                                    
Distributions paid from:                                                            
  Ordinary income                                             $2,422,197    $ 95,332
------------------------------------------------------------------------------------
  Long-term capital gain                                          52,687     204,895
====================================================================================
Total distributions                                           $2,474,884    $300,227
____________________________________________________________________________________
====================================================================================

TAX COMPONENTS OF NET ASSETS:                                                   

As of December 31, 2004, the components of net assets on a tax basis were as    
follows:                                                                        

                                                                [Download Table]

                                                                2004        
--------------------------------------------------------------------------- 
                                                                            
Undistributed ordinary income                                   $   216,446 
--------------------------------------------------------------------------- 
Unrealized appreciation -- investments                            7,456,725 
--------------------------------------------------------------------------- 
Temporary book/tax differences                                      (15,968)
--------------------------------------------------------------------------- 
Post-October capital loss deferral                                   (8,353)
--------------------------------------------------------------------------- 
Shares of beneficial interest                                    63,139,205 
=========================================================================== 
Total net assets                                                $70,788,055 
___________________________________________________________________________ 
=========================================================================== 

The difference between book-basis and tax-basis unrealized appreciation 
(depreciation) is due to differences in the timing of recognition of gains and  
losses on investments for tax and book purposes. The Fund's unrealized          
appreciation (depreciation) difference is attributable primarily to losses on   
wash sales and realization of gains on passive foreign investment companies. The
tax-basis unrealized appreciation (depreciation) on investments amount includes 
appreciation (depreciation) on option contracts written and foreign currencies  
of $(10,322.)                                                                   

The temporary book/tax differences are a result of timing differences   
between book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of the trustee deferral of compensation and 
retirement plan expenses.                                                       

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NOTE 9--INVESTMENT SECURITIES                                                   

The aggregate amount of investment securities (other than short-term securities 
and money market funds) purchased and sold by the Fund during the year ended    
December 31, 2004 was $60,854,445 and $36,672,647, respectively.                

                                                                [Download Table]

UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
------------------------------------------------------------------------------
                                                                              
Aggregate unrealized appreciation of investment securities        $7,638,896  
------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities        (171,849) 
==============================================================================
Net unrealized appreciation of investment securities              $7,467,047  
______________________________________________________________________________
==============================================================================
Cost of investments for tax purposes is $63,005,198.                          

NOTE 10--RECLASSIFICATION OF PERMANENT DIFFERENCES                              

Primarily as a result of differing book/tax treatment of foreign currency       
transactions and passive foreign investment companies, on December 31, 2004,    
undistributed net investment income (loss) was increased by $93,238 and         
undistributed net realized gain was decreased by $93,238. This reclassification 
had no effect on the net assets of the Fund.                                    

NOTE 11--SHARE INFORMATION                                                      

The Fund currently offers three different classes of shares: Class A shares,    
Class B shares and Class C shares. Class A shares are sold with a front-end     
sales charge. Class B shares and Class C shares are sold with CDSC. Under       
certain circumstances, Class A shares are subject to CDSC. Generally, Class B   
shares will automatically convert to Class A shares eight years after the end of
the calendar month of purchase.                                                 

                                                        [Enlarge/Download Table]

                                          CHANGES IN SHARES OUTSTANDING                                           
----------------------------------------------------------------------------------------------------------------- 
                                                                            YEAR ENDED DECEMBER 31,               
                                                              --------------------------------------------------- 
                                                                        2004                       2003           
                                                              ------------------------    ----------------------- 
                                                               SHARES        AMOUNT        SHARES       AMOUNT    
----------------------------------------------------------------------------------------------------------------- 
                                                                                                                  
Sold:                                                                                                             
  Class A                                                     2,289,921    $28,913,537     496,139    $ 5,108,376 
----------------------------------------------------------------------------------------------------------------- 
  Class B                                                     1,514,229     18,647,078     345,035      3,466,255 
----------------------------------------------------------------------------------------------------------------- 
  Class C                                                       618,798      7,563,706     139,530      1,450,866 
================================================================================================================= 
Issued as reinvestment of dividends:                                                                              
  Class A                                                        95,009      1,238,925      14,310        160,136 
----------------------------------------------------------------------------------------------------------------- 
  Class B                                                        62,110        794,388       8,515         94,004 
----------------------------------------------------------------------------------------------------------------- 
  Class C                                                        24,725        316,475       3,440         37,992 
================================================================================================================= 
Automatic conversion of Class B shares to Class A shares:                                                         
  Class A                                                        60,173        757,419      14,898        155,309 
----------------------------------------------------------------------------------------------------------------- 
  Class B                                                       (61,312)      (757,419)    (15,126)      (155,309)
================================================================================================================= 
Reacquired:(a)                                                                                                    
  Class A                                                      (518,218)    (6,554,224)   (434,061)    (4,327,216)
----------------------------------------------------------------------------------------------------------------- 
  Class B                                                      (231,753)    (2,777,651)   (244,204)    (2,352,751)
----------------------------------------------------------------------------------------------------------------- 
  Class C                                                      (121,102)    (1,428,512)   (103,345)    (1,007,828)
================================================================================================================= 
                                                              3,732,580    $46,713,722     225,131    $ 2,629,834 
_________________________________________________________________________________________________________________ 
================================================================================================================= 

(a) Amount is net of redemption fees of $1,773, $1,289, and $566 for Class A,   
Class B and Class C shares, respectively.                               

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NOTE 12--FINANCIAL HIGHLIGHTS                                                   

The following schedule presents financial highlights for a share of the Fund    
outstanding throughout the periods indicated.                                   

                                                        [Enlarge/Download Table]

                                                                                          CLASS A                              
                                                            -------------------------------------------------------------------
                                                                                                              DECEMBER 29, 2000
                                                                                                              (DATE OPERATIONS 
                                                                       YEAR ENDED DECEMBER 31,                  COMMENCED) TO  
                                                            ----------------------------------------------      DECEMBER 31,   
                                                             2004            2003        2002        2001           2000       
-------------------------------------------------------------------------------------------------------------------------------
                                                                                                                               
Net asset value, beginning of period                        $ 11.74         $ 9.05      $ 9.85      $10.00         $10.00      
-------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:                                                                                             
  Net investment income (loss)                                 0.01(a)(b)     0.01(b)    (0.11)(b)   (0.05)(b)          --     
-------------------------------------------------------------------------------------------------------------------------------
  Net gains (losses) on securities (both realized and                                                                          
    unrealized)                                                2.04           2.89       (0.69)      (0.10)            --      
===============================================================================================================================
    Total from investment operations                           2.05           2.90       (0.80)      (0.15)            --      
===============================================================================================================================
Less distributions:                                                                                                            
  Dividends from net investment income                        (0.03)         (0.09)      (0.00)      (0.00)            --      
-------------------------------------------------------------------------------------------------------------------------------
  Distributions from net realized gains                       (0.48)         (0.12)         --          --             --      
===============================================================================================================================
    Total distributions                                       (0.51)         (0.21)      (0.00)      (0.00)            --      
===============================================================================================================================
Redemption fees added to beneficial interest                   0.00             --          --          --             --      
===============================================================================================================================
Net asset value, end of period                              $ 13.28         $11.74      $ 9.05      $ 9.85         $10.00      
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Total return(c)                                               17.50%         32.15%      (8.08)%     (1.49)%           --      
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratios/supplemental data:                                                                                                      
Net assets, end of period (000s omitted)                    $36,092         $9,270      $6,321      $8,725         $1,110      
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Ratio of expenses to average net assets:                                                                                       
  With fee waivers and/or expense reimbursements               2.00%(d)       2.00%       2.00%       1.91%          1.80%(e)  
-------------------------------------------------------------------------------------------------------------------------------
  Without fee waivers and/or expense reimbursements            2.20%(d)       3.12%       2.75%       4.44%         76.90%(e)  
===============================================================================================================================
Ratio of net investment income (loss) to average net                                                                           
  assets                                                       0.10%(a)(d)    0.14%      (1.16)%     (0.52)%         3.91%(e)  
_______________________________________________________________________________________________________________________________
===============================================================================================================================
Portfolio turnover rate(f)                                      129%           372%        101%        168%            --      
_______________________________________________________________________________________________________________________________
===============================================================================================================================

(a)  Net investment income per share and the ratio of net investment income     
 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 per share and the ratio of net investment to average net assets
excluding the special dividend are $(0.02) and (0.14)%, respectively. 
(b)  Calculated using average shares outstanding.                               
(c)  Includes adjustments in accordance with accounting principles generally    
accepted in the United States of America and as such, the net asset   
 value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for  
shareholder transactions. Does not include sales charges and is not   
annualized for periods less than one year.                            
(d)  Ratios are based on average daily net assets of $17,864,283.               
(e)  Annualized.                                                                
(f)  Not annualized for periods less than one year.                             

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NOTE 12--FINANCIAL HIGHLIGHTS (CONTINUED)                                       

                                                        [Enlarge/Download Table]

                                                                                       CLASS B                          
                                                              ----------------------------------------------------------
                                                                                                        JANUARY 2, 2001 
                                                                                                          (DATE SALES   
                                                                   YEAR ENDED DECEMBER 31,               COMMENCED) TO  
                                                              ----------------------------------         DECEMBER 31,   
                                                               2004            2003        2002              2001       
------------------------------------------------------------------------------------------------------------------------
                                                                                                                        
Net asset value, beginning of period                          $ 11.57         $ 8.94      $ 9.79            $10.00      
------------------------------------------------------------------------------------------------------------------------
Income from investment operations:                                                                                      
  Net investment income (loss)                                  (0.07)(a)(b)   (0.05)(b)   (0.17)(b)         (0.11)(b)  
------------------------------------------------------------------------------------------------------------------------
  Net gains (losses) on securities (both realized and                                                                   
    unrealized)                                                  2.00           2.83       (0.68)            (0.10)     
========================================================================================================================
    Total from investment operations                             1.93           2.78       (0.85)            (0.21)     
========================================================================================================================
Less distributions:                                                                                                     
  Dividends from net investment income                          (0.00)         (0.03)         --             (0.00)     
------------------------------------------------------------------------------------------------------------------------
  Distributions from net realized gains                         (0.48)         (0.12)         --                --      
========================================================================================================================
    Total distributions                                         (0.48)         (0.15)         --             (0.00)     
========================================================================================================================
Redemption fees added to beneficial interest                     0.00             --          --                --      
========================================================================================================================
Net asset value, end of period                                $ 13.02         $11.57      $ 8.94            $ 9.79      
________________________________________________________________________________________________________________________
========================================================================================================================
Total return(c)                                                 16.77%         31.26%      (8.68)%           (2.09)%    
________________________________________________________________________________________________________________________
========================================================================================================================
Ratios/supplemental data:                                                                                               
Net assets, end of period (000s omitted)                      $24,675         $7,075      $4,624            $3,613      
________________________________________________________________________________________________________________________
========================================================================================================================
Ratio of expenses to average net assets:                                                                                
  With fee waivers and/or expense reimbursements                 2.65%(d)       2.65%       2.65%             2.57%(e)  
------------------------------------------------------------------------------------------------------------------------
  Without fee waivers and/or expense reimbursements              2.85%(d)       3.77%       3.40%             5.10%(e)  
========================================================================================================================
Ratio of net investment income (loss) to average net assets     (0.55)%(a)(d)  (0.51)%     (1.81)%           (1.18)%(e) 
________________________________________________________________________________________________________________________
========================================================================================================================
Portfolio turnover rate(f)                                        129%           372%        101%              168%     
________________________________________________________________________________________________________________________
========================================================================================================================

(a)  Net investment income per share and the ratio of net investment income     
 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 per share and the ratio of net investment to average net assets
excluding the special dividend are $(0.10) and (0.79)%, respectively. 
(b)  Calculated using average shares outstanding.                               
(c)  Includes adjustments in accordance with accounting principles generally    
accepted in the United States of America and as such, the net asset   
 value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for  
shareholder transactions. Does not include sales charges and is not   
annualized for periods less than one year.                            
(d)  Ratios are based on average daily net assets of $13,005,885.               
(e)  Annualized.                                                                
(f)  Not annualized for periods less than one year.                             

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NOTE 12--FINANCIAL HIGHLIGHTS (CONTINUED)                                       

                                                        [Enlarge/Download Table]

                                                                                        CLASS C                           
                                                              ------------------------------------------------------------
                                                                                                         JANUARY 11, 2001 
                                                                                                            (DATE SALES   
                                                                    YEAR ENDED DECEMBER 31,                COMMENCED) TO  
                                                              ------------------------------------         DECEMBER 31,   
                                                               2004              2003        2002              2001       
--------------------------------------------------------------------------------------------------------------------------
                                                                                                                          
Net asset value, beginning of period                          $ 11.58           $ 8.94      $ 9.79            $10.00      
--------------------------------------------------------------------------------------------------------------------------
Income from investment operations:                                                                                        
  Net investment income (loss)                                  (0.07)(a)(b)     (0.05)(b)   (0.17)(b)         (0.11)(b)  
--------------------------------------------------------------------------------------------------------------------------
  Net gains (losses) on securities (both realized and                                                                     
    unrealized)                                                  2.00             2.84       (0.68)            (0.10)     
==========================================================================================================================
    Total from investment operations                             1.93             2.79       (0.85)            (0.21)     
==========================================================================================================================
Less distributions:                                                                                                       
  Dividends from net investment income                          (0.00)           (0.03)         --             (0.00)     
--------------------------------------------------------------------------------------------------------------------------
  Distributions from net realized gains                         (0.48)           (0.12)         --                --      
==========================================================================================================================
    Total distributions                                         (0.48)           (0.15)         --             (0.00)     
==========================================================================================================================
Redemption fees added to beneficial interest                     0.00               --          --                --      
==========================================================================================================================
Net asset value, end of period                                $ 13.03           $11.58      $ 8.94            $ 9.79      
__________________________________________________________________________________________________________________________
==========================================================================================================================
Total return(c)                                                 16.75%           31.37%      (8.68)%           (2.09)%    
__________________________________________________________________________________________________________________________
==========================================================================================================================
Ratios/supplemental data:                                                                                                 
Net assets, end of period (000s omitted)                      $10,021           $2,853      $1,850            $1,312      
__________________________________________________________________________________________________________________________
==========================================================================================================================
Ratio of expenses to average net assets:                                                                                  
  With fee waivers and/or expense reimbursements                 2.65%(d)         2.65%       2.65%             2.57%(e)  
--------------------------------------------------------------------------------------------------------------------------
  Without fee waivers and/or expense reimbursements              2.85%(d)         3.77%       3.40%             5.10%(e)  
==========================================================================================================================
Ratio of net investment income (loss) to average net assets     (0.55)%(a)(d)    (0.51)%     (1.81)%           (1.18)%(e) 
__________________________________________________________________________________________________________________________
==========================================================================================================================
Portfolio turnover rate(f)                                        129%             372%        101%              168%     
__________________________________________________________________________________________________________________________
==========================================================================================================================

(a)  Net investment income per share and the ratio of net investment income     
 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 per share and the ratio of net investment to average net assets
excluding the special dividend are $(0.10) and (0.79)%, respectively. 
(b)  Calculated using average shares outstanding.                               
(c)  Includes adjustments in accordance with accounting principles generally    
accepted in the United States of America and as such, the net asset   
 value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for  
shareholder transactions. Does not include sales charges and is not   
annualized for periods less than one year.                            
(d)  Ratios are based on average daily net assets of $5,663,781.                
(e)  Annualized.                                                                
(f)  Not annualized for periods less than one year.                             

NOTE 13--LEGAL PROCEEDINGS                                                      

Terms used in the Legal Proceedings Note are defined terms solely for the       
purpose of this note.                                                           

Settled Enforcement Actions and Investigations Related to Market Timing         

On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment
advisor to certain AIM Funds) and A I M Advisors, Inc. ("AIM") (the Fund's      
investment advisor) reached final settlements with certain regulators, including
without limitation the Securities and Exchange Commission ("SEC"), the New York 
Attorney General ("NYAG") and the Colorado Attorney General ("COAG"), to resolve
civil enforcement actions and investigations related to market timing activity  
and related issues in the AIM Funds, including those formerly advised by IFG.   
These regulators alleged, in substance, that IFG and AIM failed to disclose in  
the prospectuses for the AIM Funds that they advised and to the independent     
directors/trustees of such Funds that they had entered into certain arrangements
permitting market timing of such Funds, thereby breaching their fiduciary duties
to such Funds. As a result of the foregoing, the regulators alleged that IFG and
AIM breached various Federal and state securities, business and consumer        
protection laws. On the same date, A I M Distributors, Inc. ("ADI") (the        
distributor of the retail AIM Funds) reached a final settlement with the SEC to 
resolve an investigation relating to market timing activity and related issues  
in the AIM Funds. The SEC also alleged that ADI violated various Federal        
securities laws. The SEC also has settled related market timing enforcement     
actions brought against certain former officers and employees of IFG.           

  Under the terms of the settlements, IFG agreed to pay a total of $325 million,
of which $110 million is civil penalties. Of this $325 million total payment,   
half has been paid and the remaining half will be paid on or before December 31,
2005. AIM and ADI agreed to pay a total of $50 million, of which $30 million is 
civil penalties, all of which has been paid. The entire $325 million IFG        
settlement payment will be made available for distribution to the shareholders  
of those AIM Funds that IFG formerly advised that were harmed by market timing  
activity, and the entire $50 million settlement payment by AIM and ADI will be  
made available for distribution to the shareholders of those AIM Funds advised  
by AIM that were harmed by market timing activity, all as to be determined by an
independent distribution consultant. The settlement payments will be distributed
in accordance with a methodology to be determined by the independent            
distribution consultant, in consultation with AIM and the independent trustees  
of the AIM Funds and acceptable to the staff of the SEC. Under the settlements  
with the NYAG and COAG, AIM has agreed to reduce management fees on certain     
equity and balanced AIM Funds by $15 million per year for the next five years,  
based upon effective fee rates and assets under management as of July 1, 2004,  
and not to increase certain management fees.                                    

   FS-86

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NOTE 13--LEGAL PROCEEDINGS (CONTINUED)                                          

Under the terms of the settlements, AIM will make certain governance and    
compliance reforms, including maintaining an internal controls committee and    
retaining an independent compliance consultant and a corporate ombudsman. Also, 
commencing in 2007 and at least once every other year thereafter, AIM will      
undergo a compliance review by an independent third party. In addition, under   
the terms of the settlements, AIM has undertaken to cause the AIM Funds to      
operate in accordance with certain governance policies and practices, including 
retaining a full-time independent senior officer whose duties will include      
monitoring compliance and managing the process by which proposed management fees
to be charged the AIM Funds are negotiated. Also, commencing in 2008 and not    
less than every fifth calendar year thereafter, the AIM Funds will hold         
shareholder meetings at which their Boards of Trustees will be elected.         

At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"), 
the parent company of IFG and AIM, has agreed to pay expenses incurred by such  
Funds related to market timing matters.                                         

 The SEC has also settled market timing enforcement actions against Raymond R.
Cunningham (the former president and chief executive officer of IFG and a former
member of the board of directors of the AIM Funds formerly advised by IFG),     
Timothy J. Miller (the former chief investment officer and a former portfolio   
manager for IFG), Thomas A. Kolbe (the former national sales manager of IFG) and
Michael D. Legoski (a former assistant vice president in IFG's sales            
department). As part of these settlements, the SEC ordered these individuals to 
pay restitution and civil penalties in various amounts and prohibited them from 
associating with, or serving as an officer or director of, an investment        
advisor, broker, dealer and/or investment company, as applicable, for certain   
periods of time.                                                                

 The payments made in connection with the above-referenced settlements by IFG,
AIM and ADI will total approximately $375 million (not including AIM's agreement
to reduce management fees on certain equity and balanced AIM Funds by $15       
million per year for the next five years, based upon effective fee rates and    
assets under management as of July 1, 2004). The manner in which the settlement 
payments will be distributed is unknown at the present time and will be         
determined by an independent distribution consultant appointed under the        
settlement agreements. Therefore, management of AIM and the Fund are unable at  
the present time to estimate the impact, if any, that the distribution of the   
settlement payments may have on the Fund or whether such distribution will have 
an impact on the Fund's financial statements in the future.                     

  At the present time, management of AIM and the Fund are unable to estimate the
impact, if any, that the outcome of the Regulatory Inquiries and Pending        
Litigation described below may have on AIM, ADI or the Fund.                    

Regulatory Inquiries and Pending Litigation                                     

The mutual fund industry as a whole is currently subject to regulatory      
inquiries and litigation related to a wide range of issues. These issues        
include, among others, market timing activity, late trading, fair value pricing,
excessive or improper advisory and/or distribution fees, mutual fund sales      
practices, including but not limited to revenue sharing and directed-brokerage  
arrangements, investments in securities of other registered investment          
companies, contractual plans, issues related to Section 529 college savings     
plans, procedures for locating lost security holders and participation in class 
action settlements.                                                             

As described more fully below, IFG and AIM are the subject of a number of   
ongoing regulatory inquiries and civil lawsuits related to one or more of the   
issues currently being scrutinized by various Federal and state regulators,     
including but not limited to those issues described above. Additional regulatory
actions and/or civil lawsuits related to the above or other issues may be filed 
against the AIM Funds, IFG, AIM and/or related entities and individuals in the  
future. Additional regulatory inquiries related to the above or other issues    
also may be received by the AIM Funds, IFG, AIM and/or related entities and     
individuals in the future.                                                      

Ongoing Regulatory Inquiries Concerning IFG and AIM                             

IFG, certain related entities, certain of their current and former officers 
and/or certain of the AIM Funds formerly advised by IFG have received regulatory
inquiries in the form of subpoenas or other oral or written requests for        
information and/or documents related to one or more of the following issues,    
some of which concern one or more such Funds: market timing activity, late      
trading, fair value pricing, excessive or improper advisory and/or distribution 
fees, mutual fund sales practices, including revenue sharing and                
directed-brokerage arrangements, and investments in securities of other         
registered investment companies. These regulators include the SEC, the NASD,    
Inc. ("NASD"), the Florida Department of Financial Services, the Attorney       
General of the State of West Virginia, the West Virginia Securities Commission  
and the Bureau of Securities of the State of New Jersey. IFG and certain of     
these other parties also have received more limited inquiries from the United   
States Department of Labor ("DOL") and the United States Attorney's Office for  
the Southern District of New York, some of which concern one or more of the AIM 
Funds formerly advised by IFG. IFG is providing full cooperation with respect to
these inquiries.                                                                

AIM, certain related entities, certain of their current and former officers 
and/or certain of the AIM Funds have received regulatory inquiries in the form  
of subpoenas or other oral or written requests for information and/or documents 
related to one or more of the following issues, some of which concern one or    
more AIM Funds: market timing activity, late trading, fair value pricing,       
excessive or improper advisory and/or distribution fees, mutual fund sales      
practices, including revenue sharing and directed-brokerage arrangements,       
investments in securities of other registered investment companies, contractual 
plans, issues related to Section 529 college savings plans and procedures for   
locating lost securityholders. These regulators include the SEC, the NASD, the  
Department of Banking for the State of Connecticut, the Attorney General of the 
State of West Virginia, the West Virginia Securities Commission and the Bureau  
of Securities of the State of New Jersey. AIM and certain of these other parties
also have received more limited inquiries from the SEC, the NASD, the DOL, the  
Internal Revenue Service, the United States Attorney's Office for the Southern  
District of New York, the United States Attorney's Office for the Central       
District of California, the United States Attorney's Office for the District of 
Massachusetts, the Massachusetts Securities Division, the U.S. Postal Inspection
Service and the Commodity Futures Trading Commission, some of which concern one 
or more AIM Funds. AIM is providing full cooperation with respect to these      
inquiries.                                                                      

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NOTE 13--LEGAL PROCEEDINGS (CONTINUED)                                          

Private Civil Actions Alleging Market Timing                                    

Multiple civil lawsuits, including purported class action and shareholder   
derivative suits, have been filed against various parties (including, depending 
on the lawsuit, certain AIM Funds, IFG, AIM, AIM Management, AMVESCAP, certain  
related entities, certain of their current and former officers and/or certain   
unrelated third parties) making allegations that are similar in many respects to
those in the settled regulatory actions brought by the SEC, the NYAG and the    
COAG concerning market timing activity in the AIM Funds. These lawsuits allege a
variety of theories of recovery, including but not limited to: (i) violation of 
various provisions of the Federal and state securities laws; (ii) violation of  
various provisions of ERISA; (iii) breach of fiduciary duty; and/or (iv) breach 
of contract. These lawsuits were initiated in both Federal and state courts and 
seek such remedies as compensatory damages; restitution; injunctive relief;     
disgorgement of management fees; imposition of a constructive trust; removal of 
certain directors and/or employees; various corrective measures under ERISA;    
rescission of certain Funds' advisory agreements; interest; and attorneys' and  
experts' fees.                                                                  

 All lawsuits based on allegations of market timing, late trading, and related
issues have been transferred to the United States District Court for the        
District of Maryland (the "MDL Court") for consolidated or coordinated pre-trial
proceedings. Pursuant to an Order of the MDL Court, plaintiffs consolidated     
their claims for pre-trial purposes into three amended complaints against       
various AIM- and IFG-related parties: (i) a Consolidated Amended Class Action   
Complaint purportedly brought on behalf of shareholders of the AIM Funds; (ii) a
Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of 
the AIM Funds and fund registrants; and (iii) an Amended Class Action Complaint 
for Violations of the Employee Retirement Income Securities Act ("ERISA")       
purportedly brought on behalf of participants in AMVESCAP's 401(k) plan. The    
plaintiffs in one of the underlying lawsuits continue to seek remand of their   
lawsuit to state court.                                                         

Private Civil Actions Alleging Improper Use of Fair Value Pricing               

Multiple civil class action lawsuits have been filed against various parties
(including, depending on the lawsuit, certain AIM Funds, IFG and/or AIM)        
alleging that certain AIM Funds inadequately employed fair value pricing. These 
lawsuits allege a variety of theories of recovery, including but not limited to:
(i) violations of various provisions of the Federal securities laws; (ii) common
law breach of duty; and (iii) common law negligence and gross negligence. These 
lawsuits have been filed in both Federal and state courts and seek such remedies
as compensatory and punitive damages; interest; and attorneys' fees and costs.  

Private Civil Actions Alleging Excessive Advisory and/or Distribution Fees      

Multiple civil lawsuits, including purported class action and shareholder   
derivative suits, have been filed against various parties (including, depending 
on the lawsuit, IFG, AIM, INVESCO Institutional (N.A.), Inc. ("IINA"), ADI      
and/or INVESCO Distributors, Inc. ("INVESCO Distributors")) alleging that the   
defendants charged excessive advisory and/or distribution fees and failed to    
pass on to shareholders the perceived savings generated by economies of scale.  
Certain of these lawsuits also allege that the defendants adopted unlawful      
distribution plans. These lawsuits allege a variety of theories of recovery,    
including but not limited to: (i) violation of various provisions of the Federal
securities laws; (ii) breach of fiduciary duty; and/or (iii) breach of contract.
These lawsuits have been filed in Federal courts and seek such remedies as      
damages; injunctive relief; rescission of certain Funds' advisory agreements and
distribution plans; interest; prospective relief in the form of reduced fees;   
and attorneys' and experts' fees. All of these lawsuits have been transferred to
the United States District Court for the Southern District of Texas, Houston    
Division by order of the applicable United States District Court in which they  
were initially filed. The plaintiff in one of these lawsuits has challenged this
order.                                                                          

Private Civil Actions Alleging Improper Charging of Distribution Fees on Limited
Offering Funds or Share Classes                                                 

Multiple civil lawsuits, including shareholder derivative suits, have been  
filed against various parties (including, depending on the lawsuit, IFG, AIM,   
ADI and/or certain of the trustees of the AIM Funds) alleging that the          
defendants breached their fiduciary duties by charging distribution fees while  
funds and/or specific share classes were closed generally to new investors      
and/or while other share classes of the same fund were not charged the same     
distribution fees. These lawsuits allege a variety of theories of recovery,     
including but not limited to: (i) violation of various provisions of the Federal
securities laws; and (ii) breach of fiduciary duty. These lawsuits have been    
filed in Federal courts and seek such remedies as damages; injunctive relief;   
and attorneys' and experts' fees.                                               

Private Civil Actions Alleging Improper Mutual Fund Sales Practices and         
Directed-Brokerage Arrangements                                                 

Multiple civil lawsuits, including purported class action and shareholder   
derivative suits, have been filed against various parties (including, depending 
on the lawsuit, AIM Management, IFG, AIM, AIM Investment Services, Inc. ("AIS") 
and/or certain of the trustees of the AIM Funds) alleging that the defendants   
improperly used the assets of the AIM Funds to pay brokers to aggressively      
promote the sale of the AIM Funds over other mutual funds and that the          
defendants concealed such payments from investors by disguising them as         
brokerage commissions. These lawsuits allege a variety of theories of recovery, 
including but not limited to: (i) violation of various provisions of the Federal
securities laws; (ii) breach of fiduciary duty; and (iii) aiding and abetting a 
breach of fiduciary duty. These lawsuits have been filed in Federal courts and  
seek such remedies as compensatory and punitive damages; rescission of certain  
Funds' advisory agreements and distribution plans and recovery of all fees paid;
an accounting of all fund-related fees, commissions and soft dollar payments;   
restitution of all unlawfully or discriminatorily obtained fees and charges; and
attorneys' and experts' fees.                                                   

Private Civil Action Alleging Failure to Ensure Participation in Class Action   
Settlements                                                                     

A civil lawsuit, purporting to be a class action lawsuit, has been filed    
against AIM, IINA, A I M Capital Management, Inc. and the trustees of the AIM   
Funds alleging that the defendants breached their fiduciary duties by failing to
ensure that the AIM Funds participated in class action settlements in which the 
AIM Funds were eligible to participate. This lawsuit alleges as theories of     
recovery: (i) violation of various provisions of the Federal securities laws;   
(ii) common law breach of fiduciary duty; and (iii) common law negligence. This 
lawsuit has been filed in Federal court and seeks such remedies as compensatory 
and punitive damages; forfeiture of all commissions and fees paid by the class  
of plaintiffs; and costs and attorneys' fees.                                   
*                                       *                                      *
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

As a result of the matters discussed above, investors in the AIM Funds might
react by redeeming their investments. This might require the Funds to sell      
investments to provide for sufficient liquidity and could also have an adverse  
effect on the investment performance of the Funds.                              

FS-88 

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                         

To the Board of Trustees and Shareholders of                                    
AIM International Small Company 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 Small Company    
Fund, formerly AIM International Emerging Growth Fund (one of the funds         
constituting AIM Funds Group hereafter referred to as the "Fund") at December   
31, 2004, the results of its operations for the year then ended, the changes in 
its net assets for each of the two years in the period then ended and the       
financial highlights for each of the periods indicated, in conformity with      
accounting principles generally accepted in the United States of America. These 
financial statements and financial highlights (hereafter referred to as         
"financial statements") are the responsibility of the Fund's management; our    
responsibility is to express an opinion on these financial statements based on  
our audits. We conducted our audits of these financial statements in accordance 
with the standards of the Public Company Accounting Oversight Board (United     
States). Those standards require that we plan and perform the audit to obtain   
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting 
the amounts and disclosures in the financial statements, assessing the          
accounting principles used and significant estimates made by management, and    
evaluating the overall financial statement presentation. We believe that our    
audits, which included confirmation of securities at December 31, 2004 by       
correspondence with the custodian and brokers, provide a reasonable basis for   
our opinion.                                                                    

/S/ PRICEWATERHOUSECOOPERS LLP                                                  

February 18, 2005                                                               
Houston, Texas                                                                  

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FINANCIALS                                                                      

SCHEDULE OF INVESTMENTS                                                         

December 31, 2004                                                               

                                                                [Download Table]

                                                               MARKET   
                                                 SHARES        VALUE    
------------------------------------------------------------------------
                                                                        
FOREIGN STOCKS & OTHER EQUITY                                           
  INTERESTS--91.61%                                                     

AUSTRALIA-1.82%                                                         

Computershare Ltd. (Data Processing &                                   
  Outsourced Services)(a)                         260,000   $  1,154,064
------------------------------------------------------------------------
CSL Ltd. (Biotechnology)(a)                        97,000      2,223,526
------------------------------------------------------------------------
Ramsay Health Care Ltd. (Health Care                                    
  Facilities)(a)                                  263,900      1,475,197
------------------------------------------------------------------------
Toll Holdings Ltd. (Trucking)(a)                  156,100      1,565,853
========================================================================
                                                               6,418,640
========================================================================

AUSTRIA-1.41%                                                           

Andritz A.G. (Industrial Machinery)(a)             65,700      4,989,898
========================================================================

BERMUDA-2.11%                                                           

Central European Media Enterprises Ltd.-Class                           
  A (Broadcasting & Cable TV)(b)                   79,050      3,081,527
------------------------------------------------------------------------
Giordano International Ltd. (Apparel                                    
  Retail)(a)                                    2,698,000      1,692,553
------------------------------------------------------------------------
Regal Hotels International Holdings Ltd.                                
  (Hotels, Resorts & Cruise Lines)(a)(b)       34,070,000      2,451,415
------------------------------------------------------------------------
Top Form International Ltd. (Apparel,                                   
  Accessories & Luxury Goods)(a)                  986,000        233,097
========================================================================
                                                               7,458,592
========================================================================

BRAZIL-1.99%                                                            

Companhia Brasileira de Distribuicao Grupo                              
  Pao de Acucar-ADR (Hypermarkets & Super                               
  Centers)                                         62,000      1,587,200
------------------------------------------------------------------------
Natura Cosmeticos S.A. (Personal Products)                              
  (Acquired 11/10/04-12/13/04; Cost                                     
  $1,794,994)(c)                                   80,100      2,337,255
------------------------------------------------------------------------
Perdigao S.A.-Pfd. (Packaged Foods & Meats)        77,300      1,667,654
------------------------------------------------------------------------
Sadia S.A.-Pfd. (Packaged Foods & Meats)          632,700      1,424,528
========================================================================
                                                               7,016,637
========================================================================

CANADA-19.98%                                                           

Aastra Technologies Ltd. (Communications                                
  Equipment)(b)                                    79,400      1,386,040
------------------------------------------------------------------------
ADDENDA Capital Inc. (Investment Banking &                              
  Brokerage) (Acquired 12/03/04; Cost                                   
  $2,847,571)(b)(c)(d)(e)                         200,000      4,102,009
------------------------------------------------------------------------
AKITA Drilling Ltd.-Class A (Oil & Gas                                  
  Drilling)                                        80,820      1,798,839
------------------------------------------------------------------------
Badger Income Fund (Construction &                                      
  Engineering)                                    264,140      3,819,739
------------------------------------------------------------------------
BMTC Group, Inc.-Class A (Specialty Stores)       147,564      1,559,315
------------------------------------------------------------------------
Ceramic Protection Corp. (Aerospace &                                   
  Defense)(b)                                     116,400      2,895,836
------------------------------------------------------------------------
Crew Energy Inc. (Oil & Gas Exploration &                               
  Production)(b)                                  347,400      2,413,604
------------------------------------------------------------------------
CryptoLogic Inc. (Internet Software &                                   
  Services)                                       282,090      7,034,353
------------------------------------------------------------------------
Exco Technologies Ltd. (Industrial Machinery)     166,400      1,041,168
------------------------------------------------------------------------
Extendicare Inc.-Class A (Health Care                                   
  Facilities)(b)                                  124,540      1,600,984
------------------------------------------------------------------------

                                                                [Download Table]

                                                               MARKET   
                                                 SHARES        VALUE    
------------------------------------------------------------------------
                                                                        
CANADA-(CONTINUED)                                                      

FirstService Corp. (Diversified Commercial                              
  Services)(b)                                    131,600   $  2,146,158
------------------------------------------------------------------------
Great Canadian Gaming Corp. (Casinos &                                  
  Gaming)(b)                                      139,040      5,264,975
------------------------------------------------------------------------
Groupe Laperriere & Verreault Inc.-Class A                              
  (Industrial Machinery)(b)                        50,300        935,395
------------------------------------------------------------------------
Kingsway Financial Services Inc. (Property &                            
  Casualty Insurance)(b)                          144,000      2,276,490
------------------------------------------------------------------------
Lions Gate Entertainment Corp. (Movies &                                
  Entertainment)(b)                               275,080      2,921,350
------------------------------------------------------------------------
Reitmans (Canada) Ltd.-Class A (Apparel                                 
  Retail)                                         113,000      2,689,021
------------------------------------------------------------------------
StarPoint Energy Ltd. (Oil & Gas Exploration                            
  & Production)(b)                                643,100      2,835,986
------------------------------------------------------------------------
Telesystem International Wireless Inc.                                  
  (Wireless Telecommunication Services)(b)        169,990      1,902,372
------------------------------------------------------------------------
Total Energy Services Ltd. (Oil & Gas                                   
  Equipment & Services)(b)                        354,190      2,012,828
------------------------------------------------------------------------
Transat A.T. Inc. (Airlines)(b)                    69,350      1,390,635
------------------------------------------------------------------------
Trican Well Service Ltd. (Oil & Gas Equipment                           
  & Services)(b)                                  137,080      7,584,823
------------------------------------------------------------------------
Vanguard Response Systems Inc. (Specialty                               
  Chemicals)(b)                                   436,000      1,832,009
------------------------------------------------------------------------
Wajax Ltd. (Industrial Machinery)(b)              141,870      1,676,211
------------------------------------------------------------------------
West Energy Ltd. (Oil & Gas Exploration &                               
  Production)(b)                                  620,000      2,950,784
------------------------------------------------------------------------
Western Oil Sands Inc.-Class A (Oil & Gas                               
  Exploration & Production)(b)                     68,900      2,399,189
------------------------------------------------------------------------
Workbrain Corp. (Application Software)(b)         148,300      2,127,297
========================================================================
                                                              70,597,410
========================================================================

CAYMAN ISLANDS-3.74%                                                    

China Mengniu Dairy Co. Ltd. (Packaged Foods                            
  & Meats)(b)                                   1,766,000      1,385,936
------------------------------------------------------------------------
Chitaly Holdings Ltd. (Home Furnishings)(a)     1,684,000      1,378,213
------------------------------------------------------------------------
Global Bio-chem Technology Group Co.                                    
  Ltd.-Wts., expiring 05/31/07                                          
  (Biotechnology)(f)                              114,250          5,438
------------------------------------------------------------------------
Golden Meditech Co. Ltd. (Health Care                                   
  Equipment)                                    2,744,000        691,931
------------------------------------------------------------------------
Hengan International Group Co. Ltd. (Personal                           
  Products)(a)                                  2,558,000      1,679,118
------------------------------------------------------------------------
Luen Thai Holdings Ltd. (Distributors)                                  
  (Acquired 07/09/04-10/25/04; Cost                                     
  $1,225,048)(b)(c)                             2,705,000      1,400,734
------------------------------------------------------------------------
Norstar Founders Group Ltd. (Auto Parts &                               
  Equipment)(a)                                 2,000,000        455,728
------------------------------------------------------------------------
Sa Sa International Holdings Ltd. (Specialty                            
  Stores)(a)                                    2,896,000      1,555,574
------------------------------------------------------------------------

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                                                                [Download Table]

                                                               MARKET   
                                                 SHARES        VALUE    
------------------------------------------------------------------------
                                                                        
CAYMAN ISLANDS-(CONTINUED)                                              

Shanda Interactive Entertainment Ltd.-ADR                               
  (Home Entertainment Software)(b)(c)              59,950   $  2,547,875
------------------------------------------------------------------------
Solomon Systech International Ltd.                                      
  (Semiconductors)(a)                           8,546,000      2,118,521
========================================================================
                                                              13,219,068
========================================================================

CHINA-0.97%                                                             

Tong Ren Tang Technologies Co. Ltd.-Class H                             
  (Pharmaceuticals)                               400,000        877,419
------------------------------------------------------------------------
Weiqiao Textile Co. Ltd.-Class H (Textiles)                             
  (Acquired 09/19/03-10/25/04; Cost                                     
  $1,237,509)(a)(c)                               927,000      1,460,027
------------------------------------------------------------------------
Yantai North Andre Juice Co. Ltd.-Class H                               
  (Packaged Foods & Meats)                      8,265,000      1,084,590
========================================================================
                                                               3,422,036
========================================================================

DENMARK-0.72%                                                           

Topdanmark A.S. (Multi-Line Insurance)(a)(b)       32,443      2,554,177
========================================================================

FINLAND-0.60%                                                           

Nokian Renkaat Oyj (Tires & Rubber)(a)             14,045      2,122,685
========================================================================

FRANCE-5.30%                                                            

Camaieu (Apparel Retail)(a)                        28,615      2,841,018
------------------------------------------------------------------------
Eiffage S.A. (Construction & Engineering)                               
  (Acquired 03/26/04-11/22/04; Cost                                     
  $2,562,122)(a)(c)                                33,370      3,855,876
------------------------------------------------------------------------
Elior (Restaurants)(a)                            291,300      3,311,990
------------------------------------------------------------------------
Eramet SLN (Diversified Metals & Mining)           15,600      1,400,885
------------------------------------------------------------------------
Euler Hermes S.A. (Property & Casualty                                  
  Insurance)(a)                                    49,320      3,397,255
------------------------------------------------------------------------
Trigano (Leisure Products)(a)                      47,375      3,912,266
========================================================================
                                                              18,719,290
========================================================================

GERMANY-5.13%                                                           

Bijou Brigitte Modische Accessoires A.G.                                
  (Apparel, Accessories & Luxury Goods)(a)         40,430      5,354,713
------------------------------------------------------------------------
Puma A.G. Rudolf Dassler Sport (Footwear)                               
  (Acquired 01/30/02-02/13/04; Cost                                     
  $933,270)(a)(c)                                  11,819      3,246,411
------------------------------------------------------------------------
Rheinmetall A.G.-Pfd. (Industrial                                       
  Conglomerates)(a)                                77,161      4,022,723
------------------------------------------------------------------------
Techem A.G. (Diversified Commercial                                     
  Services)(b)                                    151,280      5,489,403
========================================================================
                                                              18,113,250
========================================================================

GREECE-1.32%                                                            

Germanos S.A. (Computer & Electronics                                   
  Retail)(a)                                       69,821      2,062,989
------------------------------------------------------------------------
Titan Cement Co. S.A. (Construction                                     
  Materials)(a)                                    88,200      2,608,088
========================================================================
                                                               4,671,077
========================================================================

HONG KONG-1.52%                                                         

Dah Sing Banking Group Ltd. (Diversified                                
  Banks)                                          753,840      1,561,448
------------------------------------------------------------------------
Dah Sing Financial Group (Diversified                                   
  Banks)(a)                                        95,200        739,152
------------------------------------------------------------------------

                                                                [Download Table]

                                                               MARKET   
                                                 SHARES        VALUE    
------------------------------------------------------------------------
                                                                        
HONG KONG-(CONTINUED)                                                   

Techtronic Industries Co. Ltd. (Household                               
  Appliances) (Acquired 04/24/02-08/19/04;                              
  Cost $639,888)(a)(c)                            600,000   $  1,307,691
------------------------------------------------------------------------
Wing Hang Bank Ltd. (Diversified Banks)(a)        252,000      1,770,888
========================================================================
                                                               5,379,179
========================================================================

INDIA-1.66%                                                             

Bharat Forge Ltd. (Auto Parts & Equipment)         52,290      1,291,131
------------------------------------------------------------------------
Bharat Forge Ltd.-Wts., expiring 09/30/06                               
  (Auto Parts & Equipment)(f)                       1,245          4,726
------------------------------------------------------------------------
HDFC Bank Ltd. (Diversified Banks)(a)             172,000      2,058,543
------------------------------------------------------------------------
Housing Development Finance Corp. Ltd.                                  
  (Thrifts & Mortgage Finance)                     78,000      1,374,645
------------------------------------------------------------------------
Wockhardt Ltd. (Pharmaceuticals)                  141,600      1,152,149
========================================================================
                                                               5,881,194
========================================================================

IRELAND-3.44%                                                           

Anglo Irish Bank Corp. PLC (Diversified                                 
  Banks)(a)                                       155,365      3,767,734
------------------------------------------------------------------------
Depfa Bank PLC (Diversified Banks)(a)              72,910      1,223,650
------------------------------------------------------------------------
Grafton Group PLC (Trading Companies &                                  
  Distributors)(b)(g)                             239,830      2,602,635
------------------------------------------------------------------------
Kingspan Group PLC (Building Products)            272,900      2,609,831
------------------------------------------------------------------------
Paddy Power PLC (Casinos & Gaming)(a)             131,800      1,936,620
========================================================================
                                                              12,140,470
========================================================================

ITALY-0.97%                                                             

Lottomatica S.p.A. (Casinos & Gaming)(a)           94,400      3,442,914
========================================================================

JAPAN-5.67%                                                             

ARGO GRAPHICS Inc. (IT Consulting & Other                               
  Services)(a)                                     57,500      1,490,054
------------------------------------------------------------------------
Clarion Co., Ltd. (Consumer                                             
  Electronics)(a)(b)                            1,057,000      2,491,159
------------------------------------------------------------------------
Daiwa House Industry Co., Ltd.                                          
  (Homebuilding)(a)                                94,000      1,071,125
------------------------------------------------------------------------
Mars Engineering Corp. (Leisure Products)(a)       60,100      2,038,437
------------------------------------------------------------------------
NEOMAX Co., Ltd. (Electrical Components &                               
  Equipment)(a)                                   120,000      2,129,373
------------------------------------------------------------------------
NHK Spring Co., Ltd. (Auto Parts &                                      
  Equipment)(a)                                   414,000      2,836,491
------------------------------------------------------------------------
NOK Corp. (Auto Parts & Equipment)(a)              23,000        721,291
------------------------------------------------------------------------
OMRON Corp. (Electronic Equipment                                       
  Manufacturers)(a)                                74,600      1,780,940
------------------------------------------------------------------------
Sekisui Chemical Co., Ltd. (Homebuilding)(a)      172,000      1,260,549
------------------------------------------------------------------------
Stanley Electric Co., Ltd. (Auto Parts &                                
  Equipment)(a)                                   171,800      2,951,252
------------------------------------------------------------------------
USS Co., Ltd. (Specialty Stores)(a)                15,100      1,268,471
========================================================================
                                                              20,039,142
========================================================================

LUXEMBOURG-0.55%                                                        

SBS Broadcasting S.A. (Broadcasting & Cable                             
  TV)(b)                                           48,470      1,949,948
========================================================================

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                                                               MARKET   
                                                 SHARES        VALUE    
------------------------------------------------------------------------
                                                                        

MALAYSIA-0.71%                                                          

Maxis Communications Berhad (Wireless                                   
  Telecommunication Services)(a)                  476,600   $  1,173,216
------------------------------------------------------------------------
Public Bank Berhad (Diversified Banks)(a)         672,950      1,345,072
========================================================================
                                                               2,518,288
========================================================================

MEXICO-1.46%                                                            

Consorcio ARA, S.A. de C.V. (Homebuilding)(b)     463,100      1,393,251
------------------------------------------------------------------------
Corporacion GEO, S.A. de C.V.-Series B                                  
  (Homebuilding)(b)                               687,600      1,377,052
------------------------------------------------------------------------
Grupo Financiero Banorte S.A. de C.V.-Class O                           
  (Diversified Banks)                             380,600      2,399,472
========================================================================
                                                               5,169,775
========================================================================

NETHERLANDS-3.07%                                                       

Aalberts Industries N.V. (Industrial                                    
  Conglomerates)(a)                               110,121      5,318,731
------------------------------------------------------------------------
Axalto Holding N.V. (Computer Storage &                                 
  Peripherals)(b)                                  44,400      1,153,378
------------------------------------------------------------------------
Koninklijke BAM Groep N.V. (Construction &                              
  Engineering)(a)                                  87,100      4,363,990
========================================================================
                                                              10,836,099
========================================================================

NORWAY-4.11%                                                            

Aktiv Kapital A.S.A. (Specialized Finance)        266,554      5,930,940
------------------------------------------------------------------------
Ekornes A.S.A. (Home Furnishings)(a)               41,336        896,813
------------------------------------------------------------------------
Schibsted A.S.A. (Publishing)(a)                  117,000      3,307,014
------------------------------------------------------------------------
TGS Nopec Geophysical Co. A.S.A. (Oil & Gas                             
  Equipment & Services)(a)(b)                     171,780      4,372,914
========================================================================
                                                              14,507,681
========================================================================

PHILIPPINES-0.45%                                                       

Philippine Long Distance Telephone Co.                                  
  (Integrated Telecommunication                                         
  Services)(a)(b)                                  64,500      1,583,886
========================================================================

PORTUGAL-0.61%                                                          

SonaeCom, SGPS, S.A. (Wireless                                          
  Telecommunication Services)(a)(b)               417,600      2,148,697
========================================================================

SINGAPORE-1.39%                                                         

Keppel Corp. Ltd. (Industrial                                           
  Conglomerates)(a)                               148,000        780,244
------------------------------------------------------------------------
Keppel Land Ltd. (Real Estate Management &                              
  Development)(a)                               1,184,000      1,632,819
------------------------------------------------------------------------
SembCorp Logistics Ltd. (Marine Ports &                                 
  Services)                                     1,032,000      1,093,904
------------------------------------------------------------------------
Sunningdale Precision Industries Ltd.                                   
  (Industrial Machinery)(a)                     2,918,000      1,388,048
========================================================================
                                                               4,895,015
========================================================================

SOUTH AFRICA-0.84%                                                      

Massmart Holdings Ltd. (Hypermarkets & Super                            
  Centers)                                        369,600      2,954,791
========================================================================

SOUTH KOREA-2.26%                                                       

Cheil Communications Inc. (Advertising)(a)(b)       8,600      1,249,390
------------------------------------------------------------------------

                                                                [Download Table]

                                                               MARKET   
                                                 SHARES        VALUE    
------------------------------------------------------------------------
                                                                        
SOUTH KOREA-(CONTINUED)                                                 

CJ Corp. (Packaged Foods & Meats)(a)(b)            26,610   $  1,812,301
------------------------------------------------------------------------
Core Logic (Electronic Manufacturing                                    
  Services)                                        56,310      1,770,567
------------------------------------------------------------------------
Hana Bank (Diversified Banks)(a)(b)                53,600      1,334,964
------------------------------------------------------------------------
Hyundai Department Store Co., Ltd.                                      
  (Department Stores)(a)(b)                        55,400      1,807,429
========================================================================
                                                               7,974,651
========================================================================

SPAIN-0.97%                                                             

Corporacion Mapfre S.A. (Multi-Line                                     
  Insurance)(a)                                   151,830      2,231,423
------------------------------------------------------------------------
Gestevision Telecinco S.A. (Broadcasting &                              
  Cable TV) (Acquired 06/23/04; Cost                                    
  $712,386)(b)(c)                                  58,000      1,194,317
========================================================================
                                                               3,425,740
========================================================================

SWITZERLAND-3.96%                                                       

Amazys Holding A.G. (Diversified Commercial                             
  Services)(a)                                     60,000      3,253,736
------------------------------------------------------------------------
Leica Geosystems A.G. (Electronic Equipment                             
  Manufacturers)(a)(b)                             17,200      5,268,679
------------------------------------------------------------------------
SAIA-Burgess Electronics A.G. (Electronic                               
  Equipment Manufacturers)(a)                       4,950      2,945,314
------------------------------------------------------------------------
Saurer A.G. (Industrial Machinery)(a)(b)           43,400      2,541,197
========================================================================
                                                              14,008,926
========================================================================

TAIWAN-1.54%                                                            

Catcher Technology Co., Ltd. (Computer                                  
  Storage & Peripherals)(a)                       599,200      1,977,266
------------------------------------------------------------------------
Hotai Motor Co. Ltd. (Automobile                                        
  Manufacturers)(a)                               990,000      2,032,484
------------------------------------------------------------------------
Merry Electronics Co., Ltd. (Consumer                                   
  Electronics)(a)                                 555,954      1,331,950
------------------------------------------------------------------------
Novatek Microelectronics Corp., Ltd.                                    
  (Semiconductors)(a)                              31,194        109,469
========================================================================
                                                               5,451,169
========================================================================

THAILAND-0.68%                                                          

Siam Commercial Bank PCL (Diversified                                   
  Banks)(a)                                     1,925,000      2,410,098
========================================================================

UNITED KINGDOM-10.66%                                                   

Admiral Group PLC (Property & Casualty                                  
  Insurance) (Acquired 09/23/04-12/29/04;                               
  Cost $1,450,709)(b)(c)                          278,800      1,724,891
------------------------------------------------------------------------
Balfour Beatty PLC (Construction &                                      
  Engineering)(a)                                 395,600      2,388,216
------------------------------------------------------------------------
Cattles PLC (Consumer Finance)                    254,720      1,793,363
------------------------------------------------------------------------
Enterprise Inns PLC (Restaurants)(a)              180,740      2,748,192
------------------------------------------------------------------------
Findel PLC (Catalog Retail)(a)                    222,900      2,027,327
------------------------------------------------------------------------
Homeserve PLC (Diversified Commercial                                   
  Services)                                       295,800      4,324,066
------------------------------------------------------------------------
Johnston Press PLC (Publishing)(a)                173,390      1,800,422
------------------------------------------------------------------------
Kensington Group PLC (Thrifts & Mortgage                                
  Finance)(a)                                     182,720      1,678,225
------------------------------------------------------------------------
McBride PLC (Household Products)(a)             1,134,010      3,065,224
------------------------------------------------------------------------
NDS Group PLC-ADR (Application Software)(b)        98,300      3,349,966
------------------------------------------------------------------------
Savills PLC (Other Diversified Financial                                
  Services)                                       244,225      2,440,996
------------------------------------------------------------------------

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                                                               MARKET   
                                                 SHARES        VALUE    
------------------------------------------------------------------------
                                                                        
UNITED KINGDOM-(CONTINUED)                                              

Sportingbet PLC (Casinos & Gaming)(a)(b)        1,036,600   $  3,757,147
------------------------------------------------------------------------
T&F Informa PLC (Publishing)                      404,614      2,930,198
------------------------------------------------------------------------
Warner Chilcott PLC (Pharmaceuticals)              70,200      1,158,176
------------------------------------------------------------------------
WS Atkins PLC (Diversified Commercial                                   
  Services)(a)                                    181,355      2,483,866
========================================================================
                                                              37,670,275
========================================================================
    Total Foreign Stocks & Other Equity                                 
      Interests (Cost $239,167,228)                          323,690,698
========================================================================

                                                                [Download Table]

                                                               MARKET   
                                                 SHARES        VALUE    
------------------------------------------------------------------------
                                                                        

MONEY MARKET FUNDS-8.29%                                                

Liquid Assets Portfolio-Institutional                                   
  Class(h)                                     14,652,276   $ 14,652,276
------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(h)    14,652,276     14,652,276
========================================================================
    Total Money Market Funds (Cost                                      
      $29,304,552)                                            29,304,552
========================================================================
TOTAL INVESTMENTS-99.90% (Cost $268,471,780)                 352,995,250
========================================================================
OTHER ASSETS LESS LIABILITIES-0.10%                              343,237
========================================================================
NET ASSETS-100.00%                                          $353,338,487
________________________________________________________________________
========================================================================

Investment Abbreviations:                                                       

                                                                [Download Table]
                                   
ADR   - American Depositary Receipt
Pfd.  - Preferred                  
Wts.  - Warrants                   

Notes to Schedule of Investments:                                               

(a) In accordance with the procedures established by the Board of Trustees, the 
 foreign security is fair valued using adjusted closing market prices. The
aggregate market value of these securities at December 31, 2004 was     
   $178,575,072, which represented 50.59% of the Fund's Total Investments. See
Note 1A.                                                                
(b) Non-income producing security.                                              
(c) Security not registered under the Securities Act of 1933, as amended (e.g., 
the security was purchased in a Rule 144A transaction or a Regulation D 
   transaction). The security may be resold only pursuant to an exemption from
registration under the 1933 Act, typically to qualified institutional   
  buyers. The Fund has no rights to demand registration of these securities.
The aggregate market value of these securities at December 31, 2004 was 
$20,629,211, which represented 5.84% of the Fund 's Net Assets. Unless  
otherwise indicated these securities are not considered to be illiquid. 
(d) Security considered to be illiquid. The market value of this security       
    considered illiquid at December 31, 2004 represented 1.16% of the Fund's Net
Assets.                                                                 
(e) Security fair valued in good faith in accordance with the procedures        
  established by the Board of Trustees. The market value of this security at
December 31, 2004 represented 1.16% of the Fund's Total Investments. See
Note 1A.                                                                
(f) Non-income producing security acquired as part of a unit with or in exchange
for other securities.                                                   
(g) Each unit represents one ordinary share, one ordinary C share and nine      
ordinary A shares.                                                      
(h) The money market fund and the Fund are affiliated by having the same        
investment advisor. See Note 3.                                         

See accompanying notes which are an integral part of the financial statements.  
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STATEMENT OF ASSETS AND LIABILITIES                                             

December 31, 2004                                                               

                                                                [Download Table]
                                                            
ASSETS:                                                     

Investments, at market value (cost                          
  $239,167,228)                                $323,690,698 
----------------------------------------------------------- 
Investments in affiliated money market funds                
  (cost $29,304,552)                             29,304,552 
=========================================================== 
    Total investments (cost $268,471,780)       352,995,250 
=========================================================== 
Foreign currencies, at market value (cost                   
  $2,473,153)                                     2,519,115 
----------------------------------------------------------- 
Receivables for:                                            
  Investments sold                                1,724,506 
----------------------------------------------------------- 
  Fund shares sold                                4,438,252 
----------------------------------------------------------- 
  Dividends                                         739,715 
----------------------------------------------------------- 
Investment for trustee deferred compensation                
  and retirement plans                               24,095 
----------------------------------------------------------- 
Other assets                                         61,483 
=========================================================== 
    Total assets                                362,502,416 
___________________________________________________________ 
=========================================================== 

LIABILITIES:                                                

Payables for:                                               
  Investments purchased                           8,126,760 
----------------------------------------------------------- 
  Fund shares reacquired                            680,323 
----------------------------------------------------------- 
  Trustee deferred compensation and                         
    retirement plans                                 26,670 
----------------------------------------------------------- 
Accrued distribution fees                           156,276 
----------------------------------------------------------- 
Accrued transfer agent fees                          38,289 
----------------------------------------------------------- 
Accrued operating expenses                          135,611 
=========================================================== 
    Total liabilities                             9,163,929 
=========================================================== 
Net assets applicable to shares outstanding    $353,338,487 
___________________________________________________________ 
=========================================================== 

NET ASSETS CONSIST OF:                                      

Shares of beneficial interest                  $269,345,292 
----------------------------------------------------------- 
Undistributed net investment income (loss)          (21,967)
----------------------------------------------------------- 
Undistributed net realized gain (loss) from                 
  investment securities and foreign                         
  currencies                                       (457,096)
----------------------------------------------------------- 
Unrealized appreciation of investment                       
  securities, foreign currencies and futures                
  contracts                                      84,472,258 
=========================================================== 
                                               $353,338,487 
___________________________________________________________ 
=========================================================== 

NET ASSETS:                                                 

Class A                                        $257,578,890 
___________________________________________________________ 
=========================================================== 
Class B                                        $ 47,941,767 
___________________________________________________________ 
=========================================================== 
Class C                                        $ 47,817,830 
___________________________________________________________ 
=========================================================== 

SHARES OUTSTANDING, $0.01 PAR VALUE PER                     
  SHARE, UNLIMITED NUMBER OF SHARES                         
  AUTHORIZED:                                               

Class A                                          15,933,590 
___________________________________________________________ 
=========================================================== 
Class B                                           3,031,921 
___________________________________________________________ 
=========================================================== 
Class C                                           3,025,009 
___________________________________________________________ 
=========================================================== 
Class A:                                                    
  Net asset value per share                    $      16.17 
----------------------------------------------------------- 
  Offering price per share:                                 
    (Net asset value of $16.17 divided by                   
      94.50%)                                  $      17.11 
___________________________________________________________ 
=========================================================== 
Class B:                                                    
  Net asset value and offering price per                    
    share                                      $      15.81 
___________________________________________________________ 
=========================================================== 
Class C:                                                    
  Net asset value and offering price per                    
    share                                      $      15.81 
___________________________________________________________ 
=========================================================== 

See accompanying notes which are an integral part of the financial statements.  
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STATEMENT OF OPERATIONS                                                         

For the year ended December 31, 2004                                            

                                                                [Download Table]
                                                                          
INVESTMENT INCOME:                                                        

Dividends (net of foreign withholding tax of $456,976)        $ 3,007,124 
------------------------------------------------------------------------- 
Dividends from affiliated money market funds                      135,911 
------------------------------------------------------------------------- 
Interest                                                            7,800 
========================================================================= 
    Total investment income                                     3,150,835 
========================================================================= 

EXPENSES:                                                                 

Advisory fees                                                   1,828,269 
------------------------------------------------------------------------- 
Administrative services fees                                       50,000 
------------------------------------------------------------------------- 
Custodian fees                                                    309,059 
------------------------------------------------------------------------- 
Distribution fees:                                                        
  Class A                                                         495,861 
------------------------------------------------------------------------- 
  Class B                                                         273,185 
------------------------------------------------------------------------- 
  Class C                                                         234,563 
------------------------------------------------------------------------- 
Transfer agent fees                                               429,862 
------------------------------------------------------------------------- 
Trustees' fees and retirement benefits                             17,510 
------------------------------------------------------------------------- 
Other                                                             246,697 
========================================================================= 
    Total expenses                                              3,885,006 
========================================================================= 
Less: Fees waived, expenses reimbursed and expense offset                 
    arrangement                                                   (37,258)
========================================================================= 
    Net expenses                                                3,847,748 
========================================================================= 
Net investment income (loss)                                     (696,913)
========================================================================= 

REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT                       
  SECURITIES, FOREIGN CURRENCIES AND FUTURES CONTRACTS:                   

Net realized gain from:                                                   
  Investment securities (Net of tax on sale of foreign                    
    investments of $90,696) -- Note 1G                          5,950,394 
------------------------------------------------------------------------- 
  Foreign currencies                                              140,539 
========================================================================= 
                                                                6,090,933 
========================================================================= 
Change in net unrealized appreciation (depreciation) of:                  
  Investment securities (Net of tax on sale of foreign                    
    investments of $47,079) -- Note 1G                         59,958,824 
------------------------------------------------------------------------- 
  Foreign currencies                                               13,603 
------------------------------------------------------------------------- 
  Futures contracts                                                   (21)
========================================================================= 
                                                               59,972,406 
========================================================================= 
Net gain from investment securities, foreign currencies and               
  futures contracts                                            66,063,339 
========================================================================= 
Net increase in net assets resulting from operations          $65,366,426 
_________________________________________________________________________ 
========================================================================= 

See accompanying notes which are an integral part of the financial statements.  
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STATEMENT OF CHANGES IN NET ASSETS                                              

For the years ended December 31, 2004 and 2003                                  

                                                        [Enlarge/Download Table]

                                                                  2004            2003     
------------------------------------------------------------------------------------------ 
                                                                                           
OPERATIONS:                                                                                

  Net investment income (loss)                                $   (696,913)   $   (284,447)
------------------------------------------------------------------------------------------ 
  Net realized gain from investment securities, foreign                                    
    currencies and future contracts                              6,090,933       5,752,968 
------------------------------------------------------------------------------------------ 
  Change in net unrealized appreciation of investment                                      
    securities, foreign currencies and futures contracts        59,972,406      23,348,468 
========================================================================================== 
    Net increase in net assets resulting from operations        65,366,426      28,816,989 
========================================================================================== 
Distributions to shareholders from net investment                                          
  income -- Class A                                                (60,067)       (120,788)
========================================================================================== 
Distributions to shareholders from net realized gains:                                     
  Class A                                                       (3,378,922)             -- 
------------------------------------------------------------------------------------------ 
  Class B                                                         (646,759)             -- 
------------------------------------------------------------------------------------------ 
  Class C                                                         (626,531)             -- 
========================================================================================== 
    Decrease in net assets resulting from distributions         (4,712,279)       (120,788)
========================================================================================== 
Share transactions-net:                                                                    
  Class A                                                      126,403,770      56,079,420 
------------------------------------------------------------------------------------------ 
  Class B                                                       22,472,939       8,070,154 
------------------------------------------------------------------------------------------ 
  Class C                                                       30,787,540       3,704,141 
========================================================================================== 
    Net increase in net assets resulting from share                                        
     transactions                                              179,664,249      67,853,715 
========================================================================================== 
    Net increase in net assets                                 240,318,396      96,549,916 
========================================================================================== 

NET ASSETS:                                                                                

  Beginning of year                                            113,020,091      16,470,175 
========================================================================================== 
  End of year (including undistributed net investment income                               
    (loss) of $(21,967) and $(77,408), respectively)          $353,338,487    $113,020,091 
__________________________________________________________________________________________ 
========================================================================================== 

See accompanying notes which are an integral part of the financial statements.  
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NOTES TO FINANCIAL STATEMENTS                                                   

December 31, 2004                                                               

NOTE 1--SIGNIFICANT ACCOUNTING POLICIES                                         

AIM International Small Company Fund, formerly AIM International Emerging Growth
Fund, (the "Fund") is a series portfolio of AIM Funds Group (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 nine separate portfolios, each authorized to   
issue an unlimited number of shares of beneficial interest. The Fund currently  
offers multiple classes of shares. Matters affecting each portfolio or class    
will be voted on exclusively by the shareholders of such portfolio or class. The
assets, liabilities and operations of each portfolio are accounted for          
separately. Information presented in these financial statements pertains only to
the Fund.                                                                       

  The Fund's investment objective is to achieve long-term growth of capital.
Companies are listed in the Schedule of Investments based on the country in     
which they are organized.                                                       

   Under the Trust's organizational documents, 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. However, the Fund has not had prior claims or losses pursuant to these
contracts.                                                                      

The preparation of financial statements in conformity with accounting   
principles generally accepted in the United States of America requires          
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported 
amounts of revenues and expenses during the reporting period. Actual results    
could differ from those estimates. The following is a summary of the significant
accounting policies followed by the Fund in the preparation of its financial    
statements.                                                                     

A.   SECURITY VALUATIONS -- Securities, including restricted securities, are    
valued according to the following policy.                             

      A security listed or traded on an exchange (except convertible bonds) is
 valued at its last sales price as of the close of the customary trading
session on the exchange where the security is principally traded, or  
lacking any sales on a particular day, the security is valued at the  
     closing bid price on that day. Each security traded in the over-the-counter
   market (but not securities reported on the NASDAQ National Market System)
    is valued on the basis of prices furnished by independent pricing services
or market makers. Each security reported on the NASDAQ National Market
  System is valued at the NASDAQ Official Closing Price ("NOCP") as of the
  close of the customary trading session on the valuation date or absent a
NOCP, at the closing bid price.                                       

  Futures contracts are valued at the final settlement price set by an
     exchange on which they are principally traded. Listed options are valued at
     the mean between the last bid and the ask prices from the exchange on which
   they are principally traded. Options not listed on an exchange are valued
   by an independent source at the mean between the last bid and ask prices.
   For purposes of determining net asset value per share, futures and option
contracts generally will be valued 15 minutes after the close of the  
customary trading session of the New York Stock Exchange ("NYSE").    

    Investments in open-end registered investment companies and closed-end
     registered investment companies that do not trade on an exchange are valued
at the end of day net asset value per share. Investments in closed-end
     registered investment companies that trade on an exchange are valued at the
  last sales price as of the close of the customary trading session on the
exchange where the security is principally traded.                    

     Debt obligations (including convertible bonds) are fair valued using an
evaluated quote provided by an independent pricing service. Evaluated 
    quotes provided by the pricing service may be determined without exclusive
reliance on quoted prices, and may reflect appropriate factors such as
institution-size trading in similar groups of securities, developments
related to specific securities, dividend rate, yield, quality, type of
    issue, coupon rate, maturity, individual trading characteristics and other
    market data. Short-term obligations having 60 days or less to maturity and
 commercial paper are valued at amortized cost which approximates market
value.                                                                

     Securities for which market prices are not provided by any of the above
   methods are valued based upon quotes furnished by independent sources and
  are valued at the last bid price in the case of equity securities and in
the case of debt obligations, the mean between the last bid and asked 
prices.                                                               

     Foreign securities (including foreign exchange contracts) are converted
into U.S. dollar amounts using the applicable exchange rates as of the
close of the NYSE. Generally, trading in foreign securities is        
     substantially completed each day at various times prior to the close of the
   NYSE. The values of such securities used in computing the net asset value
of the Fund's shares are determined as of the close of the respective 
   markets. Events affecting the values of such foreign securities may occur
 between the times at which the particular foreign market closes and the
close of the customary trading session of the NYSE which would not    
   ordinarily be reflected in the computation of the Fund's net asset value.
    If the event is likely to have affected the closing price of the security,
  the security will be valued at fair value in good faith using procedures
     approved by the Board of Trustees. Adjustments to closing prices to reflect
fair value may also be based on a screening process of an independent 
  pricing service to indicate the degree of certainty, based on historical
data, that the closing price in the principal market where a foreign  
security trades is not the current market value as of the close of the
    NYSE. Foreign securities meeting the approved degree of certainty that the
price is not reflective of current market value will be priced at the 
 indication of fair value from the independent pricing service. Multiple
     factors may be considered by the independent pricing service in determining
   adjustments to reflect fair value and may include information relating to
sector indices, ADRs, domestic and foreign index futures and          
exchange-traded funds.                                                

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     Securities for which market quotations are not readily available or are
     unreliable are valued at fair value as determined in good faith by or under
  the supervision of the Trust's officers following procedures approved by
the Board of Trustees. Issuer specific events, market trends, bid/ask 
  quotes of brokers and information providers and other market data may be
     reviewed in the course of making a good faith determination of a security's
fair value.                                                           

B.   SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions   
    are accounted for on a trade date basis. Realized gains or losses on sales
are computed on the basis of specific identification of the securities
sold. Interest income is recorded on the accrual basis from settlement
date. Dividend income is recorded on the ex-dividend date.            

     Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased 
  and/or a reduction of proceeds on a sale of securities. Such transaction
 costs are included in the determination of realized and unrealized gain
   (loss) from investment securities reported in the Statement of Operations
    and the Statement of Changes in Net Assets and the realized and unrealized
 net gains (losses) on securities per share in the Financial Highlights.
   Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These   
transaction costs are not considered operating expenses and are not   
    reflected in net investment income reported in the Statement of Operations
  and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation  
arrangements between the Fund and the advisor.                        

     The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.     

C.   DISTRIBUTIONS -- Distributions from income and net realized capital gain,  
   if any, are generally paid annually and recorded on ex-dividend date. The
Fund may elect to use a portion of the proceeds from redemptions as   
distributions for federal income tax purposes.                        

D.   FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of
Subchapter M of the Internal Revenue Code necessary to qualify as a   
   regulated investment company and, as such, will not be subject to federal
  income taxes on otherwise taxable income (including net realized capital
 gain) which is distributed to shareholders. Therefore, no provision for
federal income taxes is recorded in the financial statements.         

E.   EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular    
 class of the Fund and which are directly attributable to that class are
   charged to the operations of such class. All other expenses are allocated
among the classes based on relative net assets.                       

F.   REDEMPTION FEES -- The Fund has instituted a 2% redemption fee on certain  
share classes that is to be retained by the Fund to offset transaction
costs and other expenses associated with short-term redemptions and   
  exchanges. The fee, subject to certain exceptions, is imposed on certain
redemptions, including exchanges of shares held less than 30 days. The
redemption fee is accounted for as an addition to shares of beneficial
    interest by the Fund and is allocated among the share classes based on the
relative net assets of each class.                                    

G.   FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of
  the NYSE based on quotations posted by banks and major currency dealers.
Portfolio securities and other assets and liabilities denominated in  
foreign currencies are translated into U.S. dollar amounts at date of 
valuation. Purchases and sales of portfolio securities (net of foreign
taxes withheld on disposition) and income items denominated in foreign
    currencies are translated into U.S. dollar amounts on the respective dates
    of such transactions. The Fund does not separately account for the portion
 of the results of operations resulting from changes in foreign exchange
  rates on investments and the fluctuations arising from changes in market
prices of securities held. The combined results of changes in foreign 
    exchange rates and the fluctuation of market prices on investments (net of
   estimated foreign tax withholding) are included with the net realized and
  unrealized gain or loss from investments in the Statement of Operations.
Reported net realized foreign currency gains or losses arise from, (i)
     sales of foreign currencies, (ii) currency gains or losses realized between
  the trade and settlement dates on securities transactions, and (iii) the
difference between the amounts of dividends, interest, and foreign    
withholding taxes recorded on the Fund's books and the U.S. dollar    
     equivalent of the amounts actually received or paid. Net unrealized foreign
   currency gains and losses arise from changes in the fair values of assets
     and liabilities, other than investments in securities at fiscal period end,
resulting from changes in exchange rates.                             

H.   FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation 
to purchase or sell a specific currency for an agreed-upon price at a 
     future date. The Fund may enter into a foreign currency contract to attempt
   to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency   
  contract for the purchase or sale of a security denominated in a foreign
    currency in order to "lock in" the U.S. dollar price of that security. The
     Fund could be exposed to risk if counterparties to the contracts are unable
to meet the terms of their contracts or if the value of the foreign   
currency changes unfavorably.                                         

I.   FUTURES CONTRACTS -- The Fund may purchase or sell futures contracts as a  
hedge against changes in market conditions. Initial margin deposits   
required upon entering into futures contracts are satisfied by the    
 segregation of specific securities as collateral for the account of the
 broker (the Fund's agent in acquiring the futures position). During the
period the futures contracts are open, changes in the value of the    
contracts are recognized as unrealized gains or losses by "marking to 
  market" on a daily basis to reflect the market value of the contracts at
the end of each day's trading. Variation margin payments are made or  
  received depending upon whether unrealized gains or losses are incurred.
    When the contracts are closed, the Fund recognizes a realized gain or loss
    equal to the difference between the proceeds from, or cost of, the closing
   transaction and the Fund's basis in the contract. If the Fund were unable
 to liquidate a futures contract and/or enter into an offsetting closing
transaction, the Fund would continue to be subject to market risk with
respect to the value of the contracts and continue to be required to  
maintain the margin deposits on the futures contracts.                

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NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES                         

The Trust has entered into a master investment advisory agreement with A I M    
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,   
the Fund pays an advisory fee to AIM at the annual rate of 0.95% of the Fund's  
average daily net assets. Effective January 1, 2005 through December 31, 2009,  
AIM has contractually agreed to waive advisory fees to the extent necessary so  
that the advisory fees payable by the Fund (based on the Fund's average daily   
net assets) do not exceed the annual rate of 0.935% of the first $250 million,  
plus 0.91% of the next $250 million, plus 0.885% of the next $500 million, plus 
0.86% of the next $1.5 billion, plus 0.835% of the next $2.5 billion, plus 0.81%
of the next $2.5 billion, plus 0.785% of the next $2.5 billion, plus 0.76% of   
the Fund's average daily net assets in excess of $10 billion. AIM has           
contractually agreed to waive advisory fees and/or reimburse expenses to the    
extent necessary to limit total annual operating expenses (excluding certain    
items discussed below) of Class A, Class B and Class C shares to 2.00%, 2.65%   
and 2.65% of average daily net assets, respectively, through December 31, 2005. 
In determining the advisor's obligation to waive advisory fees and/or reimburse 
expenses, the following expenses are not taken into account, and could cause the
total annual fund operating expenses to exceed the limit stated above: (i)      
interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary 
items (these are expenses that are not anticipated to arise from the Fund's     
day-to-day operations), or items designated as such by the Fund's Board of      
Trustees; (v) expenses related to a merger or reorganization, as approved by the
Fund's Board of Trustees; and (vi) expenses that the Fund has incurred but did  
not actually pay because of an expense offset arrangement. Currently, the only  
expense offset arrangements from which the Fund benefits are in the form of     
credits that the Fund receives from banks where the Fund or its transfer agent  
has deposit accounts in which it holds uninvested cash. Those credits are used  
to pay certain expenses incurred by the Fund. AIM did not waive fees and/or     
reimburse expenses during the period under this expense limitation. Further, AIM
has voluntarily agreed to waive advisory fees of the Fund in the amount of 25%  
of the advisory fee AIM receives from the affiliated money market funds on      
investments by the Fund in such affiliated money market funds. Voluntary fee    
waivers or reimbursements may be modified or discontinued at any time upon      
consultation with the Board of Trustees without further notice to investors. For
the year ended December 31, 2004, AIM waived fees of $1,642.                    

   For the year ended December 31, 2004, at the request of the Trustees of the
Trust, AMVESCAP PLC ("AMVESCAP") agreed to reimburse $33,283 of expenses        
incurred by the Fund in connection with matters related to recently settled     
regulatory actions and investigations concerning market timing activity in the  
AIM Funds, including legal, audit, shareholder servicing, communication and     
trustee expenses. These expenses along with the related expense reimbursement,  
are included in the Statement of Operations.                                    

  The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing    
accounting services to the Fund. Pursuant to such agreement for the year ended  
December 31, 2004, AIM was paid $50,000.                                        

    The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay AIM Investment Services, Inc. ("AISI") a fee for providing transfer agency  
and shareholder services to the Fund and reimburse AISI for certain expenses    
incurred by AISI in the course of providing such services. For the year ended   
December 31, 2004, the Fund paid AISI $429,862. AISI may make payments to       
intermediaries that provide omnibus account services, sub-accounting services   
and/or networking services.                                                     

The Trust has entered into master distribution agreements with A I M    
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the     
Class A, Class B and Class C shares of the Fund. The Trust has adopted plans    
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A,   
Class B and Class C shares (collectively the "Plans"). The Fund, pursuant to the
Plans, pays AIM Distributors compensation at the annual rate of 0.35% of the    
Fund's average daily net assets of Class A shares and 1.00% of the average daily
net assets of Class B and Class C shares. Of these amounts, up to 0.25% of the  
average daily net assets of the Class A, Class B or Class C shares may be paid  
to furnish continuing personal shareholder services to customers who purchase   
and own shares of such classes. Any amounts not paid as a service fee under the 
Plans would constitute an asset-based sales charge. NASD Rules also impose a cap
on the total sales charges, including asset-based sales charges that may be paid
by any class of shares of the Fund. AIM Distributors did not reimburse fees     
during the period under this expense limitation. Pursuant to the Plans, for the 
year ended December 31, 2004, the Class A, Class B and Class C shares paid      
$495,861, $273,185 and $234,563, respectively.                                  

  Front-end sales commissions and contingent deferred sales charges ("CDSC")
(collectively the "sales charges") are not recorded as expenses of the Fund.    
Front-end sales commissions are deducted from proceeds from the sales of Fund   
shares prior to investment in Class A shares of the Fund. CDSC are deducted from
redemption proceeds prior to remittance to the shareholder. During year ended   
December 31, 2004, AIM Distributors advised the Fund that it retained $164,316  
in front-end sales commissions from the sale of Class A shares and $50,130,     
$18,191 and $36,764 from Class A, Class B and Class C shares, respectively, for 
CDSC imposed upon redemptions by shareholders.                                  

Certain officers and trustees of the Trust are officers and directors of
AIM, AISI and/or AIM Distributors.                                              

NOTE 3--INVESTMENTS IN AFFILIATES                                               

The Fund is permitted, pursuant to an exemptive order from the Securities and   
Exchange Commission ("SEC") and approved procedures by the Board of Trustees, to
invest daily available cash balances in affiliated money market funds. The Fund 
and the money market funds below have the same investment advisor and therefore,
are considered to be affiliated. The table below shows the transactions in and  
earnings from investments in affiliated money market funds for the year ended   
December 31, 2004.                                                              

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INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:                                   

                                                        [Enlarge/Download Table]

                                                                         UNREALIZED                                               
                 MARKET VALUE       PURCHASES          PROCEEDS         APPRECIATION     MARKET VALUE     DIVIDEND      REALIZED  
FUND               12/31/03          AT COST          FROM SALES       (DEPRECIATION)      12/31/04        INCOME      GAIN (LOSS)
----------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                  
Liquid Assets                                                                                                                     
  Portfolio-                                                                                                                      
  Institutional                                                                                                                   
  Class           $4,055,406       $ 73,608,722      $ (63,011,852)        $   --         $14,652,276     $ 68,175       $   --   
----------------------------------------------------------------------------------------------------------------------------------
STIC Prime                                                                                                                        
  Portfolio-                                                                                                                      
  Institutional                                                                                                                   
  Class            4,055,406         73,608,722        (63,011,852)            --          14,652,276       67,736           --   
==================================================================================================================================
  Total           $8,110,812       $147,217,444      $(126,023,704)        $   --         $29,304,552     $135,911       $   --   
__________________________________________________________________________________________________________________________________
==================================================================================================================================

NOTE 4--EXPENSE OFFSET ARRANGEMENT                                              

The expense offset arrangement is comprised of transfer agency credits which    
result from balances in Demand Deposit Accounts (DDA) used by the transfer agent
for clearing shareholder transactions. For the year ended December 31, 2004, the
Fund received credits in transfer agency fees of $2,333 under an expense offset 
arrangement, which resulted in a reduction of the Fund's total expenses of      
$2,333.                                                                         

NOTE 5--TRUSTEES' FEES                                                          

Trustees' fees represent remuneration paid to each Trustee of the Trust who is  
not an "interested person" of AIM. Trustees have the option to defer            
compensation payable by the Trust. Those Trustees who defer compensation have   
the option to select various AIM Funds in which their deferral accounts shall be
deemed to be invested.                                                          

Current Trustees are eligible to participate in a retirement plan that  
provides for benefits to be paid upon retirement to Trustees over a period of   
time based on the number of years of service. The Fund may have certain former  
Trustees that also participate in a retirement plan and receive benefits under  
such plan.                                                                      

  Obligations under the deferred compensation and retirement plans represent
unsecured claims against the general assets of the Fund.                        

   During the year ended December 31, 2004, the Fund paid legal fees of $2,996
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Independent Trustees. A member of that firm is a Trustee of the Trust.          

NOTE 6--BORROWINGS                                                              

Pursuant to an exemptive order from the SEC, the Fund may participate in an     
interfund lending facility that AIM has established for temporary borrowings by 
the AIM Funds. An interfund loan will be made under this facility only if the   
loan rate (an average of the rate available on bank loans and the rate available
on investments in overnight repurchase agreements) is favorable to both the     
lending fund and the borrowing fund. A loan will be secured by collateral if the
Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total    
assets. To the extent that the loan is required to be secured by collateral, the
collateral is marked to market daily to ensure that the market value is at least
102% of the outstanding principal value of the loan.                            

The Fund is a participant in an uncommitted unsecured revolving credit  
facility with State Street Bank and Trust Company ("SSB"). The Fund may borrow  
up to the lesser of (i) $125,000,000, or (ii) the limits set by its prospectus  
for borrowings. The Fund and other funds advised by AIM which are parties to the
credit facility can borrow on a first come, first served basis. Principal on    
each loan outstanding shall bear interest at the bid rate quoted by SSB at the  
time of the request for the loan.                                               

During the year ended December 31, 2004, the Fund did not borrow or lend
under the interfund lending facility or borrow under the uncommitted unsecured  
revolving credit facility.                                                      

Additionally, the Fund is permitted to temporarily carry a negative or  
overdrawn balance in its account with SSB, the custodian bank. To compensate the
custodian bank for such overdrafts, the overdrawn Fund may either (i) leave     
funds in the account so the custodian can be compensated by earning the         
additional interest; or (ii) compensate by paying the custodian bank. In either 
case, the custodian bank will be compensated at an amount equal to the Federal  
Funds rate plus 100 basis points.                                               

NOTE 7--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS          

DISTRIBUTIONS TO SHAREHOLDERS:                                                  

The tax character of distributions paid during the years ended December 31, 2004
and 2003 was as follows:                                                        

                                                                [Download Table]

                                                                 2004         2003  
------------------------------------------------------------------------------------
                                                                                    
Distributions paid from:                                                            
  Ordinary income                                             $1,464,397    $120,788
------------------------------------------------------------------------------------
  Long-term capital gain                                       3,247,882          --
====================================================================================
Total distributions                                           $4,712,279    $120,788
____________________________________________________________________________________
====================================================================================

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TAX COMPONENTS OF NET ASSETS:                                                   

As of December 31, 2004, the components of net assets on a tax basis were as    
follows:                                                                        

                                                                [Download Table]

                                                                  2004     
-------------------------------------------------------------------------- 
                                                                           
Undistributed ordinary income                                 $    478,007 
-------------------------------------------------------------------------- 
Unrealized appreciation -- investments                          83,942,218 
-------------------------------------------------------------------------- 
Temporary book/tax differences                                     (21,967)
-------------------------------------------------------------------------- 
Post-October capital loss deferral                                (405,063)
-------------------------------------------------------------------------- 
Shares of beneficial interest                                  269,345,292 
========================================================================== 
Total net assets                                              $353,338,487 
__________________________________________________________________________ 
========================================================================== 

The difference between book-basis and tax-basis unrealized appreciation 
(depreciation) is due to differences in the timing of recognition of gains and  
losses on investments for tax and book purposes. The Fund's unrealized          
appreciation difference is attributable primarily to the deferral of losses on  
wash sales. The tax-basis unrealized appreciation on investments amount includes
appreciation (depreciation) on foreign currencies and accrued tax on certain    
unrealized gains of $(51,211).                                                  

The temporary book/tax differences are a result of timing differences   
between book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of the trustee deferral of compensation and 
retirement plan expenses.                                                       

   Capital loss carryforward is calculated and reported as of a specific date.
Results of transactions and other activity after that date may affect the amount
of capital loss carryforward actually available for the Fund to utilize. The    
ability to utilize capital loss carryforward in the future may be limited under 
the Internal Revenue Code and related regulations based on the results of future
transactions.                                                                   

    There was no capital loss carryforward for the year ended December 31, 2004.

NOTE 8--INVESTMENT SECURITIES                                                   

The aggregate amount of investment securities (other than short-term securities 
and money market funds) purchased and sold by the Fund during the year ended    
December 31, 2004 was $314,025,223 and $158,935,700, respectively.              

                                                                [Download Table]

UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS 
-------------------------------------------------------------------------------
                                                                               
Aggregate unrealized appreciation of investment securities        $84,632,502  
-------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities         (639,073) 
===============================================================================
Net unrealized appreciation of investment securities              $83,993,429  
_______________________________________________________________________________
===============================================================================
Cost of investments for tax purposes is $269,001,821.                          

NOTE 9--RECLASSIFICATION OF PERMANENT DIFFERENCES                               

Primarily as a result of differing book/tax treatment of foreign currency       
transactions excise taxes, treatment of passive foreign investment companies,   
distribution reclassification, the use of proceeds from redemption as           
distributions, treatment of foreign capital gain tax and net operating losses,  
on December 31, 2004, undistributed net investment income was increased by      
$812,421, undistributed net realized gain (loss) was decreased by $1,933,211 and
shares of beneficial interest increased by $1,120,790. This reclassification had
no effect on the net assets of the Fund.                                        

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NOTE 10--SHARE INFORMATION                                                      

The Fund currently offers three different classes of shares: Class A shares,    
Class B shares and Class C shares. Class A shares are sold with a front-end     
sales charge. Class B shares and Class C shares are sold with CDSC. Under       
certain circumstances, Class A shares are subject to CDSC. Generally, Class B   
shares will automatically convert to Class A shares eight years after the end of
the calendar month of purchase.                                                 

                                                        [Enlarge/Download Table]

                                           CHANGES IN SHARES OUTSTANDING(a)                                             
----------------------------------------------------------------------------------------------------------------------- 
                                                                               YEAR ENDED DECEMBER 31,                  
                                                              --------------------------------------------------------- 
                                                                         2004                           2003            
                                                              ---------------------------    -------------------------- 
                                                                SHARES         AMOUNT          SHARES         AMOUNT    
----------------------------------------------------------------------------------------------------------------------- 
                                                                                                                        
Sold:                                                                                                                   
  Class A                                                     16,386,746    $ 224,397,563    11,919,761    $109,893,228 
----------------------------------------------------------------------------------------------------------------------- 
  Class B                                                      2,424,445       32,530,604     1,165,952      11,299,951 
----------------------------------------------------------------------------------------------------------------------- 
  Class C                                                      3,054,037       40,985,997     2,225,582      18,994,606 
======================================================================================================================= 
Issued as reinvestment of dividends:                                                                                    
  Class A                                                        171,758        2,658,846         7,488          87,303 
----------------------------------------------------------------------------------------------------------------------- 
  Class B                                                         40,784          617,885            --              -- 
----------------------------------------------------------------------------------------------------------------------- 
  Class C                                                         39,308          595,120            --              -- 
======================================================================================================================= 
Automatic conversion of Class B shares to Class A shares:                                                               
  Class A                                                        124,568        1,742,784        33,321         340,599 
----------------------------------------------------------------------------------------------------------------------- 
  Class B                                                       (127,016)      (1,742,784)      (33,826)       (340,599)
======================================================================================================================= 
Reacquired:(b)                                                                                                          
  Class A                                                     (7,975,559)    (102,395,423)   (6,138,550)    (54,241,710)
----------------------------------------------------------------------------------------------------------------------- 
  Class B                                                       (697,463)      (8,932,766)     (313,814)     (2,889,198)
----------------------------------------------------------------------------------------------------------------------- 
  Class C                                                       (843,079)     (10,793,577)   (1,867,698)    (15,290,465)
======================================================================================================================= 
                                                              12,598,529    $ 179,664,249     6,998,216    $ 67,853,715 
_______________________________________________________________________________________________________________________ 
======================================================================================================================= 

(a) There is one entity that is a record owner of more than 5% of the           
    outstanding shares of the Fund and owns 10% of the outstanding shares of the
Fund. AIM Distributors has an agreement with this entity to sell Fund   
shares. The Fund, AIM and/or AIM affiliates may make payments to this   
entity, which is considered to be related to the Fund, for providing    
    services to the Fund, AIM and/or AIM affiliates including but not limited to
services such as, securities brokerage, distribution, third party record
   keeping and account servicing. The Trust has no knowledge as to whether all
 or any portion of the shares owned of record by this entity is also owned
beneficially.                                                           
(b) Net of redemption fees of $22,491, $3,963 and $3,254 for Class A, Class B   
  and Class C shares for 2004, respectively, and $121, $28 and $17 for Class
    A, Class B, and Class C shares for 2003, respectively, based on the relative
net assets of each class.                                               

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NOTE 11--FINANCIAL HIGHLIGHTS                                                   

The following schedule presents financial highlights for a share of the Fund    
outstanding throughout the periods indicated.                                   

                                                        [Enlarge/Download Table]

                                                                                         CLASS A                                 
                                                         ------------------------------------------------------------------------
                                                                                                                 AUGUST 31, 2000 
                                                                                                                 (DATE OPERATIONS
                                                                      YEAR ENDED DECEMBER 31,                     COMMENCED) TO  
                                                         -------------------------------------------------         DECEMBER 31,  
                                                           2004          2003          2002         2001               2000      
---------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                 
Net asset value, beginning of period                     $  12.08       $  6.91       $ 7.10       $  7.97           $ 10.00     
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:                                                                                               
  Net investment income (loss)                              (0.03)(a)     (0.04)(a)    (0.06)(a)     (0.08)(a)         (0.03)(a) 
---------------------------------------------------------------------------------------------------------------------------------
  Net gains (losses) on securities (both realized and                                                                            
    unrealized)                                              4.34          5.24        (0.13)        (0.76)            (2.00)    
=================================================================================================================================
    Total from investment operations                         4.31          5.20        (0.19)        (0.84)            (2.03)    
=================================================================================================================================
Less distributions:                                                                                                              
  Dividends from net investment income                      (0.00)        (0.03)          --         (0.03)               --     
---------------------------------------------------------------------------------------------------------------------------------
  Distributions from net realized gains                     (0.22)           --           --            --                --     
=================================================================================================================================
    Total distributions                                     (0.22)        (0.03)          --         (0.03)               --     
=================================================================================================================================
Redemptions fees added to shares of beneficial interest      0.00          0.00           --            --                --     
=================================================================================================================================
Net asset value, end of period                           $  16.17       $ 12.08       $ 6.91       $  7.10           $  7.97     
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b)                                             35.83%        75.10%       (2.68)%      (10.48)%          (20.30)%   
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:                                                                                                        
Net assets, end of period (000s omitted)                 $257,579       $87,269       $9,703       $ 5,202           $ 5,625     
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:                                                                                         
  With fee waivers and/or expense reimbursements             1.83%(c)      2.00%        2.01%         2.00%(d)          2.11%(e) 
---------------------------------------------------------------------------------------------------------------------------------
  Without fee waivers and/or expense reimbursements          1.85%(c)      2.35%        3.03%         4.53%(d)          6.83%(e) 
=================================================================================================================================
Ratio of net investment income (loss) to average net                                                                             
  assets                                                    (0.19)%(c)    (0.46)%      (0.85)%       (1.12)%           (1.09)%(e)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(f)                                     87%           93%         118%          145%               30%    
_________________________________________________________________________________________________________________________________
=================================================================================================================================

(a)  Calculated using average shares outstanding.                               
(b)  Includes adjustments in accordance with accounting principles generally    
accepted in the United States of America and as such, the net asset   
 value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for  
shareholder transactions. Does not include sales charges and is not   
annualized for periods less than one year.                            
(c)  Ratios are based on average daily net assets of $141,674,613.              
(d)  Ratio of expenses to average net assets including interest expense were    
2.02% and 4.55% with and without fee waivers and/or expense           
reimbursements, respectively. Ratio of interest expense to average net
assets was 0.02%.                                                     
(e)  Annualized.                                                                
(f)  Not annualized for periods less than one year.                             

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NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)                                       

                                                        [Enlarge/Download Table]

                                                                                          CLASS B                                
                                                          -----------------------------------------------------------------------
                                                                                                                 AUGUST 31, 2000 
                                                                                                                 (DATE OPERATIONS
                                                                      YEAR ENDED DECEMBER 31,                     COMMENCED) TO  
                                                          ------------------------------------------------         DECEMBER 31,  
                                                           2004          2003          2002         2001               2000      
---------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                 
Net asset value, beginning of period                      $ 11.89       $  6.84       $ 7.07       $  7.95           $ 10.00     
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:                                                                                               
  Net investment income (loss)                              (0.11)(a)     (0.10)(a)    (0.11)(a)     (0.13)(a)         (0.05)(a) 
---------------------------------------------------------------------------------------------------------------------------------
  Net gains (losses) on securities (both realized and                                                                            
    unrealized)                                              4.25          5.15        (0.12)        (0.75)            (2.00)    
=================================================================================================================================
    Total from investment operations                         4.14          5.05        (0.23)        (0.88)            (2.05)    
=================================================================================================================================
Less distributions from net realized gains                  (0.22)           --           --            --                --     
=================================================================================================================================
Redemptions fees added to shares of beneficial interest      0.00          0.00           --            --                --     
=================================================================================================================================
Net asset value, end of period                            $ 15.81       $ 11.89       $ 6.84       $  7.07           $  7.95     
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b)                                             34.94%        73.83%       (3.25)%      (11.07)%          (20.50)%   
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:                                                                                                        
Net assets, end of period (000s omitted)                  $47,942       $16,543       $3,918       $ 2,016           $ 1,992     
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:                                                                                         
  With fee waivers and/or expense reimbursements             2.48%(c)      2.65%        2.66%         2.70%(d)          2.81%(e) 
---------------------------------------------------------------------------------------------------------------------------------
  Without fee waivers and/or expense reimbursements          2.50%(c)      3.00%        3.68%         5.23%(d)          7.53%(e) 
=================================================================================================================================
Ratio of net investment income (loss) to average net                                                                             
  assets                                                    (0.84)%(c)    (1.11)%      (1.50)%       (1.83)%           (1.79)%(e)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(f)                                     87%           93%         118%          145%               30%    
_________________________________________________________________________________________________________________________________
=================================================================================================================================

(a)  Calculated using average shares outstanding.                               
(b)  Includes adjustments in accordance with accounting principles generally    
accepted in the United States of America and as such, the net asset   
 value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for  
shareholder transactions. Does not include sales charges and is not   
annualized for periods less than one year.                            
(c)  Ratios are based on average daily net assets of $27,318,464.               
(d)  Ratio of expenses to average net assets including interest expense were    
2.72% and 5.25% with and without fee waivers and/or expense           
reimbursements, respectively. Ratio of interest expense to average net
assets was 0.02%.                                                     
(e)  Annualized.                                                                
(f)  Not annualized for periods less than one year.                             

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NOTE 11--FINANCIAL HIGHLIGHTS (CONTINUED)                                       

                                                        [Enlarge/Download Table]

                                                                                          CLASS C                                
                                                           ----------------------------------------------------------------------
                                                                                                                 AUGUST 31, 2000 
                                                                                                                 (DATE OPERATIONS
                                                                       YEAR ENDED DECEMBER 31,                    COMMENCED) TO  
                                                           -----------------------------------------------         DECEMBER 31,  
                                                            2004          2003         2002         2001               2000      
---------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                 
Net asset value, beginning of period                       $ 11.89       $ 6.83       $ 7.07       $  7.95           $ 10.00     
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:                                                                                               
  Net investment income (loss)                               (0.11)(a)    (0.10)(a)    (0.11)(a)     (0.13)(a)         (0.05)(a) 
---------------------------------------------------------------------------------------------------------------------------------
  Net gains (losses) on securities (both realized and                                                                            
    unrealized)                                               4.25         5.16        (0.13)        (0.75)            (2.00)    
=================================================================================================================================
    Total from investment operations                          4.14         5.06        (0.24)        (0.88)            (2.05)    
=================================================================================================================================
Less distributions from net realized gains                   (0.22)          --           --            --                --     
=================================================================================================================================
Redemptions fees added to shares of beneficial interest       0.00         0.00           --            --                --     
=================================================================================================================================
Net asset value, end of period                             $ 15.81       $11.89       $ 6.83       $  7.07           $  7.95     
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b)                                              34.94%       74.09%       (3.39)%      (11.07)%          (20.50)%   
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:                                                                                                        
Net assets, end of period (000s omitted)                   $47,818       $9,208       $2,849       $ 2,588           $ 2,649     
=================================================================================================================================
Ratio of expenses to average net assets:                                                                                         
  With fee waivers and/or expense reimbursements              2.48%(c)     2.65%        2.66%         2.70%(d)          2.81%(e) 
---------------------------------------------------------------------------------------------------------------------------------
  Without fee waivers and/or expense reimbursements           2.50%(c)     3.00%        3.68%         5.23%(d)          7.53%(e) 
=================================================================================================================================
Ratio of net investment income (loss) to average net                                                                             
  assets                                                     (0.84)%(c)   (1.11)%      (1.50)%       (1.83)%           (1.79)%(e)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(f)                                      87%          93%         118%          145%               30%    
_________________________________________________________________________________________________________________________________
=================================================================================================================================

(a)  Calculated using average shares outstanding.                               
(b)  Includes adjustments in accordance with accounting principles generally    
accepted in the United States of America and as such, the net asset   
 value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for  
shareholder transactions. Does not include sales charges and is not   
annualized for periods less than one year.                            
(c)  Ratios are based on average daily net assets of $23,456,283.               
(d)  Ratio of expenses to average net assets including interest expense were    
2.72% and 5.25% with and without fee waivers and/or expense           
reimbursements, respectively. Ratio of interest expense to average net
assets was 0.02%.                                                     
(e)  Annualized.                                                                
(f)  Not annualized for periods less than one year.                             

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 October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment
advisor to certain AIM Funds) and A I M Advisors, Inc. ("AIM") (the Fund's      
investment advisor) reached final settlements with certain regulators, including
without limitation the Securities and Exchange Commission ("SEC"), the New York 
Attorney General ("NYAG") and the Colorado Attorney General ("COAG"), to resolve
civil enforcement actions and investigations related to market timing activity  
and related issues in the AIM Funds, including those formerly advised by IFG.   
These regulators alleged, in substance, that IFG and AIM failed to disclose in  
the prospectuses for the AIM Funds that they advised and to the independent     
directors/trustees of such Funds that they had entered into certain arrangements
permitting market timing of such Funds, thereby breaching their fiduciary duties
to such Funds. As a result of the foregoing, the regulators alleged that IFG and
AIM breached various Federal and state securities, business and consumer        
protection laws. On the same date, A I M Distributors, Inc. ("ADI") (the        
distributor of the retail AIM Funds) reached a final settlement with the SEC to 
resolve an investigation relating to market timing activity and related issues  
in the AIM Funds. The SEC also alleged that ADI violated various Federal        
securities laws. The SEC also has settled related market timing enforcement     
actions brought against certain former officers and employees of IFG.           

Under the terms of the settlements, IFG agreed to pay a total of $325   
million, of which $110 million is civil penalties. Of this $325 million total   
payment, half has been paid and the remaining half will be paid on or before    
December 31, 2005. AIM and ADI agreed to pay a total of $50 million, of which   
$30 million is civil penalties, all of which has been paid. The entire $325     
million IFG settlement payment will be made available for distribution to the   
shareholders of those AIM Funds that IFG formerly advised that were harmed by   
market timing activity, and the entire $50 million settlement payment by AIM and
ADI will be made available for distribution to the shareholders of those AIM    
Funds advised by AIM that were harmed by market timing activity, all as to be   
determined by an independent distribution consultant. The settlement payments   
will be distributed in accordance with a methodology to be determined by the    
independent distribution consultant, in consultation with AIM and the           
independent trustees of the AIM Funds and acceptable to the staff of the SEC.   
Under the settlements with the NYAG and COAG, AIM has agreed to reduce          
management fees on certain equity and balanced AIM                              

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NOTE 12--LEGAL PROCEEDINGS (CONTINUED)                                          

Funds by $15 million per year for the next five years, based upon effective fee 
rates and assets under management as of July 1, 2004, and not to increase       
certain management fees.                                                        

Under the terms of the settlements, AIM will make certain governance and
compliance reforms, including maintaining an internal controls committee and    
retaining an independent compliance consultant and a corporate ombudsman. Also, 
commencing in 2007 and at least once every other year thereafter, AIM will      
undergo a compliance review by an independent third party. In addition, under   
the terms of the settlements, AIM has undertaken to cause the AIM Funds to      
operate in accordance with certain governance policies and practices, including 
retaining a full-time independent senior officer whose duties will include      
monitoring compliance and managing the process by which proposed management fees
to be charged the AIM Funds are negotiated. Also, commencing in 2008 and not    
less than every fifth calendar year thereafter, the AIM Funds will hold         
shareholder meetings at which their Boards of Trustees will be elected.         

   At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"),
the parent company of IFG and AIM, has agreed to pay expenses incurred by such  
Funds related to market timing matters.                                         

  The SEC has also settled market timing enforcement actions against Raymond
R. Cunningham (the former president and chief executive officer of IFG and a    
former member of the board of directors of the AIM Funds formerly advised by    
IFG), Timothy J. Miller (the former chief investment officer and a former       
portfolio manager for IFG), Thomas A. Kolbe (the former national sales manager  
of IFG) and Michael D. Legoski (a former assistant vice president in IFG's sales
department). As part of these settlements, the SEC ordered these individuals to 
pay restitution and civil penalties in various amounts and prohibited them from 
associating with, or serving as an officer or director of, an investment        
advisor, broker, dealer and/or investment company, as applicable, for certain   
periods of time.                                                                

The payments made in connection with the above-referenced settlements by
IFG, AIM and ADI will total approximately $375 million (not including AIM's     
agreement to reduce management fees on certain equity and balanced AIM Funds by 
$15 million per year for the next five years, based upon effective fee rates and
assets under management as of July 1, 2004). The manner in which the settlement 
payments will be distributed is unknown at the present time and will be         
determined by an independent distribution consultant appointed under the        
settlement agreements. Therefore, management of AIM and the Fund are unable at  
the present time to estimate the impact, if any, that the distribution of the   
settlement payments may have on the Fund or whether such distribution will have 
an impact on the Fund's financial statements in the future.                     

  At the present time, management of AIM and the Fund are unable to estimate
the impact, if any, that the outcome of the Regulatory Inquiries and Pending    
Litigation described below may have on AIM, ADI or the Fund.                    

Regulatory Inquiries and Pending Litigation                                     

The mutual fund industry as a whole is currently subject to regulatory  
inquiries and litigation related to a wide range of issues. These issues        
include, among others, market timing activity, late trading, fair value pricing,
excessive or improper advisory and/or distribution fees, mutual fund sales      
practices, including but not limited to revenue sharing and directed-brokerage  
arrangements, investments in securities of other registered investment          
companies, contractual plans, issues related to Section 529 college savings     
plans, procedures for locating lost security holders and participation in class 
action settlements.                                                             

 As described more fully below, IFG and AIM are the subject of a number of
ongoing regulatory inquiries and civil lawsuits related to one or more of the   
issues currently being scrutinized by various Federal and state regulators,     
including but not limited to those issues described above. Additional regulatory
actions and/or civil lawsuits related to the above or other issues may be filed 
against the AIM Funds, IFG, AIM and/or related entities and individuals in the  
future. Additional regulatory inquiries related to the above or other issues    
also may be received by the AIM Funds, IFG, AIM and/or related entities and     
individuals in the future.                                                      

Ongoing Regulatory Inquiries Concerning IFG and AIM                             

   IFG, certain related entities, certain of their current and former officers
and/or certain of the AIM Funds formerly advised by IFG have received regulatory
inquiries in the form of subpoenas or other oral or written requests for        
information and/or documents related to one or more of the following issues,    
some of which concern one or more such Funds: market timing activity, late      
trading, fair value pricing, excessive or improper advisory and/or distribution 
fees, mutual fund sales practices, including revenue sharing and                
directed-brokerage arrangements, and investments in securities of other         
registered investment companies. These regulators include the SEC, the NASD,    
Inc. ("NASD"), the Florida Department of Financial Services, the Attorney       
General of the State of West Virginia, the West Virginia Securities Commission  
and the Bureau of Securities of the State of New Jersey. IFG and certain of     
these other parties also have received more limited inquiries from the United   
States Department of Labor ("DOL") and the United States Attorney's Office for  
the Southern District of New York, some of which concern one or more of the AIM 
Funds formerly advised by IFG. IFG is providing full cooperation with respect to
these inquiries.                                                                

   AIM, certain related entities, certain of their current and former officers
and/or certain of the AIM Funds have received regulatory inquiries in the form  
of subpoenas or other oral or written requests for information and/or documents 
related to one or more of the following issues, some of which concern one or    
more AIM Funds: market timing activity, late trading, fair value pricing,       
excessive or improper advisory and/or distribution fees, mutual fund sales      
practices, including revenue sharing and directed-brokerage arrangements,       
investments in securities of other registered investment companies, contractual 
plans, issues related to Section 529 college savings plans and procedures for   
locating lost securityholders. These regulators include the SEC, the NASD, the  
Department of Banking for the State of Connecticut, the Attorney General of the 
State of West Virginia, the West Virginia Securities Commission and the Bureau  
of Securities of the State of New Jersey. AIM and certain of these other parties
also have received more limited inquiries from the SEC, the NASD,               
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NOTE 12--LEGAL PROCEEDINGS (CONTINUED)                                          

the DOL, the Internal Revenue Service, the United States Attorney's Office for  
the Southern District of New York, the United States Attorney's Office for the  
Central District of California, the United States Attorney's Office for the     
District of Massachusetts, the Massachusetts Securities Division, the U.S.      
Postal Inspection Service and the Commodity Futures Trading Commission, some of 
which concern one or more AIM Funds. AIM is providing full cooperation with     
respect to these inquiries.                                                     

Private Civil Actions Alleging Market Timing                                    

 Multiple civil lawsuits, including purported class action and shareholder
derivative suits, have been filed against various parties (including, depending 
on the lawsuit, certain AIM Funds, IFG, AIM, AIM Management, AMVESCAP, certain  
related entities, certain of their current and former officers and/or certain   
unrelated third parties) making allegations that are similar in many respects to
those in the settled regulatory actions brought by the SEC, the NYAG and the    
COAG concerning market timing activity in the AIM Funds. These lawsuits allege a
variety of theories of recovery, including but not limited to: (i) violation of 
various provisions of the Federal and state securities laws; (ii) violation of  
various provisions of ERISA; (iii) breach of fiduciary duty; and/or (iv) breach 
of contract. These lawsuits were initiated in both Federal and state courts and 
seek such remedies as compensatory damages; restitution; injunctive relief;     
disgorgement of management fees; imposition of a constructive trust; removal of 
certain directors and/or employees; various corrective measures under ERISA;    
rescission of certain Funds' advisory agreements; interest; and attorneys' and  
experts' fees.                                                                  

All lawsuits based on allegations of market timing, late trading, and   
related issues have been transferred to the United States District Court for the
District of Maryland (the "MDL Court") for consolidated or coordinated pre-trial
proceedings. Pursuant to an Order of the MDL Court, plaintiffs consolidated     
their claims for pre-trial purposes into three amended complaints against       
various AIM- and IFG-related parties: (i) a Consolidated Amended Class Action   
Complaint purportedly brought on behalf of shareholders of the AIM Funds; (ii) a
Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of 
the AIM Funds and fund registrants; and (iii) an Amended Class Action Complaint 
for Violations of the Employee Retirement Income Securities Act ("ERISA")       
purportedly brought on behalf of participants in AMVESCAP's 401(k) plan. The    
plaintiffs in one of the underlying lawsuits continue to seek remand of their   
lawsuit to state court.                                                         

Private Civil Actions Alleging Improper Use of Fair Value Pricing               

    Multiple civil class action lawsuits have been filed against various parties
(including, depending on the lawsuit, certain AIM Funds, IFG and/or AIM)        
alleging that certain AIM Funds inadequately employed fair value pricing. These 
lawsuits allege a variety of theories of recovery, including but not limited to:
(i) violations of various provisions of the Federal securities laws; (ii) common
law breach of duty; and (iii) common law negligence and gross negligence. These 
lawsuits have been filed in both Federal and state courts and seek such remedies
as compensatory and punitive damages; interest; and attorneys' fees and costs.  

Private Civil Actions Alleging Excessive Advisory and/or Distribution Fees      

 Multiple civil lawsuits, including purported class action and shareholder
derivative suits, have been filed against various parties (including, depending 
on the lawsuit, IFG, AIM, INVESCO Institutional (N.A.), Inc. ("IINA"), ADI      
and/or INVESCO Distributors, Inc. ("INVESCO Distributors")) alleging that the   
defendants charged excessive advisory and/or distribution fees and failed to    
pass on to shareholders the perceived savings generated by economies of scale.  
Certain of these lawsuits also allege that the defendants adopted unlawful      
distribution plans. These lawsuits allege a variety of theories of recovery,    
including but not limited to: (i) violation of various provisions of the Federal
securities laws; (ii) breach of fiduciary duty; and/or (iii) breach of contract.
These lawsuits have been filed in Federal courts and seek such remedies as      
damages; injunctive relief; rescission of certain Funds' advisory agreements and
distribution plans; interest; prospective relief in the form of reduced fees;   
and attorneys' and experts' fees. All of these lawsuits have been transferred to
the United States District Court for the Southern District of Texas, Houston    
Division by order of the applicable United States District Court in which they  
were initially filed. The plaintiff in one of these lawsuits has challenged this
order.                                                                          

Private Civil Actions Alleging Improper Charging of Distribution Fees on Limited
Offering Funds or Share Classes                                                 

  Multiple civil lawsuits, including shareholder derivative suits, have been
filed against various parties (including, depending on the lawsuit, IFG, AIM,   
ADI and/or certain of the trustees of the AIM Funds) alleging that the          
defendants breached their fiduciary duties by charging distribution fees while  
funds and/or specific share classes were closed generally to new investors      
and/or while other share classes of the same fund were not charged the same     
distribution fees. These lawsuits allege a variety of theories of recovery,     
including but not limited to: (i) violation of various provisions of the Federal
securities laws; and (ii) breach of fiduciary duty. These lawsuits have been    
filed in Federal courts and seek such remedies as damages; injunctive relief;   
and attorneys' and experts' fees.                                               

Private Civil Actions Alleging Improper Mutual Fund Sales Practices and         
Directed-Brokerage Arrangements                                                 

 Multiple civil lawsuits, including purported class action and shareholder
derivative suits, have been filed against various parties (including, depending 
on the lawsuit, AIM Management, IFG, AIM, AIM Investment Services, Inc. ("AIS") 
and/or certain of the trustees of the AIM Funds) alleging that the defendants   
improperly used the assets of the AIM Funds to pay brokers to aggressively      
promote the sale of the AIM Funds over other mutual funds and that the          
defendants concealed such payments from investors by disguising them as         
brokerage commissions. These lawsuits allege a variety of theories of recovery, 
including but not limited to: (i) violation of various provisions of the Federal
securities laws; (ii) breach of fiduciary duty; and (iii) aiding and abetting a 
breach of fiduciary duty. These lawsuits have been filed in Federal courts and  
seek such remedies as compensatory and punitive damages; rescission of certain  
Funds' advisory agreements and distribution plans and recovery of all fees paid;
an accounting of all fund-related fees, commissions and soft dollar payments;   
restitution of all unlawfully or discriminatorily obtained fees and charges; and
attorneys' and experts' fees.                                                   

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NOTE 12--LEGAL PROCEEDINGS (CONTINUED)                                          

Private Civil Action Alleging Failure to Ensure Participation in Class Action   
Settlements                                                                     

A civil lawsuit, purporting to be a class action lawsuit, has been filed
against AIM, IINA, A I M Capital Management, Inc. and the trustees of the AIM   
Funds alleging that the defendants breached their fiduciary duties by failing to
ensure that the AIM Funds participated in class action settlements in which the 
AIM Funds were eligible to participate. This lawsuit alleges as theories of     
recovery: (i) violation of various provisions of the Federal securities laws;   
(ii) common law breach of fiduciary duty; and (iii) common law negligence. This 
lawsuit has been filed in Federal court and seeks such remedies as compensatory 
and punitive damages; forfeiture of all commissions and fees paid by the class  
of plaintiffs; and costs and attorneys' fees.                                   
*                                       *                                      *
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

    As a result of the matters discussed above, investors in the AIM Funds might
react by redeeming their investments. This might require the Funds to sell      
investments to provide for sufficient liquidity and could also have an adverse  
effect on the investment performance of the Funds.                              

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                         

To the Board of Trustees and Shareholders of                                    
AIM Mid Cap Basic Value 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 Mid Cap Basic Value Fund (one  
of the funds constituting AIM Funds Group hereafter referred to as the "Fund")  
at December 31, 2004, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended and
the financial highlights for each of the periods indicated, in conformity with  
accounting principles generally accepted in the United States of America. These 
financial statements and financial highlights (hereafter referred to as         
"financial statements") are the responsibility of the Fund's management; our    
responsibility is to express an opinion on these financial statements based on  
our audits. We conducted our audits of these financial statements in accordance 
with the standards of the Public Company Accounting Oversight Board (United     
States). Those standards require that we plan and perform the audit to obtain   
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting 
the amounts and disclosures in the financial statements, assessing the          
accounting principles used and significant estimates made by management, and    
evaluating the overall financial statement presentation. We believe that our    
audits, which included confirmation of securities at December 31, 2004 by       
correspondence with the custodian and brokers, provide a reasonable basis for   
our opinion.                                                                    

/s/ PRICEWATERHOUSECOOPERS LLP                                                  

February 18, 2005                                                               
Houston, Texas                                                                  

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FINANCIALS                                                                      

SCHEDULE OF INVESTMENTS                                                         

December 31, 2004                                                               

                                                                [Download Table]


                                                              MARKET   
                                                SHARES        VALUE    
-----------------------------------------------------------------------
                                                                       
COMMON STOCKS & OTHER EQUITY INTERESTS-95.11%                          

ADVERTISING-2.95%                                                      

Interpublic Group of Cos., Inc. (The)(a)         470,070   $  6,298,938
=======================================================================

APPAREL RETAIL-4.50%                                                   

Gap, Inc. (The)                                  215,500      4,551,360
-----------------------------------------------------------------------
TJX Cos., Inc. (The)                             201,900      5,073,747
=======================================================================
                                                              9,625,107
=======================================================================

APPLICATION SOFTWARE-0.99%                                             

MAPICS, Inc.(a)                                  200,200      2,112,110
=======================================================================

ASSET MANAGEMENT & CUSTODY BANKS-2.25%                                 

Waddell & Reed Financial, Inc.-Class A           201,490      4,813,596
=======================================================================

BUILDING PRODUCTS-1.69%                                                

American Standard Cos. Inc.(a)                    87,250      3,605,170
=======================================================================

CONSUMER FINANCE-1.81%                                                 

MoneyGram International, Inc.                    183,500      3,879,190
=======================================================================

DATA PROCESSING & OUTSOURCED SERVICES-9.70%                            

BISYS Group, Inc. (The)(a)                       174,900      2,877,105
-----------------------------------------------------------------------
Ceridian Corp.(a)                                239,280      4,374,039
-----------------------------------------------------------------------
Certegy Inc.                                     113,850      4,045,090
-----------------------------------------------------------------------
DST Systems, Inc.(a)                             111,270      5,799,392
-----------------------------------------------------------------------
SunGard Data Systems Inc.(a)                     128,300      3,634,739
=======================================================================
                                                             20,730,365
=======================================================================

DIVERSIFIED COMMERCIAL SERVICES-6.10%                                  

Corinthian Colleges, Inc.(a)                     261,100      4,920,430
-----------------------------------------------------------------------
Jackson Hewitt Tax Service Inc.                  321,400      8,115,350
=======================================================================
                                                             13,035,780
=======================================================================

FOOD RETAIL-2.21%                                                      

Kroger Co. (The)(a)                              268,700      4,712,998
=======================================================================

HEALTH CARE DISTRIBUTORS-3.04%                                         

McKesson Corp.                                   206,200      6,487,052
=======================================================================

HEALTH CARE EQUIPMENT-2.55%                                            

Waters Corp.(a)                                  116,500      5,451,035
=======================================================================

HEALTH CARE FACILITIES-1.65%                                           

Universal Health Services, Inc.-Class B           79,350      3,531,075
=======================================================================

HEALTH CARE SERVICES-0.99%                                             

IMS Health Inc.                                   91,240      2,117,680
=======================================================================

                                                                [Download Table]
                                                              MARKET   
                                                SHARES        VALUE    
-----------------------------------------------------------------------


                                                                       

HOTELS, RESORTS & CRUISE LINES-2.57%                                   

Orient-Express Hotels Ltd.-Class A (Bermuda)     140,700   $  2,894,199
-----------------------------------------------------------------------
Starwood Hotels & Resorts Worldwide, Inc.         44,380      2,591,792
=======================================================================
                                                              5,485,991
=======================================================================

INSURANCE BROKERS-2.38%                                                

Aon Corp.                                        213,600      5,096,496
=======================================================================

IT CONSULTING & OTHER SERVICES-2.55%                                   

Acxiom Corp.                                     207,550      5,458,565
=======================================================================

LEISURE FACILITIES-2.24%                                               

Speedway Motorsports, Inc.                       122,300      4,791,714
=======================================================================

LEISURE PRODUCTS-2.42%                                                 

Brunswick Corp.                                  104,470      5,171,265
=======================================================================

LIFE & HEALTH INSURANCE-4.14%                                          

Nationwide Financial Services, Inc.-Class A      123,290      4,713,377
-----------------------------------------------------------------------
Protective Life Corp.                             96,900      4,136,661
=======================================================================
                                                              8,850,038
=======================================================================

MANAGED HEALTH CARE-5.43%                                              

Aetna Inc.                                        46,890      5,849,528
-----------------------------------------------------------------------
WellPoint Inc.(a)                                 49,980      5,747,700
=======================================================================
                                                             11,597,228
=======================================================================

MULTI-LINE INSURANCE-3.62%                                             

American Financial Group, Inc.                   114,630      3,589,065
-----------------------------------------------------------------------
Genworth Financial Inc.-Class A                  154,000      4,158,000
=======================================================================
                                                              7,747,065
=======================================================================

OIL & GAS DRILLING-5.37%                                               

Nabors Industries, Ltd. (Bermuda)(a)              77,290      3,964,204
-----------------------------------------------------------------------
Pride International, Inc.(a)(b)                  202,910      4,167,771
-----------------------------------------------------------------------
Todco-Class A(a)                                 181,000      3,334,020
=======================================================================
                                                             11,465,995
=======================================================================

PACKAGED FOODS & MEATS-2.13%                                           

Cadbury Schweppes PLC-ADR (United Kingdom)       120,700      4,550,390
=======================================================================

PROPERTY & CASUALTY INSURANCE-3.39%                                    

ACE Ltd. (Cayman Islands)                        169,320      7,238,430
=======================================================================

REGIONAL BANKS-4.52%                                                   

Cullen/Frost Bankers, Inc.                        90,100      4,378,860
-----------------------------------------------------------------------
Zions Bancorp                                     77,570      5,277,087
=======================================================================
                                                              9,655,947
=======================================================================

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                                                                [Download Table]


                                                              MARKET   
                                                SHARES        VALUE    
-----------------------------------------------------------------------
                                                                       

RESTAURANTS-3.97%                                                      

CEC Entertainment Inc.(a)                         98,950   $  3,955,032
-----------------------------------------------------------------------
Outback Steakhouse, Inc.                          99,030      4,533,593
=======================================================================
                                                              8,488,625
=======================================================================

SYSTEMS SOFTWARE-3.88%                                                 

Computer Associates International, Inc.          266,800      8,286,808
=======================================================================

THRIFTS & MORTGAGE FINANCE-6.07%                                       

Federal Agricultural Mortgage Corp.-Class C      102,100      2,378,930
-----------------------------------------------------------------------
MGIC Investment Corp.                             59,300      4,086,363
-----------------------------------------------------------------------
Radian Group Inc.                                122,280      6,510,187
=======================================================================
                                                             12,975,480
=======================================================================
    Total Common Stocks & Other Equity                                 
      Interests (Cost $161,663,226)                         203,260,133
=======================================================================

                                                                [Download Table]
                                                              MARKET    
                                                SHARES        VALUE     
----------------------------------------------------------------------- 


                                                                        

MONEY MARKET FUNDS-4.57%                                                

Liquid Assets Portfolio-Institutional                                   
  Class(c)                                     4,883,864   $  4,883,864 
----------------------------------------------------------------------- 
STIC Prime Portfolio-Institutional Class(c)    4,883,864      4,883,864 
======================================================================= 
    Total Money Market Funds (Cost                                      
      $9,767,728)                                             9,767,728 
======================================================================= 
TOTAL INVESTMENTS-99.68% (excluding                                     
  investments purchased with cash collateral                            
  from securities loaned) (Cost $171,430,954)               213,027,861 
======================================================================= 

INVESTMENTS PURCHASED WITH CASH COLLATERAL                              
  FROM SECURITIES LOANED                                                

MONEY MARKET FUNDS-0.72%                                                

STIC Prime Portfolio-Institutional                                      
  Class(c)(d)                                  1,530,900      1,530,900 
======================================================================= 
    Total Money Market Funds (purchased with                            
      cash collateral from securities loaned)                           
      (Cost $1,530,900)                                       1,530,900 
======================================================================= 
TOTAL INVESTMENTS-100.40% (Cost $172,961,854)               214,558,761 
======================================================================= 
OTHER ASSETS LESS LIABILITIES-(0.40%)                          (856,409)
======================================================================= 
NET ASSETS-100.00%                                         $213,702,352 
_______________________________________________________________________ 
======================================================================= 

Investment Abbreviations:                                                       

                                                                [Download Table]
                                  
ADR  - American Depositary Receipt

Notes to Schedule of Investments:                                               

(a) Non-income producing security.                                              
(b) All or a portion of this security has been pledged as collateral for        
securities lending transactions at December 31, 2004.                   
(c) The money market fund and the Fund are affiliated by having the same        
investment advisor. See Note 3.                                         
(d) The security has been segregated to satisfy the forward commitment to return
the cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned. See Note 8.                 

See accompanying notes which are an integral part of the financial statements.  
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STATEMENT OF ASSETS AND LIABILITIES                                             

December 31, 2004                                                               

                                                                [Download Table]
                                                            
ASSETS:                                                     

Investments, at market value (cost                          
  $161,663,226)*                               $203,260,133 
----------------------------------------------------------- 
Investments in affiliated money market funds                
  (cost $11,298,628)                             11,298,628 
=========================================================== 
    Total investments (cost $172,961,854)       214,558,761 
=========================================================== 
Receivables for:                                            
  Investments sold                                  319,517 
----------------------------------------------------------- 
  Fund shares sold                                  583,161 
----------------------------------------------------------- 
  Dividends                                         170,145 
----------------------------------------------------------- 
Investment for trustee deferred compensation                
  and retirement plans                               13,369 
----------------------------------------------------------- 
Other assets                                         50,335 
=========================================================== 
    Total assets                                215,695,288 
___________________________________________________________ 
=========================================================== 

LIABILITIES:                                                

Payables for:                                               
  Fund shares reacquired                            232,295 
----------------------------------------------------------- 
  Trustee deferred compensation and                         
    retirement plans                                 16,081 
----------------------------------------------------------- 
  Collateral upon return of securities loaned     1,530,900 
----------------------------------------------------------- 
Accrued distribution fees                           105,432 
----------------------------------------------------------- 
Accrued transfer agent fees                          58,420 
----------------------------------------------------------- 
Accrued operating expenses                           49,808 
=========================================================== 
    Total liabilities                             1,992,936 
=========================================================== 
Net assets applicable to shares outstanding    $213,702,352 
___________________________________________________________ 
=========================================================== 

NET ASSETS CONSIST OF:                                      

Shares of beneficial interest                  $181,830,611 
----------------------------------------------------------- 
Undistributed net investment income (loss)          (12,855)
----------------------------------------------------------- 
Undistributed net realized gain (loss) from                 
  investment securities                          (9,712,311)
----------------------------------------------------------- 
Unrealized appreciation of investment                       
  securities                                     41,596,907 
=========================================================== 
                                               $213,702,352 
___________________________________________________________ 
=========================================================== 

NET ASSETS:                                                 

Class A                                        $115,163,883 
___________________________________________________________ 
=========================================================== 
Class B                                        $ 63,374,466 
___________________________________________________________ 
=========================================================== 
Class C                                        $ 27,601,222 
___________________________________________________________ 
=========================================================== 
Class R                                        $     32,984 
___________________________________________________________ 
=========================================================== 
Institutional Class                            $  7,529,797 
___________________________________________________________ 
=========================================================== 

SHARES OUTSTANDING, $0.01 PAR VALUE PER                     
  SHARE, UNLIMITED NUMBER OF SHARES                         
  AUTHORIZED:                                               

Class A                                           8,777,188 
___________________________________________________________ 
=========================================================== 
Class B                                           4,924,252 
___________________________________________________________ 
=========================================================== 
Class C                                           2,145,814 
___________________________________________________________ 
=========================================================== 
Class R                                               2,516 
___________________________________________________________ 
=========================================================== 
Institutional Class                                 571,534 
___________________________________________________________ 
=========================================================== 
Class A:                                                    
  Net asset value per share                    $      13.12 
----------------------------------------------------------- 
  Offering price per share:                                 
    (Net asset value of $13.12 divided by                   
      94.50%)                                  $      13.88 
___________________________________________________________ 
=========================================================== 
Class B:                                                    
  Net asset value and offering price per                    
    share                                      $      12.87 
___________________________________________________________ 
=========================================================== 
Class C:                                                    
  Net asset value and offering price per                    
    share                                      $      12.86 
___________________________________________________________ 
=========================================================== 
Class R:                                                    
  Net asset value and offering price per                    
    share                                      $      13.11 
___________________________________________________________ 
=========================================================== 
Institutional Class:                                        
  Net asset value and offering price per                    
    share                                      $      13.17 
___________________________________________________________ 
=========================================================== 

* At December 31, 2004, securities with an aggregate market value of $1,497,366 
were on loan to brokers.                                                    

See accompanying notes which are an integral part of the financial statements.  
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STATEMENT OF OPERATIONS                                                         

For the year ended December 31, 2004                                            

                                                                [Download Table]
                                                                          
INVESTMENT INCOME:                                                        

Dividends (net of foreign withholding tax of $4,934)          $ 1,176,488 
------------------------------------------------------------------------- 
Dividends from affiliated money market funds (including                   
  securities lending income of $1,827*)                           113,881 
========================================================================= 
    Total investment income                                     1,290,369 
========================================================================= 

EXPENSES:                                                                 

Advisory fees                                                   1,259,409 
------------------------------------------------------------------------- 
Administrative services fees                                       50,000 
------------------------------------------------------------------------- 
Custodian fees                                                     25,507 
------------------------------------------------------------------------- 
Distribution fees:                                                        
  Class A                                                         300,274 
------------------------------------------------------------------------- 
  Class B                                                         505,689 
------------------------------------------------------------------------- 
  Class C                                                         189,702 
------------------------------------------------------------------------- 
  Class R                                                              43 
------------------------------------------------------------------------- 
Transfer agent fees -- Class A, B, C and R                        504,123 
------------------------------------------------------------------------- 
Transfer agent fees -- Institutional Class                          1,279 
------------------------------------------------------------------------- 
Trustees' fees and retirement benefits                             16,965 
------------------------------------------------------------------------- 
Other                                                             248,256 
========================================================================= 
    Total expenses                                              3,101,247 
========================================================================= 
Less: Fees waived, expenses reimbursed and expense offset                 
    arrangements                                                  (40,504)
========================================================================= 
    Net expenses                                                3,060,743 
========================================================================= 
Net investment income (loss)                                   (1,770,374)
========================================================================= 

REALIZED AND UNREALIZED GAIN FROM INVESTMENT SECURITIES:                  

Net realized gain from investment securities                    1,517,779 
------------------------------------------------------------------------- 
Net increase from payments by affiliates -- See Note 2            146,526 
========================================================================= 
Change in net unrealized appreciation of investment                       
  securities                                                   24,454,568 
========================================================================= 
Net gain from investment securities                            26,118,873 
========================================================================= 
Net increase in net assets resulting from operations          $24,348,499 
_________________________________________________________________________ 
========================================================================= 

* Dividends from affiliated money market funds are net of income rebate paid to 
securities lending counterparties.                                          

See accompanying notes which are an integral part of the financial statements.  
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STATEMENT OF CHANGES IN NET ASSETS                                              

For the years ended December 31, 2004 and 2003                                  

                                                        [Enlarge/Download Table]

                                                                  2004            2003     
------------------------------------------------------------------------------------------ 
                                                                                           
OPERATIONS:                                                                                

  Net investment income (loss)                                $ (1,770,374)   $   (967,184)
------------------------------------------------------------------------------------------ 
  Net realized gain (loss) from investment securities            1,517,779      (4,054,747)
------------------------------------------------------------------------------------------ 
  Net increase from payments by affiliates                         146,526              -- 
------------------------------------------------------------------------------------------ 
  Change in net unrealized appreciation of investment                                      
    securities                                                  24,454,568      27,636,943 
========================================================================================== 
    Net increase in net assets resulting from operations        24,348,499      22,615,012 
========================================================================================== 
Share transactions-net:                                                                    
  Class A                                                       46,344,715       4,929,815 
------------------------------------------------------------------------------------------ 
  Class B                                                       17,811,507       8,575,378 
------------------------------------------------------------------------------------------ 
  Class C                                                       11,353,920       2,445,889 
------------------------------------------------------------------------------------------ 
  Class R                                                           31,275              -- 
------------------------------------------------------------------------------------------ 
  Institutional Class                                            6,853,263              -- 
========================================================================================== 
    Net increase in net assets resulting from share                                        
     transactions                                               82,394,680      15,951,082 
========================================================================================== 
    Net increase in net assets                                 106,743,179      38,566,094 
========================================================================================== 

NET ASSETS:                                                                                

  Beginning of year                                            106,959,173      68,393,079 
========================================================================================== 
  End of year (including undistributed net investment income                               
    (loss) of $(12,855) and $(7,330), respectively)           $213,702,352    $106,959,173 
__________________________________________________________________________________________ 
========================================================================================== 

See accompanying notes which are an integral part of the financial statements.  
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NOTES TO FINANCIAL STATEMENTS                                                   

December 31, 2004                                                               

NOTE 1--SIGNIFICANT ACCOUNTING POLICIES                                         

AIM Mid Cap Basic Value Fund (the "Fund") is a series portfolio of AIM Funds    
Group (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 nine separate portfolios,    
each authorized to issue an unlimited number of shares of beneficial interest.  
The Fund currently offers multiple classes of shares. Matters affecting each    
portfolio or class will be voted on exclusively by the shareholders of such     
portfolio or class. The assets, liabilities and operations of each portfolio are
accounted for separately. Information presented in these financial statements   
pertains only to the Fund.                                                      

    The Fund's investment objective is long-term growth of capital. Each company
listed in the Schedule of Investments is organized in the United States of      
America unless otherwise noted.                                                 

   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. However, the Fund has not had prior claims or losses pursuant to these
contracts.                                                                      

The preparation of financial statements in conformity with accounting   
principles generally accepted in the United States of America requires          
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported 
amounts of revenues and expenses during the reporting period. Actual results    
could differ from those estimates. The following is a summary of the significant
accounting policies followed by the Fund in the preparation of its financial    
statements.                                                                     

A.   SECURITY VALUATIONS -- Securities, including restricted securities, are    
valued according to the following policy.                             

      A security listed or traded on an exchange (except convertible bonds) is
 valued at its last sales price as of the close of the customary trading
session on the exchange where the security is principally traded, or  
lacking any sales on a particular day, the security is valued at the  
     closing bid price on that day. Each security traded in the over-the-counter
   market (but not securities reported on the NASDAQ National Market System)
    is valued on the basis of prices furnished by independent pricing services
or market makers. Each security reported on the NASDAQ National Market
  System is valued at the NASDAQ Official Closing Price ("NOCP") as of the
  close of the customary trading session on the valuation date or absent a
NOCP, at the closing bid price.                                       

  Futures contracts are valued at the final settlement price set by an
     exchange on which they are principally traded. Listed options are valued at
     the mean between the last bid and the ask prices from the exchange on which
   they are principally traded. Options not listed on an exchange are valued
   by an independent source at the mean between the last bid and ask prices.
   For purposes of determining net asset value per share, futures and option
contracts generally will be valued 15 minutes after the close of the  
customary trading session of the New York Stock Exchange ("NYSE").    

    Investments in open-end registered investment companies and closed-end
     registered investment companies that do not trade on an exchange are valued
at the end of day net asset value per share. Investments in closed-end
     registered investment companies that trade on an exchange are valued at the
  last sales price as of the close of the customary trading session on the
exchange where the security is principally traded.                    

     Debt obligations (including convertible bonds) are fair valued using an
evaluated quote provided by an independent pricing service. Evaluated 
    quotes provided by the pricing service may be determined without exclusive
reliance on quoted prices, and may reflect appropriate factors such as
institution-size trading in similar groups of securities, developments
related to specific securities, dividend rate, yield, quality, type of
    issue, coupon rate, maturity, individual trading characteristics and other
    market data. Short-term obligations having 60 days or less to maturity and
 commercial paper are valued at amortized cost which approximates market
value.                                                                

     Securities for which market prices are not provided by any of the above
   methods are valued based upon quotes furnished by independent sources and
  are valued at the last bid price in the case of equity securities and in
the case of debt obligations, the mean between the last bid and asked 
prices.                                                               

     Foreign securities (including foreign exchange contracts) are converted
into U.S. dollar amounts using the applicable exchange rates as of the
close of the NYSE. Generally, trading in foreign securities is        
     substantially completed each day at various times prior to the close of the
   NYSE. The values of such securities used in computing the net asset value
of the Fund's shares are determined as of the close of the respective 
   markets. Events affecting the values of such foreign securities may occur
 between the times at which the particular foreign market closes and the
close of the customary trading session of the NYSE which would not    
   ordinarily be reflected in the computation of the Fund's net asset value.
    If the event is likely to have affected the closing price of the security,
  the security will be valued at fair value in good faith using procedures
     approved by the Board of Trustees. Adjustments to closing prices to reflect
fair value may also be based on a screening process of an independent 
  pricing service to indicate the degree of certainty, based on historical
data, that the closing price in the principal market where a foreign  
security trades is not the current market value as of the close of the
    NYSE. Foreign securities meeting the approved degree of certainty that the
price is not reflective of current market value will be priced at the 
 indication of fair value from the independent pricing service. Multiple
     factors may be considered by the independent pricing service in determining
   adjustments to reflect fair value and may include information relating to
sector indices, ADRs, domestic and foreign index futures and          
exchange-traded funds.                                                

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     Securities for which market quotations are not readily available or are
     unreliable are valued at fair value as determined in good faith by or under
  the supervision of the Trust's officers following procedures approved by
the Board of Trustees. Issuer specific events, market trends, bid/ask 
  quotes of brokers and information providers and other market data may be
     reviewed in the course of making a good faith determination of a security's
fair value.                                                           

B.   SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions   
    are accounted for on a trade date basis. Realized gains or losses on sales
are computed on the basis of specific identification of the securities
sold. Interest income is recorded on the accrual basis from settlement
date. Dividend income is recorded on the ex-dividend date.            

     Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased 
  and/or a reduction of proceeds on a sale of securities. Such transaction
 costs are included in the determination of realized and unrealized gain
   (loss) from investment securities reported in the Statement of Operations
    and the Statement of Changes in Net Assets and the realized and unrealized
 net gains (losses) on securities per share in the Financial Highlights.
   Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These   
transaction costs are not considered operating expenses and are not   
    reflected in net investment income reported in the Statement of Operations
  and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation  
arrangements between the Fund and the advisor.                        

     The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.     

C.   DISTRIBUTIONS -- Distributions from income and net realized capital gain,  
   if any, are generally paid annually and recorded on ex-dividend date. The
Fund may elect to use a portion of the proceeds from redemptions as   
distributions for federal income tax purposes.                        

D.   FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of
Subchapter M of the Internal Revenue Code necessary to qualify as a   
   regulated investment company and, as such, will not be subject to federal
  income taxes on otherwise taxable income (including net realized capital
 gain) which is distributed to shareholders. Therefore, no provision for
federal income taxes is recorded in the financial statements.         

E.   EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular    
 class of the Fund are charged to the operations of such class. Transfer
agency fees and expenses and other shareholder recordkeeping fees and 
     expenses attributable to the Institutional Class are charged to such class.
    Transfer agency fees and expenses and other shareholder recordkeeping fees
and expenses relating to all other classes are allocated among those  
classes based on relative net assets. All other expenses are allocated
among the classes based on relative net assets.                       

NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES                         

The Trust has entered into a master investment advisory agreement with A I M    
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,   
the Fund pays an advisory fee to AIM at the annual rate of 0.80% of the first $1
billion of the Fund's average daily net assets, plus 0.75% of the next $4       
billion of the Fund's average daily net assets, plus 0.70% of the Fund's average
daily net assets in excess of $5 billion. Effective January 1, 2005 through     
December 31, 2009, AIM has contractually agreed to waive advisory fees to the   
extent necessary so that the advisory fees payable by the Fund (based on the    
Fund's average daily net assets) do not exceed the annual rate of 0.745% of the 
first $250 million, plus 0.73% of the next $250 million, plus 0.715% of the next
$500 million, plus 0.70% of the next $1.5 billion, plus 0.685% of the next $2.5 
billion, plus 0.67% of the next $2.5 billion, plus 0.655% of the next $2.5      
billion, plus 0.64% of the Fund's average daily net assets in excess of $10     
billion. AIM has voluntarily agreed to waive advisory fees and/or reimburse     
expenses to the extent necessary to limit total annual operating expenses       
(excluding certain items discussed below) of Class A, Class B, Class C, Class R 
and Institutional Class shares to 1.80%, 2.45%, 2.45%, 1.95% and 1.45% of       
average daily net assets, respectively. In determining the advisor's obligation 
to waive advisory fees and/or reimburse expenses, the following expenses are not
taken into account, and could cause the total annual fund operating expenses to 
exceed the limit stated above: (i) interest; (ii) taxes; (iii) dividend expense 
on short sales; (iv) extraordinary items (these are expenses that are not       
anticipated to arise from the Fund's day-to-day operations), or items designated
as such by the Fund's Board of Trustees; (v) expenses related to a merger or    
reorganization, as approved by the Fund's Board of Trustees; and (vi) expenses  
that the Fund has incurred but did not actually pay because of an expense offset
arrangement. Currently, the only expense offset arrangements from which the Fund
benefits are in the form of credits that the Fund receives from banks where the 
Fund or its transfer agent has deposit accounts in which it holds uninvested    
cash. Those credits are used to pay certain expenses incurred by the Fund. AIM  
did not waive fees and/or reimburse expenses during the period under this       
expense limitation. Further, AIM has voluntarily agreed to waive advisory fees  
of the Fund in the amount of 25% of the advisory fee AIM receives from the      
affiliated money market funds on investments by the Fund in such affiliated     
money market funds (excluding investments made in affiliated money market funds 
with cash collateral from securities loaned by the Fund). Voluntary fee waivers 
or reimbursements may be modified or discontinued at any time upon consultation 
with the Board of Trustees without further notice to investors. For the year    
ended December 31, 2004, AIM waived fees of $1,532.                             

For the year ended December 31, 2004, the advisor reimbursed the Fund   
$146,526 for an economic loss due to a trading error.                           

   For the year ended December 31, 2004, at the request of the Trustees of the
Trust, AMVESCAP PLC ("AMVESCAP") agreed to reimburse $36,613 of expenses        
incurred by the Fund in connection with matters related to recently settled     
regulatory actions and investigations concerning market timing activity in the  
AIM Funds, including legal, audit, shareholder servicing, communication and     
trustee expenses. These expenses along with the related expense reimbursement,  
are included in the Statement of Operations.                                    

  The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing    
accounting services to the Fund. Pursuant to such agreement for the year ended  
December 31, 2004, AIM was paid $50,000.                                        

    The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay AIM Investment Services, Inc. ("AISI") a fee for providing transfer agency  
and shareholder services to the Fund and reimburse AISI for certain expenses    
incurred by AISI in the course of providing such services. For the              
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Institutional Class, the transfer agent has contractually agreed to reimburse   
class specific transfer agent fees and expenses to the extent necessary to limit
transfer agent fees to 0.10% of the average net assets. AISI did not reimburse  
fees during the period under this expense limitation. For the year ended        
December 31, 2004, the Fund paid AISI $504,123 for Class A, Class B, Class C and
Class R shares and $1,279 for Institutional Class shares. AISI may make payments
to intermediaries that provide omnibus account services, sub-accounting services
and/or networking services.                                                     

The Trust has entered into master distribution agreements with A I M    
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the     
Class A, Class B, Class C, Class R and Institutional Class shares of the Fund.  
The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with      
respect to the Fund's Class A, Class B, Class C and Class R shares (collectively
the "Plans"). The Fund, pursuant to the Plans, pays AIM Distributors            
compensation at the annual rate of 0.35% of the Fund's average daily net assets 
of Class A shares, 1.00% of the average daily net assets of Class B and Class C 
shares and 0.50% of the average daily net assets of Class R shares. Of these    
amounts, up to 0.25% of the average daily net assets of the Class A, Class B,   
Class C or Class R shares may be paid to furnish continuing personal shareholder
services to customers who purchase and own shares of such classes. Any amounts  
not paid as a service fee under the Plans would constitute an asset-based sales 
charge. NASD Rules also impose a cap on the total sales charges, including      
asset-based sales charges that may be paid by any class of shares of the Fund.  
Pursuant to the Plans, for the year ended December 31, 2004, the Class A, Class 
B, Class C and Class R shares paid $300,274, $505,689, $189,702 and $43,        
respectively.                                                                   

  Front-end sales commissions and contingent deferred sales charges ("CDSC")
(collectively the "sales charges") are not recorded as expenses of the Fund.    
Front-end sales commissions are deducted from proceeds from the sales of Fund   
shares prior to investment in Class A shares of the Fund. CDSC are deducted from
redemption proceeds prior to remittance to the shareholder. During year ended   
December 31, 2004, AIM Distributors advised the Fund that it retained $99,857 in
front-end sales commissions from the sale of Class A shares and $2,319, $18,299,
$4,347 and $0 from Class A, Class B, Class C and Class R shares, respectively,  
for CDSC imposed upon redemptions by shareholders.                              

Certain officers and trustees of the Trust are officers and directors of
AIM, AISI and/or AIM Distributors.                                              

NOTE 3--INVESTMENTS IN AFFILIATES                                               

The Fund is permitted, pursuant to an exemptive order from the Securities and   
Exchange Commission ("SEC"), to invest daily available cash balances and cash   
collateral from securities lending transactions in affiliated money market      
funds. The Fund and the money market funds below have the same investment       
advisor and therefore, are considered to be affiliated. The tables below show   
the transactions in and earnings from investments in affiliated money market    
funds for the year ended December 31, 2004.                                     

INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:                                   

                                                        [Enlarge/Download Table]

                                                                         UNREALIZED                                               
                 MARKET VALUE       PURCHASES          PROCEEDS         APPRECIATION     MARKET VALUE     DIVIDEND      REALIZED  
FUND               12/31/03          AT COST          FROM SALES       (DEPRECIATION)      12/31/04        INCOME      GAIN (LOSS)
----------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                  
Liquid Assets                                                                                                                     
  Portfolio-                                                                                                                      
  Institutional                                                                                                                   
  Class           $3,469,832       $ 53,717,341      $ (52,303,309)        $   --         $ 4,883,864     $ 56,426       $   --   
----------------------------------------------------------------------------------------------------------------------------------
STIC Prime                                                                                                                        
  Portfolio-                                                                                                                      
  Institutional                                                                                                                   
  Class            3,469,832         53,717,341        (52,303,309)            --           4,883,864       55,628           --   
==================================================================================================================================
  Subtotal        $6,939,664       $107,434,682      $(104,606,618)        $   --         $ 9,767,728     $112,054       $   --   
==================================================================================================================================

INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:            

                                                        [Enlarge/Download Table]

                                                                         UNREALIZED                                               
                 MARKET VALUE       PURCHASES          PROCEEDS         APPRECIATION     MARKET VALUE     DIVIDEND      REALIZED  
FUND               12/31/03          AT COST          FROM SALES       (DEPRECIATION)      12/31/04        INCOME*     GAIN (LOSS)
----------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                  
Liquid Assets                                                                                                                     
  Portfolio-                                                                                                                      
  Institutional                                                                                                                   
  Class           $1,742,200       $ 28,664,200      $ (30,406,400)        $   --         $        --     $  1,324       $   --   
----------------------------------------------------------------------------------------------------------------------------------
STIC Prime                                                                                                                        
  Portfolio-                                                                                                                      
  Institutional                                                                                                                   
  Class                   --         24,428,273        (22,897,373)            --           1,530,900          503           --   
==================================================================================================================================
  Subtotal        $1,742,200       $ 53,092,473      $ (53,303,773)        $   --         $ 1,530,900     $  1,827       $   --   
==================================================================================================================================
  Total           $8,681,864       $160,527,155      $(157,910,391)        $   --         $11,298,628     $113,881       $   --   
__________________________________________________________________________________________________________________________________
==================================================================================================================================

* Dividend income is net of income rebate paid to securities lending            
counterparties.                                                             

NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS                             

The Fund is permitted to purchase or sell securities from or to certain other   
AIM Funds under specified conditions outlined in procedures adopted by the Board
of Trustees of the Trust. The procedures have been designed to ensure that any  
purchase or sale of securities by the Fund from or to another fund or portfolio 
that is or could be considered an affiliate by virtue of having a common        
investment advisor (or affiliated investment advisors), common Trustees and/or  
common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined   
under the procedures each transaction is effected at the                        

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current market price. Pursuant to these procedures, during the year ended       
December 31, 2004, the Fund engaged in purchases and sales of securities of     
$94,900 and $1,545,616, respectively.                                           

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 December 31, 2004, the Fund received credits in transfer agency fees of   
$2,175 and credits in custodian fees of $184 under expense offset arrangements, 
which resulted in a reduction of the Fund's total expenses of $2,359.           

NOTE 6--TRUSTEES' FEES                                                          

Trustees' fees represent remuneration paid to each Trustee of the Trust who is  
not an "interested person" of AIM. Trustees have the option to defer            
compensation payable by the Trust. Those Trustees who defer compensation have   
the option to select various AIM Funds in which their deferral accounts shall be
deemed to be invested.                                                          

Current Trustees are eligible to participate in a retirement plan that  
provides for benefits to be paid upon retirement to Trustees over a period of   
time based on the number of years of service. The Fund may have certain former  
Trustees that also participate in a retirement plan and receive benefits under  
such plan.                                                                      

  Obligations under the deferred compensation and retirement plans represent
unsecured claims against the general assets of the Fund.                        

   During the year ended December 31, 2004, the Fund paid legal fees of $2,947
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Independent Trustees. A member of that firm is a Trustee of the Trust.          

NOTE 7--BORROWINGS                                                              

Pursuant to an exemptive order from the SEC, the Fund may participate in an     
interfund lending facility that AIM has established for temporary borrowings by 
the AIM Funds. An interfund loan will be made under this facility only if the   
loan rate (an average of the rate available on bank loans and the rate available
on investments in overnight repurchase agreements) is favorable to both the     
lending fund and the borrowing fund. A loan will be secured by collateral if the
Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total    
assets. To the extent that the loan is required to be secured by collateral, the
collateral is marked to market daily to ensure that the market value is at least
102% of the outstanding principal value of the loan.                            

The Fund is a participant in an uncommitted unsecured revolving credit  
facility with State Street Bank and Trust Company ("SSB"). The Fund may borrow  
up to the lesser of (i) $125,000,000, or (ii) the limits set by its prospectus  
for borrowings. The Fund and other funds advised by AIM which are parties to the
credit facility can borrow on a first come, first served basis. Principal on    
each loan outstanding shall bear interest at the bid rate quoted by SSB at the  
time of the request for the loan.                                               

During the year ended December 31, 2004, the Fund did not borrow or lend
under the interfund lending facility or borrow under the uncommitted unsecured  
revolving credit facility.                                                      

Additionally, the Fund is permitted to temporarily carry a negative or  
overdrawn balance in its account with SSB, the custodian bank. To compensate the
custodian bank for such overdrafts, the overdrawn Fund may either (i) leave     
funds in the account so the custodian can be compensated by earning the         
additional interest; or (ii) compensate by paying the custodian bank. In either 
case, the custodian bank will be compensated at an amount equal to the Federal  
Funds rate plus 100 basis points.                                               

NOTE 8--PORTFOLIO SECURITIES LOANED                                             

The Fund may lend portfolio securities having a market value up to one-third of 
the Fund's total assets. Such loans are secured by collateral equal to no less  
than the market value of the loaned securities determined daily. Such collateral
will be cash or debt securities issued or guaranteed by the U.S. Government or  
any of its agencies. Cash collateral received in connection with these loans is 
invested in short-term money market instruments or affiliated money market      
funds. It is the Fund's policy to obtain additional collateral from or return   
excess collateral to the borrower by the end of the next business day, following
the valuation date of the securities loaned. Therefore, the value of the        
collateral held may be temporarily less than the value of the securities on     
loan. Lending securities entails a risk of loss to the Fund if and to the extent
that the market value of the securities loaned were to increase and the borrower
did not increase the collateral accordingly, and the borrower fails to return   
the securities. The Fund could also experience delays and costs in gaining      
access to the collateral. The Fund bears the risk of any deficiency in the      
amount of the collateral available for return to the borrower due to a loss on  
the collateral invested.                                                        

   At December 31, 2004, securities with an aggregate value of $1,497,366 were
on loan to brokers. The loans were secured by cash collateral of $1,530,900     
received by the Fund and subsequently invested in affiliated money market funds.
For the year ended December 31, 2004, the Fund received dividends on cash       
collateral net of income rebate paid to counterparties of $1,827 for securities 
lending transactions.                                                           

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NOTE 9--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS          

DISTRIBUTIONS TO SHAREHOLDERS:                                                  

There were no ordinary income or long term capital distributions paid during the
year ended December 31, 2004 and 2003.                                          

TAX COMPONENTS OF NET ASSETS:                                                   

As of December 31, 2004, the components of net assets on a tax basis were as    
follows:                                                                        

                                                                [Download Table]

                                                                  2004     
-------------------------------------------------------------------------- 
                                                                           
Unrealized appreciation -- investments                        $ 39,182,328 
-------------------------------------------------------------------------- 
Temporary book/tax differences                                     (12,855)
-------------------------------------------------------------------------- 
Capital loss carryforward                                       (6,979,842)
-------------------------------------------------------------------------- 
Post-October capital loss deferral                                (317,890)
-------------------------------------------------------------------------- 
Shares of beneficial interest                                  181,830,611 
========================================================================== 
Total net assets                                              $213,702,352 
__________________________________________________________________________ 
========================================================================== 

The difference between book-basis and tax-basis unrealized appreciation 
(depreciation) is due to differences in the timing of recognition of gains and  
losses on investments for tax and book purposes. The Fund's unrealized          
appreciation (depreciation) difference is attributable primarily to losses on   
wash sales.                                                                     

The temporary book/tax differences are a result of timing differences   
between book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of the trustee deferral of compensation and 
retirement plan expenses.                                                       

   Capital loss carryforward is calculated and reported as of a specific date.
Results of transactions and other activity after that date may affect the amount
of capital loss carryforward actually available for the Fund to utilize. The    
ability to utilize capital loss carryforward in the future may be limited under 
the Internal Revenue Code and related regulations based on the results of future
transactions.                                                                   

The Fund utilized $2,916,017 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 December 31, 2004 which expires as   
follows:                                                                        

                                                                [Download Table]

                                                              CAPITAL LOSS 
EXPIRATION                                                    CARRYFORWARD*
---------------------------------------------------------------------------
                                                                           
December 31, 2010                                              $  369,421  
---------------------------------------------------------------------------
December 31, 2011                                               6,610,421  
===========================================================================
Total capital loss carryforward                                $6,979,842  
___________________________________________________________________________
===========================================================================

* Capital loss carryforward as of the date listed above is reduced for          
limitations, if any, to the extent required by the Internal Revenue Code.   

NOTE 10--INVESTMENT SECURITIES                                                  

The aggregate amount of investment securities (other than short-term securities 
and money market funds) purchased and sold by the Fund during year ended        
December 31, 2004 was $124,871,102 and $50,454,355, respectively.               

                                                                [Download Table]

UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS 
-------------------------------------------------------------------------------
                                                                               
Aggregate unrealized appreciation of investment securities         $40,629,174 
-------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities        (1,446,846)
===============================================================================
Net unrealized appreciation of investment securities               $39,182,328 
_______________________________________________________________________________
===============================================================================
Cost of investments for tax purposes is $175,376,433.                          

NOTE 11--RECLASSIFICATION OF PERMANENT DIFFERENCES                              

Primarily as a result of differing book/tax treatment of net operating losses,  
on December 31, 2004, undistributed net investment income was increased by      
$1,764,849 and shares of beneficial interest decreased by $1,764,849. This      
reclassification had no effect on the net assets of the Fund.                   

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NOTE 12--SHARE INFORMATION                                                      

The Fund currently offers five different classes of shares: Class A shares,     
Class B shares, Class C shares, Class R shares and Institutional Class shares.  
Class A shares are sold with a front-end sales charge. Class B shares and Class 
C shares are sold with CDSC. Class R shares and Institutional Class shares are  
sold at net asset value. Under certain circumstances, Class A shares and Class R
shares are subject to CDSC. Generally, Class B shares will automatically convert
to Class A shares eight years after the end of the calendar month of purchase.  

                                                        [Enlarge/Download Table]

                                            CHANGES IN SHARES OUTSTANDING                                              
---------------------------------------------------------------------------------------------------------------------- 
                                                                              YEAR ENDED DECEMBER 31,                  
                                                              -------------------------------------------------------- 
                                                                         2004                          2003            
                                                              --------------------------    -------------------------- 
                                                                SHARES         AMOUNT         SHARES         AMOUNT    
---------------------------------------------------------------------------------------------------------------------- 
                                                                                                                       
Sold:                                                                                                                  
  Class A                                                      6,159,742    $ 73,250,446     3,832,986    $ 37,737,367 
---------------------------------------------------------------------------------------------------------------------- 
  Class B                                                      3,016,119      35,457,428     1,803,614      17,257,750 
---------------------------------------------------------------------------------------------------------------------- 
  Class C                                                      1,748,301      20,660,237       886,121       8,452,954 
---------------------------------------------------------------------------------------------------------------------- 
  Class R(a)                                                       2,516          31,275            --              -- 
---------------------------------------------------------------------------------------------------------------------- 
  Institutional Class(a)                                         575,259       6,898,180            --              -- 
====================================================================================================================== 
Automatic conversion of Class B shares to Class A shares:                                                              
  Class A                                                        286,013       3,430,679       156,161       1,515,851 
---------------------------------------------------------------------------------------------------------------------- 
  Class B                                                       (290,717)     (3,430,679)     (157,780)     (1,515,851)
====================================================================================================================== 
Reacquired:                                                                                                            
  Class A                                                     (2,577,027)    (30,336,910)   (3,833,211)    (34,323,403)
---------------------------------------------------------------------------------------------------------------------- 
  Class B                                                     (1,227,626)    (14,215,242)     (811,030)     (7,166,521)
---------------------------------------------------------------------------------------------------------------------- 
  Class C                                                       (808,272)     (9,306,317)     (665,740)     (6,007,065)
---------------------------------------------------------------------------------------------------------------------- 
  Institutional Class(a)                                          (3,725)        (44,917)           --              -- 
====================================================================================================================== 
                                                               6,880,583    $ 82,394,680     1,211,121    $ 15,951,082 
______________________________________________________________________________________________________________________ 
====================================================================================================================== 

(a) Class R shares and Institutional Class shares commenced sales on April 30,  
2004.                                                                   

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NOTE 13--FINANCIAL HIGHLIGHTS                                                   

The following schedule presents financial highlights for a share of the Fund    
outstanding throughout the periods indicated.                                   

                                                        [Enlarge/Download Table]

                                                                                       CLASS A                         
                                                              ---------------------------------------------------------
                                                                   YEAR ENDED DECEMBER 31,            DECEMBER 31, 2001
                                                              ---------------------------------       (DATE OPERATIONS 
                                                                2004          2003       2002            COMMENCED)    
-----------------------------------------------------------------------------------------------------------------------
                                                                                                                       
Net asset value, beginning of period                          $  11.28       $  8.23    $  9.99            $ 10.00     
-----------------------------------------------------------------------------------------------------------------------
Income from investment operations:                                                                                     
  Net investment income (loss)                                   (0.10)(a)     (0.08)     (0.06)(a)          (0.00)    
-----------------------------------------------------------------------------------------------------------------------
  Net gains (losses) on securities (both realized and                                                                  
    unrealized)                                                   1.93          3.13      (1.70)             (0.01)    
-----------------------------------------------------------------------------------------------------------------------
  Net increase from payments by affiliates                        0.01            --         --                 --     
=======================================================================================================================
    Total from investment operations                              1.84          3.05      (1.76)             (0.01)    
=======================================================================================================================
Less dividends from net investment income                           --            --      (0.00)                --     
=======================================================================================================================
Net asset value, end of period                                $  13.12       $ 11.28    $  8.23            $  9.99     
_______________________________________________________________________________________________________________________
=======================================================================================================================
Total return(b)                                                  16.31%(c)     37.06%    (17.62)%            (0.10)%   
_______________________________________________________________________________________________________________________
=======================================================================================================================
Ratios/supplemental data:                                                                                              
Net assets, end of period (000s omitted)                      $115,164       $55,372    $39,130            $   400     
_______________________________________________________________________________________________________________________
=======================================================================================================================
Ratio of expenses to average net assets:                                                                               
  With fee waivers and/or expense reimbursements                  1.67%(d)      1.80%      1.80%              1.80%(e) 
-----------------------------------------------------------------------------------------------------------------------
  Without fee waivers and/or expense reimbursements               1.69%(d)      1.92%      1.93%            199.49%(e) 
=======================================================================================================================
Ratio of net investment income (loss) to average net assets      (0.85)%(d)    (1.00)%    (0.70)%            (0.31)%(e)
_______________________________________________________________________________________________________________________
=======================================================================================================================
Portfolio turnover rate(f)                                          34%           52%        41%                --     
_______________________________________________________________________________________________________________________
=======================================================================================================================

(a)  Calculated using average shares outstanding.                               
(b)  Includes adjustments in accordance with accounting principles generally    
accepted in the United States of America and as such, the net asset   
 value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for  
shareholder transactions. Does not include sales charges and is not   
annualized for periods less than one year.                            
(c)  Total return is after the reimbursement the advisor paid for an economic   
loss due to a trading error. Total return before reimbursement by the 
advisor was 16.22%.                                                   
(d)  Ratios are based on average daily net assets of $85,792,642.               
(e)  Annualized.                                                                
(f)  Not annualized for periods less than one year.                             

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NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)                                       

                                                        [Enlarge/Download Table]

                                                                                      CLASS B                         
                                                              --------------------------------------------------------
                                                                  YEAR ENDED DECEMBER 31,            DECEMBER 31, 2001
                                                              --------------------------------       (DATE OPERATIONS 
                                                               2004          2003       2002            COMMENCED)    
----------------------------------------------------------------------------------------------------------------------
                                                                                                                      
Net asset value, beginning of period                          $ 11.14       $  8.18    $  9.99            $ 10.00     
----------------------------------------------------------------------------------------------------------------------
Income from investment operations:                                                                                    
  Net investment income (loss)                                  (0.18)(a)     (0.13)     (0.12)(a)          (0.00)    
----------------------------------------------------------------------------------------------------------------------
  Net gains (losses) on securities (both realized and                                                                 
    unrealized)                                                  1.90          3.09      (1.69)             (0.01)    
----------------------------------------------------------------------------------------------------------------------
  Net increase from payments by affiliates                       0.01            --         --                 --     
======================================================================================================================
    Total from investment operations                             1.73          2.96      (1.81)             (0.01)    
======================================================================================================================
Less dividends from net investment income                          --            --      (0.00)                --     
======================================================================================================================
Net asset value, end of period                                $ 12.87       $ 11.14    $  8.18            $  9.99     
______________________________________________________________________________________________________________________
======================================================================================================================
Total return(b)                                                 15.53%(c)     36.19%    (18.12)%            (0.10)%   
______________________________________________________________________________________________________________________
======================================================================================================================
Ratios/supplemental data:                                                                                             
Net assets, end of period (000s omitted)                      $63,374       $38,165    $21,204            $   300     
______________________________________________________________________________________________________________________
======================================================================================================================
Ratio of expenses to average net assets:                                                                              
  With fee waivers and/or expense reimbursements                 2.32%(d)      2.45%      2.45%              2.45%(e) 
----------------------------------------------------------------------------------------------------------------------
  Without fee waivers and/or expense reimbursements              2.34%(d)      2.57%      2.58%            200.14%(e) 
======================================================================================================================
Ratio of net investment income (loss) to average net assets     (1.50)%(d)    (1.65)%    (1.35)%            (0.96)%(e)
______________________________________________________________________________________________________________________
======================================================================================================================
Portfolio turnover rate(f)                                         34%           52%        41%                --     
______________________________________________________________________________________________________________________
======================================================================================================================

(a)  Calculated using average shares outstanding.                               
(b)  Includes adjustments in accordance with accounting principles generally    
accepted in the United States of America and as such, the net asset   
 value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for  
shareholder transactions. Does not include sales charges and is not   
annualized for periods less than one year.                            
(c)  Total return is after the reimbursement the advisor paid for an economic   
loss due to a trading error. Total return before reimbursement by the 
advisor was 15.44%.                                                   
(d)  Ratios are based on average daily net assets of $50,568,838.               
(e)  Annualized.                                                                
(f)  Not annualized for periods less than one year.                             

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NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)                                       

                                                        [Enlarge/Download Table]

                                                                                      CLASS C                         
                                                              --------------------------------------------------------
                                                                  YEAR ENDED DECEMBER 31,            DECEMBER 31, 2001
                                                              --------------------------------       (DATE OPERATIONS 
                                                               2004          2003       2002            COMMENCED)    
----------------------------------------------------------------------------------------------------------------------
                                                                                                                      
Net asset value, beginning of period                          $ 11.13       $  8.18    $  9.99            $ 10.00     
----------------------------------------------------------------------------------------------------------------------
Income from investment operations:                                                                                    
  Net investment income (loss)                                  (0.18)(a)     (0.12)     (0.12)(a)          (0.00)    
----------------------------------------------------------------------------------------------------------------------
  Net gains (losses) on securities (both realized and                                                                 
    unrealized)                                                  1.90          3.07      (1.69)             (0.01)    
----------------------------------------------------------------------------------------------------------------------
  Net increase from payments by affiliates                       0.01            --         --                 --     
======================================================================================================================
    Total from investment operations                             1.73          2.95      (1.81)             (0.01)    
======================================================================================================================
Less dividends from net investment income                          --            --      (0.00)                --     
======================================================================================================================
Net asset value, end of period                                $ 12.86       $ 11.13    $  8.18            $  9.99     
______________________________________________________________________________________________________________________
======================================================================================================================
Total return(b)                                                 15.54%(c)     36.06%    (18.12)%            (0.10)%   
______________________________________________________________________________________________________________________
======================================================================================================================
Ratios/supplemental data:                                                                                             
Net assets, end of period (000s omitted)                      $27,601       $13,422    $ 8,059            $   300     
______________________________________________________________________________________________________________________
======================================================================================================================
Ratio of expenses to average net assets:                                                                              
  With fee waivers and/or expense reimbursements                 2.32%(d)      2.45%      2.45%              2.45%(e) 
----------------------------------------------------------------------------------------------------------------------
  Without fee waivers and/or expense reimbursements              2.34%(d)      2.57%      2.58%            200.14%(e) 
======================================================================================================================
Ratio of net investment income (loss) to average net assets     (1.50)%(d)    (1.65)%    (1.35)%            (0.96)%(e)
______________________________________________________________________________________________________________________
======================================================================================================================
Portfolio turnover rate(f)                                         34%           52%        41%                --     
______________________________________________________________________________________________________________________
======================================================================================================================

(a)  Calculated using average shares outstanding.                               
(b)  Includes adjustments in accordance with accounting principles generally    
accepted in the United States of America and as such, the net asset   
 value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for  
shareholder transactions. Does not include sales charges and is not   
annualized for periods less than one year.                            
(c)  Total return is after the reimbursement the advisor paid for an economic   
loss due to a trading error. Total return before reimbursement by the 
advisor was 15.45%.                                                   
(d)  Ratios are annualized and based on average daily net assets of             
$18,970,193.                                                          
(e)  Annualized.                                                                
(f)  Not annualized for periods less than one year.                             

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NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)                                       

                                                                [Download Table]

                                                                   CLASS R     
                                                                -------------- 
                                                                APRIL 30, 2004 
                                                                 (DATE SALES   
                                                                COMMENCED) TO  
                                                                 DECEMBER 31,  
                                                                     2004      
------------------------------------------------------------------------------ 
                                                                               
Net asset value, beginning of period                                $11.88     
------------------------------------------------------------------------------ 
Income from investment operations:                                             
  Net investment income (loss)                                       (0.08)(a) 
------------------------------------------------------------------------------ 
  Net gains on securities (both realized and unrealized)              1.30     
------------------------------------------------------------------------------ 
  Net increase from payments by affiliates                            0.01     
============================================================================== 
    Total from investment operations                                  1.23     
============================================================================== 
Net asset value, end of period                                      $13.11     
______________________________________________________________________________ 
============================================================================== 
Total return(b)                                                      10.35%(c) 
______________________________________________________________________________ 
============================================================================== 
Ratios/supplemental data:                                                      
Net assets, end of period (000s omitted)                            $   33     
______________________________________________________________________________ 
============================================================================== 
Ratio of expenses to average net assets:                                       
  With fee waivers and/or expense reimbursements                      1.78%(d) 
------------------------------------------------------------------------------ 
  Without fee waivers and/or expense reimbursements                   1.80%(d) 
============================================================================== 
Ratio of net investment income (loss) to average net assets          (0.96)%(d)
______________________________________________________________________________ 
============================================================================== 
Portfolio turnover rate(e)                                              34%    
______________________________________________________________________________ 
============================================================================== 

(a)  Calculated using average shares outstanding.                               
(b)  Includes adjustments in accordance with accounting principles generally    
accepted in the United States of America and as such, the net asset   
 value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for  
  shareholder transactions. Not annualized for periods less than one year.
(c)  Total return is after the reimbursement the advisor paid for an economic   
loss due to a trading error. Total return before reimbursement by the 
advisor was 10.27%.                                                   
(d)  Ratios are annualized and based on average daily net assets of $12,864.    
(e)  Not annualized for periods less than one year.                             

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NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)                                       

                                                                [Download Table]

                                                              INSTITUTIONAL CLASS
                                                              -------------------
                                                                APRIL 30, 2004   
                                                                  (DATE SALES    
                                                                 COMMENCED) TO   
                                                                 DECEMBER 31,    
                                                                     2004        
---------------------------------------------------------------------------------
                                                                                 
Net asset value, beginning of period                                $11.88       
---------------------------------------------------------------------------------
Income from investment operations:                                               
  Net investment income (loss)                                       (0.02)(a)   
---------------------------------------------------------------------------------
  Net gains on securities (both realized and unrealized)              1.30       
---------------------------------------------------------------------------------
  Net increase from payments by affiliates                            0.01       
=================================================================================
    Total from investment operations                                  1.29       
=================================================================================
Net asset value, end of period                                      $13.17       
_________________________________________________________________________________
=================================================================================
Total return(b)                                                      10.86%(c)   
_________________________________________________________________________________
=================================================================================
Ratios/supplemental data:                                                        
Net assets, end of period (000s omitted)                            $7,530       
_________________________________________________________________________________
=================================================================================
Ratio of expenses to average net assets:                                         
  With fee waivers and/or expense reimbursements                      1.03%(d)   
---------------------------------------------------------------------------------
  Without fee waivers and/or expense reimbursements                   1.05%(d)   
=================================================================================
Ratio of net investment income (loss) to average net assets          (0.21)%(d)  
_________________________________________________________________________________
=================================================================================
Portfolio turnover rate(e)                                              34%      
_________________________________________________________________________________
=================================================================================

(a)  Calculated using average shares outstanding.                               
(b)  Includes adjustments in accordance with accounting principles generally    
accepted in the United States of America and as such, the net asset   
 value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for  
  shareholder transactions. Not annualized for periods less than one year.
(c)  Total return is after the reimbursement the advisor paid for an economic   
loss due to a trading error. Total return before reimbursement by the 
advisor was 10.77%.                                                   
(d)  Ratios are annualized and based on average daily net assets of             
$3,103,341.                                                           
(e)  Not annualized for periods less than one year.                             

NOTE 14--LEGAL PROCEEDINGS                                                      

Terms used in the Legal Proceedings Note are defined terms solely for the       
purpose of this note.                                                           

Settled Enforcement Actions and Investigations Related to Market Timing         

    On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment
advisor to certain AIM Funds) and A I M Advisors, Inc. ("AIM") (the Fund's      
investment advisor) reached final settlements with certain regulators, including
without limitation the Securities and Exchange Commission ("SEC"), the New York 
Attorney General ("NYAG") and the Colorado Attorney General ("COAG"), to resolve
civil enforcement actions and investigations related to market timing activity  
and related issues in the AIM Funds, including those formerly advised by IFG.   
These regulators alleged, in substance, that IFG and AIM failed to disclose in  
the prospectuses for the AIM Funds that they advised and to the independent     
directors/trustees of such Funds that they had entered into certain arrangements
permitting market timing of such Funds, thereby breaching their fiduciary duties
to such Funds. As a result of the foregoing, the regulators alleged that IFG and
AIM breached various Federal and state securities, business and consumer        
protection laws. On the same date, A I M Distributors, Inc. ("ADI") (the        
distributor of the retail AIM Funds) reached a final settlement with the SEC to 
resolve an investigation relating to market timing activity and related issues  
in the AIM Funds. The SEC also alleged that ADI violated various Federal        
securities laws. The SEC also has settled related market timing enforcement     
actions brought against certain former officers and employees of IFG.           

Under the terms of the settlements, IFG agreed to pay a total of $325   
million, of which $110 million is civil penalties. Of this $325 million total   
payment, half has been paid and the remaining half will be paid on or before    
December 31, 2005. AIM and ADI agreed to pay a total of $50 million, of which   
$30 million is civil penalties, all of which has been paid. The entire $325     
million IFG settlement payment will be made available for distribution to the   
shareholders of those AIM Funds that IFG formerly advised that were harmed by   
market timing activity, and the entire $50 million settlement payment by AIM and
ADI will be made available for distribution to the shareholders of those AIM    
Funds advised by AIM that were harmed by market timing activity, all as to be   
determined by an independent distribution consultant. The settlement payments   
will be distributed in accordance with a methodology to be determined by the    
independent distribution consultant, in consultation with AIM and the           
independent trustees of the AIM Funds and acceptable to the staff of the SEC.   
Under the settlements with the NYAG and COAG, AIM has agreed to reduce          
management fees on certain equity and balanced AIM Funds by $15 million per year
for the next five years, based upon effective fee rates and assets under        
management as of July 1, 2004, and not to increase certain management fees.     

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NOTE 14--LEGAL PROCEEDINGS (CONTINUED)                                          

Under the terms of the settlements, AIM will make certain governance and
compliance reforms, including maintaining an internal controls committee and    
retaining an independent compliance consultant and a corporate ombudsman. Also, 
commencing in 2007 and at least once every other year thereafter, AIM will      
undergo a compliance review by an independent third party. In addition, under   
the terms of the settlements, AIM has undertaken to cause the AIM Funds to      
operate in accordance with certain governance policies and practices, including 
retaining a full-time independent senior officer whose duties will include      
monitoring compliance and managing the process by which proposed management fees
to be charged the AIM Funds are negotiated. Also, commencing in 2008 and not    
less than every fifth calendar year thereafter, the AIM Funds will hold         
shareholder meetings at which their Boards of Trustees will be elected.         

   At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"),
the parent company of IFG and AIM, has agreed to pay expenses incurred by such  
Funds related to market timing matters.                                         

  The SEC has also settled market timing enforcement actions against Raymond
R. Cunningham (the former president and chief executive officer of IFG and a    
former member of the board of directors of the AIM Funds formerly advised by    
IFG), Timothy J. Miller (the former chief investment officer and a former       
portfolio manager for IFG), Thomas A. Kolbe (the former national sales manager  
of IFG) and Michael D. Legoski (a former assistant vice president in IFG's sales
department). As part of these settlements, the SEC ordered these individuals to 
pay restitution and civil penalties in various amounts and prohibited them from 
associating with, or serving as an officer or director of, an investment        
advisor, broker, dealer and/or investment company, as applicable, for certain   
periods of time.                                                                

The payments made in connection with the above-referenced settlements by
IFG, AIM and ADI will total approximately $375 million (not including AIM's     
agreement to reduce management fees on certain equity and balanced AIM Funds by 
$15 million per year for the next five years, based upon effective fee rates and
assets under management as of July 1, 2004). The manner in which the settlement 
payments will be distributed is unknown at the present time and will be         
determined by an independent distribution consultant appointed under the        
settlement agreements. Therefore, management of AIM and the Fund are unable at  
the present time to estimate the impact, if any, that the distribution of the   
settlement payments may have on the Fund or whether such distribution will have 
an impact on the Fund's financial statements in the future.                     

  At the present time, management of AIM and the Fund are unable to estimate
the impact, if any, that the outcome of the Regulatory Inquiries and Pending    
Litigation described below may have on AIM, ADI or the Fund.                    

Regulatory Inquiries and Pending Litigation                                     

The mutual fund industry as a whole is currently subject to regulatory  
inquiries and litigation related to a wide range of issues. These issues        
include, among others, market timing activity, late trading, fair value pricing,
excessive or improper advisory and/or distribution fees, mutual fund sales      
practices, including but not limited to revenue sharing and directed-brokerage  
arrangements, investments in securities of other registered investment          
companies, contractual plans, issues related to Section 529 college savings     
plans, procedures for locating lost security holders and participation in class 
action settlements.                                                             

 As described more fully below, IFG and AIM are the subject of a number of
ongoing regulatory inquiries and civil lawsuits related to one or more of the   
issues currently being scrutinized by various Federal and state regulators,     
including but not limited to those issues described above. Additional regulatory
actions and/or civil lawsuits related to the above or other issues may be filed 
against the AIM Funds, IFG, AIM and/or related entities and individuals in the  
future. Additional regulatory inquiries related to the above or other issues    
also may be received by the AIM Funds, IFG, AIM and/or related entities and     
individuals in the future.                                                      

Ongoing Regulatory Inquiries Concerning IFG and AIM                             

   IFG, certain related entities, certain of their current and former officers
and/or certain of the AIM Funds formerly advised by IFG have received regulatory
inquiries in the form of subpoenas or other oral or written requests for        
information and/or documents related to one or more of the following issues,    
some of which concern one or more such Funds: market timing activity, late      
trading, fair value pricing, excessive or improper advisory and/or distribution 
fees, mutual fund sales practices, including revenue sharing and                
directed-brokerage arrangements, and investments in securities of other         
registered investment companies. These regulators include the SEC, the NASD,    
Inc. ("NASD"), the Florida Department of Financial Services, the Attorney       
General of the State of West Virginia, the West Virginia Securities Commission  
and the Bureau of Securities of the State of New Jersey. IFG and certain of     
these other parties also have received more limited inquiries from the United   
States Department of Labor ("DOL") and the United States Attorney's Office for  
the Southern District of New York, some of which concern one or more of the AIM 
Funds formerly advised by IFG. IFG is providing full cooperation with respect to
these inquiries.                                                                

   AIM, certain related entities, certain of their current and former officers
and/or certain of the AIM Funds have received regulatory inquiries in the form  
of subpoenas or other oral or written requests for information and/or documents 
related to one or more of the following issues, some of which concern one or    
more AIM Funds: market timing activity, late trading, fair value pricing,       
excessive or improper advisory and/or distribution fees, mutual fund sales      
practices, including revenue sharing and directed-brokerage arrangements,       
investments in securities of other registered investment companies, contractual 
plans, issues related to Section 529 college savings plans and procedures for   
locating lost securityholders. These regulators include the SEC, the NASD, the  
Department of Banking for the State of Connecticut, the Attorney General of the 
State of West Virginia, the West Virginia Securities Commission and the Bureau  
of Securities of the State of New Jersey. AIM and certain of these other parties
also have received more limited inquiries from the SEC, the NASD, the DOL, the  
Internal Revenue Service, the United States Attorney's Office for the Southern  
District of New York, the United States Attorney's Office for the Central       
District of California, the United States Attorney's Office for the District of 
Massachusetts, the Massachusetts Securities Division, the U.S. Postal           

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NOTE 14--LEGAL PROCEEDINGS (CONTINUED)                                          

Inspection Service and the Commodity Futures Trading Commission, some of which  
concern one or more AIM Funds. AIM is providing full cooperation with respect to
these inquiries.                                                                

Private Civil Actions Alleging Market Timing                                    

 Multiple civil lawsuits, including purported class action and shareholder
derivative suits, have been filed against various parties (including, depending 
on the lawsuit, certain AIM Funds, IFG, AIM, AIM Management, AMVESCAP, certain  
related entities, certain of their current and former officers and/or certain   
unrelated third parties) making allegations that are similar in many respects to
those in the settled regulatory actions brought by the SEC, the NYAG and the    
COAG concerning market timing activity in the AIM Funds. These lawsuits allege a
variety of theories of recovery, including but not limited to: (i) violation of 
various provisions of the Federal and state securities laws; (ii) violation of  
various provisions of ERISA; (iii) breach of fiduciary duty; and/or (iv) breach 
of contract. These lawsuits were initiated in both Federal and state courts and 
seek such remedies as compensatory damages; restitution; injunctive relief;     
disgorgement of management fees; imposition of a constructive trust; removal of 
certain directors and/or employees; various corrective measures under ERISA;    
rescission of certain Funds' advisory agreements; interest; and attorneys' and  
experts' fees.                                                                  

All lawsuits based on allegations of market timing, late trading, and   
related issues have been transferred to the United States District Court for the
District of Maryland (the "MDL Court") for consolidated or coordinated pre-trial
proceedings. Pursuant to an Order of the MDL Court, plaintiffs consolidated     
their claims for pre-trial purposes into three amended complaints against       
various AIM- and IFG-related parties: (i) a Consolidated Amended Class Action   
Complaint purportedly brought on behalf of shareholders of the AIM Funds; (ii) a
Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of 
the AIM Funds and fund registrants; and (iii) an Amended Class Action Complaint 
for Violations of the Employee Retirement Income Securities Act ("ERISA")       
purportedly brought on behalf of participants in AMVESCAP's 401(k) plan. The    
plaintiffs in one of the underlying lawsuits continue to seek remand of their   
lawsuit to state court.                                                         

Private Civil Actions Alleging Improper Use of Fair Value Pricing               

    Multiple civil class action lawsuits have been filed against various parties
(including, depending on the lawsuit, certain AIM Funds, IFG and/or AIM)        
alleging that certain AIM Funds inadequately employed fair value pricing. These 
lawsuits allege a variety of theories of recovery, including but not limited to:
(i) violations of various provisions of the Federal securities laws; (ii) common
law breach of duty; and (iii) common law negligence and gross negligence. These 
lawsuits have been filed in both Federal and state courts and seek such remedies
as compensatory and punitive damages; interest; and attorneys' fees and costs.  

Private Civil Actions Alleging Excessive Advisory and/or Distribution Fees      

 Multiple civil lawsuits, including purported class action and shareholder
derivative suits, have been filed against various parties (including, depending 
on the lawsuit, IFG, AIM, INVESCO Institutional (N.A.), Inc. ("IINA"), ADI      
and/or INVESCO Distributors, Inc. ("INVESCO Distributors")) alleging that the   
defendants charged excessive advisory and/or distribution fees and failed to    
pass on to shareholders the perceived savings generated by economies of scale.  
Certain of these lawsuits also allege that the defendants adopted unlawful      
distribution plans. These lawsuits allege a variety of theories of recovery,    
including but not limited to: (i) violation of various provisions of the Federal
securities laws; (ii) breach of fiduciary duty; and/or (iii) breach of contract.
These lawsuits have been filed in Federal courts and seek such remedies as      
damages; injunctive relief; rescission of certain Funds' advisory agreements and
distribution plans; interest; prospective relief in the form of reduced fees;   
and attorneys' and experts' fees. All of these lawsuits have been transferred to
the United States District Court for the Southern District of Texas, Houston    
Division by order of the applicable United States District Court in which they  
were initially filed. The plaintiff in one of these lawsuits has challenged this
order.                                                                          

Private Civil Actions Alleging Improper Charging of Distribution Fees on Limited
Offering Funds or Share Classes                                                 

  Multiple civil lawsuits, including shareholder derivative suits, have been
filed against various parties (including, depending on the lawsuit, IFG, AIM,   
ADI and/or certain of the trustees of the AIM Funds) alleging that the          
defendants breached their fiduciary duties by charging distribution fees while  
funds and/or specific share classes were closed generally to new investors      
and/or while other share classes of the same fund were not charged the same     
distribution fees. These lawsuits allege a variety of theories of recovery,     
including but not limited to: (i) violation of various provisions of the Federal
securities laws; and (ii) breach of fiduciary duty. These lawsuits have been    
filed in Federal courts and seek such remedies as damages; injunctive relief;   
and attorneys' and experts' fees.                                               

Private Civil Actions Alleging Improper Mutual Fund Sales Practices and         
Directed-Brokerage Arrangements                                                 

 Multiple civil lawsuits, including purported class action and shareholder
derivative suits, have been filed against various parties (including, depending 
on the lawsuit, AIM Management, IFG, AIM, AIM Investment Services, Inc. ("AIS") 
and/or certain of the trustees of the AIM Funds) alleging that the defendants   
improperly used the assets of the AIM Funds to pay brokers to aggressively      
promote the sale of the AIM Funds over other mutual funds and that the          
defendants concealed such payments from investors by disguising them as         
brokerage commissions. These lawsuits allege a variety of theories of recovery, 
including but not limited to: (i) violation of various provisions of the Federal
securities laws; (ii) breach of fiduciary duty; and (iii) aiding and abetting a 
breach of fiduciary duty. These lawsuits have been filed in Federal courts and  
seek such remedies as compensatory and punitive damages; rescission of certain  
Funds' advisory agreements and distribution plans and recovery of all fees paid;
an accounting of all fund-related fees, commissions and soft dollar payments;   
restitution of all unlawfully or discriminatorily obtained fees and charges; and
attorneys' and experts' fees.                                                   

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NOTE 14--LEGAL PROCEEDINGS (CONTINUED)                                          

Private Civil Action Alleging Failure to Ensure Participation in Class Action   
Settlements                                                                     

A civil lawsuit, purporting to be a class action lawsuit, has been filed
against AIM, IINA, A I M Capital Management, Inc. and the trustees of the AIM   
Funds alleging that the defendants breached their fiduciary duties by failing to
ensure that the AIM Funds participated in class action settlements in which the 
AIM Funds were eligible to participate. This lawsuit alleges as theories of     
recovery: (i) violation of various provisions of the Federal securities laws;   
(ii) common law breach of fiduciary duty; and (iii) common law negligence. This 
lawsuit has been filed in Federal court and seeks such remedies as compensatory 
and punitive damages; forfeiture of all commissions and fees paid by the class  
of plaintiffs; and costs and attorneys' fees.                                   
*                                       *                                      *
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

    As a result of the matters discussed above, investors in the AIM Funds might
react by redeeming their investments. This might require the Funds to sell      
investments to provide for sufficient liquidity and could also have an adverse  
effect on the investment performance of the Funds.                              

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                         

To the Board of Trustees and Shareholders of                                    
AIM Premier 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 Premier Equity Fund (one of the
funds constituting AIM Funds Group hereafter referred to as the "Fund") at      
December 31, 2004, the results of its operations for the year then ended, the   
changes in its net assets for each of the two years in the period then ended and
the financial highlights for each of the periods indicated, in conformity with  
accounting principles generally accepted in the United States of America. These 
financial statements and financial highlights (hereafter referred to as         
"financial statements") are the responsibility of the Fund's management; our    
responsibility is to express an opinion on these financial statements based on  
our audits. We conducted our audits of these financial statements in accordance 
with the standards of the Public Company Accounting Oversight Board (United     
States). Those standards require that we plan and perform the audit to obtain   
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting 
the amounts and disclosures in the financial statements, assessing the          
accounting principles used and significant estimates made by management, and    
evaluating the overall financial statement presentation. We believe that our    
audits, which included confirmation of securities at December 31, 2004 by       
correspondence with the custodian and brokers, provide a reasonable basis for   
our opinion.                                                                    

/S/ PRICEWATERHOUSECOOPERS LLP                                                  

February 18, 2005                                                               
Houston, Texas                                                                  

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FINANCIALS                                                                      

SCHEDULE OF INVESTMENTS                                                         

December 31, 2004                                                               

                                                                [Download Table]

                                                                 MARKET    
                                                 SHARES          VALUE     
---------------------------------------------------------------------------
                                                                           
COMMON STOCKS & OTHER EQUITY INTERESTS-96.70%                              

ADVERTISING-1.11%                                                          

Interpublic Group of Cos., Inc. (The)(a)         1,582,800   $   21,209,520
---------------------------------------------------------------------------
Omnicom Group Inc.                                 648,100       54,647,792
===========================================================================
                                                                 75,857,312
===========================================================================

AEROSPACE & DEFENSE-1.58%                                                  

Boeing Co. (The)                                   350,000       18,119,500
---------------------------------------------------------------------------
General Dynamics Corp.                             175,000       18,305,000
---------------------------------------------------------------------------
Honeywell International Inc.                       785,900       27,828,719
---------------------------------------------------------------------------
Northrop Grumman Corp.                             808,200       43,933,752
===========================================================================
                                                                108,186,971
===========================================================================

ALUMINUM-0.35%                                                             

Alcoa Inc.                                         760,700       23,901,194
===========================================================================

APPAREL RETAIL-1.00%                                                       

Gap, Inc. (The)                                  1,670,000       35,270,400
---------------------------------------------------------------------------
Limited Brands                                   1,450,000       33,379,000
===========================================================================
                                                                 68,649,400
===========================================================================

APPLICATION SOFTWARE-0.71%                                                 

Amdocs Ltd. (United Kingdom)(a)                  1,175,000       30,843,750
---------------------------------------------------------------------------
Intuit Inc.(a)                                     400,000       17,604,000
===========================================================================
                                                                 48,447,750
===========================================================================

ASSET MANAGEMENT & CUSTODY BANKS-0.65%                                     

Bank of New York Co., Inc. (The)                 1,326,900       44,344,998
===========================================================================

BIOTECHNOLOGY-0.51%                                                        

Genentech, Inc.(a)                                 325,000       17,693,000
---------------------------------------------------------------------------
Gilead Sciences, Inc.(a)                           500,000       17,495,000
===========================================================================
                                                                 35,188,000
===========================================================================

BREWERS-0.75%                                                              

Heineken N.V. (Netherlands)(b)                   1,555,386       51,640,580
===========================================================================

BUILDING PRODUCTS-1.44%                                                    

Masco Corp.                                      2,708,000       98,923,240
===========================================================================

COMMUNICATIONS EQUIPMENT-2.12%                                             

Cisco Systems, Inc.(a)                           1,850,000       35,705,000
---------------------------------------------------------------------------
Motorola, Inc.                                   1,526,400       26,254,080
---------------------------------------------------------------------------
Nokia Oyj-ADR (Finland)                          2,206,500       34,575,855
---------------------------------------------------------------------------
QUALCOMM Inc.                                      875,000       37,100,000
---------------------------------------------------------------------------
Research In Motion Ltd. (Canada)(a)                145,000       11,950,900
===========================================================================
                                                                145,585,835
===========================================================================

                                                                [Download Table]

                                                                 MARKET    
                                                 SHARES          VALUE     
---------------------------------------------------------------------------
                                                                           

COMPUTER & ELECTRONICS RETAIL-0.26%                                        

Best Buy Co., Inc.                                 300,000   $   17,826,000
===========================================================================

COMPUTER HARDWARE-1.47%                                                    

Dell Inc.(a)                                     1,300,000       54,782,000
---------------------------------------------------------------------------
International Business Machines Corp.              470,800       46,411,464
===========================================================================
                                                                101,193,464
===========================================================================

COMPUTER STORAGE & PERIPHERALS-0.27%                                       

Lexmark International, Inc.-Class A(a)             220,000       18,700,000
===========================================================================

CONSUMER ELECTRONICS-0.56%                                                 

Sony Corp.-ADR (Japan)                             980,000       38,180,800
===========================================================================

CONSUMER FINANCE-1.04%                                                     

American Express Co.                               325,000       18,320,250
---------------------------------------------------------------------------
Capital One Financial Corp.                        150,000       12,631,500
---------------------------------------------------------------------------
MBNA Corp.                                         675,000       19,028,250
---------------------------------------------------------------------------
SLM Corp.                                          400,000       21,356,000
===========================================================================
                                                                 71,336,000
===========================================================================

DATA PROCESSING & OUTSOURCED SERVICES-1.37%                                

First Data Corp.                                 2,204,100       93,762,414
===========================================================================

DEPARTMENT STORES-1.18%                                                    

J.C. Penney Co., Inc.                              475,000       19,665,000
---------------------------------------------------------------------------
Kohl's Corp.(a)                                  1,248,900       61,408,413
===========================================================================
                                                                 81,073,413
===========================================================================

DIVERSIFIED BANKS-1.26%                                                    

Bank of America Corp.                            1,125,400       52,882,546
---------------------------------------------------------------------------
Wachovia Corp.                                     640,600       33,695,560
===========================================================================
                                                                 86,578,106
===========================================================================

DIVERSIFIED CHEMICALS-0.83%                                                

Dow Chemical Co. (The)                           1,157,400       57,302,874
===========================================================================

DIVERSIFIED COMMERCIAL SERVICES-1.29%                                      

Cendant Corp.                                    3,776,200       88,287,556
===========================================================================

ELECTRIC UTILITIES-0.49%                                                   

FPL Group, Inc.                                    450,200       33,652,450
===========================================================================

ELECTRICAL COMPONENTS & EQUIPMENT-1.03%                                    

Emerson Electric Co.                               485,200       34,012,520
---------------------------------------------------------------------------

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                                                                [Download Table]

                                                                 MARKET    
                                                 SHARES          VALUE     
---------------------------------------------------------------------------

                                                                           
ELECTRICAL COMPONENTS & EQUIPMENT-(CONTINUED)                              

Rockwell Automation, Inc.                          740,000   $   36,667,000
===========================================================================
                                                                 70,679,520
===========================================================================

ENVIRONMENTAL SERVICES-1.90%                                               

Waste Management, Inc.                           4,364,300      130,667,142
===========================================================================

FOOD RETAIL-1.99%                                                          

Kroger Co. (The)(a)                              6,094,900      106,904,546
---------------------------------------------------------------------------
Safeway Inc.(a)                                  1,484,300       29,300,082
===========================================================================
                                                                136,204,628
===========================================================================

FOOTWEAR-0.76%                                                             

NIKE, Inc.-Class B                                 575,000       52,146,750
===========================================================================

GENERAL MERCHANDISE STORES-1.34%                                           

Target Corp.                                     1,764,100       91,609,713
===========================================================================

HEALTH CARE DISTRIBUTORS-1.64%                                             

Cardinal Health, Inc.                            1,297,000       75,420,550
---------------------------------------------------------------------------
McKesson Corp.                                   1,170,000       36,808,200
===========================================================================
                                                                112,228,750
===========================================================================

HEALTH CARE EQUIPMENT-1.50%                                                

Baxter International Inc.                        1,010,000       34,885,400
---------------------------------------------------------------------------
Becton, Dickinson & Co.                            700,000       39,760,000
---------------------------------------------------------------------------
Waters Corp.(a)                                    600,000       28,074,000
===========================================================================
                                                                102,719,400
===========================================================================

HEALTH CARE FACILITIES-0.56%                                               

HCA, Inc.                                          960,000       38,361,600
===========================================================================

HEALTH CARE SERVICES-0.46%                                                 

IMS Health Inc.                                    321,100        7,452,731
---------------------------------------------------------------------------
Quest Diagnostics Inc.                             250,000       23,887,500
===========================================================================
                                                                 31,340,231
===========================================================================

HEALTH CARE SUPPLIES-0.45%                                                 

Alcon Inc. (Switzerland)                           385,000       31,031,000
===========================================================================

HOTELS, RESORTS & CRUISE LINES-0.34%                                       

Starwood Hotels & Resorts Worldwide, Inc.          399,300       23,319,120
===========================================================================

HOUSEHOLD PRODUCTS-1.19%                                                   

Kimberly-Clark Corp.                               592,300       38,979,263
---------------------------------------------------------------------------
Procter & Gamble Co. (The)                         775,000       42,687,000
===========================================================================
                                                                 81,666,263
===========================================================================

HOUSEWARES & SPECIALTIES-0.28%                                             

Fortune Brands, Inc.                               250,000       19,295,000
===========================================================================

HYPERMARKETS & SUPER CENTERS-0.39%                                         

Costco Wholesale Corp.                             550,000       26,625,500
===========================================================================

                                                                [Download Table]


                                                                 MARKET    
                                                 SHARES          VALUE     
---------------------------------------------------------------------------
                                                                           

INDUSTRIAL CONGLOMERATES-4.90%                                             

General Electric Co.                             2,888,500   $  105,430,250
---------------------------------------------------------------------------
Textron Inc.                                       250,000       18,450,000
---------------------------------------------------------------------------
Tyco International Ltd. (Bermuda)                5,940,300      212,306,322
===========================================================================
                                                                336,186,572
===========================================================================

INDUSTRIAL MACHINERY-2.07%                                                 

Danaher Corp.                                      670,000       38,464,700
---------------------------------------------------------------------------
Dover Corp.                                      1,086,700       45,576,198
---------------------------------------------------------------------------
Eaton Corp.                                        325,000       23,517,000
---------------------------------------------------------------------------
Illinois Tool Works Inc.                           370,000       34,291,600
===========================================================================
                                                                141,849,498
===========================================================================

INTEGRATED OIL & GAS-3.79%                                                 

Amerada Hess Corp.                                 579,420       47,732,620
---------------------------------------------------------------------------
BP PLC-ADR (United Kingdom)                      1,406,900       82,162,960
---------------------------------------------------------------------------
ChevronTexaco Corp.                                633,200       33,249,332
---------------------------------------------------------------------------
Exxon Mobil Corp.                                1,244,700       63,803,322
---------------------------------------------------------------------------
Murphy Oil Corp.                                   406,700       32,719,015
===========================================================================
                                                                259,667,249
===========================================================================

INTEGRATED TELECOMMUNICATION SERVICES-0.49%                                

ALLTEL Corp.                                       577,200       33,916,272
===========================================================================

INTERNET RETAIL-0.95%                                                      

eBay Inc.(a)                                       265,000       30,814,200
---------------------------------------------------------------------------
IAC/InterActiveCorp(a)(c)                        1,235,400       34,121,748
===========================================================================
                                                                 64,935,948
===========================================================================

INTERNET SOFTWARE & SERVICES-0.60%                                         

Yahoo! Inc.(a)                                   1,100,000       41,448,000
===========================================================================

INVESTMENT BANKING & BROKERAGE-2.42%                                       

Goldman Sachs Group, Inc. (The)                    300,000       31,212,000
---------------------------------------------------------------------------
Merrill Lynch & Co., Inc.                          649,700       38,832,569
---------------------------------------------------------------------------
Morgan Stanley                                   1,723,100       95,666,512
===========================================================================
                                                                165,711,081
===========================================================================

IT CONSULTING & OTHER SERVICES-1.22%                                       

Accenture Ltd.-Class A (Bermuda)(a)              3,099,500       83,686,500
===========================================================================

LIFE & HEALTH INSURANCE-0.54%                                              

Prudential Financial, Inc.                         672,900       36,982,584
===========================================================================

MANAGED HEALTH CARE-1.94%                                                  

Aetna Inc.                                         250,000       31,187,500
---------------------------------------------------------------------------
UnitedHealth Group Inc.                            515,000       45,335,450
---------------------------------------------------------------------------
WellPoint Inc.(a)                                  492,800       56,672,000
===========================================================================
                                                                133,194,950
===========================================================================

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                                                                 MARKET    
                                                 SHARES          VALUE     
---------------------------------------------------------------------------
                                                                           

MOTORCYCLE MANUFACTURERS-0.39%                                             

Harley-Davidson, Inc.                              440,000   $   26,730,000
===========================================================================

MOVIES & ENTERTAINMENT-0.79%                                               

Walt Disney Co. (The)                            1,940,000       53,932,000
===========================================================================

MULTI-LINE INSURANCE-0.45%                                                 

Hartford Financial Services Group, Inc. (The)      450,000       31,189,500
===========================================================================

MULTI-UTILITIES & UNREGULATED POWER-0.46%                                  

Dominion Resources, Inc.                           462,000       31,295,880
===========================================================================

OFFICE ELECTRONICS-1.32%                                                   

Xerox Corp.(a)                                   5,319,300       90,481,293
===========================================================================

OIL & GAS DRILLING-1.71%                                                   

GlobalSantaFe Corp. (Cayman Islands)             1,158,000       38,341,380
---------------------------------------------------------------------------
Nabors Industries, Ltd. (Bermuda)(a)               661,600       33,933,464
---------------------------------------------------------------------------
Transocean Inc. (Cayman Islands)(a)              1,060,000       44,933,400
===========================================================================
                                                                117,208,244
===========================================================================

OIL & GAS EQUIPMENT & SERVICES-2.88%                                       

Baker Hughes Inc.                                1,089,000       46,467,630
---------------------------------------------------------------------------
BJ Services Co.                                    716,000       33,322,640
---------------------------------------------------------------------------
Halliburton Co.                                  1,280,000       50,227,200
---------------------------------------------------------------------------
Schlumberger Ltd. (Netherlands)                    548,000       36,688,600
---------------------------------------------------------------------------
Smith International, Inc.(a)                       570,750       31,054,507
===========================================================================
                                                                197,760,577
===========================================================================

OTHER DIVERSIFIED FINANCIAL SERVICES-2.29%                                 

Citigroup Inc.                                   2,070,400       99,751,872
---------------------------------------------------------------------------
JPMorgan Chase & Co.                             1,464,000       57,110,640
===========================================================================
                                                                156,862,512
===========================================================================

PACKAGED FOODS & MEATS-3.98%                                               

Campbell Soup Co.                                1,632,700       48,801,403
---------------------------------------------------------------------------
General Mills, Inc.                              2,170,600      107,900,526
---------------------------------------------------------------------------
Kraft Foods Inc.-Class A                         2,277,400       81,098,214
---------------------------------------------------------------------------
Sara Lee Corp.                                   1,453,300       35,082,662
===========================================================================
                                                                272,882,805
===========================================================================

PAPER PRODUCTS-0.68%                                                       

Georgia-Pacific Corp.                            1,223,000       45,838,040
---------------------------------------------------------------------------
Neenah Paper, Inc.(a)(c)                            17,948          585,105
===========================================================================
                                                                 46,423,145
===========================================================================

PERSONAL PRODUCTS-1.08%                                                    

Estee Lauder Cos. Inc. (The)-Class A               565,000       25,860,050
---------------------------------------------------------------------------
Gillette Co. (The)                               1,075,000       48,138,500
===========================================================================
                                                                 73,998,550
===========================================================================

                                                                [Download Table]

                                                                 MARKET    
                                                 SHARES          VALUE     
---------------------------------------------------------------------------
                                                                           

PHARMACEUTICALS-9.23%                                                      

Bristol-Myers Squibb Co.                         1,887,800   $   48,365,436
---------------------------------------------------------------------------
Forest Laboratories, Inc.(a)                     1,510,000       67,738,600
---------------------------------------------------------------------------
GlaxoSmithKline PLC-ADR (United Kingdom)         1,651,100       78,245,629
---------------------------------------------------------------------------
Johnson & Johnson                                1,472,400       93,379,608
---------------------------------------------------------------------------
Merck & Co. Inc.                                 2,708,600       87,054,404
---------------------------------------------------------------------------
Pfizer Inc.                                      1,572,700       42,289,903
---------------------------------------------------------------------------
Sanofi-Aventis (France)(b)                         936,600       74,731,005
---------------------------------------------------------------------------
Teva Pharmaceutical Industries Ltd.-ADR                                    
  (Israel)                                       1,745,400       52,117,644
---------------------------------------------------------------------------
Wyeth                                            2,091,300       89,068,467
===========================================================================
                                                                632,990,696
===========================================================================

PROPERTY & CASUALTY INSURANCE-2.75%                                        

ACE Ltd. (Cayman Islands)                        2,285,900       97,722,225
---------------------------------------------------------------------------
Allstate Corp. (The)                               400,000       20,688,000
---------------------------------------------------------------------------
Chubb Corp. (The)                                  450,000       34,605,000
---------------------------------------------------------------------------
St. Paul Travelers Cos., Inc. (The)                956,100       35,442,627
===========================================================================
                                                                188,457,852
===========================================================================

PUBLISHING-1.74%                                                           

Gannett Co., Inc.                                  519,600       42,451,320
---------------------------------------------------------------------------
New York Times Co. (The)-Class A                   815,200       33,260,160
---------------------------------------------------------------------------
Tribune Co.                                      1,030,000       43,404,200
===========================================================================
                                                                119,115,680
===========================================================================

RAILROADS-1.12%                                                            

Norfolk Southern Corp.                             960,200       34,749,638
---------------------------------------------------------------------------
Union Pacific Corp.                                621,200       41,775,700
===========================================================================
                                                                 76,525,338
===========================================================================

REGIONAL BANKS-0.94%                                                       

BB&T Corp.                                         819,000       34,438,950
---------------------------------------------------------------------------
SunTrust Banks, Inc.                               405,400       29,950,952
===========================================================================
                                                                 64,389,902
===========================================================================

RESTAURANTS-1.24%                                                          

McDonald's Corp.                                 1,250,000       40,075,000
---------------------------------------------------------------------------
Yum! Brands, Inc.                                  950,000       44,821,000
===========================================================================
                                                                 84,896,000
===========================================================================

SEMICONDUCTOR EQUIPMENT-0.51%                                              

Applied Materials, Inc.(a)                       2,030,000       34,713,000
===========================================================================

SEMICONDUCTORS-2.55%                                                       

Analog Devices, Inc.                             1,744,200       64,395,864
---------------------------------------------------------------------------
Intel Corp.                                      1,881,800       44,015,302
---------------------------------------------------------------------------
National Semiconductor Corp.                     1,994,700       35,804,865
---------------------------------------------------------------------------
Xilinx, Inc.                                     1,030,600       30,557,290
===========================================================================
                                                                174,773,321
===========================================================================

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                                                                 MARKET    
                                                 SHARES          VALUE     
---------------------------------------------------------------------------

                                                                           

SOFT DRINKS-0.88%                                                          

Coca-Cola Co. (The)                                800,000   $   33,304,000
---------------------------------------------------------------------------
PepsiCo, Inc.                                      525,000       27,405,000
===========================================================================
                                                                 60,709,000
===========================================================================

SPECIALTY STORES-0.33%                                                     

Staples, Inc.                                      670,000       22,585,700
===========================================================================

SYSTEMS SOFTWARE-4.73%                                                     

Adobe Systems Inc.                                 350,000       21,959,000
---------------------------------------------------------------------------
Computer Associates International, Inc.          3,772,700      117,180,062
---------------------------------------------------------------------------
Microsoft Corp.                                  3,795,200      101,369,792
---------------------------------------------------------------------------
Oracle Corp.(a)                                  2,450,000       33,614,000
---------------------------------------------------------------------------
Symantec Corp.(a)                                1,950,000       50,232,000
===========================================================================
                                                                324,354,854
===========================================================================

THRIFTS & MORTGAGE FINANCE-1.66%                                           

Countrywide Financial Corp.                        365,000       13,508,650
---------------------------------------------------------------------------
Fannie Mae                                         911,500       64,907,915
---------------------------------------------------------------------------
Washington Mutual, Inc.                            832,400       35,193,872
===========================================================================
                                                                113,610,437
===========================================================================
Total Common Stocks & Other Equity Interests                               
  (Cost $5,683,380,702)                                       6,629,977,914
===========================================================================

                                                                [Download Table]


                                                                 MARKET     
                                                 SHARES          VALUE      
--------------------------------------------------------------------------- 
                                                                            

MONEY MARKET FUNDS-3.47%                                                    

Liquid Assets Portfolio-Institutional                                       
  Class(d)                                     119,054,041   $  119,054,041 
--------------------------------------------------------------------------- 
STIC Prime Portfolio-Institutional Class(d)    119,054,041      119,054,041 
=========================================================================== 
    Total Money Market Funds (Cost                                          
      $238,108,082)                                             238,108,082 
=========================================================================== 
TOTAL INVESTMENTS-100.17% (excluding                                        
  investments purchased with cash collateral                                
  from securities loaned) (Cost                                             
  $5,921,488,784)                                             6,868,085,996 
=========================================================================== 
INVESTMENTS PURCHASED WITH CASH COLLATERAL                                  
  FROM SECURITIES LOANED                                                    

MONEY MARKET FUNDS-0.40%                                                    

STIC Prime Portfolio-Institutional                                          
  Class(d)(e)                                   27,306,920       27,306,920 
=========================================================================== 
    Total Money Market Funds (purchased with                                
      cash collateral from securities loaned)                               
      (Cost $27,306,920)                                         27,306,920 
=========================================================================== 
TOTAL INVESTMENTS-100.57% (Cost                                             
  $5,948,795,704)                                             6,895,392,916 
=========================================================================== 
OTHER ASSETS LESS LIABILITIES-(0.57%)                           (39,241,056)
=========================================================================== 
NET ASSETS-100.00%                                           $6,856,151,860 
___________________________________________________________________________ 
=========================================================================== 

Investment Abbreviations:                                                       

                                                                [Download Table]
                                  
ADR  - American Depositary Receipt

Notes to Schedule of Investments:                                               

(a) Non-income producing security.                                              
(b) In accordance with the procedures established by the Board of Trustees, the 
 foreign security is fair valued using adjusted closing market prices. The
aggregate market value of these securities at December 31, 2004 was     
  $126,371,585, which represented 1.83% of the Fund's Total Investments. See
Note 1A.                                                                
(c) All or a portion of this security has been pledged as collateral for        
securities lending transactions at December 31, 2004.                   
(d) The money market fund and the Fund are affiliated by having the same        
investment advisor. See Note 3.                                         
(e) The security has been segregated to satisfy the forward commitment to return
the cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned. See Note 8.                 

See accompanying notes which are an integral part of the financial statements.  
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STATEMENT OF ASSETS AND LIABILITIES                                             

December 31, 2004                                                               

                                                                [Download Table]
                                                             
ASSETS:                                                      

Investments, at market value (cost                           
  $5,683,380,702)*                           $ 6,629,977,914 
------------------------------------------------------------ 
Investments in affiliated money market                       
  funds (cost $265,415,002)                      265,415,002 
============================================================ 
  Total investments (cost $5,948,795,704)      6,895,392,916 
____________________________________________________________ 
============================================================ 
Foreign currencies, at market value (cost                    
  $314)                                                  327 
------------------------------------------------------------ 
Receivables for:                                             
  Investments sold                                30,095,164 
------------------------------------------------------------ 
  Fund shares sold                                   876,506 
------------------------------------------------------------ 
  Dividends                                       11,615,984 
------------------------------------------------------------ 
Investment for trustee deferred                              
  compensation and retirement plans                  570,984 
------------------------------------------------------------ 
Other assets                                          66,109 
============================================================ 
  Total assets                                 6,938,617,990 
____________________________________________________________ 
============================================================ 

LIABILITIES:                                                 

Payables for:                                                
  Investments purchased                           10,619,597 
------------------------------------------------------------ 
  Fund shares reacquired                          37,448,126 
------------------------------------------------------------ 
  Trustee deferred compensation and                          
    retirement plans                               1,267,901 
------------------------------------------------------------ 
  Collateral upon return of securities                       
    loaned                                        27,306,920 
------------------------------------------------------------ 
Accrued distribution fees                          2,923,342 
------------------------------------------------------------ 
Accrued transfer agent fees                        2,446,786 
------------------------------------------------------------ 
Accrued operating expenses                           453,458 
============================================================ 
  Total liabilities                               82,466,130 
============================================================ 
Net assets applicable to shares outstanding  $ 6,856,151,860 
____________________________________________________________ 
============================================================ 

NET ASSETS CONSIST OF:                                       

Shares of beneficial interest                $10,092,375,074 
------------------------------------------------------------ 
Undistributed net investment income                 (788,589)
------------------------------------------------------------ 
Undistributed net realized gain (loss) from                  
  investment securities, foreign currencies                  
  and futures contracts                       (4,182,032,090)
------------------------------------------------------------ 
Unrealized appreciation of investment                        
  securities and foreign currencies              946,597,465 
============================================================ 
                                             $ 6,856,151,860 
____________________________________________________________ 
============================================================ 

NET ASSETS:                                                  

Class A                                      $ 4,225,191,623 
____________________________________________________________ 
============================================================ 
Class B                                      $ 2,315,118,550 
____________________________________________________________ 
============================================================ 
Class C                                      $   312,034,903 
____________________________________________________________ 
============================================================ 
Class R                                      $       831,863 
____________________________________________________________ 
============================================================ 
Institutional Class                          $     2,974,921 
____________________________________________________________ 
============================================================ 

SHARES OUTSTANDING, $0.01 PAR VALUE PER                      
  SHARE, UNLIMITED NUMBER OF SHARES                          
  AUTHORIZED:                                                

Class A                                          427,648,250 
____________________________________________________________ 
============================================================ 
Class B                                          252,665,016 
____________________________________________________________ 
============================================================ 
Class C                                           34,026,511 
____________________________________________________________ 
============================================================ 
Class R                                               84,630 
____________________________________________________________ 
============================================================ 
Institutional Class                                  298,926 
____________________________________________________________ 
============================================================ 
Class A:                                                     
  Net asset value per share                  $          9.88 
------------------------------------------------------------ 
  Offering price per share:                                  
    (Net asset value of $9.88 divided by                     
      94.50%)                                $         10.46 
____________________________________________________________ 
============================================================ 
Class B:                                                     
  Net asset value and offering price per                     
    share                                    $          9.16 
____________________________________________________________ 
============================================================ 
Class C:                                                     
  Net asset value and offering price per                     
    share                                    $          9.17 
____________________________________________________________ 
============================================================ 
Class R:                                                     
  Net asset value and offering price per                     
    share                                    $          9.83 
____________________________________________________________ 
============================================================ 
Institutional Class:                                         
  Net asset value and offering price per                     
    share                                    $          9.95 
____________________________________________________________ 
============================================================ 

* At December 31, 2004, securities with an aggregate market value of $26,012,960
were on loan to brokers.                                                    

See accompanying notes which are an integral part of the financial statements.  
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STATEMENT OF OPERATIONS                                                         

For the year ended December 31, 2004                                            

                                                                [Download Table]
                                                                            
INVESTMENT INCOME:                                                          

Dividends (net of foreign withholding tax of $994,634)        $ 125,438,615 
--------------------------------------------------------------------------- 
Dividends from affiliated money market funds (including                     
  securities lending income of $403,714*)                         3,358,823 
--------------------------------------------------------------------------- 
Interest                                                             98,725 
=========================================================================== 
  Total investment income                                       128,896,163 
=========================================================================== 

EXPENSES:                                                                   

Advisory fees                                                    49,234,296 
--------------------------------------------------------------------------- 
Administrative services fees                                        725,065 
--------------------------------------------------------------------------- 
Custodian fees                                                      600,725 
--------------------------------------------------------------------------- 
Distribution fees:                                                          

  Class A                                                        11,551,335 
--------------------------------------------------------------------------- 
  Class B                                                        28,505,751 
--------------------------------------------------------------------------- 
  Class C                                                         3,624,154 
--------------------------------------------------------------------------- 
  Class R                                                             3,593 
--------------------------------------------------------------------------- 
Transfer agent fees--Class A,B,C,R & Institutional               26,056,032 
--------------------------------------------------------------------------- 
Trustees' fees and retirement benefits                              225,306 
--------------------------------------------------------------------------- 
Other                                                             3,640,523 
=========================================================================== 
  Total expenses                                                124,166,780 
=========================================================================== 
Less: Fees waived, expenses reimbursed and expense offset                   
  arrangements                                                   (1,766,556)
=========================================================================== 
  Net expenses                                                  122,400,224 
=========================================================================== 
Net investment income                                             6,495,939 
=========================================================================== 

REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT                         
  SECURITIES, FOREIGN CURRENCIES AND FUTURES CONTRACTS:                     

Net realized gain (loss) from:                                              
  Investment securities                                         528,077,046 
--------------------------------------------------------------------------- 
  Foreign currencies                                               (259,491)
--------------------------------------------------------------------------- 
  Futures contracts                                              15,858,268 
=========================================================================== 
                                                                543,675,823 
=========================================================================== 
Change in net unrealized appreciation (depreciation) of:                    
  Investment securities                                        (222,461,581)
--------------------------------------------------------------------------- 
  Foreign currencies                                                (17,361)
--------------------------------------------------------------------------- 
  Futures contracts                                             (11,022,800)
=========================================================================== 
                                                               (233,501,742)
=========================================================================== 
Net gain from investment securities, foreign currencies and                 
  futures contracts                                             310,174,081 
=========================================================================== 
Net increase in net assets resulting from operations          $ 316,670,020 
___________________________________________________________________________ 
=========================================================================== 

* Dividends from affiliated money market funds are net of income rebate paid to 
securities lending counterparties.                                          

See accompanying notes which are an integral part of the financial statements.  
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STATEMENT OF CHANGES IN NET ASSETS                                              

For the years ended December 31, 2004 and 2003                                  

                                                        [Enlarge/Download Table]

                                                                   2004               2003       
------------------------------------------------------------------------------------------------ 
                                                                                                 

OPERATIONS:                                                                                      

  Net investment income (loss)                                $     6,495,939    $   (25,735,883)
------------------------------------------------------------------------------------------------ 
  Net realized gain (loss) from investment securities,                                           
    foreign currencies, foreign currency contracts, futures                                      
    contracts and option contracts                                543,675,823       (519,632,972)
------------------------------------------------------------------------------------------------ 
  Change in net unrealized appreciation (depreciation) of                                        
    investment securities, foreign currencies, foreign                                           
    currency contracts and futures contracts                     (233,501,742)     2,505,788,002 
================================================================================================ 
    Net increase in net assets resulting from operations          316,670,020      1,960,419,147 
================================================================================================ 
Distributions to shareholders from net investment income:                                        
  Class A                                                          (6,005,272)                -- 
------------------------------------------------------------------------------------------------ 
  Institutional Class                                                 (28,013)                -- 
================================================================================================ 
    Decrease in net assets resulting from distributions            (6,033,285)                -- 
================================================================================================ 
Share transactions-net:                                                                          
  Class A                                                      (1,093,570,069)      (586,536,341)
------------------------------------------------------------------------------------------------ 
  Class B                                                      (1,396,211,918)    (1,467,119,888)
------------------------------------------------------------------------------------------------ 
  Class C                                                        (134,394,245)      (101,720,007)
------------------------------------------------------------------------------------------------ 
  Class R                                                             137,938            318,566 
------------------------------------------------------------------------------------------------ 
  Institutional Class                                                 603,693           (625,385)
================================================================================================ 
    Net increase (decrease) in net assets resulting from                                         
     share transactions                                        (2,623,434,601)    (2,155,683,055)
================================================================================================ 
    Net increase (decrease) in net assets                      (2,312,797,866)      (195,263,908)
================================================================================================ 

NET ASSETS:                                                                                      

  Beginning of year                                             9,168,949,726      9,364,213,634 
================================================================================================ 
  End of year (including undistributed net investment income                                     
    (loss) of $(788,589) and $(990,003), respectively)        $ 6,856,151,860    $ 9,168,949,726 
________________________________________________________________________________________________ 
================================================================================================ 

See accompanying notes which are an integral part of the financial statements.  
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NOTES TO FINANCIAL STATEMENTS                                                   

December 31, 2004                                                               

NOTE 1--SIGNIFICANT ACCOUNTING POLICIES                                         

AIM Premier Equity Fund (the "Fund") is a series portfolio of AIM Funds Group   
(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 nine separate portfolios,    
each authorized to issue an unlimited number of shares of beneficial interest.  
The Fund currently offers multiple classes of shares. Matters affecting each    
portfolio or class will be voted on exclusively by the shareholders of such     
portfolio or class. The assets, liabilities and operations of each portfolio are
accounted for separately. Information presented in these financial statements   
pertains only to the Fund.                                                      

 The Fund's primary investment objective is to achieve long-term growth of
capital. Income is a secondary objective. Each company listed in the Schedule of
Investments is organized in the United States of America unless otherwise noted.

   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. However, the Fund has not had prior claims or losses pursuant to these
contracts.                                                                      

The preparation of financial statements in conformity with accounting   
principles generally accepted in the United States of America requires          
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported 
amounts of revenues and expenses during the reporting period. Actual results    
could differ from those estimates. The following is a summary of the significant
accounting policies followed by the Fund in the preparation of its financial    
statements.                                                                     

A.   SECURITY VALUATIONS -- Securities, including restricted securities, are    
valued according to the following policy.                             

      A security listed or traded on an exchange (except convertible bonds) is
 valued at its last sales price as of the close of the customary trading
session on the exchange where the security is principally traded, or  
lacking any sales on a particular day, the security is valued at the  
     closing bid price on that day. Each security traded in the over-the-counter
   market (but not securities reported on the NASDAQ National Market System)
    is valued on the basis of prices furnished by independent pricing services
or market makers. Each security reported on the NASDAQ National Market
  System is valued at the NASDAQ Official Closing Price ("NOCP") as of the
  close of the customary trading session on the valuation date or absent a
NOCP, at the closing bid price.                                       

  Futures contracts are valued at the final settlement price set by an
     exchange on which they are principally traded. Listed options are valued at
     the mean between the last bid and the ask prices from the exchange on which
   they are principally traded. Options not listed on an exchange are valued
   by an independent source at the mean between the last bid and ask prices.
   For purposes of determining net asset value per share, futures and option
contracts generally will be valued 15 minutes after the close of the  
customary trading session of the New York Stock Exchange ("NYSE").    

    Investments in open-end registered investment companies and closed-end
     registered investment companies that do not trade on an exchange are valued
at the end of day net asset value per share. Investments in closed-end
     registered investment companies that trade on an exchange are valued at the
  last sales price as of the close of the customary trading session on the
exchange where the security is principally traded.                    

     Debt obligations (including convertible bonds) are fair valued using an
evaluated quote provided by an independent pricing service. Evaluated 
    quotes provided by the pricing service may be determined without exclusive
reliance on quoted prices, and may reflect appropriate factors such as
institution-size trading in similar groups of securities, developments
related to specific securities, dividend rate, yield, quality, type of
    issue, coupon rate, maturity, individual trading characteristics and other
    market data. Short-term obligations having 60 days or less to maturity and
 commercial paper are valued at amortized cost which approximates market
value.                                                                

     Securities for which market prices are not provided by any of the above
   methods are valued based upon quotes furnished by independent sources and
  are valued at the last bid price in the case of equity securities and in
the case of debt obligations, the mean between the last bid and asked 
prices.                                                               

     Foreign securities (including foreign exchange contracts) are converted
into U.S. dollar amounts using the applicable exchange rates as of the
close of the NYSE. Generally, trading in foreign securities is        
     substantially completed each day at various times prior to the close of the
   NYSE. The values of such securities used in computing the net asset value
of the Fund's shares are determined as of the close of the respective 
   markets. Events affecting the values of such foreign securities may occur
 between the times at which the particular foreign market closes and the
close of the customary trading session of the NYSE which would not    
   ordinarily be reflected in the computation of the Fund's net asset value.
    If the event is likely to have affected the closing price of the security,
  the security will be valued at fair value in good faith using procedures
     approved by the Board of Trustees. Adjustments to closing prices to reflect
fair value may also be based on a screening process of an independent 
  pricing service to indicate the degree of certainty, based on historical
data, that the closing price in the principal market where a foreign  
security trades is not the current market value as of the close of the
    NYSE. Foreign securities meeting the approved degree of certainty that the
price is not reflective of current market value will be priced at the 
 indication of fair value from the independent pricing service. Multiple
     factors may be considered by the independent pricing service in determining
   adjustments to reflect fair value and may include information relating to
sector indices, ADRs, domestic and foreign index futures and          
exchange-traded funds.                                                

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     Securities for which market quotations are not readily available or are
     unreliable are valued at fair value as determined in good faith by or under
  the supervision of the Trust's officers following procedures approved by
the Board of Trustees. Issuer specific events, market trends, bid/ask 
  quotes of brokers and information providers and other market data may be
     reviewed in the course of making a good faith determination of a security's
fair value.                                                           

B.   SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions   
    are accounted for on a trade date basis. Realized gains or losses on sales
are computed on the basis of specific identification of the securities
sold. Interest income is recorded on the accrual basis from settlement
date. Dividend income is recorded on the ex-dividend date.            

     Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased 
  and/or a reduction of proceeds on a sale of securities. Such transaction
 costs are included in the determination of realized and unrealized gain
   (loss) from investment securities reported in the Statement of Operations
    and the Statement of Changes in Net Assets and the realized and unrealized
 net gains (losses) on securities per share in the Financial Highlights.
   Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These   
transaction costs are not considered operating expenses and are not   
    reflected in net investment income reported in the Statement of Operations
  and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation  
arrangements between the Fund and the advisor.                        

     The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.     

C.   DISTRIBUTIONS -- Distributions from income and net realized capital gain,  
   if any, are generally paid annually and recorded on ex-dividend date. The
Fund may elect to use a portion of the proceeds from redemptions as   
distributions for federal income tax purposes.                        

D.   FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of
Subchapter M of the Internal Revenue Code necessary to qualify as a   
   regulated investment company and, as such, will not be subject to federal
  income taxes on otherwise taxable income (including net realized capital
 gain) which is distributed to shareholders. Therefore, no provision for
federal income taxes is recorded in the financial statements.         

E.   EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular    
 class of the Fund are charged to the operations of such class. Transfer
agency fees and expenses and other shareholder recordkeeping fees and 
     expenses attributable to the Institutional Class are charged to such class.
    Transfer agency fees and expenses and other shareholder recordkeeping fees
and expenses relating to all other classes are allocated among those  
classes based on relative net assets. All other expenses are allocated
among the classes based on relative net assets.                       

F.   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.                             

G.   FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation 
to purchase or sell a specific currency for an agreed-upon price at a 
     future date. The Fund may enter into a foreign currency contract to attempt
   to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency   
  contract for the purchase or sale of a security denominated in a foreign
    currency in order to "lock in" the U.S. dollar price of that security. The
     Fund could be exposed to risk if counterparties to the contracts are unable
to meet the terms of their contracts or if the value of the foreign   
currency changes unfavorably.                                         

H.   COVERED CALL OPTIONS -- The Fund may write call options, on a covered      
  basis; that is, the Fund will own the underlying security. When the Fund
  writes a covered call option, an amount equal to the premium received by
     the Fund is recorded as an asset and an equivalent liability. The amount of
 the liability is subsequently "marked-to-market" to reflect the current
   market value of the option written. The current market value of a written
    option is the mean between the last bid and asked prices on that day. If a
  written call option expires on the stipulated expiration date, or if the
   Fund enters into a closing purchase transaction, the Fund realizes a gain
     (or a loss if the closing purchase transaction exceeds the premium received
    when the option was written) without regard to any unrealized gain or loss
 on the underlying security, and the liability related to such option is
     extinguished. If a written option is exercised, the Fund realizes a gain or
 a loss from the sale of the underlying security and the proceeds of the
    sale are increased by the premium originally received. A risk in writing a
 call option is that the Fund gives up the opportunity for profit if the
market price of the security increases and the option is exercised.   

I.   FUTURES CONTRACTS -- The Fund may purchase or sell futures contracts as a  
hedge against changes in market conditions. Initial margin deposits   
required upon entering into futures contracts are satisfied by the    
 segregation of specific securities as collateral for the account of the
 broker (the Fund's agent in acquiring the futures position). During the
period the futures contracts are open, changes in the value of the    
contracts are recognized as unrealized gains or losses by "marking to 
  market" on a daily basis to reflect the market value of the contracts at
the end of each day's trading. Variation margin payments are made or  
  received depending upon whether unrealized gains or losses are incurred.
When the contracts                                                    

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are closed, the Fund recognizes a realized gain or loss equal to the  
   difference between the proceeds from, or cost of, the closing transaction
    and the Fund's basis in the contract. If the Fund were unable to liquidate
     a futures contract and/or enter into an offsetting closing transaction, the
    Fund would continue to be subject to market risk with respect to the value
of the contracts and continue to be required to maintain the margin   
deposits on the futures contracts.                                    

NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES                         

The Trust has entered into a master investment advisory agreement with A I M    
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,   
the Fund pays an advisory fee to AIM at the annual rate of 0.80% of the first   
$150 million of the Fund's average daily net assets, plus 0.625% of the Fund's  
average daily net assets in excess of $150 million. Effective January 1, 2005   
through December 31, 2009, AIM has contractually agreed to waive advisory fees  
to the extent necessary so that the advisory fees payable by the Fund (based on 
the Fund's average daily net assets) do not exceed the annual rate of 0.75% of  
the first $150 million, plus 0.615% of the next $4.85 billion, plus 0.57% of the
next $2.5 billion, plus 0.545% of the next $2.5 billion, plus 0.52% of the      
Fund's average daily net assets in excess of $10 billion. Further, AIM has      
voluntarily agreed to waive advisory fees of the Fund in the amount of 25% of   
the advisory fee AIM receives from the affiliated money market funds on         
investments by the Fund in such affiliated money market funds (excluding        
investments made in affiliated money market funds with cash collateral from     
securities loaned by the Fund). Voluntary fee waivers or reimbursements may be  
modified or discontinued at any time upon consultation with the Board of        
Trustees without further notice to investors. For the year ended December 31,   
2004, AIM waived fees of $770,935.                                              

   For the year ended December 31, 2004, at the request of the Trustees of the
Trust, AMVESCAP PLC ("AMVESCAP") agreed to reimburse $885,101 of expenses       
incurred by the Fund in connection with matters related to recently settled     
regulatory actions and investigations concerning market timing activity in the  
AIM Funds, including legal, audit, shareholder servicing, communication and     
trustee expenses. These expenses along with the related expense reimbursement,  
are included in the Statement of Operations.                                    

  The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing    
accounting services to the Fund. For the year ended December 31, 2004, AIM was  
paid $725,065 for such services.                                                

    The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay AIM Investment Services, Inc. ("AISI") a fee for providing transfer agency  
and shareholder services to the Fund and reimburse AISI for certain expenses    
incurred by AISI in the course of providing such services. For the Institutional
Class, the transfer agent has contractually agreed to reimburse class specific  
transfer agent fees and expenses to the extent necessary to limit transfer agent
fees to 0.10% of the average net assets. AISI did not reimburse fees during the 
period under this expense limitation. For the year ended December 31, 2004, the 
Fund paid AISI $26,056,032 for Class A, Class B, Class C, Class R and           
Institutional Class shares. AISI may make payments to intermediaries that       
provide omnibus account services, sub-accounting services and/or networking     
services.                                                                       

The Trust has entered into master distribution agreements with A I M    
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the     
Class A, Class B, Class C, Class R and Institutional Class shares of the Fund.  
The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with      
respect to the Fund's Class A, Class B, Class C and Class R shares (collectively
the "Plans"). The Fund, pursuant to the Plans, pays AIM Distributors            
compensation at the annual rate of 0.25% 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 these    
amounts, up to 0.25% of the average daily net assets of the Class A, Class B,   
Class C or Class R shares may be paid to furnish continuing personal shareholder
services to customers who purchase and own shares of such classes. Any amounts  
not paid as a service fee under the Plans would constitute an asset-based sales 
charge. NASD Rules also impose a cap on the total sales charges, including      
asset-based sales charges that may be paid by any class of shares of the Fund.  
Pursuant to the Plans, for the year ended December 31, 2004, the Class A, Class 
B, Class C and Class R shares paid $11,551,335, $28,505,751, $3,624,154 and     
$3,593, respectively.                                                           

  Front-end sales commissions and contingent deferred sales charges ("CDSC")
(collectively the "sales charges") are not recorded as expenses of the Fund.    
Front-end sales commissions are deducted from proceeds from the sales of Fund   
shares prior to investment in Class A shares of the Fund. CDSC are deducted from
redemption proceeds prior to remittance to the shareholder. During year ended   
December 31, 2004, AIM Distributors advised the Fund that it retained $388,971  
in front-end sales commissions from the sale of Class A shares and $6,192,      
$241,988, $19,556 and $0 from Class A, Class B, Class C and Class R shares,     
respectively, for CDSC imposed upon redemptions by shareholders.                

Certain officers and trustees of the Trust are officers and directors of
AIM, AISI and/or AIM Distributors.                                              

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NOTE 3--INVESTMENTS IN AFFILIATES                                               

The Fund is permitted, pursuant to an exemptive order from the Securities and   
Exchange Commission ("SEC"), to invest daily available cash balances and cash   
collateral from securities lending transactions in affiliated money market      
funds. The Fund and the money market funds below have the same investment       
advisor and therefore, are considered to be affiliated. The tables below show   
the transactions in and earnings from investments in affiliated money market    
funds for the year ended December 31, 2004.                                     

INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:                                   

                                                        [Enlarge/Download Table]

                                                                                UNREALIZED                                
                         MARKET VALUE      PURCHASES        PROCEEDS FROM      APPRECIATION     MARKET VALUE     DIVIDEND 
FUND                      12/31/2003        AT COST             SALES         (DEPRECIATION)      12/31/04        INCOME  
--------------------------------------------------------------------------------------------------------------------------
                                                                                                                          
Liquid Asset Portfolio-                                                                                                   
  Institutional Class    $149,855,268    $1,520,793,513    $(1,551,594,740)    $         --     $119,054,041    $1,488,808
--------------------------------------------------------------------------------------------------------------------------
STIC Prime Portfolio-                                                                                                     
  Institutional Class    149,855,268      1,520,793,513    (1,551,594,740)               --     119,054,041      1,466,301
==========================================================================================================================
  Subtotal               $299,710,536    $3,041,587,026    $(3,103,189,480)    $         --     $238,108,082    $2,955,109
==========================================================================================================================



                           REALIZED                                                                                       
FUND                     GAIN (LOSS)                                                                                      
-----------------------                                                                                                   
                                                                                                                          
Liquid Asset Portfolio-                                                                                                   
  Institutional Class    $         --                                                                                     
-----------------------                                                                                                   
STIC Prime Portfolio-                                                                                                     
  Institutional Class              --                                                                                     
=======================                                                                                                   
  Subtotal               $         --                                                                                     
=======================                                                                                                   

INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:            

                                                        [Enlarge/Download Table]

                                                                                UNREALIZED                                
                         MARKET VALUE      PURCHASES        PROCEEDS FROM      APPRECIATION     MARKET VALUE     DIVIDEND 
FUND                      12/31/2003        AT COST             SALES         (DEPRECIATION)      12/31/04       INCOME*  
--------------------------------------------------------------------------------------------------------------------------
                                                                                                                          
Liquid Asset Portfolio-                                                                                                   
  Institutional Class    $119,778,490    $  649,658,610    $ (769,437,100)     $         --     $        --     $  315,099
--------------------------------------------------------------------------------------------------------------------------
STIC Prime Portfolio-                                                                                                     
  Institutional Class             --        300,579,793      (273,272,873)               --      27,306,920         88,615
==========================================================================================================================
  Subtotal               $119,778,490    $  950,238,403    $(1,042,709,973)    $         --     $27,306,920     $  403,714
==========================================================================================================================
  Total                  $419,489,026    $3,991,825,429    $(4,145,899,453)    $         --     $265,415,002    $3,358,823
__________________________________________________________________________________________________________________________
==========================================================================================================================



                           REALIZED                                                                                       
FUND                     GAIN (LOSS)                                                                                      
-----------------------                                                                                                   
                                                                                                                          
Liquid Asset Portfolio-                                                                                                   
  Institutional Class    $         --                                                                                     
-----------------------                                                                                                   
STIC Prime Portfolio-                                                                                                     
  Institutional Class              --                                                                                     
=======================                                                                                                   
  Subtotal               $         --                                                                                     
=======================                                                                                                   
  Total                  $         --                                                                                     
_______________________                                                                                                   
=======================                                                                                                   

* Dividend income is net of income rebate paid to securities lending            
counterparties.                                                             

NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS                             

The Fund is permitted to purchase or sell securities from or to certain other   
AIM Funds under specified conditions outlined in procedures adopted by the Board
of Trustees of the Trust. The procedures have been designed to ensure that any  
purchase or sale of securities by the Fund from or to another fund or portfolio 
that is or could be considered an affiliate by virtue of having a common        
investment advisor (or affiliated investment advisors), common Trustees and/or  
common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined   
under the procedures each transaction is effected at the current market price.  
Pursuant to these procedures, during the year ended December 31, 2004, the Fund 
engaged in purchases and sales of securities of $208,839,267 and $151,062,573,  
respectively.                                                                   

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 December 31, 2004, the Fund received credits in transfer agency fees of   
$108,971 and credits in custodian fees of $1,549 under expense offset           
arrangements, which resulted in a reduction of the Fund's total expenses of     
$110,520.                                                                       

NOTE 6--TRUSTEES' FEES                                                          

Trustees' fees represent remuneration paid to each Trustee of the Trust who is  
not an "interested person" of AIM. Trustees have the option to defer            
compensation payable by the Trust. Those Trustees who defer compensation have   
the option to select various AIM Funds in which their deferral accounts shall be
deemed to be invested.                                                          

Current Trustees are eligible to participate in a retirement plan that  
provides for benefits to be paid upon retirement to Trustees over a period of   
time based on the number of years of service. The Fund may have certain former  
Trustees that also participate in a retirement plan and receive benefits under  
such plan.                                                                      

  Obligations under the deferred compensation and retirement plans represent
unsecured claims against the general assets of the Fund.                        

    During the year ended December 31, 2004, the Fund paid legal fees of $21,824
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.          

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NOTE 7--BORROWINGS                                                              

Pursuant to an exemptive order from the SEC, the Fund may participate in an     
interfund lending facility that AIM has established for temporary borrowings by 
the AIM Funds. An interfund loan will be made under this facility only if the   
loan rate (an average of the rate available on bank loans and the rate available
on investments in overnight repurchase agreements) is favorable to both the     
lending fund and the borrowing fund. A loan will be secured by collateral if the
Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total    
assets. To the extent that the loan is required to be secured by collateral, the
collateral is marked to market daily to ensure that the market value is at least
102% of the outstanding principal value of the loan.                            

The Fund is a participant in an uncommitted unsecured revolving credit  
facility with State Street Bank and Trust Company ("SSB"). The Fund may borrow  
up to the lesser of (i) $125,000,000, or (ii) the limits set by its prospectus  
for borrowings. The Fund and other funds advised by AIM which are parties to the
credit facility can borrow on a first come, first served basis. Principal on    
each loan outstanding shall bear interest at the bid rate quoted by SSB at the  
time of the request for the loan.                                               

During the year ended December 31, 2004, the Fund did not borrow or lend
under the interfund lending facility or borrow under the uncommitted unsecured  
revolving credit facility.                                                      

Additionally, the Fund is permitted to temporarily carry a negative or  
overdrawn balance in its account with SSB, the custodian bank. To compensate the
custodian bank for such overdrafts, the overdrawn Fund may either (i) leave     
funds in the account so the custodian can be compensated by earning the         
additional interest; or (ii) compensate by paying the custodian bank. In either 
case, the custodian bank will be compensated at an amount equal to the Federal  
Funds rate plus 100 basis points.                                               

NOTE 8--PORTFOLIO SECURITIES LOANED                                             

The Fund may lend portfolio securities having a market value up to one-third of 
the Fund's total assets. Such loans are secured by collateral equal to no less  
than the market value of the loaned securities determined daily. Such collateral
will be cash or debt securities issued or guaranteed by the U.S. Government or  
any of its agencies. Cash collateral received in connection with these loans is 
invested in short-term money market instruments or affiliated money market      
funds. It is the Fund's policy to obtain additional collateral from or return   
excess collateral to the borrower by the end of the next business day, following
the valuation date of the securities loaned. Therefore, the value of the        
collateral held may be temporarily less than the value of the securities on     
loan. Lending securities entails a risk of loss to the Fund if and to the extent
that the market value of the securities loaned were to increase and the borrower
did not increase the collateral accordingly, and the borrower fails to return   
the securities. The Fund could also experience delays and costs in gaining      
access to the collateral. The Fund bears the risk of any deficiency in the      
amount of the collateral available for return to the borrower due to a loss on  
the collateral invested.                                                        

    At December 31, 2004, securities with an aggregate value of $26,012,960 were
on loan to brokers. The loans were secured by cash collateral of $27,306,920    
received by the Fund and subsequently invested in affiliated money market funds.
For the year ended December 31, 2004, the Fund received dividends on cash       
collateral net of income rebate paid to counterparties of $403,714 for          
securities lending transactions.                                                

NOTE 9--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS          

DISTRIBUTIONS TO SHAREHOLDERS:                                                  

The tax character of distributions paid during the years ended December 31, 2004
and 2003 was as follows:                                                        

                                                        [Enlarge/Download Table]

                                                                 2004           2003    
----------------------------------------------------------------------------------------
                                                                                        
Distributions paid from ordinary income                       $6,033,285    $         --
________________________________________________________________________________________
========================================================================================

TAX COMPONENTS OF NET ASSETS:                                                   

As of December 31, 2004, the components of net assets on a tax basis were as    
follows:                                                                        

                                                                [Download Table]

                                                                     2004       
------------------------------------------------------------------------------- 
                                                                                
Undistributed ordinary income                                   $       239,299 
------------------------------------------------------------------------------- 
Unrealized appreciation -- investments                              924,089,426 
------------------------------------------------------------------------------- 
Temporary book/tax differences                                       (1,121,639)
------------------------------------------------------------------------------- 
Capital loss carryforward                                        (4,159,430,300)
------------------------------------------------------------------------------- 
Shares of beneficial interest                                    10,092,375,074 
=============================================================================== 
Total net assets                                                $ 6,856,151,860 
_______________________________________________________________________________ 
=============================================================================== 

The difference between book-basis and tax-basis unrealized appreciation 
(depreciation) is due to differences in the timing of recognition of gains and  
losses on investments for tax and book purposes. The Fund's unrealized          
appreciation (depreciation) difference is attributable primarily to losses on   
wash sales and return of capital distributions. The tax-basis unrealized        
appreciation on investments amount includes appreciation on foreign currencies  
of $253.                                                                        

The temporary book/tax differences are a result of timing differences   
between book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of the trustee deferral of compensation and 
retirement plan expenses and return of capital distributions.                   

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   Capital loss carryforward is calculated and reported as of a specific date.
Results of transactions and other activity after that date may affect the amount
of capital loss carryforward actually available for the Fund to utilize. The    
ability to utilize capital loss carryforward in the future may be limited under 
the Internal Revenue Code and related regulations based on the results of future
transactions. Under these limitation rules, the Fund is limited as of December  
31, 2004 to utilizing $4,144,170,085 of capital loss carryforward in the fiscal 
year ended December 31, 2005.                                                   

  The Fund utilized $543,143,350 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 December 31, 2004 which expires as   
follows:                                                                        

                                                                [Download Table]

                                                                   CAPITAL LOSS   
EXPIRATION                                                        CARRYFORWARD*   
----------------------------------------------------------------------------------
                                                                                  
December 31, 2009                                                 $1,147,080,694  
----------------------------------------------------------------------------------
December 31, 2010                                                  2,279,293,105  
----------------------------------------------------------------------------------
December 31, 2011                                                    733,056,501  
==================================================================================
Total capital loss carryforward                                   $4,159,430,300  
__________________________________________________________________________________
==================================================================================

* Capital loss carryforward as of the date listed above is reduced for          
limitations, if any, to the extent required by the Internal Revenue Code. To
the extent that unrealized gains as of November 24, 2003, the date of the   
reorganization of AIM Premier Equity II Fund into the Fund, are realized on 
securities held in each fund at such date, the capital loss carryforward may
be further limited for up to five years from the date of the reorganization.

NOTE 10--INVESTMENT SECURITIES                                                  

The aggregate amount of investment securities (other than short-term securities 
and money market funds) purchased and sold by the Fund during the year ended    
December 31, 2004 was $6,524,651,967 and $9,092,451,785, respectively.          

                                                                [Download Table]

UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS 
------------------------------------------------------------------------------ 
                                                                               
Aggregate unrealized appreciation of investment securities      $1,060,577,425 
------------------------------------------------------------------------------ 
Aggregate unrealized (depreciation) of investment securities      (136,488,252)
============================================================================== 
Net unrealized appreciation of investment securities            $  924,089,173 
______________________________________________________________________________ 
============================================================================== 
Cost of investments for tax purposes is $5,971,303,743.                        

NOTE 11--RECLASSIFICATION OF PERMANENT DIFFERENCES                              

Primarily as a result of differing book/tax treatment of foreign currency       
transactions and return of capital distributions, on December 31, 2004,         
undistributed net investment income (loss) was decreased by $261,240,           
undistributed net realized gain (loss) was increased by $281,979 and shares of  
beneficial interest decreased by $20,739. This reclassification had no effect on
the net assets of the Fund.                                                     

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NOTE 12--SHARE INFORMATION                                                      

The Fund currently offers five different classes of shares: Class A shares,     
Class B shares, Class C shares, Class R shares and Institutional Class shares.  
Class A shares are sold with a front-end sales charge. Class B shares and Class 
C shares are sold with CDSC. Class R shares and Institutional Class shares are  
sold at net asset value. Under certain circumstances, Class A shares and Class R
shares are subject to CDSC. Generally, Class B shares will automatically convert
to Class A shares eight years after the end of the calendar month of purchase.  

                                                        [Enlarge/Download Table]

                                                CHANGES IN SHARES OUTSTANDING(a)                                                 
-------------------------------------------------------------------------------------------------------------------------------- 
                                                                                   YEAR ENDED DECEMBER 31,                       
                                                              ------------------------------------------------------------------ 
                                                                           2004                               2003               
                                                              -------------------------------    ------------------------------- 
                                                                 SHARES           AMOUNT            SHARES           AMOUNT      
-------------------------------------------------------------------------------------------------------------------------------- 
                                                                                                                                 
Sold:                                                                                                                            
  Class A                                                       19,026,912    $   177,793,866      39,598,262    $   320,765,623 
-------------------------------------------------------------------------------------------------------------------------------- 
  Class B                                                        7,798,250         67,922,205      13,786,253        105,078,641 
-------------------------------------------------------------------------------------------------------------------------------- 
  Class C                                                        1,961,009         17,069,552       3,249,627         24,835,033 
-------------------------------------------------------------------------------------------------------------------------------- 
  Class R                                                           39,878            369,677          89,985            704,135 
-------------------------------------------------------------------------------------------------------------------------------- 
  Institutional Class                                              276,850          2,558,155              --                 -- 
================================================================================================================================ 
Issued as reinvestment of dividends:                                                                                             
  Class A                                                          550,080          5,357,824              --                 -- 
-------------------------------------------------------------------------------------------------------------------------------- 
  Institutional Class                                                2,565             25,160              --                 -- 
================================================================================================================================ 
Issued in connection with acquisitions:(b)                                                                                       
  Class A                                                               --                 --       2,782,677         24,469,013 
-------------------------------------------------------------------------------------------------------------------------------- 
  Class B                                                               --                 --       3,838,877         31,511,253 
-------------------------------------------------------------------------------------------------------------------------------- 
  Class C                                                               --                 --       1,461,575         11,994,377 
================================================================================================================================ 
Automatic conversion of Class B shares to Class A shares:                                                                        
  Class A                                                       64,231,883        602,604,466      77,425,211        643,745,569 
-------------------------------------------------------------------------------------------------------------------------------- 
  Class B                                                      (69,041,635)      (602,604,466)    (82,660,881)      (643,745,569)
================================================================================================================================ 
Reacquired:                                                                                                                      
  Class A                                                     (201,673,468)    (1,879,326,225)   (192,041,009)    (1,575,516,546)
-------------------------------------------------------------------------------------------------------------------------------- 
  Class B                                                      (99,213,876)      (861,529,657)   (126,732,034)      (959,964,213)
-------------------------------------------------------------------------------------------------------------------------------- 
  Class C                                                      (17,405,960)      (151,463,797)    (18,159,353)      (138,549,417)
-------------------------------------------------------------------------------------------------------------------------------- 
  Class R                                                          (24,986)          (231,739)        (47,869)          (385,569)
-------------------------------------------------------------------------------------------------------------------------------- 
  Institutional Class                                             (205,058)        (1,979,622)        (74,164)          (625,385)
================================================================================================================================ 
                                                              (293,677,556)   $(2,623,434,601)   (277,482,843)   $(2,155,683,055)
________________________________________________________________________________________________________________________________ 
================================================================================================================================ 

(a)  There are two entities that are each record owners of more than 5% of      
the outstanding shares of the Fund and in the aggregate the own 16% of
the outstanding shares of the Fund. AIM Distributors has an agreement 
with this entity to sell the Fund shares. The Fund, AIM and/or AIM    
 affiliates may make payments to these entities, which are considered to
be related, for providing services to the Fund, AIM and/or AIM        
affiliates including but not limited to services such as, securities  
brokerage, distribution, third party record keeping and account       
servicing. The Trust has no knowledge as to whether all or any portion
of the shares owned of record by these shareholders are also owned    
beneficially.                                                         
(b)  As of the opening of business on November 24, 2003, the Fund acquired      
all of the net assets of AIM Premier Equity II Fund pursuant to a plan
  of reorganization approved by AIM Premier Equity II Fund shareholders on
October 28, 2003. The acquisition was accomplished by a tax-free      
exchange of 8,083,129 shares of the Fund for 12,162,356 shares of AIM 
 Premier Equity II Fund outstanding as of the close of business November
21, 2003. AIM Premier Equity II Fund net assets at that date of       
$67,974,643 including $(5,277,895) of unrealized appreciation         
 (depreciation), were combined with those of the Fund. The aggregate net
assets of the Fund immediately before the acquisition were            
$8,817,104,791.                                                       

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NOTE 13--FINANCIAL HIGHLIGHTS                                                   

The following schedule presents financial highlights for a share of the Fund    
outstanding throughout the periods indicated.                                   

                                                        [Enlarge/Download Table]

                                                                                          CLASS A                                   
                                                           ---------------------------------------------------------------------    
                                                                                  YEAR ENDED DECEMBER 31,                           
                                                           ---------------------------------------------------------------------    
                                                              2004             2003          2002          2001        2000(A)      
--------------------------------------------------------------------------------------------------------------------------------    
                                                                                                                                    
Net asset value, beginning of period                       $     9.38       $     7.51    $    10.87    $    12.51   $     16.28    
--------------------------------------------------------------------------------------------------------------------------------    
Income from investment operations:                                                                                                  
  Net investment income (loss)                                   0.04(b)(c)       0.01(b)      (0.01)(b)     (0.00)        (0.04)(b)
--------------------------------------------------------------------------------------------------------------------------------    
  Net gains (losses) on securities (both realized and                                                                               
    unrealized)                                                  0.47             1.86         (3.35)        (1.63)        (2.42)   
================================================================================================================================    
    Total from investment operations                             0.51             1.87         (3.36)        (1.63)        (2.46)   
================================================================================================================================    
Less distributions:                                                                                                                 
  Dividends from net investment income                          (0.01)              --            --            --            --    
--------------------------------------------------------------------------------------------------------------------------------    
  Distributions from net realized gains                            --               --            --         (0.01)        (1.31)   
================================================================================================================================    
    Total distributions                                         (0.01)              --            --         (0.01)        (1.31)   
================================================================================================================================    
Net asset value, end of period                             $     9.88       $     9.38    $     7.51    $    10.87   $     12.51    
________________________________________________________________________________________________________________________________    
================================================================================================================================    
Total return(d)                                                  5.48%           24.90%       (30.91)%      (12.99)%      (14.95)%  
________________________________________________________________________________________________________________________________    
================================================================================================================================    
Ratios/supplemental data:                                                                                                           
Net assets, end of period (000s omitted)                   $4,225,192       $5,116,444    $4,642,361    $8,502,699   $11,223,504    
________________________________________________________________________________________________________________________________    
================================================================================================================================    
Ratio of expenses to average net assets:                                                                                            
  With fee waivers and/or expense reimbursements                 1.26%(e)         1.26%         1.17%         1.08%         1.00%   
--------------------------------------------------------------------------------------------------------------------------------    
  Without fee waivers and/or expense reimbursements              1.28%(e)         1.27%         1.19%         1.12%         1.04%   
================================================================================================================================    
Ratio of net investment income (loss) to average net                                                                                
  assets                                                         0.39%(c)(e)       0.07%       (0.08)%       (0.03)%       (0.11)%  
________________________________________________________________________________________________________________________________    
================================================================================================================================    
Portfolio turnover rate                                            86%              37%           36%           38%           67%   
________________________________________________________________________________________________________________________________    
================================================================================================================================    

(a)  Per share information and shares have been restated to reflect a 3 for 1   
stock split, effected in the form of a 200% stock dividend on November
10, 2000.                                                             
(b)  Calculated using average shares outstanding.                               
(c)  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 (loss) to average net assets excluding the special dividend
are $0.03 and 0.24% respectively.                                     
(d)  Includes adjustments in accordance with accounting principles generally    
accepted in the United States of America and as such, the net asset   
value for financial reporting purposes and the returns based on those 
net asset values may differ from the net asset value and returns for  
shareholder transactions. Does not include sales charges.             
(e)  Ratios are based on average daily net assets of 4,620,534,125.             

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NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)                                       

                                                        [Enlarge/Download Table]

                                                                                          CLASS B                                   
                                                           ---------------------------------------------------------------------    
                                                                                  YEAR ENDED DECEMBER 31,                           
                                                           ---------------------------------------------------------------------    
                                                              2004             2003          2002          2001        2000(A)      
--------------------------------------------------------------------------------------------------------------------------------    
                                                                                                                                    
Net asset value, beginning of period                       $     8.75       $     7.07    $    10.30    $    11.94   $     15.73    
--------------------------------------------------------------------------------------------------------------------------------    
Income from investment operations:                                                                                                  
  Net investment income (loss)                                  (0.03)(b)(c)      (0.05)(b)      (0.07)(b)   (0.09)        (0.31)(b)
--------------------------------------------------------------------------------------------------------------------------------    
  Net gains (losses) on securities (both realized and                                                                               
    unrealized)                                                  0.44             1.73         (3.16)        (1.54)        (2.17)   
================================================================================================================================    
    Total from investment operations                             0.41             1.68         (3.23)        (1.63)        (2.48)   
================================================================================================================================    
Less distributions from net realized gains                         --               --            --         (0.01)        (1.31)   
================================================================================================================================    
Net asset value, end of period                             $     9.16       $     8.75    $     7.07    $    10.30   $     11.94    
________________________________________________________________________________________________________________________________    
================================================================================================================================    
Total return(d)                                                  4.69%           23.76%       (31.36)%      (13.61)%      (15.65)%  
________________________________________________________________________________________________________________________________    
================================================================================================================================    
Ratios/supplemental data:                                                                                                           
Net assets, end of period (000s omitted)                   $2,315,119       $3,616,395    $4,274,489    $9,186,980   $12,491,366    
________________________________________________________________________________________________________________________________    
================================================================================================================================    
Ratio of expenses to average net assets:                                                                                            
  With fee waivers and/or expense reimbursements                 2.01%(e)         2.01%         1.92%         1.84%         1.77%   
--------------------------------------------------------------------------------------------------------------------------------    
  Without fee waivers and/or expense reimbursements              2.03%(e)         2.02%         1.94%         1.88%         1.81%   
================================================================================================================================    
Ratio of net investment income (loss) to average net                                                                                
  assets                                                        (0.36)%(c)(e)      (0.68)%      (0.84)%      (0.79)%       (0.89)%  
________________________________________________________________________________________________________________________________    
================================================================================================================================    
Portfolio turnover rate                                            86%              37%           36%           38%           67%   
________________________________________________________________________________________________________________________________    
================================================================================================================================    

(a)  Per share information and shares have been restated to reflect a 3 for 1   
stock split, effected in the form of a 200% stock dividend on November
10, 2000.                                                             
(b)  Calculated using average shares outstanding.                               
(c)  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 (loss) to average net assets excluding the special dividend
are $(0.04) and (0.51)% respectively.                                 
(d)  Includes adjustments in accordance with accounting principles generally    
accepted in the United States of America and as such, the net asset   
value for financial reporting purposes and the returns based on those 
net asset values may differ from the net asset value and returns for  
shareholder transactions. Does not include sales charges.             
(e)  Ratios are based on average daily net assets of $2,850,575,141.            

                                                        [Enlarge/Download Table]

                                                                                          CLASS C                                
                                                              ---------------------------------------------------------------    
                                                                                  YEAR ENDED DECEMBER 31,                        
                                                              ---------------------------------------------------------------    
                                                                2004             2003        2002        2001       2000(A)      
-----------------------------------------------------------------------------------------------------------------------------    
                                                                                                                                 
Net asset value, beginning of period                          $   8.76         $   7.07    $  10.31    $  11.95    $    15.74    
-----------------------------------------------------------------------------------------------------------------------------    
Income from investment operations:                                                                                               
  Net investment income (loss)                                   (0.03)(b)(c)     (0.05)(b)    (0.07)(b)    (0.09)      (0.31)(b)
-----------------------------------------------------------------------------------------------------------------------------    
  Net gains (losses) on securities (both realized and                                                                            
    unrealized)                                                   0.44             1.74       (3.17)      (1.54)        (2.17)   
=============================================================================================================================    
    Total from investment operations                              0.41             1.69       (3.24)      (1.63)        (2.48)   
=============================================================================================================================    
Less distributions from net realized gains                          --               --          --       (0.01)        (1.31)   
=============================================================================================================================    
Net asset value, end of period                                $   9.17         $   8.76    $   7.07    $  10.31    $    11.95    
_____________________________________________________________________________________________________________________________    
=============================================================================================================================    
Total return(d)                                                   4.68%           23.90%     (31.43)%    (13.60)%      (15.62)%  
_____________________________________________________________________________________________________________________________    
=============================================================================================================================    
Ratios/supplemental data:                                                                                                        
Net assets, end of period (000s omitted)                      $312,035         $433,332    $444,901    $943,211    $1,262,192    
_____________________________________________________________________________________________________________________________    
=============================================================================================================================    
Ratio of expenses to average net assets:                                                                                         
  With fee waivers and/or expense reimbursements                  2.01%(e)         2.01%       1.92%       1.84%         1.77%   
-----------------------------------------------------------------------------------------------------------------------------    
  Without fee waivers and/or expense reimbursements               2.03%(e)         2.02%       1.94%       1.88%         1.81%   
=============================================================================================================================    
Ratio of net investment income (loss) to average net assets      (0.36)%(c)(e)    (0.68)%     (0.84)%     (0.79)%       (0.88)%  
_____________________________________________________________________________________________________________________________    
=============================================================================================================================    
Portfolio turnover rate                                             86%              37%         36%         38%           67%   
_____________________________________________________________________________________________________________________________    
=============================================================================================================================    

(a)  Per share information and shares have been restated to reflect a 3 for 1   
stock split, effected in the form of a 200% stock dividend on November
10, 2000.                                                             
(b)  Calculated using average shares outstanding.                               
(c)  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 (loss) to average net assets excluding the special dividend
are $(0.04) and (0.51)% respectively.                                 
(d)  Includes adjustments in accordance with accounting principles generally    
accepted in the United States of America and as such, the net asset   
value for financial reporting purposes and the returns based on those 
net asset values may differ from the net asset value and returns for  
shareholder transactions. Does not include sales charges.             
(e)  Ratios are based on average daily net assets of $362,415,401.              

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                                                        [Enlarge/Download Table]

                                                                              CLASS R                  
                                                              ---------------------------------------  
                                                                                        JUNE 3, 2002   
                                                                    YEAR ENDED           (DATE SALES   
                                                                   DECEMBER 31,         COMMENCED) TO  
                                                              ----------------------    DECEMBER 31,   
                                                              2004             2003         2002       
-----------------------------------------------------------------------------------------------------  
                                                                                                       
Net asset value, beginning of period                          $9.34           $ 7.50       $  9.16     
-----------------------------------------------------------------------------------------------------  
Income from investment operations:                                                                     
  Net investment income (loss)                                0.01(a)(b)       (0.01)(a)      (0.02)(a)
-----------------------------------------------------------------------------------------------------  
  Net gains (losses) on securities (both realized and                                                  
    unrealized)                                               0.48              1.85         (1.64)    
=====================================================================================================  
    Total from investment operations                          0.49              1.84         (1.66)    
=====================================================================================================  
Net asset value, end of period                                $9.83           $ 9.34       $  7.50     
_____________________________________________________________________________________________________  
=====================================================================================================  
Total return(c)                                               5.25%            24.53%       (18.12)%   
_____________________________________________________________________________________________________  
=====================================================================================================  
Ratios/supplemental data:                                                                              
Net assets, end of period (000s omitted)                      $832            $  651       $   207     
_____________________________________________________________________________________________________  
=====================================================================================================  
Ratio of expenses to average net assets:                                                               
  With fee waivers and/or expense reimbursements              1.51%(d)          1.51%         1.48%(e) 
-----------------------------------------------------------------------------------------------------  
  Without fee waivers and/or expense reimbursements           1.53%(d)          1.52%         1.50%(e) 
=====================================================================================================  
Ratio of net investment income (loss) to average net assets   0.14%(b)(d)      (0.18)%       (0.40)%(e)
_____________________________________________________________________________________________________  
=====================================================================================================  
Portfolio turnover rate(f)                                      86%               37%           36%    
_____________________________________________________________________________________________________  
=====================================================================================================  

(a)  Calculated using average shares outstanding.                               
(b)  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 (loss) to average net assets excluding the special dividend
are $(0.00) and (0.01)% respectively.                                 
(c)  Includes adjustments in accordance with accounting principles generally    
accepted in the United States of America and as such, the net asset   
value for financial reporting purposes and the returns based on those 
net asset values may differ from the net asset value and returns for  
  shareholder transactions. Not annualized for periods less than one year.
(d)  Ratios are based on average daily net assets of $718,550.                  
(e)  Annualized.                                                                
(f)  Not annualized for periods less than one year.                             

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                                                                        INSTITUTIONAL CLASS           
                                                              ----------------------------------------
                                                                                           MARCH 15,  
                                                                                             2002     
                                                                    YEAR ENDED            (DATE SALES 
                                                                   DECEMBER 31,          COMMENCED) TO
                                                              -----------------------    DECEMBER 31, 
                                                               2004             2003         2002     
------------------------------------------------------------------------------------------------------
                                                                                                      
Net asset value, beginning of period                          $ 9.47           $ 7.55       $10.66    
------------------------------------------------------------------------------------------------------
Income from investment operations:                                                                    
  Net investment income                                         0.10(a)(b)       0.05(a)      0.03(a) 
------------------------------------------------------------------------------------------------------
  Net gains (losses) on securities (both realized and                                                 
    unrealized)                                                 0.47             1.87        (3.14)   
======================================================================================================
    Total from investment operations                            0.57             1.92        (3.11)   
======================================================================================================
Less distributions from net realized gains                     (0.09)              --           --    
======================================================================================================
Net asset value, end of period                                $ 9.95           $ 9.47       $ 7.55    
______________________________________________________________________________________________________
======================================================================================================
Total return(c)                                                 6.06%           25.43%      (29.17)%  
______________________________________________________________________________________________________
======================================================================================================
Ratios/supplemental data:                                                                             
Net assets, end of period (000s omitted)                      $2,975           $2,127       $2,255    
______________________________________________________________________________________________________
======================================================================================================
Ratio of expenses to average net assets:                                                              
  With fee waivers and/or expense reimbursements                0.58%(d)         0.71%        0.66%(e)
------------------------------------------------------------------------------------------------------
  Without fee waivers and/or expense reimbursements             0.60%(d)         0.72%        0.68%(e)
======================================================================================================
Ratio of net investment income to average net assets            1.07%(b)(d)      0.62%        0.42%(e)
______________________________________________________________________________________________________
======================================================================================================
Portfolio turnover rate(f)                                        86%              37%          36%   
______________________________________________________________________________________________________
======================================================================================================

(a)  Calculated using average shares outstanding.                               
(b)  Net investment income per share and the ratio of net investment income     
 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 per share and the ratio of net investment to average net assets
excluding the special dividend are $0.09 and 0.92% respectively.      
(c)  Includes adjustments in accordance with accounting principles generally    
accepted in the United States of America and as such, the net asset   
value for financial reporting purposes and the returns based on those 
net asset values may differ from the net asset value and returns for  
  shareholder transactions. Not annualized for periods less than one year.
(d)  Ratios are based on average daily net assets of $1,244,088.                
(e)  Annualized.                                                                
(f)  Not annualized for periods less than one year.                             

NOTE 14--LEGAL PROCEEDINGS                                                      

Terms used in the Legal Proceedings Note are defined terms solely for the       
purpose of this note.                                                           

SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING         

    On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment
advisor to certain AIM Funds) and A I M Advisors, Inc. ("AIM") (the Fund's      
investment advisor) reached final settlements with certain regulators, including
without limitation the Securities and Exchange Commission ("SEC"), the New York 
Attorney General ("NYAG") and the Colorado Attorney General ("COAG"), to resolve
civil enforcement actions and investigations related to market timing activity  
and related issues in the AIM Funds, including those formerly advised by IFG.   
These regulators alleged, in substance, that IFG and AIM failed to disclose in  
the prospectuses for the AIM Funds that they advised and to the independent     
directors/trustees of such Funds that they had entered into certain arrangements
permitting market timing of such Funds, thereby breaching their fiduciary duties
to such Funds. As a result of the foregoing, the regulators alleged that IFG and
AIM breached various Federal and state securities, business and consumer        
protection laws. On the same date, A I M Distributors, Inc. ("ADI") (the        
distributor of the retail AIM Funds) reached a final settlement with the SEC to 
resolve an investigation relating to market timing activity and related issues  
in the AIM Funds. The SEC also alleged that ADI violated various Federal        
securities laws. The SEC also has settled related market timing enforcement     
actions brought against certain former officers and employees of IFG.           

Under the terms of the settlements, IFG agreed to pay a total of $325   
million, of which $110 million is civil penalties. Of this $325 million total   
payment, half has been paid and the remaining half will be paid on or before    
December 31, 2005. AIM and ADI agreed to pay a total of $50 million, of which   
$30 million is civil penalties, all of which has been paid. The entire $325     
million IFG settlement payment will be made available for distribution to the   
shareholders of those AIM Funds that IFG formerly advised that were harmed by   
market timing activity, and the entire $50 million settlement payment by AIM and
ADI will be made available for distribution to the shareholders of those AIM    
Funds advised by AIM that were harmed by market timing activity, all as to be   
determined by an independent distribution consultant. The settlement payments   
will be distributed in accordance with a methodology to be determined by the    
independent distribution consultant, in consultation with AIM and the           
independent trustees of the AIM Funds and acceptable to the staff of the SEC.   
Under the settlements with the NYAG and COAG, AIM has agreed to reduce          
management fees on certain equity and balanced AIM                              

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Funds by $15 million per year for the next five years, based upon effective fee 
rates and assets under management as of July 1, 2004, and not to increase       
certain management fees.                                                        

Under the terms of the settlements, AIM will make certain governance and
compliance reforms, including maintaining an internal controls committee and    
retaining an independent compliance consultant and a corporate ombudsman. Also, 
commencing in 2007 and at least once every other year thereafter, AIM will      
undergo a compliance review by an independent third party. In addition, under   
the terms of the settlements, AIM has undertaken to cause the AIM Funds to      
operate in accordance with certain governance policies and practices, including 
retaining a full-time independent senior officer whose duties will include      
monitoring compliance and managing the process by which proposed management fees
to be charged the AIM Funds are negotiated. Also, commencing in 2008 and not    
less than every fifth calendar year thereafter, the AIM Funds will hold         
shareholder meetings at which their Boards of Trustees will be elected.         

   At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"),
the parent company of IFG and AIM, has agreed to pay expenses incurred by such  
Funds related to market timing matters.                                         

  The SEC has also settled market timing enforcement actions against Raymond
R. Cunningham (the former president and chief executive officer of IFG and a    
former member of the board of directors of the AIM Funds formerly advised by    
IFG), Timothy J. Miller (the former chief investment officer and a former       
portfolio manager for IFG), Thomas A. Kolbe (the former national sales manager  
of IFG) and Michael D. Legoski (a former assistant vice president in IFG's sales
department). As part of these settlements, the SEC ordered these individuals to 
pay restitution and civil penalties in various amounts and prohibited them from 
associating with, or serving as an officer or director of, an investment        
advisor, broker, dealer and/or investment company, as applicable, for certain   
periods of time.                                                                

The payments made in connection with the above-referenced settlements by
IFG, AIM and ADI will total approximately $375 million (not including AIM's     
agreement to reduce management fees on certain equity and balanced AIM Funds by 
$15 million per year for the next five years, based upon effective fee rates and
assets under management as of July 1, 2004). The manner in which the settlement 
payments will be distributed is unknown at the present time and will be         
determined by an independent distribution consultant appointed under the        
settlement agreements. Therefore, management of AIM and the Fund are unable at  
the present time to estimate the impact, if any, that the distribution of the   
settlement payments may have on the Fund or whether such distribution will have 
an impact on the Fund's financial statements in the future.                     

  At the present time, management of AIM and the Fund are unable to estimate
the impact, if any, that the outcome of the Regulatory Inquiries and Pending    
Litigation described below may have on AIM, ADI or the Fund.                    

REGULATORY INQUIRIES AND PENDING LITIGATION                                     

The mutual fund industry as a whole is currently subject to regulatory  
inquiries and litigation related to a wide range of issues. These issues        
include, among others, market timing activity, late trading, fair value pricing,
excessive or improper advisory and/or distribution fees, mutual fund sales      
practices, including but not limited to revenue sharing and directed-brokerage  
arrangements, investments in securities of other registered investment          
companies, contractual plans, issues related to Section 529 college savings     
plans, procedures for locating lost security holders and participation in class 
action settlements.                                                             

 As described more fully below, IFG and AIM are the subject of a number of
ongoing regulatory inquiries and civil lawsuits related to one or more of the   
issues currently being scrutinized by various Federal and state regulators,     
including but not limited to those issues described above. Additional regulatory
actions and/or civil lawsuits related to the above or other issues may be filed 
against the AIM Funds, IFG, AIM and/or related entities and individuals in the  
future. Additional regulatory inquiries related to the above or other issues    
also may be received by the AIM Funds, IFG, AIM and/or related entities and     
individuals in the future.                                                      

Ongoing Regulatory Inquiries Concerning IFG and AIM                             

   IFG, certain related entities, certain of their current and former officers
and/or certain of the AIM Funds formerly advised by IFG have received regulatory
inquiries in the form of subpoenas or other oral or written requests for        
information and/or documents related to one or more of the following issues,    
some of which concern one or more such Funds: market timing activity, late      
trading, fair value pricing, excessive or improper advisory and/or distribution 
fees, mutual fund sales practices, including revenue sharing and                
directed-brokerage arrangements, and investments in securities of other         
registered investment companies. These regulators include the SEC, the NASD,    
Inc. ("NASD"), the Florida Department of Financial Services, the Attorney       
General of the State of West Virginia, the West Virginia Securities Commission  
and the Bureau of Securities of the State of New Jersey. IFG and certain of     
these other parties also have received more limited inquiries from the United   
States Department of Labor ("DOL") and the United States Attorney's Office for  
the Southern District of New York, some of which concern one or more of the AIM 
Funds formerly advised by IFG. IFG is providing full cooperation with respect to
these inquiries.                                                                

   AIM, certain related entities, certain of their current and former officers
and/or certain of the AIM Funds have received regulatory inquiries in the form  
of subpoenas or other oral or written requests for information and/or documents 
related to one or more of the following issues, some of which concern one or    
more AIM Funds: market timing activity, late trading, fair value pricing,       
excessive or improper advisory and/or distribution fees, mutual fund sales      
practices, including revenue sharing and directed-brokerage arrangements,       
investments in securities of other registered investment companies, contractual 
plans, issues related to Section 529 college savings plans and procedures for   
locating lost securityholders. These regulators include the SEC, the NASD, the  
Department of Banking for the State of Connecticut, the Attorney General of the 
State of West Virginia, the West Virginia Securities Commission and the Bureau  
of Securities of the State of New Jersey. AIM and certain of these other parties
also have received more limited inquiries from the SEC, the NASD,               
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the DOL, the Internal Revenue Service, the United States Attorney's Office for  
the Southern District of New York, the United States Attorney's Office for the  
Central District of California, the United States Attorney's Office for the     
District of Massachusetts, the Massachusetts Securities Division, the U.S.      
Postal Inspection Service and the Commodity Futures Trading Commission, some of 
which concern one or more AIM Funds. AIM is providing full cooperation with     
respect to these inquiries.                                                     

Private Civil Actions Alleging Market Timing                                    

 Multiple civil lawsuits, including purported class action and shareholder
derivative suits, have been filed against various parties (including, depending 
on the lawsuit, certain AIM Funds, IFG, AIM, AIM Management, AMVESCAP, certain  
related entities, certain of their current and former officers and/or certain   
unrelated third parties) making allegations that are similar in many respects to
those in the settled regulatory actions brought by the SEC, the NYAG and the    
COAG concerning market timing activity in the AIM Funds. These lawsuits allege a
variety of theories of recovery, including but not limited to: (i) violation of 
various provisions of the Federal and state securities laws; (ii) violation of  
various provisions of ERISA; (iii) breach of fiduciary duty; and/or (iv) breach 
of contract. These lawsuits were initiated in both Federal and state courts and 
seek such remedies as compensatory damages; restitution; injunctive relief;     
disgorgement of management fees; imposition of a constructive trust; removal of 
certain directors and/or employees; various corrective measures under ERISA;    
rescission of certain Funds' advisory agreements; interest; and attorneys' and  
experts' fees.                                                                  

All lawsuits based on allegations of market timing, late trading, and   
related issues have been transferred to the United States District Court for the
District of Maryland (the "MDL Court") for consolidated or coordinated pre-trial
proceedings. Pursuant to an Order of the MDL Court, plaintiffs consolidated     
their claims for pre-trial purposes into three amended complaints against       
various AIM- and IFG-related parties: (i) a Consolidated Amended Class Action   
Complaint purportedly brought on behalf of shareholders of the AIM Funds; (ii) a
Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of 
the AIM Funds and fund registrants; and (iii) an Amended Class Action Complaint 
for Violations of the Employee Retirement Income Securities Act ("ERISA")       
purportedly brought on behalf of participants in AMVESCAP's 401(k) plan. The    
plaintiffs in one of the underlying lawsuits continue to seek remand of their   
lawsuit to state court.                                                         

Private Civil Actions Alleging Improper Use of Fair Value Pricing               

    Multiple civil class action lawsuits have been filed against various parties
(including, depending on the lawsuit, certain AIM Funds, IFG and/or AIM)        
alleging that certain AIM Funds inadequately employed fair value pricing. These 
lawsuits allege a variety of theories of recovery, including but not limited to:
(i) violations of various provisions of the Federal securities laws; (ii) common
law breach of duty; and (iii) common law negligence and gross negligence. These 
lawsuits have been filed in both Federal and state courts and seek such remedies
as compensatory and punitive damages; interest; and attorneys' fees and costs.  

Private Civil Actions Alleging Excessive Advisory and/or Distribution Fees      

 Multiple civil lawsuits, including purported class action and shareholder
derivative suits, have been filed against various parties (including, depending 
on the lawsuit, IFG, AIM, INVESCO Institutional (N.A.), Inc. ("IINA"), ADI      
and/or INVESCO Distributors, Inc. ("INVESCO Distributors")) alleging that the   
defendants charged excessive advisory and/or distribution fees and failed to    
pass on to shareholders the perceived savings generated by economies of scale.  
Certain of these lawsuits also allege that the defendants adopted unlawful      
distribution plans. These lawsuits allege a variety of theories of recovery,    
including but not limited to: (i) violation of various provisions of the Federal
securities laws; (ii) breach of fiduciary duty; and/or (iii) breach of contract.
These lawsuits have been filed in Federal courts and seek such remedies as      
damages; injunctive relief; rescission of certain Funds' advisory agreements and
distribution plans; interest; prospective relief in the form of reduced fees;   
and attorneys' and experts' fees. All of these lawsuits have been transferred to
the United States District Court for the Southern District of Texas, Houston    
Division by order of the applicable United States District Court in which they  
were initially filed. The plaintiff in one of these lawsuits has challenged this
order.                                                                          

Private Civil Actions Alleging Improper Charging of Distribution Fees on Limited
Offering Funds or Share Classes                                                 

  Multiple civil lawsuits, including shareholder derivative suits, have been
filed against various parties (including, depending on the lawsuit, IFG, AIM,   
ADI and/or certain of the trustees of the AIM Funds) alleging that the          
defendants breached their fiduciary duties by charging distribution fees while  
funds and/or specific share classes were closed generally to new investors      
and/or while other share classes of the same fund were not charged the same     
distribution fees. These lawsuits allege a variety of theories of recovery,     
including but not limited to: (i) violation of various provisions of the Federal
securities laws; and (ii) breach of fiduciary duty. These lawsuits have been    
filed in Federal courts and seek such remedies as damages; injunctive relief;   
and attorneys' and experts' fees.                                               

Private Civil Actions Alleging Improper Mutual Fund Sales Practices and         
Directed-Brokerage Arrangements                                                 

 Multiple civil lawsuits, including purported class action and shareholder
derivative suits, have been filed against various parties (including, depending 
on the lawsuit, AIM Management, IFG, AIM, AIM Investment Services, Inc. ("AIS") 
and/or certain of the trustees of the AIM Funds) alleging that the defendants   
improperly used the assets of the AIM Funds to pay brokers to aggressively      
promote the sale of the AIM Funds over other mutual funds and that the          
defendants concealed such payments from investors by disguising them as         
brokerage commissions. These lawsuits allege a variety of theories of recovery, 
including but not limited to: (i) violation of various provisions of the Federal
securities laws; (ii) breach of fiduciary duty; and (iii) aiding and abetting a 
breach of fiduciary duty. These lawsuits have been filed in Federal courts and  
seek such remedies as compensatory and punitive damages; rescission of certain  
Funds' advisory agreements and distribution plans and recovery of all fees paid;
an accounting of all fund-related fees, commissions and soft dollar payments;   
restitution of all unlawfully or discriminatorily obtained fees and charges; and
attorneys' and experts' fees.                                                   

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NOTE 14--LEGAL PROCEEDINGS (CONTINUED)                                          

Private Civil Action Alleging Failure to Ensure Participation in Class Action   
Settlements                                                                     

A civil lawsuit, purporting to be a class action lawsuit, has been filed
against AIM, IINA, A I M Capital Management, Inc. and the trustees of the AIM   
Funds alleging that the defendants breached their fiduciary duties by failing to
ensure that the AIM Funds participated in class action settlements in which the 
AIM Funds were eligible to participate. This lawsuit alleges as theories of     
recovery: (i) violation of various provisions of the Federal securities laws;   
(ii) common law breach of fiduciary duty; and (iii) common law negligence. This 
lawsuit has been filed in Federal court and seeks such remedies as compensatory 
and punitive damages; forfeiture of all commissions and fees paid by the class  
of plaintiffs; and costs and attorneys' fees.                                   
*                                       *                                      *
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

    As a result of the matters discussed above, investors in the AIM Funds might
react by redeeming their investments. This might require the Funds to sell      
investments to provide for sufficient liquidity and could also have an adverse  
effect on the investment performance of the Funds.                              

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                         

To the Board of Trustees and Shareholders of                                    
AIM Select 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 Select Equity Fund (one of the 
funds constituting AIM Funds Group hereafter referred to as the "Fund") at      
December 31, 2004, the results of its operations for the year then ended, the   
changes in its net assets for each of the two years in the period then ended and
the financial highlights for each of the five years in the period then ended, in
conformity with accounting principles generally accepted in the United States of
America. These financial statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of the Fund's management;  
our responsibility is to express an opinion on these financial statements based 
on our audits. We conducted our audits of these financial statements in         
accordance with the standards of the Public Company Accounting Oversight Board  
(United States). Those standards require that we plan and perform the audit to  
obtain reasonable assurance about whether the financial statements are free of  
material misstatement. An audit includes examining, on a test basis, evidence   
supporting the amounts and disclosures in the financial statements, assessing   
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our    
audits, which included confirmation of securities at December 31, 2004 by       
correspondence with the custodian and brokers, provide a reasonable basis for   
our opinion.                                                                    

/s/ PRICEWATERHOUSECOOPERS LLP                                                  

February 18, 2005                                                               
Houston, Texas                                                                  

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FINANCIALS                                                                      

SCHEDULE OF INVESTMENTS                                                         

December 31, 2004                                                               

                                                                [Download Table]

                                                               MARKET   
                                                 SHARES        VALUE    
------------------------------------------------------------------------
                                                                        
COMMON STOCKS & OTHER EQUITY INTERESTS-96.83%                           

ADVERTISING-1.96%                                                       

Harte-Hanks, Inc.                                  36,000   $    935,280
------------------------------------------------------------------------
Interpublic Group of Cos., Inc. (The)(a)(b)       345,100      4,624,340
------------------------------------------------------------------------
Omnicom Group Inc.                                 43,300      3,651,056
========================================================================
                                                               9,210,676
========================================================================

AEROSPACE & DEFENSE-0.59%                                               

Rockwell Collins, Inc.                             21,900        863,736
------------------------------------------------------------------------
United Technologies Corp.                          18,300      1,891,305
========================================================================
                                                               2,755,041
========================================================================

AIR FREIGHT & LOGISTICS-0.34%                                           

EGL, Inc.(a)                                       17,700        529,053
------------------------------------------------------------------------
Expeditors International of Washington, Inc.       19,000      1,061,720
========================================================================
                                                               1,590,773
========================================================================

APPAREL RETAIL-2.85%                                                    

Gap, Inc. (The)                                   231,600      4,891,392
------------------------------------------------------------------------
Genesco Inc.(a)                                    32,800      1,021,392
------------------------------------------------------------------------
Jos. A. Bank Clothiers, Inc.(a)(b)                 41,250      1,167,375
------------------------------------------------------------------------
Men's Wearhouse, Inc. (The)(a)                    106,400      3,400,544
------------------------------------------------------------------------
Pacific Sunwear of California, Inc.(a)             46,100      1,026,186
------------------------------------------------------------------------
TJX Cos., Inc. (The)                               76,200      1,914,906
========================================================================
                                                              13,421,795
========================================================================

APPAREL, ACCESSORIES & LUXURY GOODS-1.46%                               

Coach, Inc.(a)                                     64,000      3,609,600
------------------------------------------------------------------------
Liz Claiborne, Inc.                                27,800      1,173,438
------------------------------------------------------------------------
V. F. Corp.                                        37,800      2,093,364
========================================================================
                                                               6,876,402
========================================================================

APPLICATION SOFTWARE-1.50%                                              

ANSYS, Inc.(a)                                     53,000      1,699,180
------------------------------------------------------------------------
Intuit Inc.(a)                                     25,000      1,100,250
------------------------------------------------------------------------
MICROS Systems, Inc.(a)                            19,300      1,506,558
------------------------------------------------------------------------
NAVTEQ Corp.(a)                                    34,900      1,617,964
------------------------------------------------------------------------
Reynolds & Reynolds Co. (The)-Class A              42,100      1,116,071
========================================================================
                                                               7,040,023
========================================================================

ASSET MANAGEMENT & CUSTODY BANKS-1.85%                                  

Affiliated Managers Group, Inc.(a)(b)              84,150      5,700,321
------------------------------------------------------------------------

                                                                [Download Table]

                                                               MARKET   
                                                 SHARES        VALUE    
------------------------------------------------------------------------
                                                                        
ASSET MANAGEMENT & CUSTODY BANKS-(CONTINUED)                            

Bank of New York Co., Inc. (The)                   89,300      2,984,406
========================================================================
                                                               8,684,727
========================================================================

BIOTECHNOLOGY-0.43%                                                     

Invitrogen Corp.(a)                                30,000   $  2,013,900
========================================================================

BUILDING PRODUCTS-2.03%                                                 

American Standard Cos. Inc.(a)                     97,100      4,012,172
------------------------------------------------------------------------
Masco Corp.                                       152,300      5,563,519
========================================================================
                                                               9,575,691
========================================================================

CASINOS & GAMING-1.30%                                                  

Penn National Gaming, Inc.(a)                      44,000      2,664,200
------------------------------------------------------------------------
Scientific Games Corp.-Class A(a)                  53,900      1,284,976
------------------------------------------------------------------------
Shuffle Master, Inc.(a)(b)                         46,500      2,190,150
========================================================================
                                                               6,139,326
========================================================================

COMMUNICATIONS EQUIPMENT-1.35%                                          

Avaya Inc.(a)                                      92,000      1,582,400
------------------------------------------------------------------------
Cisco Systems, Inc.(a)                             65,800      1,269,940
------------------------------------------------------------------------
Motorola, Inc.                                     64,700      1,112,840
------------------------------------------------------------------------
Plantronics, Inc.                                  57,100      2,367,937
========================================================================
                                                               6,333,117
========================================================================

COMPUTER & ELECTRONICS RETAIL-0.74%                                     

Best Buy Co., Inc.                                 30,000      1,782,600
------------------------------------------------------------------------
GameStop Corp.-Class A(a)                          75,600      1,690,416
========================================================================
                                                               3,473,016
========================================================================

COMPUTER HARDWARE-1.69%                                                 

Dell Inc.(a)                                      166,600      7,020,524
------------------------------------------------------------------------
International Business Machines Corp.               9,600        946,368
========================================================================
                                                               7,966,892
========================================================================

CONSTRUCTION & FARM MACHINERY & HEAVY                                   
  TRUCKS-0.22%                                                          

PACCAR Inc.                                        13,000      1,046,240
========================================================================

CONSUMER ELECTRONICS-1.41%                                              

Harman International Industries, Inc.              12,700      1,612,900
------------------------------------------------------------------------
Koninklijke (Royal) Philips Electronics                                 
  N.V.-New York Shares (Netherlands)               56,007      1,484,186
------------------------------------------------------------------------
Sony Corp.-ADR (Japan)                             90,900      3,541,464
========================================================================
                                                               6,638,550
========================================================================

CONSUMER FINANCE-2.79%                                                  

American Express Co.                               95,900      5,405,883
------------------------------------------------------------------------

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                                                               MARKET   
                                                 SHARES        VALUE    
------------------------------------------------------------------------
                                                                        
CONSUMER FINANCE-(CONTINUED)                                            

MBNA Corp.                                        175,700   $  4,952,983
------------------------------------------------------------------------
MoneyGram International, Inc.                     130,500      2,758,770
========================================================================
                                                              13,117,636
========================================================================

DATA PROCESSING & OUTSOURCED SERVICES-4.58%                             

BISYS Group, Inc. (The)(a)                         81,500      1,340,675
------------------------------------------------------------------------
Ceridian Corp.(a)                                 222,600      4,069,128
------------------------------------------------------------------------
Certegy Inc.                                       71,500      2,540,395
------------------------------------------------------------------------
DST Systems, Inc.(a)                               30,100      1,568,812
------------------------------------------------------------------------
First Data Corp.                                   92,300      3,926,442
------------------------------------------------------------------------
Fiserv, Inc.(a)                                    45,500      1,828,645
------------------------------------------------------------------------
Paychex, Inc.                                      54,800      1,867,584
------------------------------------------------------------------------
SunGard Data Systems Inc.(a)                      155,700      4,410,981
========================================================================
                                                              21,552,662
========================================================================

DEPARTMENT STORES-0.26%                                                 

Nordstrom, Inc.                                    26,100      1,219,653
========================================================================

DIVERSIFIED BANKS-0.79%                                                 

Comerica Inc.                                      22,400      1,366,848
------------------------------------------------------------------------
U.S. Bancorp                                       74,600      2,336,472
========================================================================
                                                               3,703,320
========================================================================

DIVERSIFIED CHEMICALS-0.34%                                             

Engelhard Corp.                                    52,900      1,622,443
========================================================================

DIVERSIFIED COMMERCIAL SERVICES-2.89%                                   

Apollo Group, Inc.-Class A(a)(c)                   36,861      2,975,051
------------------------------------------------------------------------
Cendant Corp.                                     213,000      4,979,940
------------------------------------------------------------------------
Cintas Corp.                                       22,300        978,078
------------------------------------------------------------------------
H&R Block, Inc.                                    26,600      1,303,400
------------------------------------------------------------------------
Jackson Hewitt Tax Service Inc.                    77,300      1,951,825
------------------------------------------------------------------------
NCO Group, Inc.(a)                                 54,900      1,419,165
========================================================================
                                                              13,607,459
========================================================================

DIVERSIFIED METALS & MINING-0.18%                                       

Compass Minerals International, Inc.               35,100        850,473
========================================================================

ELECTRICAL COMPONENTS & EQUIPMENT-0.80%                                 

II-VI Inc.(a)                                      24,000      1,019,760
------------------------------------------------------------------------
Rockwell Automation, Inc.                          55,000      2,725,250
========================================================================
                                                               3,745,010
========================================================================

ELECTRONIC EQUIPMENT MANUFACTURERS-1.27%                                

Amphenol Corp.-Class A(a)                          78,600      2,887,764
------------------------------------------------------------------------
FLIR Systems, Inc.(a)                              19,000      1,212,010
------------------------------------------------------------------------

                                                                [Download Table]

                                                               MARKET   
                                                 SHARES        VALUE    
------------------------------------------------------------------------
                                                                        
ELECTRONIC EQUIPMENT MANUFACTURERS-(CONTINUED)                          

Mettler-Toledo International Inc.(a)               36,700   $  1,883,077
========================================================================
                                                               5,982,851
========================================================================

ENVIRONMENTAL SERVICES-1.41%                                            

Republic Services, Inc.                            74,800      2,508,792
------------------------------------------------------------------------
Waste Management, Inc.                            138,000      4,131,720
========================================================================
                                                               6,640,512
========================================================================

FOOD RETAIL-1.85%                                                       

Kroger Co. (The)(a)                               243,600      4,272,744
------------------------------------------------------------------------
Safeway Inc.(a)                                   225,100      4,443,474
========================================================================
                                                               8,716,218
========================================================================

FOOTWEAR-0.52%                                                          

NIKE, Inc.-Class B                                 14,500      1,315,005
------------------------------------------------------------------------
Timberland Co. (The)-Class A(a)                    17,900      1,121,793
========================================================================
                                                               2,436,798
========================================================================

GENERAL MERCHANDISE STORES-0.68%                                        

Dollar General Corp.                               53,400      1,109,118
------------------------------------------------------------------------
Target Corp.                                       40,500      2,103,165
========================================================================
                                                               3,212,283
========================================================================

HEALTH CARE DISTRIBUTORS-1.62%                                          

Cardinal Health, Inc.                              59,300      3,448,295
------------------------------------------------------------------------
McKesson Corp.                                    132,600      4,171,596
========================================================================
                                                               7,619,891
========================================================================

HEALTH CARE EQUIPMENT-4.12%                                             

Bard (C.R.), Inc.                                  44,000      2,815,120
------------------------------------------------------------------------
Becton, Dickinson & Co.                            19,400      1,101,920
------------------------------------------------------------------------
Biomet, Inc.                                      116,000      5,033,240
------------------------------------------------------------------------
Fisher Scientific International Inc.(a)(c)         56,900      3,549,422
------------------------------------------------------------------------
Varian Inc.(a)                                     43,600      1,788,036
------------------------------------------------------------------------
Varian Medical Systems, Inc.(a)                    36,400      1,573,936
------------------------------------------------------------------------
Waters Corp.(a)                                    75,100      3,513,929
========================================================================
                                                              19,375,603
========================================================================

HEALTH CARE FACILITIES-1.16%                                            

HCA, Inc.                                          51,700      2,065,932
------------------------------------------------------------------------
Universal Health Services, Inc.-Class B            55,300      2,460,850
------------------------------------------------------------------------
VCA Antech, Inc.(a)                                48,600        952,560
========================================================================
                                                               5,479,342
========================================================================

HEALTH CARE SERVICES-3.02%                                              

Apria Healthcare Group Inc.(a)                     34,800      1,146,660
------------------------------------------------------------------------
Caremark Rx, Inc.(a)                               51,500      2,030,645
------------------------------------------------------------------------
DaVita, Inc.(a)                                    30,400      1,201,712
------------------------------------------------------------------------

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                                                               MARKET   
                                                 SHARES        VALUE    
------------------------------------------------------------------------
                                                                        
HEALTH CARE SERVICES-(CONTINUED)                                        

Express Scripts, Inc.(a)                           37,600   $  2,874,144
------------------------------------------------------------------------
HealthExtras, Inc.(a)                              71,200      1,160,560
------------------------------------------------------------------------
ICON PLC-ADR (Ireland)(a)                          27,700      1,070,605
------------------------------------------------------------------------
IMS Health Inc.                                   162,200      3,764,662
------------------------------------------------------------------------
Quest Diagnostics Inc.                             10,100        965,055
========================================================================
                                                              14,214,043
========================================================================

HEALTH CARE SUPPLIES-0.43%                                              

Sybron Dental Specialties, Inc.(a)                 56,900      2,013,122
========================================================================

HOME IMPROVEMENT RETAIL-0.32%                                           

Home Depot, Inc. (The)                             34,900      1,491,626
========================================================================

HOTELS, RESORTS & CRUISE LINES-0.62%                                    

Starwood Hotels & Resorts Worldwide, Inc.          49,900      2,914,160
========================================================================

HOUSEHOLD PRODUCTS-0.97%                                                

Procter & Gamble Co. (The)                         83,200      4,582,656
========================================================================

HOUSEWARES & SPECIALTIES-0.85%                                          

Fortune Brands, Inc.                               27,000      2,083,860
------------------------------------------------------------------------
Yankee Candle Co., Inc. (The)(a)                   57,200      1,897,896
========================================================================
                                                               3,981,756
========================================================================

INDUSTRIAL CONGLOMERATES-1.50%                                          

Tyco International Ltd. (Bermuda)                 197,100      7,044,354
========================================================================

INDUSTRIAL MACHINERY-1.32%                                              

Danaher Corp.                                      29,400      1,687,854
------------------------------------------------------------------------
Eaton Corp.                                        14,400      1,041,984
------------------------------------------------------------------------
Graco Inc.                                         93,400      3,488,490
========================================================================
                                                               6,218,328
========================================================================

INSURANCE BROKERS-0.87%                                                 

Aon Corp.                                         172,300      4,111,078
========================================================================

INTEGRATED OIL & GAS-1.66%                                              

ChevronTexaco Corp.                                25,600      1,344,256
------------------------------------------------------------------------
Exxon Mobil Corp.                                 107,900      5,530,954
------------------------------------------------------------------------
Occidental Petroleum Corp.                         16,100        939,596
========================================================================
                                                               7,814,806
========================================================================

INTEGRATED TELECOMMUNICATION SERVICES-0.31%                             

CenturyTel, Inc.                                   41,700      1,479,099
========================================================================

INTERNET RETAIL-0.45%                                                   

eBay Inc.(a)                                       18,200      2,116,296
========================================================================

INTERNET SOFTWARE & SERVICES-0.30%                                      

Yahoo! Inc.(a)                                     37,600      1,416,768
========================================================================

                                                                [Download Table]

                                                               MARKET   
                                                 SHARES        VALUE    
------------------------------------------------------------------------
                                                                        

INVESTMENT BANKING & BROKERAGE-1.35%                                    

Goldman Sachs Group, Inc. (The)                     9,000   $    936,360
------------------------------------------------------------------------
Merrill Lynch & Co., Inc.                          40,300      2,408,731
------------------------------------------------------------------------
Morgan Stanley                                     54,200      3,009,184
========================================================================
                                                               6,354,275
========================================================================

IT CONSULTING & OTHER SERVICES-0.23%                                    

Acxiom Corp.                                       41,600      1,094,080
========================================================================

LEISURE PRODUCTS-0.43%                                                  

Brunswick Corp.                                    41,300      2,044,350
========================================================================

LIFE & HEALTH INSURANCE-0.88%                                           

MetLife, Inc.                                      23,700        960,087
------------------------------------------------------------------------
Prudential Financial, Inc.                         57,900      3,182,184
========================================================================
                                                               4,142,271
========================================================================

MANAGED HEALTH CARE-2.67%                                               

AMERIGROUP Corp.(a)                                17,000      1,286,220
------------------------------------------------------------------------
UnitedHealth Group Inc.                            66,200      5,827,586
------------------------------------------------------------------------
WellChoice Inc.(a)                                 26,100      1,393,740
------------------------------------------------------------------------
WellPoint Inc.(a)                                  35,100      4,036,500
========================================================================
                                                              12,544,046
========================================================================

METAL & GLASS CONTAINERS-1.84%                                          

AptarGroup, Inc.                                   36,400      1,921,192
------------------------------------------------------------------------
Ball Corp.                                         62,400      2,744,352
------------------------------------------------------------------------
Pactiv Corp.(a)                                   158,200      4,000,878
========================================================================
                                                               8,666,422
========================================================================

MOTORCYCLE MANUFACTURERS-0.50%                                          

Harley-Davidson, Inc.                              39,000      2,369,250
========================================================================

MOVIES & ENTERTAINMENT-0.61%                                            

Walt Disney Co. (The)                             103,700      2,882,860
========================================================================

MULTI-LINE INSURANCE-0.17%                                              

Genworth Financial Inc.-Class A                    30,000        810,000
========================================================================

OFFICE SERVICES & SUPPLIES-0.31%                                        

Brady Corp.-Class A                                23,100      1,445,367
========================================================================

OIL & GAS DRILLING-1.58%                                                

Todco-Class A(a)                                   58,000      1,068,360
------------------------------------------------------------------------
Transocean Ltd. (Cayman Islands)(a)(c)            149,700      6,345,783
========================================================================
                                                               7,414,143
========================================================================

OIL & GAS EQUIPMENT & SERVICES-1.05%                                    

BJ Services Co.(c)                                 71,300      3,318,302
------------------------------------------------------------------------

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                                                               MARKET   
                                                 SHARES        VALUE    
------------------------------------------------------------------------
                                                                        
OIL & GAS EQUIPMENT & SERVICES-(CONTINUED)                              

Halliburton Co.                                    41,900   $  1,644,156
========================================================================
                                                               4,962,458
========================================================================

OIL & GAS EXPLORATION & PRODUCTION-1.43%                                

Anadarko Petroleum Corp.                           21,100      1,367,491
------------------------------------------------------------------------
Barrett (Bill) Corp.(a)                            11,300        361,487
------------------------------------------------------------------------
Comstock Resources, Inc.(a)                        68,000      1,499,400
------------------------------------------------------------------------
Ultra Petroleum Corp. (Canada)(a)(c)               33,500      1,612,355
------------------------------------------------------------------------
XTO Energy Inc.                                    52,800      1,868,064
========================================================================
                                                               6,708,797
========================================================================

OTHER DIVERSIFIED FINANCIAL SERVICES-3.60%                              

Citigroup Inc.                                    182,000      8,768,760
------------------------------------------------------------------------
JPMorgan Chase & Co.                              209,984      8,191,476
========================================================================
                                                              16,960,236
========================================================================

PACKAGED FOODS & MEATS-0.39%                                            

Flowers Foods, Inc.                                58,200      1,837,956
========================================================================

PAPER PRODUCTS-0.20%                                                    

Wausau-Mosinee Paper Corp.                         53,000        946,580
========================================================================

PERSONAL PRODUCTS-0.72%                                                 

Estee Lauder Cos. Inc. (The)-Class A               29,500      1,350,215
------------------------------------------------------------------------
Gillette Co. (The)                                 45,700      2,046,446
========================================================================
                                                               3,396,661
========================================================================

PHARMACEUTICALS-1.89%                                                   

Johnson & Johnson                                  54,000      3,424,680
------------------------------------------------------------------------
Medicis Pharmaceutical Corp.-Class A               30,300      1,063,833
------------------------------------------------------------------------
Wyeth                                             103,600      4,412,324
========================================================================
                                                               8,900,837
========================================================================

PROPERTY & CASUALTY INSURANCE-0.93%                                     

ACE Ltd. (Cayman Islands)                         102,800      4,394,700
========================================================================

REGIONAL BANKS-1.76%                                                    

Bank of the Ozarks, Inc.                           20,000        680,600
------------------------------------------------------------------------
East West Bancorp, Inc.                            95,100      3,990,396
------------------------------------------------------------------------
Hibernia Corp.-Class A                             62,800      1,853,228
------------------------------------------------------------------------
Marshall & Ilsley Corp.                            39,300      1,737,060
========================================================================
                                                               8,261,284
========================================================================

RESTAURANTS-1.55%                                                       

CBRL Group, Inc.                                   72,600      3,038,310
------------------------------------------------------------------------
Ruby Tuesday, Inc.                                 47,000      1,225,760
------------------------------------------------------------------------
Yum! Brands, Inc.                                  64,400      3,038,392
========================================================================
                                                               7,302,462
========================================================================

                                                                [Download Table]

                                                               MARKET   
                                                 SHARES        VALUE    
------------------------------------------------------------------------
                                                                        

SEMICONDUCTOR EQUIPMENT-0.17%                                           

Cabot Microelectronics Corp.(a)                    20,400   $    817,020
========================================================================

SEMICONDUCTORS-0.87%                                                    

Freescale Semiconductor Inc.-Class B(a)             7,143        131,145
------------------------------------------------------------------------
Intel Corp.                                       115,500      2,701,545
------------------------------------------------------------------------
Microchip Technology Inc.                          48,000      1,279,680
========================================================================
                                                               4,112,370
========================================================================

SOFT DRINKS-1.26%                                                       

PepsiCo, Inc.                                     113,200      5,909,040
========================================================================

SPECIALTY CHEMICALS-0.86%                                               

Albemarle Corp.                                    37,000      1,432,270
------------------------------------------------------------------------
Ecolab Inc.                                        30,000      1,053,900
------------------------------------------------------------------------
Nalco Holding Co.(a)                               80,900      1,579,168
========================================================================
                                                               4,065,338
========================================================================

SPECIALTY STORES-1.02%                                                  

Staples, Inc.                                     142,700      4,810,417
========================================================================

SYSTEMS SOFTWARE-4.82%                                                  

Adobe Systems Inc.                                 35,300      2,214,722
------------------------------------------------------------------------
Computer Associates International, Inc.           282,600      8,777,556
------------------------------------------------------------------------
Microsoft Corp.                                   182,000      4,861,220
------------------------------------------------------------------------
Oracle Corp.(a)                                   306,500      4,205,180
------------------------------------------------------------------------
Symantec Corp.(a)                                 102,000      2,627,520
========================================================================
                                                              22,686,198
========================================================================

TECHNOLOGY DISTRIBUTORS-0.75%                                           

Global Imaging Systems, Inc.(a)                    59,500      2,350,250
------------------------------------------------------------------------
ScanSource, Inc.(a)(c)                             18,600      1,156,176
========================================================================
                                                               3,506,426
========================================================================

THRIFTS & MORTGAGE FINANCE-3.90%                                        

Doral Financial Corp. (Puerto Rico)(b)            109,200      5,378,100
------------------------------------------------------------------------
Fannie Mae                                         95,000      6,764,950
------------------------------------------------------------------------
MGIC Investment Corp.                              22,500      1,550,475
------------------------------------------------------------------------
Radian Group Inc.                                  41,500      2,209,460
------------------------------------------------------------------------
Washington Mutual, Inc.                            57,500      2,431,100
========================================================================
                                                              18,334,085
========================================================================

TRADING COMPANIES & DISTRIBUTORS-0.41%                                  

MSC Industrial Direct Co., Inc.-Class A            54,100      1,946,518
========================================================================

TRUCKING-1.08%                                                          

Landstar System, Inc.(a)                           41,700      3,070,788
------------------------------------------------------------------------
Old Dominion Freight Line, Inc.(a)                 31,600      1,099,680
------------------------------------------------------------------------

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                                                               MARKET   
                                                 SHARES        VALUE    
------------------------------------------------------------------------
                                                                        
TRUCKING-(CONTINUED)                                                    

Overnite Corp.                                     25,000   $    931,000
========================================================================
                                                               5,101,468
========================================================================
    Total Common Stocks & Other Equity                                  
      Interests (Cost $343,837,044)                          455,774,330
========================================================================

MONEY MARKET FUNDS-3.35%                                                

Liquid Assets Portfolio-Institutional                                   
  Class(d)                                      7,878,327      7,878,327
------------------------------------------------------------------------
STIC Prime Portfolio-Institutional Class(d)     7,878,327      7,878,327
========================================================================
    Total Money Market Funds (Cost                                      
      $15,756,654)                                            15,756,654
========================================================================
TOTAL INVESTMENTS-100.18% (excluding                                    
  investments purchased with cash collateral                            
  from securities loaned) (Cost $359,593,698)                471,530,984
========================================================================

                                                                [Download Table]

                                                               MARKET    
                                                 SHARES        VALUE     
------------------------------------------------------------------------ 
                                                                         

INVESTMENTS PURCHASED WITH CASH COLLATERAL                               
  FROM SECURITIES LOANED                                                 

MONEY MARKET FUNDS-2.16%                                                 

STIC Prime Portfolio-Institutional                                       
  Class(d)(e)                                  10,195,750   $ 10,195,750 
======================================================================== 
    Total Money Market Funds (purchased with                             
      cash collateral from securities loaned)                            
      (Cost $10,195,750)                                      10,195,750 
======================================================================== 
TOTAL INVESTMENTS-102.34% (Cost $369,789,448)                481,726,734 
======================================================================== 
OTHER ASSETS LESS LIABILITIES-(2.34%)                        (11,036,555)
======================================================================== 
NET ASSETS-100.00%                                          $470,690,179 
________________________________________________________________________ 
======================================================================== 

Investment Abbreviations:                                                       

                                                                [Download Table]
                                  
ADR  - American Depositary Receipt

Notes to Schedule of Investments:                                               

(a) Non-income producing security.                                              
(b) All or a portion of this security has been pledged as collateral for        
security lending transactions at December 31, 2004.                     
(c) A portion of this security is subject to call options written. See Note 1F  
and Note 9.                                                             
(d) The money market fund and the Fund are affiliated by having the same        
investment advisor. See Note 3.                                         
(e) The security has been segregated to satisfy the forward commitment to return
the cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned. See Note 8.                 

See accompanying notes which ae an integral part of the financial statements.   
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STATEMENT OF ASSETS AND LIABILITIES                                             

December 31, 2004                                                               

                                                                [Download Table]
                                                            
ASSETS:                                                     

Investments, at market value (cost                          
  $343,837,044)*                               $455,774,330 
----------------------------------------------------------- 
Investments in affiliated money market funds                
  (cost $25,952,404)                             25,952,404 
=========================================================== 
    Total investments (cost $369,789,448)       481,726,734 
=========================================================== 
Receivables for:                                            
  Investments sold                                  285,375 
----------------------------------------------------------- 
  Fund shares sold                                  452,947 
----------------------------------------------------------- 
  Dividends                                         363,785 
----------------------------------------------------------- 
Investment for trustee deferred compensation                
  and retirement plans                               90,092 
----------------------------------------------------------- 
Other assets                                         15,117 
=========================================================== 
    Total assets                                482,934,050 
___________________________________________________________ 
=========================================================== 

LIABILITIES:                                                

Payables for:                                               
  Fund shares reacquired                          1,370,082 
----------------------------------------------------------- 
  Options written, at market value (premiums                
    received $61,920)                                70,145 
----------------------------------------------------------- 
  Trustee deferred compensation and                         
    retirement plans                                124,817 
----------------------------------------------------------- 
  Collateral upon return of securities loaned    10,195,750 
----------------------------------------------------------- 
Accrued distribution fees                           200,201 
----------------------------------------------------------- 
Accrued transfer agent fees                         189,169 
----------------------------------------------------------- 
Accrued operating expenses                           93,707 
=========================================================== 
    Total liabilities                            12,243,871 
=========================================================== 
Net assets applicable to shares outstanding    $470,690,179 
___________________________________________________________ 
=========================================================== 

NET ASSETS CONSIST OF:                                      

Shares of beneficial interest                  $531,397,021 
----------------------------------------------------------- 
Undistributed net investment income (loss)         (114,811)
----------------------------------------------------------- 
Undistributed net realized gain (loss) from                 
  investment securities and option contracts   (172,521,092)
----------------------------------------------------------- 
Unrealized appreciation of investment                       
  securities and option contracts               111,929,061 
=========================================================== 
                                               $470,690,179 
___________________________________________________________ 
=========================================================== 

NET ASSETS:                                                 

Class A                                        $292,680,771 
___________________________________________________________ 
=========================================================== 
Class B                                        $148,299,721 
___________________________________________________________ 
=========================================================== 
Class C                                        $ 29,709,687 
___________________________________________________________ 
=========================================================== 

SHARES OUTSTANDING, $0.01 PAR VALUE PER                     
  SHARE, UNLIMITED NUMBER OF SHARES                         
  AUTHORIZED:                                               

Class A                                          16,582,529 
___________________________________________________________ 
=========================================================== 
Class B                                           9,400,646 
___________________________________________________________ 
=========================================================== 
Class C                                           1,886,263 
___________________________________________________________ 
=========================================================== 
Class A:                                                    
  Net asset value per share                    $      17.65 
----------------------------------------------------------- 
  Offering price per share:                                 
    (Net asset value of $17.65 divided                      
      by 94.50%)                               $      18.68 
___________________________________________________________ 
=========================================================== 
Class B:                                                    
  Net asset value and offering price per                    
    share                                      $      15.78 
___________________________________________________________ 
=========================================================== 
Class C:                                                    
  Net asset value and offering price per                    
    share                                      $      15.75 
___________________________________________________________ 
=========================================================== 

* At December 31, 2004, securities with an aggregate market value of $9,951,991 
were on loan to brokers.                                                    

See accompanying notes which are an integral part of the financial statements.  
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STATEMENT OF OPERATIONS                                                         

For the year ended December 31, 2004                                            

                                                                [Download Table]
                                                                          
INVESTMENT INCOME:                                                        

Dividends (net of foreign withholding tax of $15,206)         $ 4,532,260 
------------------------------------------------------------------------- 
Dividends from affiliated money market funds (including                   
  securities lending income of $11,193*)                          212,040 
========================================================================= 
    Total investment income                                     4,744,300 
========================================================================= 

EXPENSES:                                                                 

Advisory fees                                                   3,284,662 
------------------------------------------------------------------------- 
Administrative services fees                                      131,215 
------------------------------------------------------------------------- 
Custodian fees                                                     48,587 
------------------------------------------------------------------------- 
Distribution fees:                                                        
  Class A                                                         708,687 
------------------------------------------------------------------------- 
  Class B                                                       1,691,392 
------------------------------------------------------------------------- 
  Class C                                                         309,320 
------------------------------------------------------------------------- 
Transfer agent fees                                             1,712,470 
------------------------------------------------------------------------- 
Trustees' fees and retirement benefits                             25,993 
------------------------------------------------------------------------- 
Other                                                             355,800 
========================================================================= 
    Total expenses                                              8,268,126 
========================================================================= 
Less: Fees waived, expenses reimbursed and expense offset                 
  arrangement                                                     (87,738)
========================================================================= 
    Net expenses                                                8,180,388 
========================================================================= 
Net investment income (loss)                                   (3,436,088)
========================================================================= 

REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT                       
  SECURITIES AND OPTION CONTRACTS:                                        

Net realized gain from:                                                   
  Investment securities                                        43,506,147 
------------------------------------------------------------------------- 
  Option contracts written                                        503,131 
========================================================================= 
                                                               44,009,278 
========================================================================= 
Change in net unrealized appreciation (depreciation) of:                  
  Investment securities                                        19,637,060 
------------------------------------------------------------------------- 
  Option contracts written                                         (8,225)
========================================================================= 
                                                               19,628,835 
========================================================================= 
Net gain from investment securities and option contracts       63,638,113 
========================================================================= 
Net increase in net assets resulting from operations          $60,202,025 
_________________________________________________________________________ 
========================================================================= 

* Dividends from affiliated money market funds are net of income rebate paid to 
securities lending counterparties.                                          

See accompanying notes which are an integral part of the financial statements.  
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STATEMENT OF CHANGES IN NET ASSETS                                              

For the years ended December 31, 2004 and 2003                                  

                                                        [Enlarge/Download Table]

                                                                  2004             2003      
-------------------------------------------------------------------------------------------- 
                                                                                             
OPERATIONS:                                                                                  

  Net investment income (loss)                                $  (3,436,088)   $  (4,907,964)
-------------------------------------------------------------------------------------------- 
  Net realized gain from investment securities, futures                                      
    contracts and option contracts                               44,009,278       14,119,689 
-------------------------------------------------------------------------------------------- 
  Change in net unrealized appreciation of investment                                        
    securities and option contracts                              19,628,835      116,271,789 
============================================================================================ 
    Net increase in net assets resulting from operations         60,202,025      125,483,514 
============================================================================================ 
Share transactions-net:                                                                      
  Class A                                                       (33,113,988)     (29,873,189)
-------------------------------------------------------------------------------------------- 
  Class B                                                       (69,580,725)     (65,917,432)
-------------------------------------------------------------------------------------------- 
  Class C                                                        (7,526,304)      (6,917,020)
============================================================================================ 
    Net increase (decrease) in net assets resulting from                                     
     share transactions                                        (110,221,017)    (102,707,641)
============================================================================================ 
    Net increase (decrease) in net assets                       (50,018,992)      22,775,873 
============================================================================================ 

NET ASSETS:                                                                                  

  Beginning of year                                             520,709,171      497,933,298 
============================================================================================ 
  End of year (including undistributed net investment income                                 
    (loss) of $(114,811) and $(104,405), respectively)        $ 470,690,179    $ 520,709,171 
____________________________________________________________________________________________ 
============================================================================================ 

See accompanying notes which are an integral part of the financial statements.  
FS-159

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NOTES TO FINANCIAL STATEMENTS                                                   

December 31, 2004                                                               

NOTE 1--SIGNIFICANT ACCOUNTING POLICIES                                         

AIM Select Equity Fund (the "Fund") is a series portfolio of AIM Funds Group    
(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 nine separate portfolios,    
each authorized to issue an unlimited number of shares of beneficial interest.  
The Fund currently offers multiple classes of shares. Matters affecting each    
portfolio or class will be voted on exclusively by the shareholders of such     
portfolio or class. The assets, liabilities and operations of each portfolio are
accounted for separately. Information presented in these financial statements   
pertains only to the Fund.                                                      

  The Fund's investment objective is to achieve long-term growth of capital.
Each company listed in the Schedule of Investments is organized in the United   
States of America unless otherwise noted.                                       

   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. However, the Fund has not had prior claims or losses pursuant to these
contracts.                                                                      

The preparation of financial statements in conformity with accounting   
principles generally accepted in the United States of America requires          
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported 
amounts of revenues and expenses during the reporting period. Actual results    
could differ from those estimates. The following is a summary of the significant
accounting policies followed by the Fund in the preparation of its financial    
statements.                                                                     

A.   SECURITY VALUATIONS -- Securities, including restricted securities, are    
valued according to the following policy.                             

      A security listed or traded on an exchange (except convertible bonds) is
 valued at its last sales price as of the close of the customary trading
session on the exchange where the security is principally traded, or  
lacking any sales on a particular day, the security is valued at the  
     closing bid price on that day. Each security traded in the over-the-counter
   market (but not securities reported on the NASDAQ National Market System)
    is valued on the basis of prices furnished by independent pricing services
or market makers. Each security reported on the NASDAQ National Market
  System is valued at the NASDAQ Official Closing Price ("NOCP") as of the
  close of the customary trading session on the valuation date or absent a
NOCP, at the closing bid price.                                       

  Futures contracts are valued at the final settlement price set by an
     exchange on which they are principally traded. Listed options are valued at
     the mean between the last bid and the ask prices from the exchange on which
   they are principally traded. Options not listed on an exchange are valued
   by an independent source at the mean between the last bid and ask prices.
   For purposes of determining net asset value per share, futures and option
contracts generally will be valued 15 minutes after the close of the  
customary trading session of the New York Stock Exchange ("NYSE").    

    Investments in open-end registered investment companies and closed-end
     registered investment companies that do not trade on an exchange are valued
at the end of day net asset value per share. Investments in closed-end
     registered investment companies that trade on an exchange are valued at the
  last sales price as of the close of the customary trading session on the
exchange where the security is principally traded.                    

     Debt obligations (including convertible bonds) are fair valued using an
evaluated quote provided by an independent pricing service. Evaluated 
    quotes provided by the pricing service may be determined without exclusive
reliance on quoted prices, and may reflect appropriate factors such as
institution-size trading in similar groups of securities, developments
related to specific securities, dividend rate, yield, quality, type of
    issue, coupon rate, maturity, individual trading characteristics and other
    market data. Short-term obligations having 60 days or less to maturity and
 commercial paper are valued at amortized cost which approximates market
value.                                                                

     Securities for which market prices are not provided by any of the above
   methods are valued based upon quotes furnished by independent sources and
  are valued at the last bid price in the case of equity securities and in
the case of debt obligations, the mean between the last bid and asked 
prices.                                                               

     Foreign securities (including foreign exchange contracts) are converted
into U.S. dollar amounts using the applicable exchange rates as of the
close of the NYSE. Generally, trading in foreign securities is        
     substantially completed each day at various times prior to the close of the
   NYSE. The values of such securities used in computing the net asset value
of the Fund's shares are determined as of the close of the respective 
   markets. Events affecting the values of such foreign securities may occur
 between the times at which the particular foreign market closes and the
close of the customary trading session of the NYSE which would not    
   ordinarily be reflected in the computation of the Fund's net asset value.
    If the event is likely to have affected the closing price of the security,
  the security will be valued at fair value in good faith using procedures
     approved by the Board of Trustees. Adjustments to closing prices to reflect
fair value may also be based on a screening process of an independent 
  pricing service to indicate the degree of certainty, based on historical
data, that the closing price in the principal market where a foreign  
security trades is not the current market value as of the close of the
    NYSE. Foreign securities meeting the approved degree of certainty that the
price is not reflective of current market value will be priced at the 
 indication of fair value from the independent pricing service. Multiple
     factors may be considered by the independent pricing service in determining
   adjustments to reflect fair value and may include information relating to
sector indices, ADRs, domestic and foreign index futures and          
exchange-traded funds.                                                

    FS-160

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     Securities for which market quotations are not readily available or are
     unreliable are valued at fair value as determined in good faith by or under
  the supervision of the Trust's officers following procedures approved by
the Board of Trustees. Issuer specific events, market trends, bid/ask 
  quotes of brokers and information providers and other market data may be
     reviewed in the course of making a good faith determination of a security's
fair value.                                                           

B.   SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions   
    are accounted for on a trade date basis. Realized gains or losses on sales
are computed on the basis of specific identification of the securities
sold. Interest income is recorded on the accrual basis from settlement
date. Dividend income is recorded on the ex-dividend date.            

     Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased 
  and/or a reduction of proceeds on a sale of securities. Such transaction
 costs are included in the determination of realized and unrealized gain
   (loss) from investment securities reported in the Statement of Operations
    and the Statement of Changes in Net Assets and the realized and unrealized
 net gains (losses) on securities per share in the Financial Highlights.
   Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These   
transaction costs are not considered operating expenses and are not   
    reflected in net investment income reported in the Statement of Operations
  and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation  
arrangements between the Fund and the advisor.                        

     The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.     

C.   DISTRIBUTIONS -- Distributions from income and net realized capital gain,  
   if any, are generally paid annually and recorded on ex-dividend date. The
Fund may elect to use a portion of the proceeds from redemptions as   
distributions for federal income tax purposes.                        

D.   FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of
Subchapter M of the Internal Revenue Code necessary to qualify as a   
   regulated investment company and, as such, will not be subject to federal
  income taxes on otherwise taxable income (including net realized capital
 gain) which is distributed to shareholders. Therefore, no provision for
federal income taxes is recorded in the financial statements.         

E.   EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular    
 class of the Fund and which are directly attributable to that class are
   charged to the operations of such class. All other expenses are allocated
among the classes based on relative net assets.                       

F.   COVERED CALL OPTIONS -- The Fund may write call options, on a covered      
  basis; that is, the Fund will own the underlying security. When the Fund
  writes a covered call option, an amount equal to the premium received by
     the Fund is recorded as an asset and an equivalent liability. The amount of
 the liability is subsequently "marked-to-market" to reflect the current
   market value of the option written. The current market value of a written
    option is the mean between the last bid and asked prices on that day. If a
  written call option expires on the stipulated expiration date, or if the
   Fund enters into a closing purchase transaction, the Fund realizes a gain
     (or a loss if the closing purchase transaction exceeds the premium received
    when the option was written) without regard to any unrealized gain or loss
 on the underlying security, and the liability related to such option is
     extinguished. If a written option is exercised, the Fund realizes a gain or
 a loss from the sale of the underlying security and the proceeds of the
    sale are increased by the premium originally received. A risk in writing a
 call option is that the Fund gives up the opportunity for profit if the
market price of the security increases and the option is exercised.   

G.   FUTURES CONTRACTS -- The Fund may purchase or sell futures contracts as a  
hedge against changes in market conditions. Initial margin deposits   
required upon entering into futures contracts are satisfied by the    
 segregation of specific securities as collateral for the account of the
 broker (the Fund's agent in acquiring the futures position). During the
period the futures contracts are open, changes in the value of the    
contracts are recognized as unrealized gains or losses by "marking to 
  market" on a daily basis to reflect the market value of the contracts at
the end of each day's trading. Variation margin payments are made or  
  received depending upon whether unrealized gains or losses are incurred.
    When the contracts are closed, the Fund recognizes a realized gain or loss
    equal to the difference between the proceeds from, or cost of, the closing
   transaction and the Fund's basis in the contract. If the Fund were unable
 to liquidate a futures contract and/or enter into an offsetting closing
transaction, the Fund would continue to be subject to market risk with
respect to the value of the contracts and continue to be required to  
maintain the margin deposits on the futures contracts.                

NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES                         

The Trust has entered into a master investment advisory agreement with A I M    
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,   
the Fund pays an advisory fee to AIM at the annual rate of 0.80% of the first   
$150 million of the Fund's average daily net assets, plus 0.625% of the Fund's  
average daily net assets in excess of $150 million. AIM has voluntarily agreed  
to waive advisory fees of the Fund in the amount of 25% of the advisory fee AIM 
receives from the affiliated money market funds on investments by the Fund in   
such affiliated money market funds (excluding investments made in affiliated    
money market funds with cash collateral from securities loaned by the Fund).    
Voluntary fee waivers or reimbursements may be modified or discontinued at any  
time upon consultation with the Board of Trustees without further notice to     
investors. For the year ended December 31, 2004, AIM waived fees of $3,147.     

   For the year ended December 31, 2004, at the request of the Trustees of the
Trust, AMVESCAP PLC ("AMVESCAP") agreed to reimburse $77,679 of expenses        
incurred by the Fund in connection with matters related to recently settled     
regulatory actions and investigations concerning market timing activity in the  
AIM Funds, including legal, audit, shareholder servicing, communication and     
trustee expenses. These expenses along with the related expense reimbursement,  
are included in the Statement of Operations.                                    

  The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing    
accounting services to the Fund. Pursuant to such agreement for the year ended  
December 31, 2004, AIM was paid $131,215.                                       

    FS-161

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    The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay AIM Investment Services, Inc. ("AISI") a fee for providing transfer agency  
and shareholder services to the Fund and reimburse AISI for certain expenses    
incurred by AISI in the course of providing such services. For the year ended   
December 31, 2004, the Fund paid AISI $1,712,470. AISI may make payments to     
intermediaries that provide omnibus account services, sub-accounting services   
and/or networking services.                                                     

The Trust has entered into a master distribution agreement with A I M   
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the     
Class A, Class B and Class C shares of the Fund. The Trust has adopted plans    
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A,   
Class B and Class C shares (collectively the "Plans"). The Fund, pursuant to the
Plans, pays AIM Distributors compensation at the annual rate of 0.25% 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 these amounts, up to 0.25% of the  
average daily net assets of the Class A, Class B or Class C shares may be paid  
to furnish continuing personal shareholder services to customers who purchase   
and own shares of such classes. Any amounts not paid as a service fee under the 
Plans would constitute an asset-based sales charge. NASD Rules also impose a cap
on the total sales charges, including asset-based sales charges, that may be    
paid by any class of shares of the Fund. Pursuant to the Plans, for the year    
ended December 31, 2004, the Class A, Class B and Class C shares paid $708,687, 
$1,691,392 and $309,320, respectively.                                          

  Front-end sales commissions and contingent deferred sales charges ("CDSC")
(collectively the "sales charges") are not recorded as expenses of the Fund.    
Front-end sales commissions are deducted from proceeds from the sales of Fund   
shares prior to investment in Class A shares of the Fund. CDSC are deducted from
redemption proceeds prior to remittance to the shareholder. During the year     
ended December 31, 2004, AIM Distributors advised the Fund that it retained     
$47,026 in front-end sales commissions from the sale of Class A shares and $776,
$18,610 and $1,866 from Class A, Class B and Class C shares, respectively, for  
CDSC imposed upon redemptions by shareholders.                                  

Certain officers and trustees of the Trust are officers and directors of
AIM, AISI and/or AIM Distributors.                                              

NOTE 3--INVESTMENTS IN AFFILIATES                                               

The Fund is permitted, pursuant to an exemptive order from the Securities and   
Exchange Commission ("SEC"), to invest daily available cash balances and cash   
collateral from securities lending transactions in affiliated money market      
funds. The Fund and the money market funds below have the same investment       
advisor and therefore, are considered to be affiliated. The tables below show   
the transactions in and earnings from investments in affiliated money market    
funds for the year ended December 31, 2004.                                     

INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:                                   

                                                        [Enlarge/Download Table]

                                                                         UNREALIZED                                               
                 MARKET VALUE       PURCHASES          PROCEEDS         APPRECIATION     MARKET VALUE     DIVIDEND      REALIZED  
FUND               12/31/03          AT COST          FROM SALES       (DEPRECIATION)      12/31/04        INCOME      GAIN (LOSS)
----------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                  
Liquid Assets                                                                                                                     
  Portfolio-                                                                                                                      
  Institutional                                                                                                                   
  Class           $ 8,261,408      $ 51,027,829      $ (51,410,910)        $   --         $ 7,878,327     $101,263       $   --   
----------------------------------------------------------------------------------------------------------------------------------
STIC Prime                                                                                                                        
  Portfolio-                                                                                                                      
  Institutional                                                                                                                   
  Class             8,261,408        51,027,829        (51,410,910)            --           7,878,327       99,584           --   
==================================================================================================================================
  Subtotal        $16,522,816      $102,055,658      $(102,821,820)        $   --         $15,756,654     $200,847       $   --   
==================================================================================================================================

INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:            

                                                        [Enlarge/Download Table]

                                                                         UNREALIZED                                               
                 MARKET VALUE       PURCHASES          PROCEEDS         APPRECIATION     MARKET VALUE     DIVIDEND      REALIZED  
FUND               12/31/03          AT COST          FROM SALES       (DEPRECIATION)      12/31/04        INCOME*     GAIN (LOSS)
----------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                  
Liquid Assets                                                                                                                     
  Portfolio-                                                                                                                      
  Institutional                                                                                                                   
  Class           $11,874,485      $ 50,207,098      $ (62,081,583)        $   --         $        --     $  6,931       $   --   
----------------------------------------------------------------------------------------------------------------------------------
STIC Prime                                                                                                                        
  Portfolio-                                                                                                                      
  Institutional                                                                                                                   
  Class                    --        29,128,863        (18,933,113)            --          10,195,750        4,262           --   
==================================================================================================================================
  Subtotal        $11,874,485      $ 79,335,961      $ (81,014,696)        $   --         $10,195,750     $ 11,193       $   --   
==================================================================================================================================
  Total           $28,397,301      $181,391,619      $(183,836,516)        $   --         $25,952,404     $212,040       $   --   
__________________________________________________________________________________________________________________________________
==================================================================================================================================

NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS                             

The Fund is permitted to purchase or sell securities from or to certain other   
AIM Funds under specified conditions outlined in procedures adopted by the Board
of Trustees of the Trust. The procedures have been designed to ensure that any  
purchase or sale of securities by the Fund from or to another fund or portfolio 
that is or could be considered an affiliate by virtue of having a common        
investment advisor (or affiliated investment advisors), common Trustees and/or  
common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined   
under the procedures each transaction is effected at the current market price.  
Pursuant to these procedures, during the year ended December 31, 2004, the Fund 
engaged in purchases and sales of securities of $1,008,739 and $1,824,629,      
respectively.                                                                   

    FS-162

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NOTE 5--EXPENSE OFFSET ARRANGEMENT                                              

The expense offset arrangement is comprised of transfer agency credits which    
result from balances in Demand Deposit Accounts (DDA) used by the transfer agent
for clearing shareholder transactions. For the year ended December 31, 2004, the
Fund received credits in transfer agency fees of $6,912 under an expense offset 
arrangement, which resulted in a reduction of the Fund's total expenses of      
$6,912.                                                                         

NOTE 6--TRUSTEES' FEES                                                          

Trustees' fees represent remuneration paid to each Trustee of the Trust who is  
not an "interested person" of AIM. Trustees have the option to defer            
compensation payable by the Trust. Those Trustees who defer compensation have   
the option to select various AIM Funds in which their deferral accounts shall be
deemed to be invested.                                                          

Current Trustees are eligible to participate in a retirement plan that  
provides for benefits to be paid upon retirement to Trustees over a period of   
time based on the number of years of service. The Fund may have certain former  
Trustees that also participate in a retirement plan and receive benefits under  
such plan.                                                                      

  Obligations under the deferred compensation and retirement plans represent
unsecured claims against the general assets of the Fund.                        

   During the year ended December 31, 2004, the Fund paid legal fees of $3,757
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Independent Trustees. A member of that firm is a Trustee of the Trust.          

NOTE 7--BORROWINGS                                                              

Pursuant to an exemptive order from the SEC, the Fund may participate in an     
interfund lending facility that AIM has established for temporary borrowings by 
the AIM Funds. An interfund loan will be made under this facility only if the   
loan rate (an average of the rate available on bank loans and the rate available
on investments in overnight repurchase agreements) is favorable to both the     
lending fund and the borrowing fund. A loan will be secured by collateral if the
Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total    
assets. To the extent that the loan is required to be secured by collateral, the
collateral is marked to market daily to ensure that the market value is at least
102% of the outstanding principal value of the loan.                            

The Fund is a participant in an uncommitted unsecured revolving credit  
facility with State Street Bank and Trust Company ("SSB"). The Fund may borrow  
up to the lesser of (i) $125,000,000, or (ii) the limits set by its prospectus  
for borrowings. The Fund and other funds advised by AIM which are parties to the
credit facility can borrow on a first come, first served basis. Principal on    
each loan outstanding shall bear interest at the bid rate quoted by SSB at the  
time of the request for the loan.                                               

During the year ended December 31, 2004, the Fund did not borrow or lend
under the interfund lending facility or borrow under the uncommitted unsecured  
revolving credit facility.                                                      

Additionally, the Fund is permitted to temporarily carry a negative or  
overdrawn balance in its account with SSB, the custodian bank. To compensate the
custodian bank for such overdrafts, the overdrawn Fund may either (i) leave     
funds in the account so the custodian can be compensated by earning the         
additional interest; or (ii) compensate by paying the custodian bank. In either 
case, the custodian bank will be compensated at an amount equal to the Federal  
Funds rate plus 100 basis points.                                               

NOTE 8--PORTFOLIO SECURITIES LOANED                                             

The Fund may lend portfolio securities having a market value up to one-third of 
the Fund's total assets. Such loans are secured by collateral equal to no less  
than the market value of the loaned securities determined daily. Such collateral
will be cash or debt securities issued or guaranteed by the U.S. Government or  
any of its agencies. Cash collateral received in connection with these loans is 
invested in short-term money market instruments or affiliated money market      
funds. It is the Fund's policy to obtain additional collateral from or return   
excess collateral to the borrower by the end of the next business day, following
the valuation date of the securities loaned. Therefore, the value of the        
collateral held may be temporarily less than the value of the securities on     
loan. Lending securities entails a risk of loss to the Fund if and to the extent
that the market value of the securities loaned were to increase and the borrower
did not increase the collateral accordingly, and the borrower fails to return   
the securities. The Fund could also experience delays and costs in gaining      
access to the collateral. The Fund bears the risk of any deficiency in the      
amount of the collateral available for return to the borrower due to a loss on  
the collateral invested.                                                        

   At December 31, 2004, securities with an aggregate value of $9,951,991 were
on loan to brokers. The loans were secured by cash collateral of $10,195,750    
received by the Fund and subsequently invested in affiliated money market funds.
For the year ended December 31, 2004, the Fund received dividends on cash       
collateral net of income rebate paid to counterparties of $11,193 for securities
lending transactions.                                                           

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NOTE 9--OPTION CONTRACTS WRITTEN                                                

                                                        [Enlarge/Download Table]

                           TRANSACTIONS DURING THE PERIOD     CALL OPTION CONTRACTS  
                                                              ---------------------- 
------------------------------------------------------------------------------------ 
                                                              NUMBER OF    PREMIUMS  
                                                              CONTRACTS    RECEIVED  
------------------------------------------------------------------------------------ 
                                                                                     
Beginning of year                                                  --      $      -- 
------------------------------------------------------------------------------------ 
Written                                                         9,699        827,661 
------------------------------------------------------------------------------------ 
Closed                                                           (263)      (107,038)
------------------------------------------------------------------------------------ 
Exercised                                                      (3,792)      (260,769)
------------------------------------------------------------------------------------ 
Expired                                                        (4,950)      (397,934)
==================================================================================== 
End of year                                                       694      $  61,920 
____________________________________________________________________________________ 
==================================================================================== 

                                                        [Enlarge/Download Table]

OPEN OPTIONS WRITTEN AT PERIOD END                                                                                           
-----------------------------------------------------------------------------------------------------------------------------
                                                                                               DECEMBER 31,                  
                                                                                                   2004          UNREALIZED  
                                                CONTRACT    STRIKE    NUMBER OF    PREMIUMS       MARKET        APPRECIATION 
CALLS                                            MONTH      PRICE     CONTRACTS    RECEIVED       VALUE        (DEPRECIATION)
-----------------------------------------------------------------------------------------------------------------------------
                                                                                                                             
Apollo Group, Inc. -- Class A                    Jan-05     $95.0         60       $ 5,280       $   300          $  4,980   
-----------------------------------------------------------------------------------------------------------------------------
BJ Services Co.                                  Jan-05      50.0        300        28,699         9,750            18,949   
-----------------------------------------------------------------------------------------------------------------------------
Fisher Scientific International Inc.             Jan-05      60.0         80         6,240        23,600           (17,360)  
-----------------------------------------------------------------------------------------------------------------------------
ScanSource, Inc.                                 Jan-05      70.0         70         5,510           875             4,635   
-----------------------------------------------------------------------------------------------------------------------------
Transocean Ltd.                                  Jan-05      40.0        120        10,560        34,500           (23,940)  
-----------------------------------------------------------------------------------------------------------------------------
Ultra Petroleum Corp.                            Jan-05      55.0         64         5,631         1,120             4,511   
=============================================================================================================================
Total outstanding options written                                        694       $61,920       $70,145          $ (8,225)  
_____________________________________________________________________________________________________________________________
=============================================================================================================================

NOTE 10--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS         

DISTRIBUTIONS TO SHAREHOLDERS:                                                  

There were no ordinary income or long-term gain distributions paid during the   
years ended December 31, 2004 and 2003.                                         

TAX COMPONENTS OF NET ASSETS:                                                   

As of December 31, 2004, the components of net assets on a tax basis were as    
follows:                                                                        

                                                                [Download Table]

                                                                  2004      
--------------------------------------------------------------------------- 
                                                                            
Unrealized appreciation -- investments                        $ 109,646,596 
--------------------------------------------------------------------------- 
Temporary book/tax differences                                     (114,811)
--------------------------------------------------------------------------- 
Capital loss carryforward                                      (170,238,627)
--------------------------------------------------------------------------- 
Shares of beneficial interest                                   531,397,021 
=========================================================================== 
Total net assets                                              $ 470,690,179 
___________________________________________________________________________ 
=========================================================================== 

  The difference between book-basis and tax-basis unrealized appreciation is
due to differences in the timing of recognition of gains and losses on          
investments for tax and book purposes. The Fund's unrealized appreciation       
difference is attributable primarily to losses on wash sales. The tax-basis     
unrealized appreciation (depreciation) on investments amount includes           
appreciation (depreciation) on foreign currencies of $(8,225).                  

The temporary book/tax differences are a result of timing differences   
between book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of the trustee deferral of compensation and 
retirement plan expenses.                                                       

   Capital loss carryforward is calculated and reported as of a specific date.
Results of transactions and other activity after that date may affect the amount
of capital loss carryforward actually available for the Fund to utilize. The    
ability to utilize capital loss carryforward in the future may be limited under 
the Internal Revenue Code and related regulations based on the results of future
transactions.                                                                   

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 The Fund utilized $44,003,152 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 December 31, 2004 which expires as   
follows:                                                                        

                                                                [Download Table]

                                                                CAPITAL LOSS 
EXPIRATION                                                      CARRYFORWARD*
-----------------------------------------------------------------------------
                                                                             
December 31, 2009                                               $  3,258,555 
-----------------------------------------------------------------------------
December 31, 2010                                                120,187,758 
-----------------------------------------------------------------------------
December 31, 2011                                                 46,792,314 
=============================================================================
Total capital loss carryforward                                 $170,238,627 
_____________________________________________________________________________
=============================================================================

* Capital loss carryforward as of the date listed above is reduced for          
limitations, if any, to the extent required by the Internal Revenue Code.   

NOTE 11--INVESTMENT SECURITIES                                                  

The aggregate amount of investment securities (other than short-term securities 
and money market funds) purchased and sold by the Fund during the year ended    
December 31, 2004 was $180,611,015 and $294,526,455, respectively.              

                                                                [Download Table]

UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
------------------------------------------------------------------------------
                                                                              
Aggregate unrealized appreciation of investment securities       $119,117,730 
------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities       (9,462,909)
==============================================================================
Net unrealized appreciation of investment securities             $109,654,821 
______________________________________________________________________________
==============================================================================
Cost of investments for tax purposes is $372,071,913.                         

NOTE 12--RECLASSIFICATION OF PERMANENT DIFFERENCES                              

Primarily as a result of differing book/tax treatment of partnership income and 
net operating losses, on December 31, 2004, undistributed net investment income 
was increased by $3,425,682, undistributed net realized gain (loss) was         
decreased by $6,126 and shares of beneficial interest decreased by $3,419,556.  
This reclassification had no effect on the net assets of the Fund.              

NOTE 13--SHARE INFORMATION                                                      

The Fund currently offers three different classes of shares: Class A shares,    
Class B shares and Class C shares. Class A shares are sold with a front-end     
sales charge. Class B shares and Class C shares are sold with CDSC. Under       
certain circumstances, Class A shares are subject to CDSC. Generally, Class B   
shares will automatically convert to Class A shares eight years after the end of
the calendar month of purchase.                                                 

                                                        [Enlarge/Download Table]

                                            CHANGES IN SHARES OUTSTANDING(a)                                             
------------------------------------------------------------------------------------------------------------------------ 
                                                                               YEAR ENDED DECEMBER 31,                   
                                                              ---------------------------------------------------------- 
                                                                         2004                           2003             
                                                              ---------------------------    --------------------------- 
                                                                SHARES         AMOUNT          SHARES         AMOUNT     
------------------------------------------------------------------------------------------------------------------------ 
                                                                                                                         
Sold:                                                                                                                    
  Class A                                                      1,604,107    $  25,910,160     1,879,248    $  24,704,966 
------------------------------------------------------------------------------------------------------------------------ 
  Class B                                                        824,169       11,973,132     1,110,183       13,223,360 
------------------------------------------------------------------------------------------------------------------------ 
  Class C                                                        400,935        5,803,543       507,573        6,077,786 
======================================================================================================================== 
Automatic conversion of Class B shares to Class A shares:                                                                
  Class A                                                      2,267,898       36,759,445     2,268,563       30,491,869 
------------------------------------------------------------------------------------------------------------------------ 
  Class B                                                     (2,527,551)     (36,759,445)   (2,511,307)     (30,491,869)
======================================================================================================================== 
Reacquired:                                                                                                              
  Class A                                                     (5,935,445)     (95,783,593)   (6,444,289)     (85,070,024)
------------------------------------------------------------------------------------------------------------------------ 
  Class B                                                     (3,094,338)     (44,794,412)   (4,176,762)     (48,648,923)
------------------------------------------------------------------------------------------------------------------------ 
  Class C                                                       (924,673)     (13,329,847)   (1,100,332)     (12,994,806)
======================================================================================================================== 
                                                              (7,384,898)   $(110,221,017)   (8,467,123)   $(102,707,641)
________________________________________________________________________________________________________________________ 
======================================================================================================================== 

(a) There is one entity that is a record owner of more than 5% of the           
  outstanding shares of the Fund and it owns 6% of the outstanding shares of
 the Fund. AIM Distributors has an agreement with this entity to sell Fund
shares. The Fund, AIM and/or AIM affiliates may make payments to these  
entity, which is considered to be related to the Fund, for providing    
    services to the Fund, AIM and/or AIM affiliates including but not limited to
services such as, securities brokerage, distribution, third party record
   keeping and account servicing. The Trust has no knowledge as to whether all
or any portion of the shares owned of record by this shareholder is also
owned beneficially.                                                     

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NOTE 14--FINANCIAL HIGHLIGHTS                                                   

The following schedule presents financial highlights for a share of the Fund    
outstanding throughout the periods indicated.                                   

                                                        [Enlarge/Download Table]

                                                                                            CLASS A                                 
                                                              ------------------------------------------------------------------    
                                                                                    YEAR ENDED DECEMBER 31,                         
                                                              ------------------------------------------------------------------    
                                                                2004             2003          2002          2001          2000     
--------------------------------------------------------------------------------------------------------------------------------    
                                                                                                                                    
Net asset value, beginning of period                          $  15.50         $  11.97      $  17.00      $  22.88     $  26.23    
--------------------------------------------------------------------------------------------------------------------------------    
Income from investment operations:                                                                                                  
  Net investment income (loss)                                   (0.06)(a)(b)     (0.09)(a)     (0.06)(a)     (0.08)(a)    (0.01)(a)
--------------------------------------------------------------------------------------------------------------------------------    
  Net gains (losses) on securities (both realized and                                                                               
    unrealized)                                                   2.21             3.62         (4.97)        (5.79)       (0.44)   
================================================================================================================================    
    Total from investment operations                              2.15             3.53         (5.03)        (5.87)       (0.45)   
================================================================================================================================    
Less distributions from net realized gains                          --               --            --         (0.01)       (2.90)   
================================================================================================================================    
Net asset value, end of period                                $  17.65         $  15.50      $  11.97      $  17.00     $  22.88    
________________________________________________________________________________________________________________________________    
================================================================================================================================    
Total return(c)                                                  13.87%           29.49%       (29.59)%      (25.64)%      (1.77)%  
________________________________________________________________________________________________________________________________    
================================================================================================================================    
Ratios/supplemental data:                                                                                                           
Net assets, end of period (000s omitted)                      $292,681         $288,976      $250,666      $396,779     $532,042    
________________________________________________________________________________________________________________________________    
================================================================================================================================    
Ratio of expenses to average net assets                           1.38%(d)(e)      1.47%         1.32%         1.24%        1.07%   
================================================================================================================================    
Ratio of net investment income (loss) to average net assets      (0.40)%(b)(d)    (0.65)%       (0.45)%       (0.45)%      (0.02)%  
________________________________________________________________________________________________________________________________    
================================================================================================================================    
Portfolio turnover rate                                             38%              69%           86%          117%          56%   
________________________________________________________________________________________________________________________________    
================================================================================================================================    

(a)  Calculated using average shares outstanding.                               
(b)  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 (loss) to average net assets excluding the special dividend
are $(0.08) and (0.51)%, respectively.                                
(c)  Includes adjustments in accordance with accounting principles generally    
accepted in the United States of America and as such, the net asset   
 value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for  
shareholder transactions. Does not include sales charges.             
(d)  Ratios are based on average daily net assets of $283,474,706.              
(e)  After fee waivers and/or expense reimbursements. Ratio of expenses to      
average net assets prior to fee waivers and/or expense reimbursements 
was 1.40%.                                                            

                                                        [Enlarge/Download Table]

                                                                                            CLASS B                                 
                                                              ------------------------------------------------------------------    
                                                                                    YEAR ENDED DECEMBER 31,                         
                                                              ------------------------------------------------------------------    
                                                                2004             2003          2002          2001         2000      
--------------------------------------------------------------------------------------------------------------------------------    
                                                                                                                                    
Net asset value, beginning of period                          $  13.96         $  10.86      $  15.54      $  21.07     $  24.57    
--------------------------------------------------------------------------------------------------------------------------------    
Income from investment operations:                                                                                                  
  Net investment income (loss)                                   (0.17)(a)(b)     (0.17)(a)     (0.16)(a)     (0.20)(a)    (0.22)(a)
--------------------------------------------------------------------------------------------------------------------------------    
  Net gains (losses) on securities (both realized and                                                                               
    unrealized)                                                   1.99             3.27         (4.52)        (5.32)       (0.38)   
================================================================================================================================    
    Total from investment operations                              1.82             3.10         (4.68)        (5.52)       (0.60)   
================================================================================================================================    
Less distributions from net realized gains                          --               --            --         (0.01)       (2.90)   
================================================================================================================================    
Net asset value, end of period                                $  15.78         $  13.96      $  10.86      $  15.54     $  21.07    
________________________________________________________________________________________________________________________________    
================================================================================================================================    
Total return(c)                                                  13.04%           28.55%       (30.12)%      (26.19)%      (2.50)%  
________________________________________________________________________________________________________________________________    
================================================================================================================================    
Ratios/supplemental data:                                                                                                           
Net assets, end of period (000s omitted)                      $148,300         $198,148      $214,709      $432,002     $661,445    
________________________________________________________________________________________________________________________________    
================================================================================================================================    
Ratio of expenses to average net assets                           2.13%(d)(e)      2.22%         2.07%         2.00%        1.84%   
================================================================================================================================    
Ratio of net investment income (loss) to average net assets      (1.15)%(b)(d)    (1.40)%       (1.20)%       (1.21)%      (0.80)%  
________________________________________________________________________________________________________________________________    
================================================================================================================================    
Portfolio turnover rate                                             38%              69%           86%          117%          56%   
________________________________________________________________________________________________________________________________    
================================================================================================================================    

(a)  Calculated using average shares outstanding.                               
(b)  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 (loss) to average net assets excluding the special dividend
are $(0.19) and (1.26)%, respectively.                                
(c)  Includes adjustments in accordance with accounting principles generally    
accepted in the United States of America and as such, the net asset   
 value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for  
shareholder transactions. Does not include sales charges.             
(d)  Ratios are based on average daily net assets of $169,139,193.              
(e)  After fee waivers and/or expense reimbursements. Ratio of expenses to      
average net assets prior to fee waivers and/or expense reimbursements 
was 2.15%.                                                            

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NOTE 14--FINANCIAL HIGHLIGHTS (CONTINUED)                                       

                                                        [Enlarge/Download Table]

                                                                                         CLASS C                                
                                                              --------------------------------------------------------------    
                                                                                 YEAR ENDED DECEMBER 31,                        
                                                              --------------------------------------------------------------    
                                                               2004            2003         2002         2001         2000      
----------------------------------------------------------------------------------------------------------------------------    
                                                                                                                                
Net asset value, beginning of period                          $ 13.94         $ 10.84      $ 15.52      $ 21.05      $ 24.55    
----------------------------------------------------------------------------------------------------------------------------    
Income from investment operations:                                                                                              
  Net investment income (loss)                                  (0.17)(a)(b)    (0.17)(a)    (0.16)(a)    (0.20)(a)    (0.22)(a)
----------------------------------------------------------------------------------------------------------------------------    
  Net gains (losses) on securities (both realized and                                                                           
    unrealized)                                                  1.98            3.27        (4.52)       (5.32)       (0.38)   
============================================================================================================================    
    Total from investment operations                             1.81            3.10        (4.68)       (5.52)       (0.60)   
============================================================================================================================    
Less distributions from net realized gains                         --              --           --        (0.01)       (2.90)   
============================================================================================================================    
Net asset value, end of period                                $ 15.75         $ 13.94      $ 10.84      $ 15.52      $ 21.05    
____________________________________________________________________________________________________________________________    
============================================================================================================================    
Total return(c)                                                 12.98%          28.60%      (30.15)%     (26.21)%      (2.50)%  
____________________________________________________________________________________________________________________________    
============================================================================================================================    
Ratios/supplemental data:                                                                                                       
Net assets, end of period (000s omitted)                      $29,710         $33,585      $32,558      $59,112      $71,989    
____________________________________________________________________________________________________________________________    
============================================================================================================================    
Ratio of expenses to average net assets                          2.13%(d)(e)     2.22%        2.07%        2.00%        1.84%   
============================================================================================================================    
Ratio of net investment income (loss) to average net assets     (1.15)%(b)(d)   (1.40)%      (1.20)%      (1.21)%      (0.80)%  
____________________________________________________________________________________________________________________________    
============================================================================================================================    
Portfolio turnover rate                                            38%             69%          86%         117%          56%   
____________________________________________________________________________________________________________________________    
============================================================================================================================    

(a)  Calculated using average shares outstanding.                               
(b)  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 by Microsoft Corp. on December 2,   
2004. Net investment income (loss) per share and the ratio of net     
investment (loss) to average net assets excluding the special dividend
are $(0.19) and (1.26)%, respectively.                                
(c)  Includes adjustments in accordance with accounting principles generally    
accepted in the United States of America and as such, the net asset   
 value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for  
shareholder transactions. Does not include sales charges.             
(d)  Ratios are based on average daily net assets of $30,931,985.               
(e)  After fee waivers and/or expense reimbursements. Ratio of expenses to      
average net assets prior to fee waivers and/or expense reimbursements 
was 2.15%.                                                            

NOTE 15--LEGAL PROCEEDINGS                                                      

Terms used in the Legal Proceedings Note are defined terms solely for the       
purpose of this note.                                                           

Settled Enforcement Actions and Investigations Related to Market Timing         

On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment
advisor to certain AIM Funds) and A I M Advisors, Inc. ("AIM") (the Fund's      
investment advisor) reached final settlements with certain regulators, including
without limitation the Securities and Exchange Commission ("SEC"), the New York 
Attorney General ("NYAG") and the Colorado Attorney General ("COAG"), to resolve
civil enforcement actions and investigations related to market timing activity  
and related issues in the AIM Funds, including those formerly advised by IFG.   
These regulators alleged, in substance, that IFG and AIM failed to disclose in  
the prospectuses for the AIM Funds that they advised and to the independent     
directors/trustees of such Funds that they had entered into certain arrangements
permitting market timing of such Funds, thereby breaching their fiduciary duties
to such Funds. As a result of the foregoing, the regulators alleged that IFG and
AIM breached various Federal and state securities, business and consumer        
protection laws. On the same date, A I M Distributors, Inc. ("ADI") (the        
distributor of the retail AIM Funds) reached a final settlement with the SEC to 
resolve an investigation relating to market timing activity and related issues  
in the AIM Funds. The SEC also alleged that ADI violated various Federal        
securities laws. The SEC also has settled related market timing enforcement     
actions brought against certain former officers and employees of IFG.           

  Under the terms of the settlements, IFG agreed to pay a total of $325 million,
of which $110 million is civil penalties. Of this $325 million total payment,   
half has been paid and the remaining half will be paid on or before December 31,
2005. AIM and ADI agreed to pay a total of $50 million, of which $30 million is 
civil penalties, all of which has been paid. The entire $325 million IFG        
settlement payment will be made available for distribution to the shareholders  
of those AIM Funds that IFG formerly advised that were harmed by market timing  
activity, and the entire $50 million settlement payment by AIM and ADI will be  
made available for distribution to the shareholders of those AIM Funds advised  
by AIM that were harmed by market timing activity, all as to be determined by an
independent distribution consultant. The settlement payments will be distributed
in accordance with a methodology to be determined by the independent            
distribution consultant, in consultation with AIM and the independent trustees  
of the AIM Funds and acceptable to the staff of the SEC. Under the settlements  
with the NYAG and COAG, AIM has agreed to reduce management fees on certain     
equity and balanced AIM Funds by $15 million per year for the next five years,  
based upon effective fee rates and assets under management as of July 1, 2004,  
and not to increase certain management fees.                                    

Under the terms of the settlements, AIM will make certain governance and    
compliance reforms, including maintaining an internal controls committee and    
retaining an independent compliance consultant and a corporate ombudsman. Also, 
commencing in 2007 and at least once every other year thereafter, AIM will      
undergo a compliance review by an independent third party. In addition, under   
the terms of the settlements, AIM has undertaken to                             

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NOTE 15--LEGAL PROCEEDINGS (CONTINUED)                                          

cause the AIM Funds to operate in accordance with certain governance policies   
and practices, including retaining a full-time independent senior officer whose 
duties will include monitoring compliance and managing the process by which     
proposed management fees to be charged the AIM Funds are negotiated. Also,      
commencing in 2008 and not less than every fifth calendar year thereafter, the  
AIM Funds will hold shareholder meetings at which their Boards of Trustees will 
be elected.                                                                     

At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"), 
the parent company of IFG and AIM, has agreed to pay expenses incurred by such  
Funds related to market timing matters.                                         

 The SEC has also settled market timing enforcement actions against Raymond R.
Cunningham (the former president and chief executive officer of IFG and a former
member of the board of directors of the AIM Funds formerly advised by IFG),     
Timothy J. Miller (the former chief investment officer and a former portfolio   
manager for IFG), Thomas A. Kolbe (the former national sales manager of IFG) and
Michael D. Legoski (a former assistant vice president in IFG's sales            
department). As part of these settlements, the SEC ordered these individuals to 
pay restitution and civil penalties in various amounts and prohibited them from 
associating with, or serving as an officer or director of, an investment        
advisor, broker, dealer and/or investment company, as applicable, for certain   
periods of time.                                                                

 The payments made in connection with the above-referenced settlements by IFG,
AIM and ADI will total approximately $375 million (not including AIM's agreement
to reduce management fees on certain equity and balanced AIM Funds by $15       
million per year for the next five years, based upon effective fee rates and    
assets under management as of July 1, 2004). The manner in which the settlement 
payments will be distributed is unknown at the present time and will be         
determined by an independent distribution consultant appointed under the        
settlement agreements. Therefore, management of AIM and the Fund are unable at  
the present time to estimate the impact, if any, that the distribution of the   
settlement payments may have on the Fund or whether such distribution will have 
an impact on the Fund's financial statements in the future.                     

  At the present time, management of AIM and the Fund are unable to estimate the
impact, if any, that the outcome of the Regulatory Inquiries and Pending        
Litigation described below may have on AIM, ADI or the Fund.                    

Regulatory Inquiries and Pending Litigation                                     

The mutual fund industry as a whole is currently subject to regulatory      
inquiries and litigation related to a wide range of issues. These issues        
include, among others, market timing activity, late trading, fair value pricing,
excessive or improper advisory and/or distribution fees, mutual fund sales      
practices, including but not limited to revenue sharing and directed-brokerage  
arrangements, investments in securities of other registered investment          
companies, contractual plans, issues related to Section 529 college savings     
plans, procedures for locating lost security holders and participation in class 
action settlements.                                                             

As described more fully below, IFG and AIM are the subject of a number of   
ongoing regulatory inquiries and civil lawsuits related to one or more of the   
issues currently being scrutinized by various Federal and state regulators,     
including but not limited to those issues described above. Additional regulatory
actions and/or civil lawsuits related to the above or other issues may be filed 
against the AIM Funds, IFG, AIM and/or related entities and individuals in the  
future. Additional regulatory inquiries related to the above or other issues    
also may be received by the AIM Funds, IFG, AIM and/or related entities and     
individuals in the future.                                                      

Ongoing Regulatory Inquiries Concerning IFG and AIM                             

IFG, certain related entities, certain of their current and former officers 
and/or certain of the AIM Funds formerly advised by IFG have received regulatory
inquiries in the form of subpoenas or other oral or written requests for        
information and/or documents related to one or more of the following issues,    
some of which concern one or more such Funds: market timing activity, late      
trading, fair value pricing, excessive or improper advisory and/or distribution 
fees, mutual fund sales practices, including revenue sharing and                
directed-brokerage arrangements, and investments in securities of other         
registered investment companies. These regulators include the SEC, the NASD,    
Inc. ("NASD"), the Florida Department of Financial Services, the Attorney       
General of the State of West Virginia, the West Virginia Securities Commission  
and the Bureau of Securities of the State of New Jersey. IFG and certain of     
these other parties also have received more limited inquiries from the United   
States Department of Labor ("DOL") and the United States Attorney's Office for  
the Southern District of New York, some of which concern one or more of the AIM 
Funds formerly advised by IFG. IFG is providing full cooperation with respect to
these inquiries.                                                                

AIM, certain related entities, certain of their current and former officers 
and/or certain of the AIM Funds have received regulatory inquiries in the form  
of subpoenas or other oral or written requests for information and/or documents 
related to one or more of the following issues, some of which concern one or    
more AIM Funds: market timing activity, late trading, fair value pricing,       
excessive or improper advisory and/or distribution fees, mutual fund sales      
practices, including revenue sharing and directed-brokerage arrangements,       
investments in securities of other registered investment companies, contractual 
plans, issues related to Section 529 college savings plans and procedures for   
locating lost securityholders. These regulators include the SEC, the NASD, the  
Department of Banking for the State of Connecticut, the Attorney General of the 
State of West Virginia, the West Virginia Securities Commission and the Bureau  
of Securities of the State of New Jersey. AIM and certain of these other parties
also have received more limited inquiries from the SEC, the NASD, the DOL, the  
Internal Revenue Service, the United States Attorney's Office for the Southern  
District of New York, the United States Attorney's Office for the Central       
District of California, the United States Attorney's Office for the District of 
Massachusetts, the Massachusetts Securities Division, the U.S. Postal Inspection
Service and the Commodity Futures Trading Commission, some of which concern one 
or more AIM Funds. AIM is providing full cooperation with respect to these      
inquiries.                                                                      

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NOTE 15--LEGAL PROCEEDINGS (CONTINUED)                                          

Private Civil Actions Alleging Market Timing                                    

Multiple civil lawsuits, including purported class action and shareholder   
derivative suits, have been filed against various parties (including, depending 
on the lawsuit, certain AIM Funds, IFG, AIM, AIM Management, AMVESCAP, certain  
related entities, certain of their current and former officers and/or certain   
unrelated third parties) making allegations that are similar in many respects to
those in the settled regulatory actions brought by the SEC, the NYAG and the    
COAG concerning market timing activity in the AIM Funds. These lawsuits allege a
variety of theories of recovery, including but not limited to: (i) violation of 
various provisions of the Federal and state securities laws; (ii) violation of  
various provisions of ERISA; (iii) breach of fiduciary duty; and/or (iv) breach 
of contract. These lawsuits were initiated in both Federal and state courts and 
seek such remedies as compensatory damages; restitution; injunctive relief;     
disgorgement of management fees; imposition of a constructive trust; removal of 
certain directors and/or employees; various corrective measures under ERISA;    
rescission of certain Funds' advisory agreements; interest; and attorneys' and  
experts' fees.                                                                  

 All lawsuits based on allegations of market timing, late trading, and related
issues have been transferred to the United States District Court for the        
District of Maryland (the "MDL Court") for consolidated or coordinated pre-trial
proceedings. Pursuant to an Order of the MDL Court, plaintiffs consolidated     
their claims for pre-trial purposes into three amended complaints against       
various AIM- and IFG-related parties: (i) a Consolidated Amended Class Action   
Complaint purportedly brought on behalf of shareholders of the AIM Funds; (ii) a
Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of 
the AIM Funds and fund registrants; and (iii) an Amended Class Action Complaint 
for Violations of the Employee Retirement Income Securities Act ("ERISA")       
purportedly brought on behalf of participants in AMVESCAP's 401(k) plan. The    
plaintiffs in one of the underlying lawsuits continue to seek remand of their   
lawsuit to state court.                                                         

Private Civil Actions Alleging Improper Use of Fair Value Pricing               

Multiple civil class action lawsuits have been filed against various parties
(including, depending on the lawsuit, certain AIM Funds, IFG and/or AIM)        
alleging that certain AIM Funds inadequately employed fair value pricing. These 
lawsuits allege a variety of theories of recovery, including but not limited to:
(i) violations of various provisions of the Federal securities laws; (ii) common
law breach of duty; and (iii) common law negligence and gross negligence. These 
lawsuits have been filed in both Federal and state courts and seek such remedies
as compensatory and punitive damages; interest; and attorneys' fees and costs.  

Private Civil Actions Alleging Excessive Advisory and/or Distribution Fees      

Multiple civil lawsuits, including purported class action and shareholder   
derivative suits, have been filed against various parties (including, depending 
on the lawsuit, IFG, AIM, INVESCO Institutional (N.A.), Inc. ("IINA"), ADI      
and/or INVESCO Distributors, Inc. ("INVESCO Distributors")) alleging that the   
defendants charged excessive advisory and/or distribution fees and failed to    
pass on to shareholders the perceived savings generated by economies of scale.  
Certain of these lawsuits also allege that the defendants adopted unlawful      
distribution plans. These lawsuits allege a variety of theories of recovery,    
including but not limited to: (i) violation of various provisions of the Federal
securities laws; (ii) breach of fiduciary duty; and/or (iii) breach of contract.
These lawsuits have been filed in Federal courts and seek such remedies as      
damages; injunctive relief; rescission of certain Funds' advisory agreements and
distribution plans; interest; prospective relief in the form of reduced fees;   
and attorneys' and experts' fees. All of these lawsuits have been transferred to
the United States District Court for the Southern District of Texas, Houston    
Division by order of the applicable United States District Court in which they  
were initially filed. The plaintiff in one of these lawsuits has challenged this
order.                                                                          

Private Civil Actions Alleging Improper Charging of Distribution Fees on Limited
Offering Funds or Share Classes                                                 

Multiple civil lawsuits, including shareholder derivative suits, have been  
filed against various parties (including, depending on the lawsuit, IFG, AIM,   
ADI and/or certain of the trustees of the AIM Funds) alleging that the          
defendants breached their fiduciary duties by charging distribution fees while  
funds and/or specific share classes were closed generally to new investors      
and/or while other share classes of the same fund were not charged the same     
distribution fees. These lawsuits allege a variety of theories of recovery,     
including but not limited to: (i) violation of various provisions of the Federal
securities laws; and (ii) breach of fiduciary duty. These lawsuits have been    
filed in Federal courts and seek such remedies as damages; injunctive relief;   
and attorneys' and experts' fees.                                               

Private Civil Actions Alleging Improper Mutual Fund Sales Practices and         
Directed-Brokerage Arrangements                                                 

Multiple civil lawsuits, including purported class action and shareholder   
derivative suits, have been filed against various parties (including, depending 
on the lawsuit, AIM Management, IFG, AIM, AIM Investment Services, Inc. ("AIS") 
and/or certain of the trustees of the AIM Funds) alleging that the defendants   
improperly used the assets of the AIM Funds to pay brokers to aggressively      
promote the sale of the AIM Funds over other mutual funds and that the          
defendants concealed such payments from investors by disguising them as         
brokerage commissions. These lawsuits allege a variety of theories of recovery, 
including but not limited to: (i) violation of various provisions of the Federal
securities laws; (ii) breach of fiduciary duty; and (iii) aiding and abetting a 
breach of fiduciary duty. These lawsuits have been filed in Federal courts and  
seek such remedies as compensatory and punitive damages; rescission of certain  
Funds' advisory agreements and distribution plans and recovery of all fees paid;
an accounting of all fund-related fees, commissions and soft dollar payments;   
restitution of all unlawfully or discriminatorily obtained fees and charges; and
attorneys' and experts' fees.                                                   

Private Civil Action Alleging Failure to Ensure Participation in Class Action   
Settlements                                                                     

A civil lawsuit, purporting to be a class action lawsuit, has been filed    
against AIM, IINA, A I M Capital Management, Inc. and the trustees of the AIM   
Funds alleging that the defendants breached their fiduciary duties by failing to
ensure that the AIM Funds participated in class action settlements in which the 
AIM Funds were eligible to participate. This lawsuit alleges as theories of     
recovery: (i) violation of various provisions of the Federal securities laws;   

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NOTE 15--LEGAL PROCEEDINGS (CONTINUED)                                          

(ii) common law breach of fiduciary duty; and (iii) common law negligence. This 
lawsuit has been filed in Federal court and seeks such remedies as compensatory 
and punitive damages; forfeiture of all commissions and fees paid by the class  
of plaintiffs; and costs and attorneys' fees.                                   
*                                       *                                      *
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

As a result of the matters discussed above, investors in the AIM Funds might
react by redeeming their investments. This might require the Funds to sell      
investments to provide for sufficient liquidity and could also have an adverse  
effect on the investment performance of the Funds.                              

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                         

To the Board of Trustees and Shareholders of                                    
AIM Small Cap Equity Fund:                                                      

In our opinion, the accompanying statement of assets and liabilities, including 
the schedule of investments, and the related statements of operations and of    
changes in net assets and the financial highlights present fairly, in all       
material respects, the financial position of the AIM Small Cap Equity Fund (one 
of the funds constituting AIM Funds Group hereafter referred to as the "Fund")  
at December 31, 2004, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended and
the financial highlights for each of the periods indicated, in conformity with  
accounting principles generally accepted in the United States of America. These 
financial statements and financial highlights (hereafter referred to as         
"financial statements") are the responsibility of the Fund's management; our    
responsibility is to express an opinion on these financial statements based on  
our audits. We conducted our audits of these financial statements in accordance 
with the standards of the Public Company Accounting Oversight Board (United     
States). Those standards require that we plan and perform the audit to obtain   
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting 
the amounts and disclosures in the financial statements, assessing the          
accounting principles used and significant estimates made by management, and    
evaluating the overall financial statement presentation. We believe that our    
audits, which included confirmation of securities at December 31, 2004 by       
correspondence with the custodian and brokers, provide a reasonable basis for   
our opinion.                                                                    

/s/ PRICEWATERHOUSECOOPERS LLP                                                  

February 18, 2005                                                               
Houston, Texas                                                                  

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FINANCIALS                                                                      

SCHEDULE OF INVESTMENTS                                                         

December 31, 2004                                                               

                                                                [Download Table]


                                                                MARKET   
                                                 SHARES         VALUE    
-------------------------------------------------------------------------
                                                                         
COMMON STOCKS & OTHER EQUITY INTEREST-99.21%                             

ADVERTISING-1.22%                                                        

R.H. Donnelley Corp.(a)                             99,700   $  5,887,285
=========================================================================

AEROSPACE & DEFENSE-2.01%                                                

Alliant Techsystems Inc.(a)                         75,900      4,962,342
-------------------------------------------------------------------------
Curtiss-Wright Corp.                                81,800      4,696,138
=========================================================================
                                                                9,658,480
=========================================================================

AIR FREIGHT & LOGISTICS-2.26%                                            

EGL, Inc.(a)                                       153,000      4,573,170
-------------------------------------------------------------------------
UTI Worldwide, Inc. (United Kingdom)                92,900      6,319,058
=========================================================================
                                                               10,892,228
=========================================================================

ALUMINUM-0.49%                                                           

Century Aluminum Co.(a)                             90,000      2,363,400
=========================================================================

APPAREL RETAIL-6.15%                                                     

Aeropostale, Inc.(a)                               152,850      4,498,375
-------------------------------------------------------------------------
Cache, Inc.(a)                                     347,250      6,257,445
-------------------------------------------------------------------------
Finish Line, Inc. (The)-Class A                    151,400      2,770,620
-------------------------------------------------------------------------
Genesco Inc.(a)                                    177,200      5,518,008
-------------------------------------------------------------------------
Men's Wearhouse, Inc. (The)(a)                     159,200      5,088,032
-------------------------------------------------------------------------
Stage Stores, Inc.(a)                              131,700      5,468,184
=========================================================================
                                                               29,600,664
=========================================================================

APPAREL, ACCESSORIES & LUXURY GOODS-1.27%                                

Quiksilver, Inc.(a)                                205,300      6,115,887
=========================================================================

APPLICATION SOFTWARE-6.45%                                               

Altiris, Inc.(a)                                    73,900      2,618,277
-------------------------------------------------------------------------
ANSYS, Inc.(a)                                      99,000      3,173,940
-------------------------------------------------------------------------
Hyperion Solutions Corp.(a)                        120,700      5,627,034
-------------------------------------------------------------------------
Kronos Inc.(a)                                      51,900      2,653,647
-------------------------------------------------------------------------
MICROS Systems, Inc.(a)                             94,100      7,345,446
-------------------------------------------------------------------------
RSA Security Inc.(a)                               232,600      4,665,956
-------------------------------------------------------------------------
SERENA Software, Inc.(a)                           128,200      2,774,248
-------------------------------------------------------------------------
Verint Systems Inc.(a)                              61,100      2,219,763
=========================================================================
                                                               31,078,311
=========================================================================

ASSET MANAGEMENT & CUSTODY BANKS-1.13%                                   

Affiliated Managers Group, Inc.(a)(b)               80,400      5,446,296
=========================================================================

BIOTECHNOLOGY-2.15%                                                      

DOV Pharmaceutical, Inc.(a)                        123,000      2,220,150
-------------------------------------------------------------------------
Neurocrine Biosciences, Inc.(a)                     71,400      3,520,020
-------------------------------------------------------------------------
Serologicals Corp.(a)(b)                           208,900      4,620,868
=========================================================================
                                                               10,361,038
=========================================================================

                                                                [Download Table]
                                                                MARKET   
                                                 SHARES         VALUE    
-------------------------------------------------------------------------


                                                                         

BUILDING PRODUCTS-0.55%                                                  

NCI Building Systems, Inc.(a)                       70,700   $  2,651,250
=========================================================================

COMMERCIAL PRINTING-0.54%                                                

Banta Corp.                                         58,000      2,596,080
=========================================================================

COMMUNICATIONS EQUIPMENT-0.89%                                           

CommScope, Inc.(a)                                 226,500      4,280,850
=========================================================================

COMPUTER HARDWARE-1.56%                                                  

Intergraph Corp.(a)                                 86,900      2,340,217
-------------------------------------------------------------------------
Stratasys, Inc.(a)(b)                              153,900      5,164,884
=========================================================================
                                                                7,505,101
=========================================================================

COMPUTER STORAGE & PERIPHERALS-0.83%                                     

Synaptics Inc.(a)                                  130,400      3,987,632
=========================================================================

CONSTRUCTION & ENGINEERING-1.26%                                         

Chicago Bridge & Iron Co. N.V.-New York                                  
  Shares (Netherlands)                             151,700      6,068,000
=========================================================================

CONSTRUCTION & FARM MACHINERY & HEAVY                                    
  TRUCKS-2.16%                                                           

Wabash National Corp.(a)(b)                        182,900      4,925,497
-------------------------------------------------------------------------
Wabtec Corp.                                       257,800      5,496,296
=========================================================================
                                                               10,421,793
=========================================================================

DIVERSIFIED COMMERCIAL SERVICES-2.42%                                    

Jackson Hewitt Tax Service Inc.                    285,000      7,196,250
-------------------------------------------------------------------------
NCO Group, Inc.(a)                                 171,900      4,443,615
=========================================================================
                                                               11,639,865
=========================================================================

DIVERSIFIED METALS & MINING-1.33%                                        

Compass Minerals International, Inc.               263,400      6,382,182
=========================================================================

ELECTRONIC EQUIPMENT MANUFACTURERS-1.00%                                 

Paxar Corp.(a)                                     217,300      4,817,541
=========================================================================

ENVIRONMENTAL SERVICES-1.08%                                             

Waste Connections, Inc.(a)                         152,400      5,219,700
=========================================================================

GAS UTILITIES-0.48%                                                      

New Jersey Resources Corp.                          53,800      2,331,692
=========================================================================

HEALTH CARE EQUIPMENT-1.61%                                              

Adeza Biomedical Corp.(a)                           50,400        884,520
-------------------------------------------------------------------------
Datascope Corp.                                     54,388      2,158,660
-------------------------------------------------------------------------
Invacare Corp.                                     101,800      4,709,268
=========================================================================
                                                                7,752,448
=========================================================================

HEALTH CARE FACILITIES-2.71%                                             

Genesis HealthCare Corp.(a)                         71,800      2,515,154
-------------------------------------------------------------------------
Kindred Healthcare, Inc.(a)                        199,700      5,981,015
-------------------------------------------------------------------------

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                                                                MARKET   
                                                 SHARES         VALUE    
-------------------------------------------------------------------------
                                                                         
HEALTH CARE FACILITIES-(CONTINUED)                                       

VCA Antech, Inc.(a)(b)                             233,400   $  4,574,640
=========================================================================
                                                               13,070,809
=========================================================================

HEALTH CARE SERVICES-0.56%                                               

Apria Healthcare Group Inc.(a)                      82,300      2,711,785
=========================================================================

HEALTH CARE SUPPLIES-2.04%                                               

Haemonetics Corp.(a)                               122,800      4,446,588
-------------------------------------------------------------------------
Sybron Dental Specialties, Inc.(a)                 151,500      5,360,070
=========================================================================
                                                                9,806,658
=========================================================================

HOTELS, RESORTS & CRUISE LINES-2.22%                                     

Kerzner International Ltd. (Bahamas)(a)             92,000      5,524,600
-------------------------------------------------------------------------
La Quinta Corp.(a)                                 571,100      5,191,299
=========================================================================
                                                               10,715,899
=========================================================================

HOUSEWARES & SPECIALTIES-2.38%                                           

Jarden Corp.(a)                                    134,700      5,851,368
-------------------------------------------------------------------------
Yankee Candle Co., Inc. (The)(a)                   168,700      5,597,466
=========================================================================
                                                               11,448,834
=========================================================================

INDUSTRIAL GASES-0.93%                                                   

Airgas, Inc.                                       168,300      4,461,633
=========================================================================

INDUSTRIAL MACHINERY-3.11%                                               

Kaydon Corp.                                       150,500      4,969,510
-------------------------------------------------------------------------
Kennametal Inc.                                    108,300      5,390,091
-------------------------------------------------------------------------
Manitowoc Co., Inc. (The)                          122,800      4,623,420
=========================================================================
                                                               14,983,021
=========================================================================

INSURANCE BROKERS-1.51%                                                  

Hilb Rogal & Hobbs Co.                             101,300      3,671,112
-------------------------------------------------------------------------
U.S.I. Holdings Corp.(a)(b)                        310,200      3,589,014
=========================================================================
                                                                7,260,126
=========================================================================

INTERNET SOFTWARE & SERVICES-1.20%                                       

Digital River, Inc.(a)                              76,800      3,195,648
-------------------------------------------------------------------------
Digitas Inc.(a)                                    272,500      2,602,375
=========================================================================
                                                                5,798,023
=========================================================================

INVESTMENT BANKING & BROKERAGE-0.93%                                     

CMET Finance Holdings, Inc. (Acquired                                    
  12/08/03; Cost $4,480,000)(a)(c)(d)               44,800      4,480,000
=========================================================================

INVESTMENT COMPANIES-EXCHANGE TRADED                                     
  FUNDS-1.10%                                                            

iShares Nasdaq Biotechnology Index Fund(a)(b)       70,400      5,308,160
=========================================================================

IT CONSULTING & OTHER SERVICES-0.63%                                     

CACI International Inc.-Class A(a)                  44,600      3,038,598
=========================================================================

MANAGED HEALTH CARE-1.34%                                                

AMERIGROUP Corp.(a)                                 44,100      3,336,606
-------------------------------------------------------------------------
Sierra Health Services, Inc.(a)                     57,000      3,141,270
=========================================================================
                                                                6,477,876
=========================================================================

                                                                [Download Table]
                                                                MARKET   
                                                 SHARES         VALUE    
-------------------------------------------------------------------------


                                                                         

METAL & GLASS CONTAINERS-1.10%                                           

AptarGroup, Inc.                                   100,200   $  5,288,556
=========================================================================

MULTI-UTILITIES & UNREGULATED POWER-1.27%                                

Avista Corp.                                       124,900      2,206,983
-------------------------------------------------------------------------
Energen Corp.                                       66,400      3,914,280
=========================================================================
                                                                6,121,263
=========================================================================

OFFICE SERVICES & SUPPLIES-0.62%                                         

Brady Corp.-Class A                                 48,000      3,003,360
=========================================================================

OIL & GAS EQUIPMENT & SERVICES-0.80%                                     

FMC Technologies, Inc.(a)                          119,300      3,841,460
=========================================================================

OIL & GAS EXPLORATION & PRODUCTION-3.53%                                 

Comstock Resources, Inc.(a)                        140,000      3,087,000
-------------------------------------------------------------------------
Penn Virginia Corp.                                127,900      5,188,903
-------------------------------------------------------------------------
Plains Exploration & Production Co.(a)             173,100      4,500,600
-------------------------------------------------------------------------
Warren Resources Inc.(a)                           466,600      4,246,060
=========================================================================
                                                               17,022,563
=========================================================================

OIL & GAS REFINING, MARKETING &                                          
  TRANSPORTATION-0.58%                                                   

Golar LNG Ltd. (Bermuda)(a)(e)                     191,600      2,782,457
=========================================================================

PACKAGED FOODS & MEATS-1.15%                                             

Flowers Foods, Inc.                                174,900      5,523,342
=========================================================================

PAPER PRODUCTS-1.07%                                                     

Wausau-Mosinee Paper Corp.                         287,600      5,136,536
=========================================================================

PHARMACEUTICALS-0.72%                                                    

Medicines Co. (The)(a)                             120,400      3,467,520
=========================================================================

PROPERTY & CASUALTY INSURANCE-1.15%                                      

Philadelphia Consolidated Holding Corp.(a)          83,500      5,522,690
=========================================================================

REAL ESTATE-2.14%                                                        

Alexandria Real Estate Equities, Inc.               35,300      2,627,026
-------------------------------------------------------------------------
Amli Residential Properties Trust                   72,000      2,304,000
-------------------------------------------------------------------------
Fieldstone Investment Corp. (Acquired                                    
  11/10/03-11/11/03; Cost $4,704,275)(c)           311,300      5,369,925
=========================================================================
                                                               10,300,951
=========================================================================

REAL ESTATE MANAGEMENT & DEVELOPMENT-1.22%                               

Jones Lang LaSalle Inc.(a)                         157,250      5,882,723
=========================================================================

REGIONAL BANKS-5.39%                                                     

Alabama National BanCorp.                           74,700      4,818,150
-------------------------------------------------------------------------
Bank of the Ozarks, Inc.                            51,200      1,742,336
-------------------------------------------------------------------------
Boston Private Financial Holdings, Inc.             87,700      2,470,509
-------------------------------------------------------------------------
Cathay General Bancorp                             127,300      4,773,750
-------------------------------------------------------------------------
CVB Financial Corp.                                103,000      2,735,680
-------------------------------------------------------------------------
Hancock Holding Co.                                 70,100      2,345,546
-------------------------------------------------------------------------
Hudson United Bancorp                               61,000      2,402,180
-------------------------------------------------------------------------

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                                                                MARKET   
                                                 SHARES         VALUE    
-------------------------------------------------------------------------
                                                                         
REGIONAL BANKS-(CONTINUED)                                               

MB Financial, Inc.                                  58,300   $  2,457,345
-------------------------------------------------------------------------
Wintrust Financial Corp.                            39,100      2,227,136
=========================================================================
                                                               25,972,632
=========================================================================

RESTAURANTS-2.18%                                                        

Lone Star Steakhouse & Saloon, Inc.                 94,300      2,640,400
-------------------------------------------------------------------------
Papa John's International, Inc.(a)(b)               76,200      2,624,328
-------------------------------------------------------------------------
Steak n Shake Co. (The)(a)                         260,800      5,236,864
=========================================================================
                                                               10,501,592
=========================================================================

SEMICONDUCTOR EQUIPMENT-2.10%                                            

ATMI, Inc.(a)                                      174,500      3,931,485
-------------------------------------------------------------------------
Cymer, Inc.(a)                                      81,400      2,404,556
-------------------------------------------------------------------------
Varian Semiconductor Equipment Associates,                               
  Inc.(a)                                          102,200      3,766,070
=========================================================================
                                                               10,102,111
=========================================================================

SEMICONDUCTORS-1.98%                                                     

DSP Group, Inc.(a)                                 202,500      4,521,825
-------------------------------------------------------------------------
Semtech Corp.(a)                                   123,400      2,698,758
-------------------------------------------------------------------------
Silicon Laboratories Inc.(a)                        65,300      2,305,743
=========================================================================
                                                                9,526,326
=========================================================================

SPECIALTY CHEMICALS-2.07%                                                

Albemarle Corp.                                    135,000      5,225,850
-------------------------------------------------------------------------
Minerals Technologies Inc.                          71,250      4,752,375
=========================================================================
                                                                9,978,225
=========================================================================

STEEL-1.36%                                                              

Commercial Metals Co.                              129,800      6,562,688
=========================================================================

TECHNOLOGY DISTRIBUTORS-3.20%                                            

Anixter International Inc.                         127,700      4,595,923
-------------------------------------------------------------------------
Global Imaging Systems, Inc.(a)(b)                 147,300      5,818,350
-------------------------------------------------------------------------
ScanSource, Inc.(a)                                 80,700      5,016,312
=========================================================================
                                                               15,430,585
=========================================================================

THRIFTS & MORTGAGE FINANCE-1.57%                                         

Corus Bankshares, Inc.                              51,600      2,477,316
-------------------------------------------------------------------------

                                                                [Download Table]
                                                                MARKET    
                                                 SHARES         VALUE     
------------------------------------------------------------------------- 


                                                                          
THRIFTS & MORTGAGE FINANCE-(CONTINUED)                                    

Harbor Florida Bancshares, Inc.                     71,700   $  2,481,537 
------------------------------------------------------------------------- 
Sterling Financial Corp.(a)                         65,900      2,587,234 
========================================================================= 
                                                                7,546,087 
========================================================================= 

TIRES & RUBBER-0.50%                                                      

Bandag, Inc.                                        48,800      2,430,728 
========================================================================= 

TRADING COMPANIES & DISTRIBUTORS-1.10%                                    

Watsco, Inc.                                       150,600      5,304,132 
========================================================================= 

TRUCKING-2.91%                                                            

Landstar System, Inc.(a)(b)                         97,000      7,143,080 
------------------------------------------------------------------------- 
Overnite Corp.                                     183,900      6,848,436 
========================================================================= 
                                                               13,991,516 
========================================================================= 
    Total Common Stocks & Other Equity                                    
      Interests (Cost $372,591,691)                           477,859,188 
========================================================================= 

MONEY MARKET FUNDS-0.95%                                                  

Liquid Assets Portfolio-Institutional                                     
  Class(f)                                       2,284,239      2,284,239 
------------------------------------------------------------------------- 
STIC Prime Portfolio-Institutional Class(f)      2,284,239      2,284,239 
========================================================================= 
    Total Money Market Funds (Cost                                        
      $4,568,478)                                               4,568,478 
========================================================================= 
TOTAL INVESTMENTS-100.16% (excluding                                      
  investments purchased with cash collateral                              
  from securities loaned) (Cost $377,160,169)                 482,427,666 
========================================================================= 

INVESTMENTS PURCHASED WITH CASH COLLATERAL                                
  FROM SECURITIES LOANED                                                  

MONEY MARKET FUNDS-4.94%                                                  

Liquid Assets Portfolio-Institutional                                     
  Class(f)(g)                                   11,898,095     11,898,095 
------------------------------------------------------------------------- 
STIC Prime Portfolio-Institutional                                        
  Class(f)(g)                                   11,898,095     11,898,095 
========================================================================= 
    Total Money Market Funds (purchased with                              
      cash collateral from securities loaned)                             
      (Cost $23,796,190)                                       23,796,190 
========================================================================= 
TOTAL INVESTMENTS-105.10% (Cost $400,956,359)                 506,223,856 
========================================================================= 
OTHER ASSETS LESS LIABILITIES-(5.10%)                         (24,584,240)
========================================================================= 
NET ASSETS-100.00%                                           $481,639,616 
_________________________________________________________________________ 
========================================================================= 

Notes to Schedule of Investments:                                               

(a) Non-income producing security.                                              
(b) All or a portion of this securities has been pledged as collateral for      
securities lending transactions at December 31, 2004.                   
(c) Security not registered under the Securities Act of 1933, as amended (e.g., 
the security was purchased in a Rule 144A transaction or a Regulation D 
   transaction). The security may be resold only pursuant to an exemption from
registration under the 1933 Act, typically to qualified institutional   
  buyers. The Fund has no rights to demand registration of these securities.
The aggregate market value of these securities at December 31, 2004 was 
$9,849,925, which represented 2.05% of the Fund's Net Assets. These     
securities are considered to be illiquid.                               
(d) Security fair valued in good faith in accordance with the procedures        
  established by the Board of Trustees. The market value of this security at
December 31, 2004 represented 0.88% of the Fund's Total Investments. See
Note 1A.                                                                
(e) In accordance with the procedures established by the Board of Trustees, the 
 foreign security is fair valued using adjusted closing market prices. The
   market value of this security at December 31, 2004 represented 0.55% of the
Fund's Total Investments. See Note 1A.                                  
(f) The money market fund and the Fund are affiliated by having the same        
investment advisor. See Note 3.                                         
(g) The security has been segregated to satisfy the forward commitment to return
the cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned. See Note 8.                 

See accompanying notes which are an integral part of the financial statements.  
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STATEMENT OF ASSETS AND LIABILITIES                                             

December 31, 2004                                                               

                                                                [Download Table]
                                                            
ASSETS:                                                     

Investments, at market value (cost                          
  $372,591,691)*                               $477,859,188 
----------------------------------------------------------- 
Investments in affiliated money market funds                
  (cost $28,364,668)                             28,364,668 
=========================================================== 
    Total investments (cost $400,956,359)       506,223,856 
=========================================================== 
Receivables for:                                            
  Fund shares sold                                  519,097 
----------------------------------------------------------- 
  Dividends                                         333,164 
----------------------------------------------------------- 
Investment for trustee deferred compensation                
  and retirement plans                               29,517 
----------------------------------------------------------- 
Other assets                                         25,761 
=========================================================== 
    Total assets                                507,131,395 
___________________________________________________________ 
=========================================================== 

LIABILITIES:                                                

Payables for:                                               
  Investments purchased                               6,147 
----------------------------------------------------------- 
  Fund shares reacquired                          1,202,587 
----------------------------------------------------------- 
  Trustee deferred compensation and                         
    retirement plans                                 41,547 
----------------------------------------------------------- 
  Collateral upon return of securities loaned    23,796,190 
----------------------------------------------------------- 
Accrued distribution fees                           258,400 
----------------------------------------------------------- 
Accrued transfer agent fees                         111,647 
----------------------------------------------------------- 
Accrued operating expenses                           75,261 
=========================================================== 
    Total liabilities                            25,491,779 
=========================================================== 
Net assets applicable to shares outstanding    $481,639,616 
___________________________________________________________ 
=========================================================== 

NET ASSETS CONSIST OF:                                      

Shares of beneficial interest                  $369,758,220 
----------------------------------------------------------- 
Undistributed net investment income (loss)          (33,759)
----------------------------------------------------------- 
Undistributed net realized gain from                        
  investment securities and futures contracts     6,647,658 
----------------------------------------------------------- 
Unrealized appreciation of investment                       
  securities                                    105,267,497 
=========================================================== 
                                               $481,639,616 
___________________________________________________________ 
=========================================================== 

NET ASSETS:                                                 

Class A                                        $247,580,522 
___________________________________________________________ 
=========================================================== 
Class B                                        $156,450,163 
___________________________________________________________ 
=========================================================== 
Class C                                        $ 65,792,297 
___________________________________________________________ 
=========================================================== 
Class R                                        $ 11,816,634 
___________________________________________________________ 
=========================================================== 

SHARES OUTSTANDING, $0.01 PAR VALUE PER                     
  SHARE, UNLIMITED NUMBER OF SHARES                         
  AUTHORIZED:                                               

Class A                                          19,347,654 
___________________________________________________________ 
=========================================================== 
Class B                                          12,593,607 
___________________________________________________________ 
=========================================================== 
Class C                                           5,298,435 
___________________________________________________________ 
=========================================================== 
Class R                                             929,531 
___________________________________________________________ 
=========================================================== 
Class A:                                                    
  Net asset value per share                    $      12.80 
----------------------------------------------------------- 
  Offering price per share:                                 
    (Net asset value of $12.80 divided                      
      by 94.50%)                               $      13.54 
___________________________________________________________ 
=========================================================== 
Class B:                                                    
  Net asset value and offering price per                    
    share                                      $      12.42 
___________________________________________________________ 
=========================================================== 
Class C:                                                    
  Net asset value and offering price per                    
    share                                      $      12.42 
___________________________________________________________ 
=========================================================== 
Class R:                                                    
  Net asset value and offering price per                    
    share                                      $      12.71 
___________________________________________________________ 
=========================================================== 

* At December 31, 2004, securities with an aggregate market value of $23,145,704
were on loan to brokers.                                                    

See accompanying notes which are an integral part of the financial statements.  
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STATEMENT OF OPERATIONS                                                         

For the year ended December 31, 2004                                            

                                                                [Download Table]
                                                                           
INVESTMENT INCOME:                                                         

Dividends (net of foreign withholding tax of $5,461)          $  3,404,786 
-------------------------------------------------------------------------- 
Dividends from affiliated money market funds (including                    
  securities lending income of $106,952*)                          247,892 
-------------------------------------------------------------------------- 
Interest                                                           108,936 
========================================================================== 
    Total investment income                                      3,761,614 
========================================================================== 

EXPENSES:                                                                  

Advisory fees                                                    4,233,084 
-------------------------------------------------------------------------- 
Administrative services fees                                       144,542 
-------------------------------------------------------------------------- 
Custodian fees                                                      61,210 
-------------------------------------------------------------------------- 
Distribution fees:                                                         
  Class A                                                          899,368 
-------------------------------------------------------------------------- 
  Class B                                                        1,645,132 
-------------------------------------------------------------------------- 
  Class C                                                          694,862 
-------------------------------------------------------------------------- 
  Class R                                                           35,241 
-------------------------------------------------------------------------- 
Transfer agent fees                                              1,581,544 
-------------------------------------------------------------------------- 
Trustees' fees and retirement benefits                              26,310 
-------------------------------------------------------------------------- 
Other                                                              377,433 
========================================================================== 
    Total expenses                                               9,698,726 
========================================================================== 
Less: Fees waived, expenses reimbursed and expense offset                  
  arrangement                                                     (331,308)
========================================================================== 
    Net expenses                                                 9,367,418 
========================================================================== 
Net investment income (loss)                                    (5,605,804)
========================================================================== 

REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT                        
  SECURITIES AND FUTURES CONTRACTS:                                        

Net realized gain from:                                                    
  Investment securities                                         63,023,411 
-------------------------------------------------------------------------- 
  Futures contracts                                                190,607 
========================================================================== 
                                                                63,214,018 
========================================================================== 
Change in net unrealized appreciation (depreciation) of                    
  Investment securities                                        (17,288,151)
========================================================================== 
Net gain from investment securities and futures contracts       45,925,867 
========================================================================== 
Net increase in net assets resulting from operations          $ 40,320,063 
__________________________________________________________________________ 
========================================================================== 

* Dividends from affiliated money market funds are net of income rebate paid to 
securities lending counterparties.                                          

See accompanying notes which are an integral part of the financial statements.  
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STATEMENT OF CHANGES IN NET ASSETS                                              

For the years ended December 31, 2004 and 2003                                  

                                                        [Enlarge/Download Table]

                                                                  2004            2003     
------------------------------------------------------------------------------------------ 
                                                                                           
OPERATIONS:                                                                                

  Net investment income (loss)                                $ (5,605,804)   $ (4,347,265)
------------------------------------------------------------------------------------------ 
  Net realized gain from investment securities, foreign                                    
    currencies and futures contracts                            63,214,018      23,914,515 
------------------------------------------------------------------------------------------ 
  Change in net unrealized appreciation (depreciation) of                                  
    investment securities                                      (17,288,151)    123,707,904 
========================================================================================== 
    Net increase in net assets resulting from operations        40,320,063     143,275,154 
========================================================================================== 
Distributions to shareholders from net realized gains:                                     
  Class A                                                       (6,812,723)             -- 
------------------------------------------------------------------------------------------ 
  Class B                                                       (4,459,412)             -- 
------------------------------------------------------------------------------------------ 
  Class C                                                       (1,866,092)             -- 
------------------------------------------------------------------------------------------ 
  Class R                                                         (312,412)             -- 
========================================================================================== 
    Decrease in net assets resulting from distributions        (13,450,639)             -- 
========================================================================================== 
Share transactions-net:                                                                    
  Class A                                                      (33,241,596)     52,426,841 
------------------------------------------------------------------------------------------ 
  Class B                                                      (29,808,487)     29,417,204 
------------------------------------------------------------------------------------------ 
  Class C                                                      (13,451,247)     13,847,595 
------------------------------------------------------------------------------------------ 
  Class R                                                        8,911,070       2,003,122 
========================================================================================== 
    Net increase (decrease) in net assets resulting from                                   
     share transactions                                        (67,590,260)     97,694,762 
========================================================================================== 
    Net increase (decrease) in net assets                      (40,720,836)    240,969,916 
========================================================================================== 

NET ASSETS:                                                                                

  Beginning of year                                            522,360,452     281,390,536 
========================================================================================== 
  End of year (including undistributed net investment income                               
    (loss) of $(33,759) and $(28,398), respectively)          $481,639,616    $522,360,452 
__________________________________________________________________________________________ 
========================================================================================== 

See accompanying notes which are an integral part of the financial statements.  
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NOTES TO FINANCIAL STATEMENTS                                                   

December 31, 2004                                                               

NOTE 1--SIGNIFICANT ACCOUNTING POLICIES                                         

AIM Small Cap Equity Fund (the "Fund") is a series portfolio of AIM Funds Group 
(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 nine separate portfolios,    
each authorized to issue an unlimited number of shares of beneficial interest.  
The Fund currently offers multiple classes of shares. Matters affecting each    
portfolio or class will be voted on exclusively by the shareholders of such     
portfolio or class. The assets, liabilities and operations of each portfolio are
accounted for separately. Information presented in these financial statements   
pertains only to the Fund.                                                      

Effective December 13, 2004, the Fund is open to new investors.         

  The Fund's investment objective is to achieve long-term growth of capital.
Each company listed in the Schedule of Investments is organized in the United   
States of America unless otherwise noted.                                       

   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. However, the Fund has not had prior claims or losses pursuant to these
contracts.                                                                      

The preparation of financial statements in conformity with accounting   
principles generally accepted in the United States of America requires          
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported 
amounts of revenues and expenses during the reporting period. Actual results    
could differ from those estimates. The following is a summary of the significant
accounting policies followed by the Fund in the preparation of its financial    
statements.                                                                     

A.   SECURITY VALUATIONS -- Securities, including restricted securities, are    
valued according to the following policy.                             

      A security listed or traded on an exchange (except convertible bonds) is
 valued at its last sales price as of the close of the customary trading
session on the exchange where the security is principally traded, or  
lacking any sales on a particular day, the security is valued at the  
     closing bid price on that day. Each security traded in the over-the-counter
   market (but not securities reported on the NASDAQ National Market System)
    is valued on the basis of prices furnished by independent pricing services
or market makers. Each security reported on the NASDAQ National Market
  System is valued at the NASDAQ Official Closing Price ("NOCP") as of the
  close of the customary trading session on the valuation date or absent a
NOCP, at the closing bid price.                                       

  Futures contracts are valued at the final settlement price set by an
     exchange on which they are principally traded. Listed options are valued at
     the mean between the last bid and the ask prices from the exchange on which
   they are principally traded. Options not listed on an exchange are valued
   by an independent source at the mean between the last bid and ask prices.
   For purposes of determining net asset value per share, futures and option
contracts generally will be valued 15 minutes after the close of the  
customary trading session of the New York Stock Exchange ("NYSE").    

    Investments in open-end registered investment companies and closed-end
     registered investment companies that do not trade on an exchange are valued
at the end of day net asset value per share. Investments in closed-end
     registered investment companies that trade on an exchange are valued at the
  last sales price as of the close of the customary trading session on the
exchange where the security is principally traded.                    

     Debt obligations (including convertible bonds) are fair valued using an
evaluated quote provided by an independent pricing service. Evaluated 
    quotes provided by the pricing service may be determined without exclusive
reliance on quoted prices, and may reflect appropriate factors such as
institution-size trading in similar groups of securities, developments
related to specific securities, dividend rate, yield, quality, type of
    issue, coupon rate, maturity, individual trading characteristics and other
    market data. Short-term obligations having 60 days or less to maturity and
 commercial paper are valued at amortized cost which approximates market
value.                                                                

     Securities for which market prices are not provided by any of the above
   methods are valued based upon quotes furnished by independent sources and
  are valued at the last bid price in the case of equity securities and in
the case of debt obligations, the mean between the last bid and asked 
prices.                                                               

     Foreign securities (including foreign exchange contracts) are converted
into U.S. dollar amounts using the applicable exchange rates as of the
close of the NYSE. Generally, trading in foreign securities is        
     substantially completed each day at various times prior to the close of the
   NYSE. The values of such securities used in computing the net asset value
of the Fund's shares are determined as of the close of the respective 
   markets. Events affecting the values of such foreign securities may occur
 between the times at which the particular foreign market closes and the
close of the customary trading session of the NYSE which would not    
   ordinarily be reflected in the computation of the Fund's net asset value.
    If the event is likely to have affected the closing price of the security,
  the security will be valued at fair value in good faith using procedures
     approved by the Board of Trustees. Adjustments to closing prices to reflect
fair value may also be based on a screening process of an independent 
  pricing service to indicate the degree of certainty, based on historical
data, that the closing price in the principal market where a foreign  
security trades is not the current market value as of the close of the
    NYSE. Foreign securities meeting the approved degree of certainty that the
price is not reflective of current market value will be priced at the 
 indication of fair value from the independent pricing service. Multiple
     factors may be considered by the independent pricing service in determining
   adjustments to reflect fair value and may include information relating to
sector indices, ADRs, domestic and foreign index futures and          
exchange-traded funds.                                                

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     Securities for which market quotations are not readily available or are
     unreliable are valued at fair value as determined in good faith by or under
  the supervision of the Trust's officers following procedures approved by
the Board of Trustees. Issuer specific events, market trends, bid/ask 
  quotes of brokers and information providers and other market data may be
     reviewed in the course of making a good faith determination of a security's
fair value.                                                           

B.   SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions   
    are accounted for on a trade date basis. Realized gains or losses on sales
are computed on the basis of specific identification of the securities
sold. Interest income is recorded on the accrual basis from settlement
date. Dividend income is recorded on the ex-dividend date.            

     Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased 
  and/or a reduction of proceeds on a sale of securities. Such transaction
 costs are included in the determination of realized and unrealized gain
   (loss) from investment securities reported in the Statement of Operations
    and the Statement of Changes in Net Assets and the realized and unrealized
 net gains (losses) on securities per share in the Financial Highlights.
   Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These   
transaction costs are not considered operating expenses and are not   
    reflected in net investment income reported in the Statement of Operations
  and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation  
arrangements between the Fund and the advisor.                        

     The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.     

C.   DISTRIBUTIONS -- Distributions from income and net realized capital gain,  
   if any, are generally paid annually and recorded on ex-dividend date. The
Fund may elect to use a portion of the proceeds from redemptions as   
distributions for federal income tax purposes.                        

D.   FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of
Subchapter M of the Internal Revenue Code necessary to qualify as a   
   regulated investment company and, as such, will not be subject to federal
  income taxes on otherwise taxable income (including net realized capital
 gain) which is distributed to shareholders. Therefore, no provision for
federal income taxes is recorded in the financial statements.         

E.   EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular    
 class of the Fund and which are directly attributable to that class are
   charged to the operations of such class. All other expenses are allocated
among the classes based on relative net assets.                       

F.   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.                             

G.   FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation 
to purchase or sell a specific currency for an agreed-upon price at a 
     future date. The Fund may enter into a foreign currency contract to attempt
   to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency   
  contract for the purchase or sale of a security denominated in a foreign
    currency in order to "lock in" the U.S. dollar price of that security. The
     Fund could be exposed to risk if counterparties to the contracts are unable
to meet the terms of their contracts or if the value of the foreign   
currency changes unfavorably.                                         

H.   FUTURES CONTRACTS -- The Fund may purchase or sell futures contracts as a  
hedge against changes in market conditions. Initial margin deposits   
required upon entering into futures contracts are satisfied by the    
 segregation of specific securities as collateral for the account of the
 broker (the Fund's agent in acquiring the futures position). During the
period the futures contracts are open, changes in the value of the    
contracts are recognized as unrealized gains or losses by "marking to 
  market" on a daily basis to reflect the market value of the contracts at
the end of each day's trading. Variation margin payments are made or  
  received depending upon whether unrealized gains or losses are incurred.
    When the contracts are closed, the Fund recognizes a realized gain or loss
    equal to the difference between the proceeds from, or cost of, the closing
   transaction and the Fund's basis in the contract. If the Fund were unable
 to liquidate a futures contract and/or enter into an offsetting closing
transaction, the Fund would continue to be subject to market risk with
respect to the value of the contracts and continue to be required to  
maintain the margin deposits on the futures contracts.                

I.   PUT OPTIONS -- The Fund may purchase put options. By purchasing a put      
 option, the Fund obtains the right (but not the obligation) to sell the
    option's underlying instrument at a fixed strike price. In return for this
    right, the Fund pays an option premium. The option's underlying instrument
 may be a security or a futures contract. Put options may be used by the
     Fund to hedge securities it owns by locking in a minimum price at which the
   Fund can sell. If security prices fall, the put option could be exercised
to offset all or a portion of the Fund's resulting losses. At the same
   time, because the maximum the Fund has at risk is the cost of the option,
 purchasing put options does not eliminate the potential for the Fund to
  profit from an increase in the value of the securities hedged. A risk in
    buying an option is that the Fund pays a premium whether or not the option
is exercised. In addition, there can be no assurance that a liquid    
secondary market will exist for any option purchased or sold.         

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NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES                         

The Trust has entered into a master investment advisory agreement with A I M    
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,   
the Fund pays an advisory fee to AIM at the annual rate of 0.85% of the Fund's  
average daily net assets. Effective January 1, 2005 through December 31, 2009,  
AIM has contractually agreed to waive advisory fees to the extent that the      
advisory fees payable by the Fund (based on the Fund's average daily net assets)
do not exceed the annual rate of 0.745% of the first $250 million, plus 0.73% of
the next $250 million, plus 0.715% of the next $500 million, plus 0.70% of the  
next $1.5 billion, plus 0.685% of the next $2.5 billion, plus 0.67% of the next 
$2.5 billion, plus 0.655% of the next $2.5 billion, plus 0.64% of the Fund's    
average daily net assets in excess of $10 billion. AIM has voluntarily agreed to
waive advisory fees of the Fund in the amount of 25% of the advisory fee AIM    
receives from the affiliated money market funds on investments by the Fund in   
such affiliated money market funds (excluding investments made in affiliated    
money market funds with cash collateral from securities loaned by the Fund).    
Voluntary fee waivers or reimbursements may be modified or discontinued at any  
time upon consultation with the Board of Trustees without further notice to     
investors. For the year ended December 31, 2004, AIM waived fees of $3,093.     

   For the year ended December 31, 2004, at the request of the Trustees of the
Trust, AMVESCAP PLC ("AMVESCAP") agreed to reimburse $77,059 of expenses        
incurred by the Fund in connection with matters related to recently settled     
regulatory actions and investigations concerning market timing activity in the  
AIM Funds, including legal, audit, shareholder servicing, communication and     
trustee expenses. These expenses along with the related expense reimbursement,  
are included in the Statement of Operations.                                    

  The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing    
accounting services to the Fund. Pursuant to such agreement for the year ended  
December 31, 2004, AIM was paid $144,542.                                       

    The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay AIM Investment Services, Inc. ("AISI") a fee for providing transfer agency  
and shareholder services to the Fund and reimburse AISI for certain expenses    
incurred by AISI in the course of providing such services. For the year ended   
December 31, 2004, the Fund paid AISI $1,581,544. AISI may make payments to     
intermediaries that provide omnibus account services, sub-accounting services   
and/or networking services.                                                     

The Trust has entered into master distribution agreements with A I M    
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the     
Class A, Class B, Class C and Class R shares of the Fund. The Trust has adopted 
plans pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class
A, Class B, Class C and Class R shares (collectively the "Plans"). The Fund,    
pursuant to the Plans, pays AIM Distributors compensation at the annual rate of 
0.35% of the Fund's average daily net assets of Class A shares, 1.00% of the    
average daily net assets of Class B and Class C shares and 0.50% of the average 
daily net assets of Class R shares. Of these amounts, up to 0.25% of the average
daily net assets of the Class A, Class B, Class C or Class R shares may be paid 
to furnish continuing personal shareholder services to customers who purchase   
and own shares of such classes. Any amounts not paid as a service fee under the 
Plans would constitute an asset-based sales charge. NASD Rules also impose a cap
on the total sales charges, including asset-based sales charges that may be paid
by any class of shares of the Fund. Prior to December 13, 2004, during the      
Fund's closing to new investors, AIM Distributors agreed to waive 0.10% of the  
Fund's average daily net assets of Class A distribution plan fees. Pursuant to  
the Plans, for the year ended December 31, 2004, the Class A, Class B, Class C  
and Class R shares paid $655,183, $1,645,132, $694,862 and $35,241,             
respectively, after AIM Distributors waived Class A Plan fees of $244,185.      

  Front-end sales commissions and contingent deferred sales charges ("CDSC")
(collectively the "sales charges") are not recorded as expenses of the Fund.    
Front-end sales commissions are deducted from proceeds from the sales of Fund   
shares prior to investment in Class A shares of the Fund. CDSC are deducted from
redemption proceeds prior to remittance to the shareholder. During the year     
ended December 31, 2004, AIM Distributors advised the Fund that it retained     
$69,295 in front-end sales commissions from the sale of Class A shares and      
$15,228, $21,617, $7,791 and $0 from Class A, Class B, Class C and Class R      
shares, respectively, for CDSC imposed upon redemptions by shareholders.        

Certain officers and trustees of the Trust are officers and directors of
AIM, AISI and/or AIM Distributors.                                              

NOTE 3--INVESTMENTS IN AFFILIATES                                               

The Fund is permitted, pursuant to an exemptive order from the Securities and   
Exchange Commission ("SEC"), to invest daily available cash balances and cash   
collateral from securities lending transactions in affiliated money market      
funds. The Fund and the money market funds below have the same investment       
advisor and therefore, are considered to be affiliated. The tables below show   
the transactions in and earnings from investments in affiliated money market    
funds for the year ended December 31, 2004.                                     

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INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:                                   

                                                        [Enlarge/Download Table]

                                                                         UNREALIZED                                               
                 MARKET VALUE       PURCHASES          PROCEEDS         APPRECIATION     MARKET VALUE     DIVIDEND      REALIZED  
FUND               12/31/03          AT COST          FROM SALES       (DEPRECIATION)      12/31/04        INCOME      GAIN (LOSS)
----------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                  
Liquid Assets                                                                                                                     
  Portfolio-                                                                                                                      
  Institutional                                                                                                                   
  Class           $10,035,910      $125,196,617      $(132,948,288)        $   --         $ 2,284,239     $ 71,349       $   --   
----------------------------------------------------------------------------------------------------------------------------------
STIC Prime                                                                                                                        
  Portfolio-                                                                                                                      
  Institutional                                                                                                                   
  Class            10,035,910       125,196,617       (132,948,288)            --           2,284,239       69,591           --   
==================================================================================================================================
  Subtotal        $20,071,820      $250,393,234      $(265,896,576)        $   --         $ 4,568,478     $140,940       $   --   
==================================================================================================================================

INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:            

                                                        [Enlarge/Download Table]

                                                                         UNREALIZED                                               
                 MARKET VALUE       PURCHASES          PROCEEDS         APPRECIATION     MARKET VALUE     DIVIDEND      REALIZED  
FUND               12/31/03          AT COST          FROM SALES       (DEPRECIATION)      12/31/04        INCOME*     GAIN (LOSS)
----------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                  
Liquid Assets                                                                                                                     
  Portfolio-                                                                                                                      
  Institutional                                                                                                                   
  Class           $34,938,267      $ 61,029,785      $ (84,069,957)        $   --         $11,898,095     $ 54,140       $   --   
----------------------------------------------------------------------------------------------------------------------------------
STIC Prime                                                                                                                        
  Portfolio-                                                                                                                      
  Institutional                                                                                                                   
  Class            34,938,266        60,968,494        (84,008,665)            --          11,898,095       52,812           --   
==================================================================================================================================
  Subtotal        $69,876,533      $121,998,279      $(168,078,622)        $   --         $23,796,190     $106,952       $   --   
==================================================================================================================================
  Total           $89,948,353      $372,391,513      $(433,975,198)        $   --         $28,364,668     $247,892       $   --   
__________________________________________________________________________________________________________________________________
==================================================================================================================================

* Dividend income is net of income rebate paid to securities lending            
counterparties.                                                             

NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS                             

The Fund is permitted to purchase or sell securities from or to certain other   
AIM Funds under specified conditions outlined in procedures adopted by the Board
of Trustees of the Trust. The procedures have been designed to ensure that any  
purchase or sale of securities by the Fund from or to another fund or portfolio 
that is or could be considered an affiliate by virtue of having a common        
investment advisor (or affiliated investment advisors), common Trustees and/or  
common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined   
under the procedures each transaction is effected at the current market price.  
Pursuant to these procedures, during the year ended December 31, 2004, the Fund 
engaged in purchases and sales of securities of $300,030 and $37,347,871,       
respectively.                                                                   

NOTE 5--EXPENSE OFFSET ARRANGEMENT                                              

The expense offset arrangement is comprised of transfer agency credits which    
result from balances in Demand Deposit Accounts (DDA) used by the transfer agent
for clearing shareholder transactions. For the year ended December 31, 2004, the
Fund received credits in transfer agency fees of $6,971 under an expense offset 
arrangement, which resulted in a reduction of the Fund's total expenses of      
$6,971.                                                                         

NOTE 6--TRUSTEES' FEES                                                          

Trustees' fees represent remuneration paid to each Trustee of the Trust who is  
not an "interested person" of AIM. Trustees have the option to defer            
compensation payable by the Trust. Those Trustees who defer compensation have   
the option to select various AIM Funds in which their deferral accounts shall be
deemed to be invested.                                                          

Current Trustees are eligible to participate in a retirement plan that  
provides for benefits to be paid upon retirement to Trustees over a period of   
time based on the number of years of service. The Fund may have certain former  
Trustees that also participate in a retirement plan and receive benefits under  
such plan.                                                                      

  Obligations under the deferred compensation and retirement plans represent
unsecured claims against the general assets of the Fund.                        

   During the year ended December 31, 2004, the Fund paid legal fees of $3,807
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Independent Trustees. A member of that firm is a Trustee of the Trust.          

NOTE 7--BORROWINGS                                                              

Pursuant to an exemptive order from the SEC, the Fund may participate in an     
interfund lending facility that AIM has established for temporary borrowings by 
the AIM Funds. An interfund loan will be made under this facility only if the   
loan rate (an average of the rate available on bank loans and the rate available
on investments in overnight repurchase agreements) is favorable to both the     
lending fund and the borrowing fund. A loan will be secured by collateral if the
Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total    
assets. To the extent that the loan is required to be secured by collateral, the
collateral is marked to market daily to ensure that the market value is at least
102% of the outstanding principal value of the loan.                            

The Fund is a participant in an uncommitted unsecured revolving credit  
facility with State Street Bank and Trust Company ("SSB"). The Fund may borrow  
up to the lesser of (i) $125,000,000, or (ii) the limits set by its prospectus  
for borrowings. The Fund and other funds advised by AIM which are               

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parties to the credit facility can borrow on a first come, first served basis.  
Principal on each loan outstanding shall bear interest at the bid rate quoted by
SSB at the time of the request for the loan.                                    

During the year ended December 31, 2004, the Fund did not borrow or lend
under the interfund lending facility or borrow under the uncommitted unsecured  
revolving credit facility.                                                      

Additionally, the Fund is permitted to temporarily carry a negative or  
overdrawn balance in its account with SSB, the custodian bank. To compensate the
custodian bank for such overdrafts, the overdrawn Fund may either (i) leave     
funds in the account so the custodian can be compensated by earning the         
additional interest; or (ii) compensate by paying the custodian bank. In either 
case, the custodian bank will be compensated at an amount equal to the Federal  
Funds rate plus 100 basis points.                                               

NOTE 8--PORTFOLIO SECURITIES LOANED                                             

The Fund may lend portfolio securities having a market value up to one-third of 
the Fund's total assets. Such loans are secured by collateral equal to no less  
than the market value of the loaned securities determined daily. Such collateral
will be cash or debt securities issued or guaranteed by the U.S. Government or  
any of its agencies. Cash collateral received in connection with these loans is 
invested in short-term money market instruments or affiliated money market      
funds. It is the Fund's policy to obtain additional collateral from or return   
excess collateral to the borrower by the end of the next business day, following
the valuation date of the securities loaned. Therefore, the value of the        
collateral held may be temporarily less than the value of the securities on     
loan. Lending securities entails a risk of loss to the Fund if and to the extent
that the market value of the securities loaned were to increase and the borrower
did not increase the collateral accordingly, and the borrower fails to return   
the securities. The Fund could also experience delays and costs in gaining      
access to the collateral. The Fund bears the risk of any deficiency in the      
amount of the collateral available for return to the borrower due to a loss on  
the collateral invested.                                                        

    At December 31, 2004, securities with an aggregate value of $23,145,704 were
on loan to brokers. The loans were secured by cash collateral of $23,796,190    
received by the Fund and subsequently invested in affiliated money market funds.
For the year ended December 31, 2004, the Fund received dividends on cash       
collateral net of income rebate paid to counterparties $106,952 for securities  
lending transactions.                                                           

NOTE 9--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS          

DISTRIBUTIONS TO SHAREHOLDERS:                                                  

The tax character of distributions paid during the years ended December 31, 2004
and 2003 was as follows:                                                        

                                                                [Download Table]

                                                                 2004        2003 
----------------------------------------------------------------------------------
                                                                                  
Distributions paid from long-term capital gain                $13,450,639    $  --
__________________________________________________________________________________
==================================================================================

TAX COMPONENTS OF NET ASSETS:                                                   

As of December 31, 2004, the components of net assets on a tax basis were as    
follows:                                                                        

                                                                [Download Table]

                                                                    2004     
---------------------------------------------------------------------------- 
                                                                             
Undistributed ordinary income                                   $  2,049,173 
---------------------------------------------------------------------------- 
Undistributed long-term gain                                       5,190,927 
---------------------------------------------------------------------------- 
Unrealized appreciation -- investments                           104,675,055 
---------------------------------------------------------------------------- 
Temporary book/tax differences                                       (33,759)
---------------------------------------------------------------------------- 
Shares of beneficial interest                                    369,758,220 
============================================================================ 
Total net assets                                                $481,639,616 
____________________________________________________________________________ 
============================================================================ 

The difference between book-basis and tax-basis unrealized appreciation 
(depreciation) is due to differences in the timing of recognition of gains and  
losses on investments for tax and book purposes. The Fund's unrealized          
appreciation (depreciation) difference is attributable primarily to losses on   
wash sales and straddles.                                                       

The temporary book/tax differences are a result of timing differences   
between book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of the trustee deferral of compensation and 
retirement plan expenses.                                                       

   Capital loss carryforward is calculated and reported as of a specific date.
Results of transactions and other activity after that date may affect the amount
of capital loss carryforward actually available for the Fund to utilize. The    
ability to utilize capital loss carryforward in the future may be limited under 
the Internal Revenue Code and related regulations based on the results of future
transactions.                                                                   

 The Fund utilized $36,493,693 of capital loss carryforward in the current
period to offset net realized capital gain for federal income tax purposes. The 
Fund has no capital loss carryforward as of December 31, 2004.                  

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NOTE 10--INVESTMENT SECURITIES                                                  

The aggregate amount of investment securities (other than short-term securities 
and money market funds) purchased and sold by the Fund during the year ended    
December 31, 2004 was $601,606,710 and $673,181,079, respectively.              

                                                                [Download Table]

UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
------------------------------------------------------------------------------
                                                                              
Aggregate unrealized appreciation of investment securities       $107,403,441 
------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities       (2,728,386)
==============================================================================
Net unrealized appreciation of investment securities             $104,675,055 
______________________________________________________________________________
==============================================================================
Cost of investments for tax purposes is $401,548,801.                         

NOTE 11--RECLASSIFICATION OF PERMANENT DIFFERENCES                              

Primarily as a result of differing book/tax treatment of net operating losses,  
on December 31, 2004, undistributed net investment income (loss) was increased  
by $5,600,443 and undistributed net realized gain was decreased by $5,600,443.  
This reclassification had no effect on the net assets of the Fund.              

NOTE 12--SHARE INFORMATION                                                      

The Fund currently offers four different classes of shares: Class A shares,     
Class B shares, Class C shares and Class R shares. Class A shares are sold with 
a front-end sales charge. Class B shares and Class C shares are sold with CDSC. 
Class R shares are sold at net asset value. Under certain circumstances, Class A
shares and Class R shares are subject to CDSC. Generally, Class B shares will   
automatically convert to Class A shares eight years after the end of the        
calendar month of purchase.                                                     

                                                        [Enlarge/Download Table]


                                           CHANGES IN SHARES OUTSTANDING(a)                                            
---------------------------------------------------------------------------------------------------------------------- 
                                                                              YEAR ENDED DECEMBER 31,                  
                                                              -------------------------------------------------------- 
                                                                         2004                          2003            
                                                              --------------------------    -------------------------- 
                                                                SHARES         AMOUNT         SHARES         AMOUNT    
---------------------------------------------------------------------------------------------------------------------- 
                                                                                                                       
Sold:                                                                                                                  
  Class A                                                      4,288,228    $ 52,758,227    11,095,421    $109,381,334 
---------------------------------------------------------------------------------------------------------------------- 
  Class B                                                      1,064,168      12,839,431     5,802,424      56,480,592 
---------------------------------------------------------------------------------------------------------------------- 
  Class C                                                        867,391      10,449,258     2,724,692      26,562,929 
---------------------------------------------------------------------------------------------------------------------- 
  Class R                                                        823,003      10,162,089       231,356       2,309,531 
====================================================================================================================== 
Issued as reinvestment of dividends:                                                                                   
  Class A                                                        481,426       6,080,413            --              -- 
---------------------------------------------------------------------------------------------------------------------- 
  Class B                                                        327,877       4,019,765            --              -- 
---------------------------------------------------------------------------------------------------------------------- 
  Class C                                                        119,514       1,465,238            --              -- 
---------------------------------------------------------------------------------------------------------------------- 
  Class R                                                         24,270         304,591            --              -- 
====================================================================================================================== 
Automatic conversion of Class B shares to Class A shares:                                                              
  Class A                                                        622,034       7,675,039       474,336       4,772,838 
---------------------------------------------------------------------------------------------------------------------- 
  Class B                                                       (637,822)     (7,675,039)     (483,310)     (4,772,838)
====================================================================================================================== 
Reacquired:                                                                                                            
  Class A                                                     (8,184,332)    (99,755,275)   (6,516,746)    (61,727,331)
---------------------------------------------------------------------------------------------------------------------- 
  Class B                                                     (3,263,817)    (38,992,644)   (2,491,251)    (22,290,550)
---------------------------------------------------------------------------------------------------------------------- 
  Class C                                                     (2,126,834)    (25,365,743)   (1,358,495)    (12,715,334)
---------------------------------------------------------------------------------------------------------------------- 
  Class R                                                       (126,430)     (1,555,610)      (29,381)       (306,409)
====================================================================================================================== 
                                                              (5,721,324)   $(67,590,260)    9,449,046    $ 97,694,762 
______________________________________________________________________________________________________________________ 
====================================================================================================================== 

(a) There is one entity that is a record owner of more than 5% of the           
  outstanding shares of the Fund and it owns 8% of the outstanding shares of
 the Fund. AIM Distributors has an agreement with this entity to sell Fund
shares. The Fund, AIM and/or AIM Affiliates may make payments to this   
entity, which is considered to be related to the Fund, for providing    
    services to the Fund, AIM and/or AIM affiliates including but not limited to
services such as, securities brokerage, distribution, third party record
   keeping and account servicing. The Trust has no knowledge as to whether all
or any portion of the shares owned of record by this shareholder is also
owned beneficially.                                                     

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NOTE 13--FINANCIAL HIGHLIGHTS                                                   

The following schedule presents financial highlights for a share of the Fund    
outstanding throughout the periods indicated.                                   

                                                        [Enlarge/Download Table]

                                                                                       CLASS A                                   
                                                     ----------------------------------------------------------------------------
                                                                                                                    AUGUST 31,   
                                                                                                                       2000      
                                                                                                                 (DATE OPERATIONS
                                                                    YEAR ENDED DECEMBER 31,                       COMMENCED) TO  
                                                     -----------------------------------------------------         DECEMBER 31,  
                                                       2004           2003           2002           2001               2000      
---------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                 
Net asset value, beginning of period                 $  12.03       $   8.23       $  10.19       $   9.36           $ 10.00     
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:                                                                                               
  Net investment income (loss)                          (0.09)(a)      (0.09)(a)      (0.05)(a)      (0.05)(a)         (0.00)(a) 
---------------------------------------------------------------------------------------------------------------------------------
  Net gains (losses) on securities (both realized                                                                                
    and unrealized)                                      1.22           3.89          (1.91)          0.88             (0.64)    
=================================================================================================================================
    Total from investment operations                     1.13           3.80          (1.96)          0.83             (0.64)    
=================================================================================================================================
Less distributions from net realized gains              (0.36)            --             --          (0.00)               --     
=================================================================================================================================
Net asset value, end of period                       $  12.80       $  12.03       $   8.23       $  10.19           $  9.36     
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b)                                          9.45%         46.17%        (19.23)%         8.92%            (6.40)%   
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:                                                                                                        
Net assets, end of period (000s omitted)             $247,581       $266,284       $140,652       $105,146           $32,805     
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:                                                                                         
  With fee waivers and/or expenses reimbursements        1.53%(c)       1.77%          1.67%          1.78%             1.78%(d) 
---------------------------------------------------------------------------------------------------------------------------------
  Without fee waivers and/or expenses                                                                                            
    reimbursements                                       1.64%(c)       1.77%          1.67%          1.78%             2.72%(d) 
=================================================================================================================================
Ratio of net investment income (loss) to average                                                                                 
  net assets                                            (0.77)%(c)     (0.89)%        (0.54)%        (0.57)%           (0.12)%(d)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e)                                124%           112%           117%           123%               49%    
_________________________________________________________________________________________________________________________________
=================================================================================================================================

(a)  Calculated using average shares outstanding.                               
(b)  Includes adjustments in accordance with accounting principles generally    
accepted in the United States of America and as such, the net asset   
 value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for  
shareholder transactions. Does not include sales charges and is not   
annualized for periods less than one year.                            
(c)  Ratios are based on average daily net assets of $256,962,380.              
(d)  Annualized.                                                                
(e)  Not annualized for periods less than one year.                             

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NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)                                       

                                                        [Enlarge/Download Table]

                                                                                      CLASS B                                    
                                                   ------------------------------------------------------------------------------
                                                                                                                    AUGUST 31,   
                                                                                                                       2000      
                                                                                                                 (DATE OPERATIONS
                                                                  YEAR ENDED DECEMBER 31,                         COMMENCED) TO  
                                                   ------------------------------------------------------          DECEMBER 31,  
                                                     2004            2003           2002           2001                2000      
---------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                 
Net asset value, beginning of period               $  11.77        $   8.11        $ 10.11        $  9.33            $ 10.00     
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:                                                                                               
  Net investment income (loss)                        (0.18)(a)       (0.15)(a)      (0.11)(a)      (0.11)(a)          (0.03)(a) 
---------------------------------------------------------------------------------------------------------------------------------
  Net gains (losses) on securities (both realized                                                                                
    and unrealized)                                    1.19            3.81          (1.89)          0.89              (0.64)    
=================================================================================================================================
    Total from investment operations                   1.01            3.66          (2.00)          0.78              (0.67)    
=================================================================================================================================
Less distributions from net realized gains            (0.36)             --             --             --                 --     
=================================================================================================================================
Net asset value, end of period                     $  12.42        $  11.77        $  8.11        $ 10.11            $  9.33     
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b)                                        8.64%          45.13%        (19.78)%         8.36%             (6.70)%   
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:                                                                                                        
Net assets, end of period (000s omitted)           $156,450        $177,811        $99,551        $64,012            $16,385     
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:                                                                                         
  With fee waivers and/or expenses reimbursements      2.27%(c)        2.42%          2.32%          2.44%              2.49%(d) 
---------------------------------------------------------------------------------------------------------------------------------
  Without fee waivers and/or expenses                                                                                            
    reimbursements                                     2.29%(c)        2.42%          2.32%          2.44%              3.43%(d) 
=================================================================================================================================
Ratio of net investment income (loss) to average                                                                                 
  net assets                                          (1.51)%(c)      (1.54)%        (1.19)%        (1.23)%            (0.83)%(d)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e)                              124%            112%           117%           123%                49%    
_________________________________________________________________________________________________________________________________
=================================================================================================================================

(a)  Calculated using average shares outstanding.                               
(b)  Includes adjustments in accordance with accounting principles generally    
accepted in the United States of America and as such, the net asset   
 value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for  
shareholder transactions. Does not include sales charges and is not   
annualized for periods less than one year.                            
(c)  Ratios are based on average daily net assets of $164,513,168.              
(d)  Annualized.                                                                
(e)  Not annualized for periods less than one year.                             

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NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)                                       

                                                        [Enlarge/Download Table]

                                                                                       CLASS C                                   
                                                     ----------------------------------------------------------------------------
                                                                                                                    AUGUST 31,   
                                                                                                                       2000      
                                                                                                                 (DATE OPERATIONS
                                                                   YEAR ENDED DECEMBER 31,                        COMMENCED) TO  
                                                     ----------------------------------------------------          DECEMBER 31,  
                                                      2004           2003           2002           2001                2000      
---------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                 
Net asset value, beginning of period                 $ 11.77        $  8.11        $ 10.10        $  9.34             $10.00     
---------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:                                                                                               
  Net investment income (loss)                         (0.18)(a)      (0.15)(a)      (0.11)(a)      (0.11)(a)          (0.03)(a) 
---------------------------------------------------------------------------------------------------------------------------------
  Net gains (losses) on securities (both realized                                                                                
    and unrealized)                                     1.19           3.81          (1.88)          0.87              (0.63)    
=================================================================================================================================
    Total from investment operations                    1.01           3.66          (1.99)          0.76              (0.66)    
=================================================================================================================================
Less distributions from net realized gains             (0.36)            --             --             --                 --     
=================================================================================================================================
Net asset value, end of period                       $ 12.42        $ 11.77        $  8.11        $ 10.10             $ 9.34     
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Total return(b)                                         8.64%         45.13%        (19.70)%         8.14%             (6.60)%   
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratios/supplemental data:                                                                                                        
Net assets, end of period (000s omitted)             $65,792        $75,763        $41,132        $29,548             $9,028     
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Ratio of expenses to average net assets:                                                                                         
  With fee waivers and/or expenses reimbursements       2.27%(c)       2.42%          2.32%          2.44%              2.49%(d) 
---------------------------------------------------------------------------------------------------------------------------------
  Without fee waivers and/or expenses                                                                                            
    reimbursements                                      2.29%(c)       2.42%          2.32%          2.44%              3.43%(d) 
=================================================================================================================================
Ratio of net investment income (loss) to average                                                                                 
  net assets                                           (1.51)%(c)     (1.54)%        (1.19)%        (1.23)%            (0.83)%(d)
_________________________________________________________________________________________________________________________________
=================================================================================================================================
Portfolio turnover rate(e)                               124%           112%           117%           123%                49%    
_________________________________________________________________________________________________________________________________
=================================================================================================================================

(a)  Calculated using average shares outstanding.                               
(b)  Includes adjustments in accordance with accounting principles generally    
accepted in the United States of America and as such, the net asset   
 value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for  
shareholder transactions. Does not include sales charges and is not   
annualized for periods less than one year.                            
(c)  Ratios are based on average daily net assets of $69,486,188.               
(d)  Annualized.                                                                
(e)  Not annualized for periods less than one year.                             

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\                                                                               

NOTE 13--FINANCIAL HIGHLIGHTS (CONTINUED)                                       

                                                        [Enlarge/Download Table]

                                                                               CLASS R                    
                                                              ------------------------------------------  
                                                                                           JUNE 3, 2002   
                                                                   YEAR ENDED               (DATE SALES   
                                                                  DECEMBER 31,             COMMENCED) TO  
                                                              ---------------------        DECEMBER 31,   
                                                               2004           2003             2002       
--------------------------------------------------------------------------------------------------------  
                                                                                                          
Net asset value, beginning of period                          $ 11.99        $ 8.22           $ 10.58     
--------------------------------------------------------------------------------------------------------  
Income from investment operations:                                                                        
  Net investment income (loss)                                  (0.12)(a)     (0.11)(a)         (0.04)(a) 
--------------------------------------------------------------------------------------------------------  
  Net gains (losses) on securities (both realized and                                                     
    unrealized)                                                  1.20          3.88             (2.32)    
========================================================================================================  
    Total from investment operations                             1.08          3.77             (2.36)    
========================================================================================================  
Less distributions from net realized gains                      (0.36)           --                --     
========================================================================================================  
Net asset value, end of period                                $ 12.71        $11.99           $  8.22     
________________________________________________________________________________________________________  
========================================================================================================  
Total return(b)                                                  9.06%        45.86%           (22.31)%   
________________________________________________________________________________________________________  
========================================================================================================  
Ratios/supplemental data:                                                                                 
Net assets, end of period (000s omitted)                      $11,817        $2,502           $    55     
________________________________________________________________________________________________________  
========================================================================================================  
Ratio of expenses to average net assets:                                                                  
  With fee waivers and/or expenses reimbursements                1.77%(c)      1.92%             1.92%(d) 
--------------------------------------------------------------------------------------------------------  
  Without fee waivers and/or expenses reimbursements             1.79%(c)      1.92%             1.92%(d) 
========================================================================================================  
Ratio of net investment income (loss) to average net assets     (1.01)%(c)    (1.04)%           (0.78)%(d)
________________________________________________________________________________________________________  
========================================================================================================  
Portfolio turnover rate(e)                                        124%          112%              117%    
________________________________________________________________________________________________________  
========================================================================================================  

(a)  Calculated using average shares outstanding.                               
(b)  Includes adjustments in accordance with accounting principles generally    
accepted in the United States of America and as such, the net asset   
 value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for  
  shareholder transactions. Not annualized for periods less than one year.
(c)  Ratios are based on average daily net assets of $7,048,177.                
(d)  Annualized.                                                                
(e)  Not annualized for periods less than one year.                             

NOTE 14--LEGAL PROCEEDINGS                                                      

Terms used in the Legal Proceedings Note are defined terms solely for the       
purpose of this note.                                                           

SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING         

On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment
advisor to certain AIM Funds) and A I M Advisors, Inc. ("AIM") (the Fund's      
investment advisor) reached final settlements with certain regulators, including
without limitation the Securities and Exchange Commission ("SEC"), the New York 
Attorney General ("NYAG") and the Colorado Attorney General ("COAG"), to resolve
civil enforcement actions and investigations related to market timing activity  
and related issues in the AIM Funds, including those formerly advised by IFG.   
These regulators alleged, in substance, that IFG and AIM failed to disclose in  
the prospectuses for the AIM Funds that they advised and to the independent     
directors/trustees of such Funds that they had entered into certain arrangements
permitting market timing of such Funds, thereby breaching their fiduciary duties
to such Funds. As a result of the foregoing, the regulators alleged that IFG and
AIM breached various Federal and state securities, business and consumer        
protection laws. On the same date, A I M Distributors, Inc. ("ADI") (the        
distributor of the retail AIM Funds) reached a final settlement with the SEC to 
resolve an investigation relating to market timing activity and related issues  
in the AIM Funds. The SEC also alleged that ADI violated various Federal        
securities laws. The SEC also has settled related market timing enforcement     
actions brought against certain former officers and employees of IFG.           

  Under the terms of the settlements, IFG agreed to pay a total of $325 million,
of which $110 million is civil penalties. Of this $325 million total payment,   
half has been paid and the remaining half will be paid on or before December 31,
2005. AIM and ADI agreed to pay a total of $50 million, of which $30 million is 
civil penalties, all of which has been paid. The entire $325 million IFG        
settlement payment will be made available for distribution to the shareholders  
of those AIM Funds that IFG formerly advised that were harmed by market timing  
activity, and the entire $50 million settlement payment by AIM and ADI will be  
made available for distribution to the shareholders of those AIM Funds advised  
by AIM that were harmed by market timing activity, all as to be determined by an
independent distribution consultant. The settlement payments will be distributed
in accordance with a methodology to be determined by the independent            
distribution consultant, in consultation with AIM and the independent trustees  
of the AIM Funds and acceptable to the staff of the SEC. Under the settlements  
with the NYAG and COAG, AIM has agreed to reduce management fees on certain     
equity and balanced AIM Funds by $15 million per year for the next five years,  
based upon effective fee rates and assets under management as of July 1, 2004,  
and not to increase certain management fees.                                    

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NOTE 14--LEGAL PROCEEDINGS (CONTINUED)                                          

Under the terms of the settlements, AIM will make certain governance and    
compliance reforms, including maintaining an internal controls committee and    
retaining an independent compliance consultant and a corporate ombudsman. Also, 
commencing in 2007 and at least once every other year thereafter, AIM will      
undergo a compliance review by an independent third party. In addition, under   
the terms of the settlements, AIM has undertaken to cause the AIM Funds to      
operate in accordance with certain governance policies and practices, including 
retaining a full-time independent senior officer whose duties will include      
monitoring compliance and managing the process by which proposed management fees
to be charged the AIM Funds are negotiated. Also, commencing in 2008 and not    
less than every fifth calendar year thereafter, the AIM Funds will hold         
shareholder meetings at which their Boards of Trustees will be elected.         

At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"), 
the parent company of IFG and AIM, has agreed to pay expenses incurred by such  
Funds related to market timing matters.                                         

 The SEC has also settled market timing enforcement actions against Raymond R.
Cunningham (the former president and chief executive officer of IFG and a former
member of the board of directors of the AIM Funds formerly advised by IFG),     
Timothy J. Miller (the former chief investment officer and a former portfolio   
manager for IFG), Thomas A. Kolbe (the former national sales manager of IFG) and
Michael D. Legoski (a former assistant vice president in IFG's sales            
department). As part of these settlements, the SEC ordered these individuals to 
pay restitution and civil penalties in various amounts and prohibited them from 
associating with, or serving as an officer or director of, an investment        
advisor, broker, dealer and/or investment company, as applicable, for certain   
periods of time.                                                                

 The payments made in connection with the above-referenced settlements by IFG,
AIM and ADI will total approximately $375 million (not including AIM's agreement
to reduce management fees on certain equity and balanced AIM Funds by $15       
million per year for the next five years, based upon effective fee rates and    
assets under management as of July 1, 2004). The manner in which the settlement 
payments will be distributed is unknown at the present time and will be         
determined by an independent distribution consultant appointed under the        
settlement agreements. Therefore, management of AIM and the Fund are unable at  
the present time to estimate the impact, if any, that the distribution of the   
settlement payments may have on the Fund or whether such distribution will have 
an impact on the Fund's financial statements in the future.                     

  At the present time, management of AIM and the Fund are unable to estimate the
impact, if any, that the outcome of the Regulatory Inquiries and Pending        
Litigation described below may have on AIM, ADI or the Fund.                    

REGULATORY INQUIRIES AND PENDING LITIGATION                                     

The mutual fund industry as a whole is currently subject to regulatory      
inquiries and litigation related to a wide range of issues. These issues        
include, among others, market timing activity, late trading, fair value pricing,
excessive or improper advisory and/or distribution fees, mutual fund sales      
practices, including but not limited to revenue sharing and directed-brokerage  
arrangements, investments in securities of other registered investment          
companies, contractual plans, issues related to Section 529 college savings     
plans, procedures for locating lost security holders and participation in class 
action settlements.                                                             

As described more fully below, IFG and AIM are the subject of a number of   
ongoing regulatory inquiries and civil lawsuits related to one or more of the   
issues currently being scrutinized by various Federal and state regulators,     
including but not limited to those issues described above. Additional regulatory
actions and/or civil lawsuits related to the above or other issues may be filed 
against the AIM Funds, IFG, AIM and/or related entities and individuals in the  
future. Additional regulatory inquiries related to the above or other issues    
also may be received by the AIM Funds, IFG, AIM and/or related entities and     
individuals in the future.                                                      

Ongoing Regulatory Inquiries Concerning IFG and AIM                             

IFG, certain related entities, certain of their current and former officers 
and/or certain of the AIM Funds formerly advised by IFG have received regulatory
inquiries in the form of subpoenas or other oral or written requests for        
information and/or documents related to one or more of the following issues,    
some of which concern one or more such Funds: market timing activity, late      
trading, fair value pricing, excessive or improper advisory and/or distribution 
fees, mutual fund sales practices, including revenue sharing and                
directed-brokerage arrangements, and investments in securities of other         
registered investment companies. These regulators include the SEC, the NASD,    
Inc. ("NASD"), the Florida Department of Financial Services, the Attorney       
General of the State of West Virginia, the West Virginia Securities Commission  
and the Bureau of Securities of the State of New Jersey. IFG and certain of     
these other parties also have received more limited inquiries from the United   
States Department of Labor ("DOL") and the United States Attorney's Office for  
the Southern District of New York, some of which concern one or more of the AIM 
Funds formerly advised by IFG. IFG is providing full cooperation with respect to
these inquiries.                                                                

AIM, certain related entities, certain of their current and former officers 
and/or certain of the AIM Funds have received regulatory inquiries in the form  
of subpoenas or other oral or written requests for information and/or documents 
related to one or more of the following issues, some of which concern one or    
more AIM Funds: market timing activity, late trading, fair value pricing,       
excessive or improper advisory and/or distribution fees, mutual fund sales      
practices, including revenue sharing and directed-brokerage arrangements,       
investments in securities of other registered investment companies, contractual 
plans, issues related to Section 529 college savings plans and procedures for   
locating lost securityholders. These regulators include the SEC, the NASD, the  
Department of Banking for the State of Connecticut, the Attorney General of the 
State of West Virginia, the West Virginia Securities Commission and the Bureau  
of Securities of the State of New Jersey. AIM and certain of these other parties
also have received more limited inquiries from the SEC, the NASD, the DOL, the  
Internal Revenue Service, the United States Attorney's Office for the Southern  
District of New York, the United States Attorney's Office for the Central       
District of California, the United States Attorney's Office for the District of 
Massachusetts, the Massachusetts Securities Division, the U.S. Postal           

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Inspection Service and the Commodity Futures Trading Commission, some of which  
concern one or more AIM Funds. AIM is providing full cooperation with respect to
these inquiries.                                                                

Private Civil Actions Alleging Market Timing                                    

Multiple civil lawsuits, including purported class action and shareholder   
derivative suits, have been filed against various parties (including, depending 
on the lawsuit, certain AIM Funds, IFG, AIM, AIM Management, AMVESCAP, certain  
related entities, certain of their current and former officers and/or certain   
unrelated third parties) making allegations that are similar in many respects to
those in the settled regulatory actions brought by the SEC, the NYAG and the    
COAG concerning market timing activity in the AIM Funds. These lawsuits allege a
variety of theories of recovery, including but not limited to: (i) violation of 
various provisions of the Federal and state securities laws; (ii) violation of  
various provisions of ERISA; (iii) breach of fiduciary duty; and/or (iv) breach 
of contract. These lawsuits were initiated in both Federal and state courts and 
seek such remedies as compensatory damages; restitution; injunctive relief;     
disgorgement of management fees; imposition of a constructive trust; removal of 
certain directors and/or employees; various corrective measures under ERISA;    
rescission of certain Funds' advisory agreements; interest; and attorneys' and  
experts' fees.                                                                  

 All lawsuits based on allegations of market timing, late trading, and related
issues have been transferred to the United States District Court for the        
District of Maryland (the "MDL Court") for consolidated or coordinated pre-trial
proceedings. Pursuant to an Order of the MDL Court, plaintiffs consolidated     
their claims for pre-trial purposes into three amended complaints against       
various AIM- and IFG-related parties: (i) a Consolidated Amended Class Action   
Complaint purportedly brought on behalf of shareholders of the AIM Funds; (ii) a
Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of 
the AIM Funds and fund registrants; and (iii) an Amended Class Action Complaint 
for Violations of the Employee Retirement Income Securities Act ("ERISA")       
purportedly brought on behalf of participants in AMVESCAP's 401(k) plan. The    
plaintiffs in one of the underlying lawsuits continue to seek remand of their   
lawsuit to state court.                                                         

Private Civil Actions Alleging Improper Use of Fair Value Pricing               

Multiple civil class action lawsuits have been filed against various parties
(including, depending on the lawsuit, certain AIM Funds, IFG and/or AIM)        
alleging that certain AIM Funds inadequately employed fair value pricing. These 
lawsuits allege a variety of theories of recovery, including but not limited to:
(i) violations of various provisions of the Federal securities laws; (ii) common
law breach of duty; and (iii) common law negligence and gross negligence. These 
lawsuits have been filed in both Federal and state courts and seek such remedies
as compensatory and punitive damages; interest; and attorneys' fees and costs.  

Private Civil Actions Alleging Excessive Advisory and/or Distribution Fees      

Multiple civil lawsuits, including purported class action and shareholder   
derivative suits, have been filed against various parties (including, depending 
on the lawsuit, IFG, AIM, INVESCO Institutional (N.A.), Inc. ("IINA"), ADI      
and/or INVESCO Distributors, Inc. ("INVESCO Distributors")) alleging that the   
defendants charged excessive advisory and/or distribution fees and failed to    
pass on to shareholders the perceived savings generated by economies of scale.  
Certain of these lawsuits also allege that the defendants adopted unlawful      
distribution plans. These lawsuits allege a variety of theories of recovery,    
including but not limited to: (i) violation of various provisions of the Federal
securities laws; (ii) breach of fiduciary duty; and/or (iii) breach of contract.
These lawsuits have been filed in Federal courts and seek such remedies as      
damages; injunctive relief; rescission of certain Funds' advisory agreements and
distribution plans; interest; prospective relief in the form of reduced fees;   
and attorneys' and experts' fees. All of these lawsuits have been transferred to
the United States District Court for the Southern District of Texas, Houston    
Division by order of the applicable United States District Court in which they  
were initially filed. The plaintiff in one of these lawsuits has challenged this
order.                                                                          

Private Civil Actions Alleging Improper Charging of Distribution Fees on Limited
Offering Funds or Share Classes                                                 

Multiple civil lawsuits, including shareholder derivative suits, have been  
filed against various parties (including, depending on the lawsuit, IFG, AIM,   
ADI and/or certain of the trustees of the AIM Funds) alleging that the          
defendants breached their fiduciary duties by charging distribution fees while  
funds and/or specific share classes were closed generally to new investors      
and/or while other share classes of the same fund were not charged the same     
distribution fees. These lawsuits allege a variety of theories of recovery,     
including but not limited to: (i) violation of various provisions of the Federal
securities laws; and (ii) breach of fiduciary duty. These lawsuits have been    
filed in Federal courts and seek such remedies as damages; injunctive relief;   
and attorneys' and experts' fees.                                               

Private Civil Actions Alleging Improper Mutual Fund Sales Practices and         
Directed-Brokerage Arrangements                                                 

Multiple civil lawsuits, including purported class action and shareholder   
derivative suits, have been filed against various parties (including, depending 
on the lawsuit, AIM Management, IFG, AIM, AIM Investment Services, Inc. ("AIS") 
and/or certain of the trustees of the AIM Funds) alleging that the defendants   
improperly used the assets of the AIM Funds to pay brokers to aggressively      
promote the sale of the AIM Funds over other mutual funds and that the          
defendants concealed such payments from investors by disguising them as         
brokerage commissions. These lawsuits allege a variety of theories of recovery, 
including but not limited to: (i) violation of various provisions of the Federal
securities laws; (ii) breach of fiduciary duty; and (iii) aiding and abetting a 
breach of fiduciary duty. These lawsuits have been filed in Federal courts and  
seek such remedies as compensatory and punitive damages; rescission of certain  
Funds' advisory agreements and distribution plans and recovery of all fees paid;
an accounting of all fund-related fees, commissions and soft dollar payments;   
restitution of all unlawfully or discriminatorily obtained fees and charges; and
attorneys' and experts' fees.                                                   

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Private Civil Action Alleging Failure to Ensure Participation in Class Action   
Settlements                                                                     

A civil lawsuit, purporting to be a class action lawsuit, has been filed    
against AIM, IINA, A I M Capital Management, Inc. and the trustees of the AIM   
Funds alleging that the defendants breached their fiduciary duties by failing to
ensure that the AIM Funds participated in class action settlements in which the 
AIM Funds were eligible to participate. This lawsuit alleges as theories of     
recovery: (i) violation of various provisions of the Federal securities laws;   
(ii) common law breach of fiduciary duty; and (iii) common law negligence. This 
lawsuit has been filed in Federal court and seeks such remedies as compensatory 
and punitive damages; forfeiture of all commissions and fees paid by the class  
of plaintiffs; and costs and attorneys' fees.                                   
*                                       *                                      *
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

As a result of the matters discussed above, investors in the AIM Funds might
react by redeeming their investments. This might require the Funds to sell      
investments to provide for sufficient liquidity and could also have an adverse  
effect on the investment performance of the Funds.                              

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                                                                   APPENDIX II

                                                               AIM BALANCED FUND
                               Annual Report to Shareholders o December 31, 2004

[COVER IMAGE] 

[YOUR GOALS. OUR SOLUTIONS.]                            [AIM INVESTMENTS LOGO]  
 --Registered Trademark --                             --Registered Trademark --

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                                                        [Enlarge/Download Table]
                                                                                                                                    
====================================================================================================================================
AIM BALANCED FUND SEEKS TO ACHIEVE AS HIGH A TOTAL RETURN AS POSSIBLE, CONSISTENT WITH PRESERVATION OF CAPITAL.                     

o Unless otherwise stated, information presented in this report is as of 12/31/04 and is based on total net assets.                 
====================================================================================================================================

ABOUT SHARE CLASSES                          o The fund uses a blended index composed     o Commonality measures the similarity of  
                                             of 60% Russell 1000 --Registered             holdings between two portfolios using     
o Effective 9/30/03, Class B shares are      Trademark-- Value Index and 40% Lehman       the lowest common percentage method.      
not available as an investment for           U.S. Aggregate Bond Index. The unmanaged     This method compares each security's      
retirement plans maintained pursuant to      Russell 1000 --Registered Trademark--        percentage of total net assets in both    
Section 401 of the Internal Revenue          Index represents the performance of the      portfolios and adds the lower             
Code, including 401(k) plans, money          stocks of large- capitalization              percentages of the two portfolios to      
purchase pension plans and profit            companies; the Value segment measures        determine commonality.                    
sharing plans. Plans that have existing      the performance of Russell 1000                                                        
accounts invested in Class B shares will     companies with lower price/book ratios       o The average credit quality of the       
continue to be allowed to make               and lower forecasted growth values. The      fund's holdings as of the close of the    
additional purchases.                        unmanaged Lehman U.S. Aggregate Bond         reporting period represents the weighted  
                                             Index, which represents the U.S.             average quality rating of the             
o Class R shares are available only to       investment- grade, fixed-rate bond           fixed-income holdings in the portfolio    
certain retirement plans. Please see the     market (including government and             as assigned by Nationally Recognized      
prospectus for more information.             corporate securities, mortgage               Statistical Rating Organizations based    
                                             pass-through securities and asset-backed     on assessment of the credit quality of    
PRINCIPAL RISKS OF INVESTING IN THE FUND     securities), is compiled by Lehman           the individual securities.                
                                             Brothers, a global investment bank.                                                    
o U.S. Treasury securities such as                                                        The fund files its complete schedule of   
bills, notes and bonds offer a high          o The fund is not managed to track the       portfolio holdings with the Securities    
degree of safety, and they guarantee the     performance of any particular index,         and Exchange Commission ("SEC") for the   
payment of principal and any applicable      including the indexes defined here, and      1st and 3rd quarters of each fiscal year  
interest if held to maturity. Fund           consequently, the performance of the         on Form N-Q. The fund's Form N-Q filings  
shares are not insured, and their value      fund may deviate significantly from the      are available on the SEC's Web site at    
and yield will vary with market              performance of the indexes.                  http://www.sec.gov. Copies of the fund's  
conditions.                                                                               Forms N-Q may be reviewed and copied at   
                                             o A direct investment cannot be made in      the SEC's Public Reference Room at 450    
o The fund may invest up to 25% of its       an index. Unless otherwise indicated,        Fifth Street, N.W., Washington, D.C.      
assets in the securities of non-U.S.         index results include reinvested             20549-0102. You can obtain information    
issuers. International investing             dividends, and they do not reflect sales     on the operation of the Public Reference  
presents certain risks not associated        charges. Performance of an index of          Room, including information about         
with investing solely in the United          funds reflects fund expenses;                duplicating fee charges, by calling       
States. These include risks relating to      performance of a market index does not.      1-202-942- 8090 or by electronic request  
fluctuations in the value of the U.S.                                                     at the following e-mail address:          
dollar relative to the values of other       OTHER INFORMATION                            publicinfo@sec.gov. The SEC file numbers  
currencies, the custody arrangements                                                      for the fund are 811-1540 and 2-27334.    
made for the fund's foreign holdings,        o The returns shown in the Management's      The fund's most recent portfolio          
differences in accounting, political         Discussion of Fund Performance are based     holdings, as filed on Form N-Q, are also  
risks and the lesser degree of public        on net asset values calculated for           available at AIMinvestments.com.          
information required to be provided by       shareholder transactions. Generally                                                    
non-U.S. companies.                          accepted accounting principles require       A description of the policies and         
                                             adjustments to be made to the net assets     procedures that the fund uses to          
ABOUT INDEXES USED IN THIS REPORT            of the fund at period end for financial      determine how to vote proxies relating    
                                             reporting purposes, and as such, the net     to portfolio securities is available      
o The unmanaged Standard & Poor's            asset values for shareholder                 without charge, upon request, from our    
Composite Index of 500 Stocks (the S&P       transactions and the returns based on        Client Services department at             
500 --Registered Trademark-- Index) is       those net asset values may differ from       800-959-4246 or on the AIM Web site,      
an index of common stocks frequently         the net asset values and returns             AIMinvestments.com. On the home page,     
used as a general measure of U.S. stock      reported in the Financial Highlights.        scroll down and click on AIM Funds Proxy  
market performance.                                                                       Policy. The information is also           
                                             o Industry classifications used in this      available on the Securities and Exchange  
o The unmanaged Lipper Balanced Fund         report are generally according to the        Commission's Web site, sec.gov.           
Index represents an average of the 30        Global Industry Classification Standard,                                               
largest balanced funds tracked by            which was developed by and is the            Information regarding how the fund voted  
Lipper, Inc., an independent mutual fund     exclusive property and a service mark of     proxies related to its portfolio          
performance monitor. It is calculated        Morgan Stanley Capital International         securities during the 12 months ended     
daily, with adjustments for                  Inc. and Standard & Poor's.                  6/30/04 is available at our Web site. Go  
distributions as of the ex-dividend                                                       to AIMinvestments.com, access the About   
dates.                                                                                    Us tab, click on Required Notices and     
                                                                                          then click on Proxy Voting Activity.      
                                                                                          Next, select your fund from the           
                                                                                          drop-down menu.                           

================================================================================
THIS REPORT MUST BE ACCOMPANIED OR PRECEDED BY A CURRENTLY EFFECTIVE FUND       
PROSPECTUS, WHICH CONTAINS MORE COMPLETE INFORMATION, INCLUDING SALES CHARGES   
AND EXPENSES. INVESTORS SHOULD READ IT CAREFULLY BEFORE INVESTING.              
================================================================================

=====================================================                           
NOT FDIC INSURED   MAY LOSE VALUE   NO BANK GUARANTEE                           
=====================================================                           

AIMinvestments.com                                                              

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AIM BALANCED FUND                                                               

                                                        [Enlarge/Download Table]
                                                                                             
                    DEAR FELLOW SHAREHOLDER OF THE AIM FAMILY OF FUNDS                       
                    --Registered Trademark-- :                                               

                    NEW BOARD CHAIRMAN                                                       

                    It is our pleasure to introduce you to Bruce Crockett, the               
[GRAHAM             new Chairman of the Board of Trustees of the AIM Funds.                  
PHOTO]              Bob Graham has served as Chairman of the Board of Trustees               
                    of the AIM Funds ever since Ted Bauer retired from that                  
ROBERT H. GRAHAM    position in 2000. However, as you may be aware, the U.S.                 
                    Securities and Exchange Commission recently adopted a rule               
[WILLIAMSON         requiring that an independent fund trustee, meaning a                    
PHOTO]              trustee who is not an officer of the fund's investment                   
                    advisor, serve as chairman of the funds' Board. In                       
MARK H. WILLIAMSON  addition, a similar provision was included in the terms of               
                    AIM Advisors' recent settlements with certain regulators.                
[CROCKETT           Accordingly, the AIM Funds' Board recently elected Mr.                   
PHOTO]              Crockett, one of the 14 independent trustees on the AIM                  
                    Funds' Board, as Chairman. His appointment became                        
BRUCE L. CROCKETT   effective on October 4, 2004. Mr. Graham will remain on                  
                    the funds' Board, as will Mark Williamson, President and                 
                    Chief Executive Officer of AIM. Mr. Graham will also                     
                    remain Chairman of AIM Investments --Registered                          
                    Trademark-- .                                                            

                       Mr. Crockett has been a member of the AIM Funds' Board                
                    since 1992, when AIM acquired certain funds that had been                
                    advised by CIGNA. He had been a member of the board of                   
                    those funds since 1978. Mr. Crockett has more than 30                    
                    years of experience in finance and general management and                
                    has been Chairman of Crockett Technologies Associates                    
                    since 1996. He is the first independent chairman of the                  
                    funds' Board in AIM's history, as he is not affiliated                   
                    with AIM or AMVESCAP in any way. He is committed to                      
                    ensuring that the AIM Funds adhere to the highest                        
                    standards of corporate governance for the benefit of fund                
                    shareholders, and we at AIM share that commitment.                       

                    MARKET CONDITIONS DURING THE FISCAL YEAR                                 

                    After nine months of slow growth, equity markets rallied                 
                    late in the year to produce solid results for 2004. The                  
                    S&P 500 Index was up 10.87% for the year as a whole, but                 
                    that includes the 9.23% total return for the fourth                      
                    quarter alone. For bonds, the turning point came earlier.                
                    Almost all of the 4.34% return produced by the Lehman U.S.               
                    Aggregate Bond Index came during the second half of the                  
                    year, despite the fact that the Federal Reserve had begun                
                    raising short-term interest rates about halfway through                  
                    the year. Overseas markets followed a similar pattern,                   
                    with quite robust double- digit performance across the                   
                    board, most of it produced during the second half of the                 
                    year.                                                                    

                       All in all, 2004 was a good year for American                         
                    investors, with the decline in the dollar over the course                
                    of the year lending a boost to returns from foreign                      
                    holdings. And there were a number of solid economic                      
                    numbers to report as of the end of the year:                             

                       o  U.S. gross domestic product (GDP) rose each quarter                
                          during 2004. And respondents to the BusinessWeek                   
                          magazine survey foresaw 2005 GDP growth at 3.5%,                   
                          above the post-World War II average of 3.4%.                       

                       o  The Institute for Supply Management's manufacturing                
                          and nonmanufacturing indexes -- based on surveys of                
                          purchasing managers in industries that together                    
                          cover more than 70% of the U.S. economy -- both                    
                          continued to rise during December and remained in                  
                          very strong territory.                                             

                       o  Thomson First Call, which tracks corporate earnings                
                          and other information for clients in financial                     
                          service industries, estimated S&P 500 earnings to be               
                          up 10.5% in 2005.                                                  

                       Of course, none of this can guarantee that 2005 will be               
                    another good year. Over the short term, the only sure                    
                    thing about the investment markets is their                              
                    unpredictability. Hence, we have always urged shareholders               
                    to keep a long-term perspective on all their investments.                

                    YOUR FUND                                                                

                    The following pages present a discussion of how your fund                
                    invests, how it performed compared to pertinent benchmarks               
                    during the fiscal year and how it has performed over the                 
                    long term. We hope you find this information helpful. We                 
                    also encourage you to visit AIMinvestments.com often.                    
                    Updated information on your fund is always available                     
                    there, as well as general information on a variety of                    
                    investing topics.                                                        

                       As always, AIM is committed to building solutions for                 
                    your investment goals, and we thank you for your                         
                    participation in AIM Investments --Registered Trademark--.               
                    If you have any questions, please contact our Client                     
                    Service representatives at 800-959-4246.                                 

                    Sincerely,                                                               

                    /s/ ROBERT H. GRAHAM                     /s/ MARK H. WILLIAMSON          

                    Robert H. Graham                         Mark H. Williamson              
                    Chairman, AIM Investments                CEO & President, AIM Investments
                    President & Vice Chairman, AIM Funds     Trustee, AIM Funds              

                    January 28, 2005                                                         

                    AIM Investments is a registered service mark of A I M                    
                    Management Group Inc. A I M Advisors, Inc. and A I M                     
                    Capital Management, Inc. are the investment advisors and A               
                    I M Distributors, Inc. is the distributor for the retail                 
                    funds represented by AIM Investments.                                    

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AIM BALANCED FUND                                                               

                                                        [Enlarge/Download Table]
                                                                                                                            
MANAGEMENT'S DISCUSSION                                                             contrast to the average mutual fund     
OF FUND PERFORMANCE                                                                 portfolio turnover of more than 100%.   
                                                                                    Furthermore, we believe low turnover    
Following a strong fourth quarter in the  best-performing sector for the year. Oil  reduces trading costs for all           
equity markets, AIM Balanced Fund         service and equipment providers           shareholders and may control the impact 
registered a positive return for 2004     Transocean and Halliburton were among     of realized capital gains for           
but fell short of beating its             the most significant contributors to      shareholders with taxable accounts.     
broad-market, style-specific and peer     performance. The combination of                                                   
group indexes.                            attractive valuations at the beginning       Fixed-income holdings were managed   
                                          of the year and favorable supply-         with a bias toward higher interest rates
========================================  and-demand trends translated into         during the period. We maintained our    
FUND VS. INDEXES                          returns of more than 50% for these        average credit quality rating of AA in  
                                          energy investments. Other significant     an effort to manage risk. The fund's    
Total returns, 12/31/03 - excluding       drivers of performance were Tyco          duration remained shorter than the      
12/31/04, applicable sales charges. If    International, Target and Masco.          Lehman U.S. Aggregate Bond Index, which 
sales charges were included, returns                                                means the fund had less sensitivity to  
would be lower.                              Tyco was one of the fund's             rising rates than its benchmark. As the 
                                          top-performing stocks in 2004. Tyco       year progressed, we also reduced the    
Class A Shares                     7.65%  proved far more durable than investors    fund's exposure to government agency,   
                                          apparently believed in the midst of the   corporate and mortgage-backed           
Class B Shares                     6.91   malfeasance charges levied against the    securities. These risk sectors          
                                          former CEO. We continued to believe Tyco  outperformed in 2004, with corporate    
Class C Shares                     6.90   was one of the better investment          bonds being the best performing sector  
                                          opportunities within the industrial       for a second straight year. By year-end,
Class R Shares                     7.43   sector of the economy, although the       the fund was                            
                                          valuation was not as compelling after                                             
S&P 500 Index                             rising more than 200% since 2002 lows.           We continued to believe          
(Broad Market Index)              10.87   Consequently we reduced our position in              Tyco was one of              
                                          the company during the year, but it               the better investment           
60% Russell 1000 Value                    remained a top holding.                          opportunities within the         
Index/40% Lehman U.S.                                                                      industrial sector of the         
                                             Our largest detractors from                    economy, although the           
Aggregate Bond Index                      performance were Pfizer, Interpublic               valuation was not as           
(Style-specific Index)            11.54   Group and Ceridian. Pfizer was a new             compelling after rising          
                                          investment in 2004 and, as is often the              more than 200%               
Lipper Balanced Fund Index                case, the stock declined initially.                  since 2002 lows.             
(Peer Group Index)                 8.99   However, we believed the market would                                             
                                          eventually recognize the long-term        underweight all non-U.S. Treasury       
SOURCE: LIPPER, INC.                      valuation opportunity that we saw in the  assets, as we believed in aggregate that
========================================  world's largest drug company. Pfizer      investors were not being appropriately  
                                          continued to face several challenges      compensated for their increasing risk.  
   We underperformed the S&P 500 Index    including patent expirations, generic                                             
because of single-digit returns in the    substitution, diminished pricing power       Finally, as we communicated to you   
fund's investment-grade bond holdings,    and, more recently, declining demand for  last year, we made changes to the fund's
which failed to match the nearly 11%      its Cox-2 anti-inflammatory drugs,        portfolio management team in December   
return of stocks as measured by the S&P   Celebrex and Bextra. We believed these    2003. The Basic Value Team now manages  
500 Index. The fund would not normally    challenges could make it difficult for    the fund's equity holdings. We continue 
be expected to outperform the S&P 500     Pfizer to grow earnings in the near       to manage the fund with the same goal of
Index when stocks post positive           term. But we continued to see a long-     maximizing total return, but do so      
double-digit returns, as bonds typically  term opportunity, as we believed these    utilizing a value-oriented strategy that
lag stocks in such periods. The fund      and other issues were already discounted  puts greater emphasis on the            
underperformed the Lipper Balanced Fund   in the company's historically low         preservation of capital. We discuss this
Index primarily because of the            valuation.                                strategy in greater detail in the       
underperformance of the fund's equity                                               sections that follow.                   
holdings. The relative strength of both      We made relatively few changes to the                                          
small- cap stocks and high-yield debt     portfolio's common stock holdings during                                          
also hurt performance in the period,      2004, consistent with our long-term                                               
given the fund's emphasis on large-cap    investment strategy. We purchased                                                 
stocks and investment-grade debt.         Pfizer, Interpublic Group, Ceridian and                                           
                                          Aon Corporation. We also sold our                                                 
CURRENT PERIOD ANALYSIS                   holdings in Cooper Cameron, MGIC                                                  
                                          Investment Corporation, United                                                    
The domestic economy continued to         Technologies, Applied Materials, Cisco                                            
recover throughout the fiscal year, with  Systems and DST Systems. This low                                                 
the broader markets responding favorably  turnover is evidence of our long-term                                             
during the period. Higher commodity       investment strategy and stands in stark                                           
prices, a more restrictive monetary                                                                                         
policy and concerns about the                                                                                               
sustainability of economic growth were                                                                                      
key issues during the period.                                                                                               

   With the price of oil rising as much                                                                                     
as 75% at its peak during the period, it                                                                                    
came as no surprise that energy was the                                                                                     
equity market's                                                                                                             

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                                                        [Enlarge/Download Table]
                                                                                                                            
INVESTMENT PROCESS AND EVALUATION         price and estimated intrinsic value does  PORTFOLIO ASSESSMENT                    
                                          not guarantee the portfolio won't                                                 
Our investment strategy is to create      experience a decline in market price, we  When assessing our potential to grow    
wealth by maintaining a long-term         believe it lessens the probability of a   your capital, we believe the single most
investment horizon and investing in       permanent loss of capital. When market    important measure of AIM Balanced Fund  
companies that we believe are             price exceeds estimated intrinsic value,  is not our historical investment results
significantly undervalued on an absolute  the absence of portfolio value content    or popular statistical measures, but    
basis or, said another way, selling at a  places capital at risk of permanent       rather the estimated intrinsic value of 
significant discount to their estimated   loss, as was the case with many           the fund's equity holdings. Since we    
intrinsic value. The fund's equity        technology stocks in 1999 - 2000.         estimate the intrinsic value of each    
philosophy is based on two elements that                                            equity holding in the portfolio, we can 
we believe are supported by empirical        It is our requirement for a large      also estimate the intrinsic value of the
evidence:                                 margin between market price and our       equity portion of the entire fund. The  
                                          estimated intrinsic value that has        difference between market price and     
o Companies have a measurable estimated   resulted in little portfolio commonality  estimated intrinsic value is about      
intrinsic value that is based on future   with market indexes.                      average for your fund over its history, 
cash flows generated by the business.                                               but we estimate it is significantly     
Importantly, this estimated intrinsic        We believe popular benchmarks are not  better than the market margin of safety.
value is independent of the company's     optimally constructed to preserve         While there is no assurance that market 
stock price.                              capital and create wealth, even if they   value will ever reflect our estimate of 
                                          are difficult to beat in certain market   portfolio intrinsic value, as managers  
o Market prices, in our opinion, are      environments. In short, we believe their  we believe this provides the best       
more volatile than estimated intrinsic    composition has been more risky than our  indicator of achieving the fund's       
values, partly because investors          historical portfolios, largely because    objective of maximizing total return.   
regularly overreact to negative news.     of lower estimated intrinsic value                                                
                                          content and greater absolute              IN CLOSING                              
   We believe a diversified portfolio     concentration in certain sectors.                                                 
with greater estimated intrinsic value                                              Market-relative results during this     
versus the market provides the               Since we began managing the fund, our  period were unfavorable, but normal     
opportunity for attractive long-term      equity holdings have had little in        market volatility predominates in the   
investment results.                       common with relevant benchmarks. This     short run. Still, we believe that our   
                                          was achieved with careful stock           investment discipline has the potential 
   Since our application of this          selection and portfolio construction.     to turn market volatility and investor  
strategy is highly disciplined and        Only 15% - 20% of the fund's investments  overreaction into capital appreciation  
relatively unique, it is important to     are common to the S&P 500 Index and the   over the long-term. As managers, we know
understand the benefits and limitations   Russell 1000 Value Index. This low        a long-term investment horizon and      
of our process.                           commonality creates the potential for     attractive portfolio estimated intrinsic
                                          outperformance in the long run but is     value content are critical to creating  
   First, the goal of our investment      too low to expect results to be           wealth. We continued to work hard on    
strategy is to preserve your capital      consistently in line with the market in   your behalf to protect and grow the     
while growing it at above-market rates    the short run. This creates a             fund's portfolio estimated intrinsic    
over the long term.                       diversification benefit but also          value. Thank you for your investment and
                                          suggests more variability in results      for sharing our long-term horizon.      
   Second, we have little portfolio       versus the market averages.                                                       
commonality with popular benchmarks and                                             The views and opinions expressed in     
most of our peers. Commonality measures      Our fixed-income portfolio investment  Management's Discussion of Fund         
the similarity of holdings between two    process is accomplished through the use   Performance are those of A I M Advisors,
portfolios using the lowest common        of top-down strategies involving          Inc. These views and opinions are       
percentage method. This method compares   duration management, yield-curve          subject to change at any time based on  
each security's percentage of total net   position and sector allocation.           factors such as market and economic     
assets in both portfolios and adds the    (Duration is the measure of a debt        conditions. These views and opinions may
lower percentages of the two portfolios   security's sensitivity to interest rate   not be relied upon as investment advice 
to determine commonality.                 changes, expressed in terms of years.     or recommendations, or as an offer for a
                                          Longer durations usually are more         particular security. The information is 
   Third, we believe this strategy        sensitive to interest rate movements.     not a complete analysis of every aspect 
creates the potential for the fund to     The yield curve traces the yields on      of any market, country, industry,       
outperform over the long-term but         debt securities of the same quality but   security or the Fund. Statements of fact
realize that short-term results may lag   different maturities from the shortest    are from sources considered reliable,   
the market.                               to the longest available.) In addition,   but A I M Advisors, Inc. makes no       
                                          we use bottom- up strategies involving    representation or warranty as to their  
   Our process is absolute in nature,     credit analysis and selection of          completeness or accuracy. Although      
which means that investment decisions     specific securities. By combining         historical performance is no guarantee  
are predicated on a company's estimated   perspectives from both the portfolio and  of future results, these insights may   
intrinsic value, not a target price       the security level, we seek to            help you understand our investment      
dependent on stock market valuation       consistently add value over time while    management philosophy.                  
levels. Funds with relative performance   minimizing portfolio risk.                                                        
objectives do not emphasize capital                                                      See important fund and index       
preservation to the same degree and                                                     disclosures inside front cover.     
commonly are more closely tied to market                                                                                    
benchmarks. We emphasize capital                                                                                            
preservation by requiring a large                                                                                           
cushion between price and estimated                                                                                         
intrinsic value. Although a large                                                                                           
cushion between market                                                                                                      

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AIM BALANCED FUND                                                               

YOUR FUND'S LONG-TERM PERFORMANCE                                               

                                                        [Enlarge/Download Table]
                                                                                                                                  
=============================================================================================================================     
Past performance cannot guarantee            RESULTS OF A $10,000 INVESTMENT                                                      
comparable future results.                   12/31/94 - 12/31/04                                                                  

   Your fund's total return includes                                         [MOUNTAIN CHART]                                     
reinvested distributions, applicable                                                                                              
sales charges, fund expenses and             DATE    AIM BALANCED FUND   S&P 500       60% RUSSELL 1000       LIPPER BALANCED     
management fees. Index results include                 CLASS A SHARES     INDEX     VALUE INDEX/40% LEHMAN       FUND INDEX       
reinvested dividends, but they do not                                              U.S. AGGREGATE BOND INDEX                      
reflect sales charges. Performance of an                                                                                          
index of funds reflects fund expenses        12/94         $ 9525        $10000             $10000                 $10000         
and management fees; performance of a         3/95          10119         10973              10771                  10604         
market index does not. Performance shown      6/95          11219         12019              11612                  11346         
in the chart does not reflect deduction       9/95          12201         12973              12308                  11955         
of taxes a shareholder would pay on fund     12/95          12857         13753              13010                  12489         
distributions or sale of fund shares.         3/96          13329         14491              13354                  12768         
Performance of the indexes does not           6/96          14014         15141              13523                  13027         
reflect the effects of taxes.                 9/96          14653         15609              13863                  13371         
                                             12/96          15330         16909              14857                  14119         
   In evaluating this chart, please note      3/97          15073         17363              15056                  14185         
that the chart uses a logarithmic scale       6/97          17059         20392              16596                  15714         
along the vertical axis (the value            9/97          18980         21919              17810                  16723         
scale). This means that each scale           12/97          19075         22548              18506                  16985         
increment always represents the same          3/98          20711         25691              19912                  18328         
percent change in price; in a linear          6/98          20758         26544              20153                  18607         
chart each scale increment always             9/98          18905         23910              19107                  17530         
represents the same absolute change in       12/98          21448         28997              21002                  19547         
price. In this example, the scale             3/99          21971         30441              21140                  19861         
increment between $5,000 and $10,000 is       6/99          22523         32583              22482                  20753         
the same as that between $10,000 and          9/99          21968         30554              21202                  19893         
$20,000. In a linear chart, the latter       12/99          25533         35096              21883                  21302         
scale increment would be twice as large.      3/00          27119         35900              22190                  21936         
The benefit of using a logarithmic scale      6/00          26015         34946              21721                  21672         
is that it better illustrates                 9/00          26411         34608              23006                  22103         
performance during the early years           12/00          24458         31902              23903                  21810         
depicted in the chart before reinvested       3/01          22229         28122              23340                  20717         
distributions and compounding create the      6/01          22819         29767              24081                  21445         
potential for the original investment to      9/01          20033         25399              22900                  19819         
grow to very large numbers. Had the          12/01          21684         28113              23922                  21104         
chart used a linear scale along its           3/02          21383         28191              24526                  21232         
vertical axis, you would not be able to       6/02          19191         24416              23611                  19829         
see as clearly the movements in the           9/02          17084         20200              21297                  17871         
value of the fund and the indexes during     12/02          17814         21902              22632                  18849         
the early years depicted in the chart.        3/03          17383         21212              22093                  18502         
We use a logarithmic scale in financial       6/03          19177         24476              24574                  20521         
reports of funds that have more than          9/03          19345         25124              24874                  20942         
five years of performance history.           12/03          20883         28181              26993                  22606         
                                              3/04          21647         28658              27771                  23146         
========================================      6/04          21650         29151              27645                  23115         
AVERAGE ANNUAL TOTAL RETURNS                  9/04          21016         28606              28255                  23157         
                                             12/04         $22481        $31245             $30109                 $24638         
As of 12/31/04, including applicable                                                                     SOURCE: LIPPER, INC.     
sales charges                                                                                                                     
                                             CLASS C SHARES                                  Class A share performance reflects   
CLASS A SHARES                               Inception (8/4/97)                 2.15%     the maximum 4.75% sales charge, and     
Inception (3/31/78)                9.32%     5 Years                           -3.24      Class B and Class C share performance   
10 Years                           8.44      1 Year                             5.90      reflects the applicable contingent      
5 Years                           -3.46                                                   deferred sales charge (CDSC) for the    
1 Year                             2.55      CLASS R SHARES                               period involved. The CDSC on Class B    
                                             10 Years                           8.70      shares declines from 5% beginning at the
CLASS B SHARES                               5 Years                           -2.74      time of purchase to 0% at the beginning 
Inception (10/18/93)               6.52%     1 Year                             7.43      of the seventh year. The CDSC on Class C
10 Years                           8.28      ========================================     shares is 1% for the first year after   
5 Years                           -3.60                                                   purchase. Class R shares do not have a  
1 Year                             1.91      Class R shares' inception date is            front-end sales charge; returns shown   
                                             6/3/02. Returns since that date are          are at net asset value and do not       
                                             historical returns. All other returns        reflect a 0.75% CDSC that may be imposed
                                             are blended returns of historical Class      on a total redemption of retirement plan
                                             R share performance and restated Class A     assets within the first year.           
                                             share performance (for periods prior to                                              
                                             the inception date of Class R shares) at        The performance of the fund's share  
                                             net asset value, adjusted to reflect the     classes will differ due to different    
                                             higher Rule 12b-1 fees applicable to         sales charge structures and class       
                                             Class R shares.                              expenses.                               

                                                The performance data quoted represent        Had the advisor not waived fees      
                                             past performance and cannot guarantee        and/or reimbursed expenses in the       
                                             comparable future results; current           current year and prior year, performance
                                             performance may be lower or higher.          would have been lower for all classes.  
                                             Please visit AIMinvestments.com for the                                              
                                             most recent month-end performance.                                                   
                                             Performance figures reflect reinvested                                               
                                             distributions, changes in net asset                                                  
                                             value and the effect of the maximum                                                  
                                             sales charge unless otherwise stated.                                                
                                             Investment return and principal value                                                
                                             will fluctuate so that you may have a                                                
                                             gain or loss when you sell shares.                                                   
=============================================================================================================================     

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AIM BALANCED FUND                                                               

CALCULATING YOUR ONGOING FUND EXPENSES                                          

                                                        [Enlarge/Download Table]
                                                                                                                                    
EXAMPLE                                      together with the amount you invested,       compare the ongoing costs of investing    
                                             to estimate the expenses that you paid       in the fund and other funds. To do so,    
As a shareholder of the fund, you incur      over the period. Simply divide your          compare this 5% hypothetical example      
two types of costs: (1) transaction          account value by $1,000 (for example, an     with the 5% hypothetical examples that    
costs, which may include sales charges       $8,600 account value divided by $1,000 =     appear in the shareholder reports of the  
(loads) on purchase payments; contingent     8.6), then multiply the result by the        other funds.                              
deferred sales charges on redemptions;       number in the table under the heading                                                  
and redemption fees, if any; and (2)         entitled "Actual Expenses Paid During           Please note that the expenses shown    
ongoing costs, including management          Period" to estimate the expenses you         in the table are meant to highlight your  
fees; distribution and/or service fees       paid on your account during this period.     ongoing costs only and do not reflect     
(12b-1); and other fund expenses. This                                                    any transactional costs, such as sales    
example is intended to help you              HYPOTHETICAL EXAMPLE FOR COMPARISON          charges (loads) on purchase payments,     
understand your ongoing costs (in            PURPOSES                                     contingent deferred sales charges on      
dollars) of investing in the fund and to                                                  redemptions, and redemption fees, if      
compare these costs with ongoing costs       The table below also provides                any. Therefore, the hypothetical          
of investing in other mutual funds. The      information about hypothetical account       information is useful in comparing        
example is based on an investment of         values and hypothetical expenses based       ongoing costs only, and will not help     
$1,000 invested at the beginning of the      on the fund's actual expense ratio and       you determine the relative total costs    
period and held for the entire period,       an assumed rate of return of 5% per year     of owning different funds. In addition,   
July 1, 2004 - December 31, 2004.            before expenses, which is not the fund's     if these transactional costs were         
                                             actual return. The hypothetical account      included, your costs would have been      
ACTUAL EXPENSES                              values and expenses may not be used to       higher.                                   
                                             estimate your actual ending account                                                    
The table below provides information         balance or expenses you paid for the                                                   
about actual account values and actual       period. You may use this information to                                                
expenses. You may use the information in                                                                                            
this table,                                                                                                                         

====================================================================================================================================
                                                   ACTUAL                                      HYPOTHETICAL                         
                                                                                    (5% ANNUAL RETURN BEFORE EXPENSES)              

            BEGINNING ACCOUNT       ENDING ACCOUNT            EXPENSES             ENDING ACCOUNT              EXPENSES             
SHARE            VALUE                   VALUE               PAID DURING               VALUE                  PAID DURING           
CLASS          (7/1/04)              (12/31/04)(1)            PERIOD(2)              (12/31/04)                PERIOD(2)            
Class A        $1,000.00               $1,038.50                $5.64                $1,019.61                   $5.58              
Class B         1,000.00                1,034.70                 9.46                 1,015.84                    9.37              
Class C         1,000.00                1,034.70                 9.46                 1,015.84                    9.37              
Class R         1,000.00                1,037.20                 6.91                 1,018.35                    6.85              

(1) The actual ending account value is based on the actual total return of the fund for the period July 1, 2004 to December 31, 2004
after actual expenses and will differ from the hypothetical ending account value which is based on the fund's expense ratio and a   
hypothetical annual return of 5% before expenses. The actual cumulative return at net asset value for the period July 1, 2004 to    
December 31, 2004 was 3.85%, 3.47%, 3.47% and 3.72% for Class A, B, C and R shares, respectively.                                   

(2) Expenses are equal to the fund's annualized expense ratio (1.10%, 1.85%, 1.85% and 1.35% for Class A, B, C and R shares,        
respectively) multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). 
====================================================================================================================================

                                                                                          [ARROW                                    
                                                                                          BUTTON       For More Information Visit   
                                                                                          IMAGE]           AIMinvestments.com       

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AIM BALANCED FUND                                                               

                                                        [Enlarge/Download Table]
                                                                                                                            
========================================  ========================================                                          

TOP 10 EQUITY HOLDINGS*                   TOP 10 INDUSTRIES*                                           BRET W. STANLEY,     
                                                                                                       Chartered Financial  
 1. Tyco International Ltd.                1. Mortgage-Backed U.S. Agency                [STANLEY      Analyst, senior      
    (Bermuda)                       2.7%      Securities                      9.4%        PHOTO]       portfolio manager, is
                                                                                                       lead manager of AIM  
 2. Cardinal Health, Inc            2.6    2. Other Diversified Financial                              Balanced Fund and the
                                              Services                        6.6   head of AIM's Value Investment          
 3. Sanofi-Aventis-ADR (France)     2.3                                             Management Unit. He received a B.B.A. in
                                           3. Non-Mortgaged-Backed U.S.             finance from The University of Texas at 
 4. Computer Associates                       Agency Securities               6.4   Austin and an M.S. in finance from the  
    International, Inc.             2.2                                             University of Houston.                  
                                           4. Pharmaceuticals                 5.0                                           
 5. JPMorgan Chase & Co.            2.1                                                                R. CANON COLEMAN II, 
                                           5. Industrial Conglomerates        4.4                      Chartered Financial  
 6. First Data Corp.                2.0                                                  [COLEMAN      Analyst, portfolio   
                                           6. U.S. Treasury Securities        4.3         PHOTO]       manager, is a manager
 7. Fannie Mae                      2.0                                                                of AIM Balanced Fund.
                                           7. Health Care Distributors        3.8                      He earned a B.S. and 
 8. Omnicom Group Inc.              2.0                                             an M.S. in accounting from the          
                                           8. Consumer Finance                3.5   University of Florida. He also has an   
 9. Waste Management, Inc.          2.0                                             M.B.A. from The Wharton School at the   
                                           9. Advertising                     3.2   University of Pennsylvania.             
10. WellPoint Inc.                  2.0                                                                                     
                                          10. Oil & Gas Equipment & Services  3.2                      JAN H. FRIEDLI,      
========================================                                                               senior portfolio     
PORTFOLIO COMPOSITION                     The fund's holdings are subject to             [FRIEDLI      manager, is a manager
By security type                          change, and there is no assurance that          PHOTO]       of AIM Balanced Fund.
                                          the fund will continue to hold any                           He joined AIM in     
 1. Stocks                         66.1%  particular security.                                         1999. He graduated   
                                                                                    cum laude from Villanova University with
 2. Corporate Bonds & Notes        16.2   *Excluding money market fund holdings.    a B.S. in computer science and earned an
                                          ========================================  M.B.A. with honors from the University  
 3. U.S. Government                                                                 of Chicago.                             
    Mortgage-Backed Securities      9.4                                                                                     
                                                                                                       SCOT W. JOHNSON,     
 4. U.S. Treasury Securities        4.3                                                                Chartered Financial  
                                                                                         [JOHNSON      Analyst, senior      
 5. Corporate Asset-Backed                                                                PHOTO]       portfolio manager, is
    Securities                      1.3                                                                a manager of AIM     
                                                                                                       Balanced Fund. He    
 6. Money Market Funds Plus                                                         received both his bachelor's degree in  
    Other Assets Less Liabilities                                                    economics and an M.B.A. in finance from
    & Other Security Types          2.7                                             Vanderbilt University.                  

TOTAL NET ASSETS            $1.9 BILLION                                                                                    
                                                                                                       MATTHEW W.           
TOTAL NUMBER OF HOLDINGS*            453                                                               SEINSHEIMER,         
                                                                                       [SEINSHEIMER    Chartered Financial  
AVERAGE CREDIT QUALITY,                                                                   PHOTO]       Analyst, senior      
FIXED-INCOME HOLDINGS:                AA                                                               portfolio manager, is
========================================                                                               a manager of AIM     
                                                                                    Balanced Fund. He received a B.B.A. from
                                                                                    Southern Methodist University and an    
                                                                                    M.B.A. from The University of Texas at  
                                                                                    Austin.                                 

                                                                                                       MICHAEL J. SIMON,    
                                                                                                       Chartered Financial  
                                                                                          [SIMON       Analyst, senior      
                                                                                          PHOTO]       portfolio manager, is
                                                                                                       a manager of AIM     
                                                                                                       Balanced Fund. He    
                                                                                    received a B.B.A. in finance from Texas 
                                                                                    Christian University and an M.B.A. from 
                                                                                    the University of Chicago.              

                                                                                    Assisted by Basic Value Team and        
                                                                                    Investment Grade Team                   

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FINANCIALS                                                                      

SCHEDULE OF INVESTMENTS                                                         

December 31, 2004                                                               

                                                                [Download Table]


                                                                     MARKET    
                                                  SHARES             VALUE     
-------------------------------------------------------------------------------
                                                                               
STOCKS & OTHER EQUITY INTERESTS-66.08%                                         

ADVERTISING-3.19%                                                              

Interpublic Group of Cos., Inc. (The)(a)(b)       1,650,000      $   22,110,000
-------------------------------------------------------------------------------
Omnicom Group Inc.(b)                               445,000          37,522,400
===============================================================================
                                                                     59,632,400
===============================================================================

AEROSPACE & DEFENSE-1.14%                                                      

Honeywell International Inc.                        605,000          21,423,050
===============================================================================

ALUMINUM-0.88%                                                                 

Alcoa Inc.                                          525,300          16,504,926
===============================================================================

APPAREL RETAIL-1.20%                                                           

Gap, Inc. (The)(b)                                1,063,700          22,465,344
===============================================================================

ASSET MANAGEMENT & CUSTODY BANKS-1.48%                                         

Bank of New York Co., Inc. (The)                    830,000          27,738,600
===============================================================================

BUILDING PRODUCTS-2.34%                                                        

American Standard Cos. Inc.(a)                      391,700          16,185,044
-------------------------------------------------------------------------------
Masco Corp.(b)                                      752,900          27,503,437
===============================================================================
                                                                     43,688,481
===============================================================================

COMMUNICATIONS EQUIPMENT-0.69%                                                 

Motorola, Inc.                                      750,000          12,900,000
===============================================================================

CONSUMER ELECTRONICS-2.12%                                                     

Koninklijke (Royal) Philips Electronics N.V.-                                  
  New York Shares (Netherlands)                     641,000          16,986,500
-------------------------------------------------------------------------------
Sony Corp.-ADR (Japan)                              581,000          22,635,760
===============================================================================
                                                                     39,622,260
===============================================================================

DATA PROCESSING & OUTSOURCED SERVICES-3.00%                                    

Ceridian Corp.(a)                                   975,100          17,824,828
-------------------------------------------------------------------------------
First Data Corp.                                    900,800          38,320,032
===============================================================================
                                                                     56,144,860
===============================================================================

DEPARTMENT STORES-0.87%                                                        

May Department Stores Co. (The)(b)                  556,300          16,355,220
===============================================================================

DIVERSIFIED CHEMICALS-0.53%                                                    

Dow Chemical Co. (The)                              201,000           9,951,510
===============================================================================

DIVERSIFIED COMMERCIAL SERVICES-1.74%                                          

Cendant Corp.                                     1,393,400          32,577,692
===============================================================================

ENVIRONMENTAL SERVICES-1.99%                                                   

Waste Management, Inc.                            1,244,100          37,248,354
===============================================================================

                                                                [Download Table]
                                                                     MARKET    
                                                  SHARES             VALUE     
-------------------------------------------------------------------------------


                                                                               

FOOD RETAIL-1.96%                                                              

Kroger Co. (The)(a)                               1,264,000      $   22,170,560
-------------------------------------------------------------------------------
Safeway Inc.(a)(b)                                  733,000          14,469,420
===============================================================================
                                                                     36,639,980
===============================================================================

GENERAL MERCHANDISE STORES-1.65%                                               

Target Corp.                                        594,500          30,872,385
===============================================================================

HEALTH CARE DISTRIBUTORS-3.80%                                                 

Cardinal Health, Inc.                               831,000          48,322,650
-------------------------------------------------------------------------------
McKesson Corp.                                      725,000          22,808,500
===============================================================================
                                                                     71,131,150
===============================================================================

HEALTH CARE EQUIPMENT-1.01%                                                    

Baxter International Inc.                           549,000          18,962,460
===============================================================================

HEALTH CARE FACILITIES-1.21%                                                   

HCA, Inc.                                           565,000          22,577,400
===============================================================================

HEALTH CARE SERVICES-0.36%                                                     

IMS Health Inc.                                     289,600           6,721,616
===============================================================================

INDUSTRIAL CONGLOMERATES-4.15%                                                 

General Electric Co.                                736,200          26,871,300
-------------------------------------------------------------------------------
Tyco International Ltd. (Bermuda)(b)              1,421,300          50,797,262
===============================================================================
                                                                     77,668,562
===============================================================================

INDUSTRIAL MACHINERY-1.49%                                                     

Illinois Tool Works Inc.(b)                         300,000          27,804,000
===============================================================================

INSURANCE BROKERS-0.60%                                                        

Aon Corp.(b)                                        474,600          11,323,956
===============================================================================

INTEGRATED OIL & GAS-0.11%                                                     

Shell Frontier Oil & Gas Inc.-Series B, 2.91%                                  
  Floating Rate Pfd.(c)                                  20           2,000,000
===============================================================================

INVESTMENT BANKING & BROKERAGE-2.77%                                           

Merrill Lynch & Co., Inc.(b)                        411,500          24,595,355
-------------------------------------------------------------------------------
Morgan Stanley                                      489,000          27,149,280
===============================================================================
                                                                     51,744,635
===============================================================================

MANAGED HEALTH CARE-1.95%                                                      

WellPoint Inc.(a)(b)                                316,900          36,443,500
===============================================================================

MOVIES & ENTERTAINMENT-1.69%                                                   

Walt Disney Co. (The)                             1,137,000          31,608,600
===============================================================================

MULTI-LINE INSURANCE-1.05%                                                     

Hartford Financial Services Group, Inc.                                        
  (The)(b)                                          282,700          19,593,937
===============================================================================

OIL & GAS DRILLING-1.54%                                                       

Transocean Inc. (Cayman Islands)(a)                 678,500          28,761,615
===============================================================================

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                                                                     MARKET    
                                                  SHARES             VALUE     
-------------------------------------------------------------------------------
                                                                               

OIL & GAS EQUIPMENT & SERVICES-3.16%                                           

Halliburton Co.(b)                                  920,000      $   36,100,800
-------------------------------------------------------------------------------
Schlumberger Ltd. (Netherlands)                     343,000          22,963,850
===============================================================================
                                                                     59,064,650
===============================================================================

OTHER DIVERSIFIED FINANCIAL SERVICES-4.29%                                     

ABN AMRO XVIII Custodial Receipts- Series                                      
  MM18, 2.79% Floating Rate Pfd. (Acquired                                     
  09/10/04-09/13/04; Cost                                                      
  $1,399,980)(d)(e)(f)                                   14           1,400,000
-------------------------------------------------------------------------------
Citigroup Inc.                                      741,933          35,746,332
-------------------------------------------------------------------------------
JPMorgan Chase & Co.                              1,002,200          39,095,822
-------------------------------------------------------------------------------
Zurich RegCaPS Funding Trust III, 2.75%                                        
  Floating Rate Pfd. (Acquired 06/03/04-                                       
  09/28/04; Cost $3,952,517)(c)(d)(f)                 4,050           3,997,350
===============================================================================
                                                                     80,239,504
===============================================================================

PACKAGED FOODS & MEATS-1.10%                                                   

Kraft Foods Inc.-Class A(b)                         578,600          20,603,946
===============================================================================

PHARMACEUTICALS-4.99%                                                          

Pfizer Inc.                                       1,019,600          27,417,044
-------------------------------------------------------------------------------
Sanofi-Aventis (France)(g)                          530,640          42,339,591
-------------------------------------------------------------------------------
Wyeth                                               552,600          23,535,234
===============================================================================
                                                                     93,291,869
===============================================================================

PROPERTY & CASUALTY INSURANCE-1.54%                                            

ACE Ltd. (Cayman Islands)                           676,000          28,899,000
===============================================================================

SYSTEMS SOFTWARE-2.18%                                                         

Computer Associates International, Inc.(b)        1,311,000          40,719,660
===============================================================================

THRIFTS & MORTGAGE FINANCE-2.31%                                               

Fannie Mae(b)                                       531,600          37,855,236
-------------------------------------------------------------------------------
Fannie Mae-Series J, 4.72% Pfd.(h)                   52,000           2,626,000
-------------------------------------------------------------------------------
Fannie Mae-Series K, 3.00% Pfd.(h)                   55,000           2,782,659
===============================================================================
                                                                     43,263,895
===============================================================================
    Total Stocks & Other Equity                                                
      Interests-(Cost $1,063,952,155)                            $1,236,189,017
===============================================================================


                                                PRINCIPAL                      
                                                  AMOUNT                       
                                                                               

BONDS & NOTES-16.18%                                                           

ADVERTISING-0.02%                                                              

Interpublic Group of Cos., Inc. (The), Sr.                                     
  Unsec. Notes, 7.88%, 10/15/05(h)             $    393,000             405,454
===============================================================================

AEROSPACE & DEFENSE-0.02%                                                      

Lockheed Martin Corp.-Series A, Medium Term                                    
  Notes, 8.66%, 11/30/06(h)                         300,000             328,188
===============================================================================

                                                                [Download Table]
-------------------------------------------------------------------------------

                                                PRINCIPAL            MARKET    
                                                  AMOUNT             VALUE     
                                                                               

AUTO PARTS & EQUIPMENT-0.09%                                                   

Lear Corp.-Series B, Sr. Unsec. Gtd Notes,                                     
  7.96%, 05/15/05(h)                           $  1,560,000      $    1,591,933
===============================================================================

AUTOMOBILE MANUFACTURERS-0.13%                                                 

DaimlerChrysler N.A. Holding Corp., Unsec.                                     
  Gtd. Global Notes, 7.40%, 01/20/05(h)           1,990,000           1,994,438
-------------------------------------------------------------------------------
General Motors Corp., Unsec. Global Notes,                                     
  6.25%, 05/01/05(h)                                450,000             454,252
===============================================================================
                                                                      2,448,690
===============================================================================

BROADCASTING & CABLE TV-0.90%                                                  

Continental Cablevision, Inc., Sr. Unsec.                                      
  Deb.,                                                                        
  8.88%, 09/15/05(h)                              5,200,000           5,397,080
-------------------------------------------------------------------------------
  9.50%, 08/01/13(h)                              1,710,000           1,823,629
-------------------------------------------------------------------------------
Cox Communications, Inc., Unsec. Notes,                                        
  6.88%, 06/15/05(h)                                600,000             610,200
-------------------------------------------------------------------------------
Cox Radio, Inc., Sr. Unsec. Notes, 6.63%,                                      
  02/15/06(h)                                       750,000             773,212
-------------------------------------------------------------------------------
Lenfest Communications, Inc., Sr. Unsec.                                       
  Notes,                                                                       
  8.38%, 11/01/05(h)                              1,000,000           1,045,750
-------------------------------------------------------------------------------
TCI Communications, Inc.,                                                      
  Sr. Notes, 7.25%, 08/01/05(h)                   1,175,000           1,203,165
-------------------------------------------------------------------------------
  Sr. Unsec. Notes, 8.00%, 08/01/05(h)              575,000             591,209
-------------------------------------------------------------------------------
Time Warner Cos., Inc.,                                                        
  Sr. Unsec. Gtd. Deb., 7.57%, 02/01/24(h)          250,000             294,082
-------------------------------------------------------------------------------
  Unsec. Deb., 9.15%, 02/01/23(h)                 2,150,000           2,874,485
-------------------------------------------------------------------------------
  Unsec. Notes, 7.75%, 06/15/05(h)                2,232,000           2,277,778
===============================================================================
                                                                     16,890,590
===============================================================================

CONSUMER FINANCE-3.45%                                                         

Associates Corp. of North America, Sr. Global                                  
  Deb., 6.95%, 11/01/18(h)                        1,525,000           1,768,878
-------------------------------------------------------------------------------
Capital One Bank, Sr. Global Notes, 8.25%,                                     
  06/15/05(h)                                     3,250,000           3,322,085
-------------------------------------------------------------------------------
Capital One Capital I, Sub. Floating Rate                                      
  Bonds, 3.71%, 02/01/27 (Acquired 09/16/04;                                   
  Cost $4,383,420)(c)(d)(f)(h)                    4,300,000           4,371,681
-------------------------------------------------------------------------------
Capital One Financial Corp.,                                                   
  Sr. Unsec. Notes, 7.25%, 05/01/06(h)            1,820,000           1,906,887
-------------------------------------------------------------------------------
  Unsec. Notes, 7.13%, 08/01/08(h)                1,000,000           1,095,310
-------------------------------------------------------------------------------
Ford Motor Credit Co., Global Notes, 7.60%,                                    
  08/01/05(h)                                     6,750,000           6,903,832
-------------------------------------------------------------------------------
  Notes, 6.75%, 05/15/05(h)                       2,425,000           2,455,409
-------------------------------------------------------------------------------
  Unsec. Floating Rate Global Notes,                                           
  2.31%, 04/28/05(c)(h)                           3,261,000           3,259,859
-------------------------------------------------------------------------------
  Unsec. Global Notes,                                                         
    6.50%, 01/25/07(h)                            1,890,000           1,966,261
-------------------------------------------------------------------------------
    6.88%, 02/01/06(h)                            6,690,000           6,898,260
-------------------------------------------------------------------------------
    7.50%, 03/15/05(h)                            2,690,000           2,714,129
-------------------------------------------------------------------------------
  Unsec. Notes, 7.75%, 03/15/05(h)                2,205,000           2,225,352
-------------------------------------------------------------------------------

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                                                PRINCIPAL            MARKET    
                                                  AMOUNT             VALUE     
-------------------------------------------------------------------------------
                                                                               
CONSUMER FINANCE-(CONTINUED)                                                   

General Motors Acceptance Corp., Floating                                      
  Rate Medium Term Notes,                                                      
    4.23%, 05/19/05(c)(h)                      $  6,250,000      $    6,272,125
-------------------------------------------------------------------------------
    4.44%, 03/04/05(c)(h)                         7,100,000(i)        7,115,265
-------------------------------------------------------------------------------
  Global Notes,                                                                
    4.50%, 07/15/06(h)                            2,000,000           2,004,320
-------------------------------------------------------------------------------
    7.50%, 07/15/05(h)                              400,000             408,488
-------------------------------------------------------------------------------
  Medium Term Notes,                                                           
    4.15%, 02/07/05(h)                            1,650,000           1,651,864
-------------------------------------------------------------------------------
    5.25%, 05/16/05(h)                            4,600,000           4,632,200
-------------------------------------------------------------------------------
  Unsec. Unsub. Global Notes,                                                  
  6.75%, 01/15/06(h)                              3,500,000(i)        3,592,330
===============================================================================
                                                                     64,564,535
===============================================================================

DIVERSIFIED BANKS-2.13%                                                        

AB Spintab (Sweden), Bonds, 7.50% (Acquired                                    
  02/12/04; Cost $3,682,866)(d)(h)(j)             3,300,000           3,505,263
-------------------------------------------------------------------------------
American Savings Bank, Notes, 6.63%, 02/15/06                                  
  (Acquired 03/05/03; Cost $554,525)(d)(f)(h)       500,000             514,425
-------------------------------------------------------------------------------
Banco Nacional de Comercio Exterior S.N.C.                                     
  (Mexico), Notes, 3.88%, 01/21/09 (Acquired                                   
  02/25/04; Cost $983,750)(d)(f)(h)               1,000,000             963,810
-------------------------------------------------------------------------------
BankBoston Capital Trust IV, Gtd. Floating                                     
  Rate Notes, 3.04%, 06/08/28(c)(h)               3,215,000           3,104,436
-------------------------------------------------------------------------------
Barclays Bank PLC (United Kingdom), Bonds,                                     
  8.55% (Acquired 11/05/03; Cost                                               
  $652,239)(d)(h)(j)                                530,000             642,296
-------------------------------------------------------------------------------
Centura Capital Trust I, Gtd. Notes, 8.85%,                                    
  06/01/27 (Acquired 05/22/03; Cost                                            
  $1,771,602)(d)(f)(h)                            1,400,000           1,652,028
-------------------------------------------------------------------------------
Chohung Bank (South Korea), Unsec. Sub.                                        
  Second Tier Notes, 11.50%, 04/01/10                                          
  (Acquired 07/01/04; Cost                                                     
  $3,407,008)(d)(f)(h)                            3,200,000           3,260,672
-------------------------------------------------------------------------------
Corporacion Andina de Fomento (Venezuela),                                     
  Unsec. Global Notes, 6.88%, 03/15/12(h)           900,000           1,004,382
-------------------------------------------------------------------------------
  Unsec. Yankee Notes, 8.88%, 06/01/05(h)         1,835,000           1,875,150
-------------------------------------------------------------------------------
Daiwa P.B. Ltd. (Cayman Islands), Gtd. Sub.                                    
  Floating Rate Medium Term Euro Notes,                                        
  3.09%(j)(k)                                     1,200,000           1,188,000
-------------------------------------------------------------------------------
Danske Bank A/S (Denmark), First Tier Bonds,                                   
  5.91% (Acquired 06/07/04; Cost                                               
  $1,245,000)(d)(h)(j)                            1,245,000           1,320,186
-------------------------------------------------------------------------------
HSBC Capital Funding L.P. (United Kingdom),                                    
  Gtd. Bonds, 4.61% (Acquired 11/05/03; Cost                                   
  $373,008)(d)(h)(j)                                400,000             379,508
-------------------------------------------------------------------------------
Lloyds Bank PLC (United Kingdom)-Series 1,                                     
  Unsec. Sub. Euro Dollar Notes,                                               
  2.94%(h)(j)(k)                                  3,870,000           3,451,537
-------------------------------------------------------------------------------
National Bank of Canada (Canada), Floating                                     
  Rate Euro Deb., 2.13%, 08/29/87(h)(k)           1,500,000           1,234,780
-------------------------------------------------------------------------------
National Westminster Bank PLC (United                                          
  Kingdom)-Series B, Unsec. Sub. Floating                                      
  Rate Euro Notes, 2.13%(h)(j)(k)                 1,000,000             882,831
-------------------------------------------------------------------------------
NBD Bank N.A. Michigan, Unsec. Sub. Deb.,                                      
  8.25%, 11/01/24(h)                              1,715,000           2,238,298
-------------------------------------------------------------------------------

                                                                [Download Table]
-------------------------------------------------------------------------------

                                                PRINCIPAL            MARKET    
                                                  AMOUNT             VALUE     
                                                                               
DIVERSIFIED BANKS-(CONTINUED)                                                  

RBS Capital Trust I, Bonds, 4.71%(h)(j)        $    400,000      $      382,948
-------------------------------------------------------------------------------
Wells Fargo & Co., Sr. Unsec. Global Notes,                                    
  3.75%, 10/15/07(h)                              6,750,000           6,781,455
-------------------------------------------------------------------------------
Wells Fargo Bank, N.A., Unsec. Sub. Global                                     
  Notes, 7.80%, 06/15/10(h)                       2,100,000           2,148,300
-------------------------------------------------------------------------------
Woori Bank (South Korea), Unsec. Sub. Second                                   
  Tier Notes, 11.75%, 03/01/10 (Acquired                                       
  07/01/04; Cost $3,388,480)(d)(f)(h)             3,200,000           3,283,840
===============================================================================
                                                                     39,814,145
===============================================================================

DIVERSIFIED CAPITAL MARKETS-0.06%                                              

UBS Preferred Funding Trust I, Gtd. Global                                     
  Bonds, 8.62%(h)(j)                              1,000,000           1,198,690
===============================================================================

ELECTRIC UTILITIES-0.57%                                                       

AmerenEnergy Generating Co.-Series C, Sr.                                      
  Unsec. Global Notes, 7.75%, 11/01/05(h)           350,000             363,590
-------------------------------------------------------------------------------
Consolidated Edison Co. of New York- Series                                    
  96A, Unsec. Deb., 7.75%, 06/01/26(h)(l)           900,000             979,380
-------------------------------------------------------------------------------
Hydro-Quebec-Series B (Canada), Gtd. Medium                                    
  Term Notes, 8.62%, 12/15/11(h)                  2,150,000           2,669,633
-------------------------------------------------------------------------------
MidAmerican Energy Holdings Co., Sr. Unsec.                                    
  Notes, 7.23%, 09/15/05(h)                       4,100,000           4,207,994
-------------------------------------------------------------------------------
Pacific Gas & Electric Co., First Mortgage                                     
  Floating Rate Notes, 2.72%, 04/03/06(c)(h)        500,000             500,447
-------------------------------------------------------------------------------
Yorkshire Power Finance (Cayman Islands)-                                      
  Series B, Sr. Unsec. Gtd. Unsub. Global                                      
  Notes, 6.50%, 02/25/08(h)                       1,875,000           1,980,037
===============================================================================
                                                                     10,701,081
===============================================================================

FOOD RETAIL-0.04%                                                              

Safeway Inc., Sr. Unsec. Notes, 2.50%,                                         
  11/01/05(h)                                       775,000             769,908
===============================================================================

GAS UTILITIES-0.35%                                                            

CenterPoint Energy Resources Corp., Unsec.                                     
  Deb., 6.50%, 02/01/08(h)                        1,990,000           2,132,603
-------------------------------------------------------------------------------
Columbia Energy Group-Series C, Notes, 6.80%,                                  
  11/28/05(h)                                     3,540,000           3,645,917
-------------------------------------------------------------------------------
NiSource Capital Markets, Inc., Medium Term                                    
  Notes, 7.68%, 04/15/05(h)                         745,000             754,536
===============================================================================
                                                                      6,533,056
===============================================================================

HOMEBUILDING-0.33%                                                             

D.R. Horton, Inc., Sr. Unsec. Notes, 7.88%,                                    
  08/15/11(h)                                       800,000             921,000
-------------------------------------------------------------------------------
Lennar Corp.-Series B, Sr. Unsec. Gtd. Global                                  
  Notes, 9.95%, 05/01/10(h)                       3,855,000           4,133,794
-------------------------------------------------------------------------------
Pulte Homes, Inc., Unsec. Gtd. Notes, 7.30%,                                   
  10/24/05(h)                                       520,000             535,038
-------------------------------------------------------------------------------
Ryland Group, Inc. (The), Sr. Unsec. Unsub.                                    
  Notes, 9.75%, 09/01/10(h)                         500,000             544,975
===============================================================================
                                                                      6,134,807
===============================================================================

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                                                PRINCIPAL            MARKET    
                                                  AMOUNT             VALUE     
-------------------------------------------------------------------------------
                                                                               

INDUSTRIAL CONGLOMERATES-0.21%                                                 

Tyco International Group S.A. (Luxembourg),                                    
  Unsec. Unsub. Gtd. Yankee Notes, 6.38%,                                      
  06/15/05(h)                                  $  3,050,000      $    3,095,842
-------------------------------------------------------------------------------
URC Holdings Corp., Sr. Notes, 7.88%,                                          
  06/30/06 (Acquired 10/08/03; Cost                                            
  $849,203)(d)(f)(h)                                750,000             798,548
===============================================================================
                                                                      3,894,390
===============================================================================

INTEGRATED OIL & GAS-0.37%                                                     

Amerada Hess Corp., Unsec. Notes, 7.13%,                                       
  03/15/33(h)                                     1,800,000           1,981,458
-------------------------------------------------------------------------------
ConocoPhillips, Unsec. Deb., 7.13%,                                            
  03/15/28(h)                                     1,000,000           1,074,580
-------------------------------------------------------------------------------
Husky Oil Ltd. (Canada), Yankee Bonds, 8.90%,                                  
  08/15/28(h)                                     2,009,000           2,290,461
-------------------------------------------------------------------------------
Repsol International Finance B.V.                                              
  (Netherlands), Unsec. Gtd. Global Notes,                                     
  7.45%, 07/15/05(h)                              1,590,000           1,631,054
===============================================================================
                                                                      6,977,553
===============================================================================

INTEGRATED TELECOMMUNICATION SERVICES-1.30%                                    

Deutsche Telekom International Finance B.V.                                    
  (Netherlands), Unsec. Unsub. Gtd. Global                                     
  Bonds, 8.25%, 06/15/05(h)                       4,550,000           4,656,743
-------------------------------------------------------------------------------
France Telecom S.A. (France), Sr. Unsec.                                       
  Global Notes, 8.50%, 03/01/31(h)                  930,000           1,262,001
-------------------------------------------------------------------------------
SBC Communications Inc., Notes, 4.21%,                                         
  06/05/05 (Acquired 12/10/04; Cost                                            
  $1,332,977)(d)(f)(h)                            1,325,000           1,332,757
-------------------------------------------------------------------------------
Southwestern Bell Telephone Co.- Series B,                                     
  Medium Term Notes, 6.25%, 07/07/05(h)             350,000             355,681
-------------------------------------------------------------------------------
Sprint Capital Corp.,                                                          
  Sr. Unsec. Gtd. Global Notes,                                                
  7.13%, 01/30/06(h)                              2,210,000           2,298,776
-------------------------------------------------------------------------------
  Unsec. Gtd. Global Notes, 7.90%,                                             
  03/15/05(h)                                     3,730,000           3,769,277
-------------------------------------------------------------------------------
Sprint Corp., Deb., 9.25%, 04/15/22(h)            1,000,000           1,332,550
-------------------------------------------------------------------------------
TELUS Corp. (Canada), Yankee Notes,                                            
  7.50%, 06/01/07(h)                                635,000             690,074
-------------------------------------------------------------------------------
  8.00%, 06/01/11(h)                                500,000             592,440
-------------------------------------------------------------------------------
Verizon California Inc.-Series F, Unsec.                                       
  Deb., 6.75%, 05/15/27(h)                        1,000,000           1,041,070
-------------------------------------------------------------------------------
Verizon Communications Inc., Unsec. Deb.,                                      
  6.36%, 04/15/06(h)                              2,570,000           2,667,557
-------------------------------------------------------------------------------
  8.75%, 11/01/21(h)                              1,350,000           1,705,280
-------------------------------------------------------------------------------
Verizon Florida Inc.-Series F, Sr. Unsec.                                      
  Deb., 6.13%, 01/15/13(h)                        1,635,000           1,742,305
-------------------------------------------------------------------------------
Verizon Virginia Inc.-Series A, Unsec. Global                                  
  Deb., 4.63%, 03/15/13(h)                          950,000             929,547
===============================================================================
                                                                     24,376,058
===============================================================================

                                                                [Download Table]
-------------------------------------------------------------------------------

                                                PRINCIPAL            MARKET    
                                                  AMOUNT             VALUE     
                                                                               

INVESTMENT BANKING & BROKERAGE-0.28%                                           

Lehman Brothers Inc.,                                                          
  Sr. Sub. Deb., 11.63%, 05/15/05(h)           $  2,585,000      $    2,659,370
-------------------------------------------------------------------------------
  Sr. Unsec. Sub. Notes, 7.63%, 06/01/06(h)       1,000,000           1,060,010
-------------------------------------------------------------------------------
Merrill Lynch & Co., Inc.-Series B, Medium                                     
  Term Notes, 4.54%, 03/08/05(h)                  1,415,000           1,420,773
===============================================================================
                                                                      5,140,153
===============================================================================

LIFE & HEALTH INSURANCE-0.29%                                                  

Prudential Holdings, LLC-Series B, Bonds,                                      
  7.25%, 12/18/23 (Acquired 01/22/04-                                          
  01/29/04; Cost $4,717,650)(d)(h)(l)             4,000,000           4,771,320
-------------------------------------------------------------------------------
ReliaStar Financial Corp., Unsec. Notes,                                       
  8.00%, 10/30/06(h)                                600,000             647,736
===============================================================================
                                                                      5,419,056
===============================================================================

MOVIES & ENTERTAINMENT-0.12%                                                   

Time Warner Inc., Sr. Unsec. Gtd. Global                                       
  Notes, 5.63%, 05/01/05(h)                       2,220,000           2,239,736
===============================================================================

MULTI-UTILITIES & UNREGULATED POWER-0.09%                                      

Dominion Resources, Inc.-Series B, Sr. Unsec.                                  
  Unsub. Global Notes, 7.63%, 07/15/05(h)         1,710,000           1,752,904
===============================================================================

MUNICIPALITIES-0.58%                                                           

Chicago (City of), Illinois; O'Hare                                            
  International Airport; Refunding Taxable                                     
  General Airport Third Lien Series 2004 E                                     
  RB, 3.88%, 01/01/08(h)(l)                       2,400,000           2,404,992
-------------------------------------------------------------------------------
Industry (City of), California Urban                                           
  Development Agency (Project 3); Taxable                                      
  Allocation Series 2003 B, 6.10%,                                             
  05/01/24(h)(l)                                  1,910,000           1,967,300
-------------------------------------------------------------------------------
Phoenix (City of), Arizona Civic Improvement                                   
  Corp.; Taxable Rental Car Facility Series                                    
  2004 RB, 3.69%, 07/01/07(h)(l)                  1,000,000           1,001,650
-------------------------------------------------------------------------------
  4.21%, 07/01/08(h)(l)                           1,185,000           1,193,888
-------------------------------------------------------------------------------
Sacramento (County of), California; Taxable                                    
  Pension Funding Series 2004 C-1 RB, 0.27%,                                   
  07/10/30(h)(l)(m)                               4,425,000           4,190,475
===============================================================================
                                                                     10,758,305
===============================================================================

OIL & GAS EXPLORATION & PRODUCTION-0.21%                                       

Pemex Project Funding Master Trust, Unsec.                                     
  Gtd. Unsub. Global Notes, 7.38%,                                             
  12/15/14(h)                                     3,535,000           3,922,083
===============================================================================

OTHER DIVERSIFIED FINANCIAL SERVICES-1.18%                                     

General Electric Capital Corp.-Series A,                                       
  Medium Term Global Notes, 2.85%,                                             
  01/30/06(h)                                       305,000             304,256
-------------------------------------------------------------------------------

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                                                PRINCIPAL            MARKET    
                                                  AMOUNT             VALUE     
-------------------------------------------------------------------------------
                                                                               
OTHER DIVERSIFIED FINANCIAL SERVICES-(CONTINUED)                               

Heller Financial, Inc., Sr. Unsec. Global                                      
  Notes, 8.00%, 06/15/05(h)                    $  2,425,000      $    2,481,260
-------------------------------------------------------------------------------
ING Capital Funding Trust III, Gtd. Global                                     
  Bonds, 8.44%(h)(j)                                900,000           1,073,340
-------------------------------------------------------------------------------
Mizuho JGB Investment LLC-Series A, Bonds,                                     
  9.87% (Acquired 06/16/04; Cost                                               
  $1,357,500)(d)(h)(j)                            1,200,000           1,390,692
-------------------------------------------------------------------------------
Pemex Finance Ltd. (Cayman Islands),                                           
  Sr. Unsec. Global Notes, 8.02%, 05/15/07(h)     1,833,333           1,940,547
-------------------------------------------------------------------------------
  Series 1999-2, Class A1, Global Bonds,                                       
  9.69%,(h) 08/15/09                              2,755,000           3,088,355
-------------------------------------------------------------------------------
Pemex Project Funding Master Trust, Unsec.                                     
  Gtd. Unsub. Global Notes, 8.63%,                                             
  02/01/22(h)                                     2,475,000           2,877,683
-------------------------------------------------------------------------------
PLC Trust 2003-1, Sec. Notes, 2.71%, 03/31/06                                  
  (Acquired 03/23/04; Cost                                                     
  $1,259,552)(d)(f)(h)                            1,205,877           1,201,151
-------------------------------------------------------------------------------
Premium Asset 2004-04 Trust, Sr. Notes,                                        
  4.13%, 03/12/09 (Acquired 03/04/04; Cost                                     
  $3,572,605)(d)(f)(h)                            3,575,000           3,499,174
-------------------------------------------------------------------------------
Regional Diversified Funding (Cayman                                           
  Islands), Sr. Notes, 9.25%, 03/15/30                                         
  (Acquired 09/22/04; Cost                                                     
  $3,221,976)(d)(f)(h)                            2,723,333           3,244,470
-------------------------------------------------------------------------------
UFJ Finance Aruba AEC (Aruba), Gtd. Sub.                                       
  Second Tier Euro Bonds, 8.75%(h)(j)               945,000           1,055,979
===============================================================================
                                                                     22,156,907
===============================================================================

PACKAGED FOODS & MEATS-0.04%                                                   

Nabisco, Inc., Notes, 6.38%, 02/01/05(h)            750,000             754,928
===============================================================================

PROPERTY & CASUALTY INSURANCE-0.45%                                            

FGIC Corp., Sr. Unsec. Unsub. Notes, 6.00%,                                    
  01/15/34 (Acquired 12/07/04; Cost                                            
  $1,828,278)(d)(f)(h)                            1,800,000           1,862,856
-------------------------------------------------------------------------------
First American Capital Trust I, Gtd. Notes,                                    
  8.50%, 04/15/12(h)                              4,295,000           4,879,592
-------------------------------------------------------------------------------
Oil Insurance Ltd. (Bermuda), Unsec. Sub.                                      
  Deb., 5.15%, 08/15/33 (Acquired 03/23/04;                                    
  Cost $908,164)(d)(f)(h)                           865,000             872,949
-------------------------------------------------------------------------------
Travelers Property Casualty Corp., Sr. Unsec.                                  
  Notes, 6.75%, 11/15/06(h)                         700,000             739,459
===============================================================================
                                                                      8,354,856
===============================================================================

REAL ESTATE-0.20%                                                              

CarrAmerica Realty Corp., Sr. Unsec. Gtd.                                      
  Notes, 6.63%, 03/01/05(h)                         420,000             422,453
-------------------------------------------------------------------------------
EOP Operating L.P., Sr. Unsec. Notes, 6.63%,                                   
  02/15/05(h)                                       430,000             431,883
-------------------------------------------------------------------------------
Health Care Property Investors, Inc., Sr.                                      
  Unsec. Notes, 6.88%, 06/08/05(h)                  380,000             386,122
-------------------------------------------------------------------------------
HRPT Properties Trust, Sr. Unsec. Notes,                                       
  6.70%, 02/23/05(h)                              1,435,000           1,442,720
-------------------------------------------------------------------------------

                                                                [Download Table]
-------------------------------------------------------------------------------

                                                PRINCIPAL            MARKET    
                                                  AMOUNT             VALUE     
                                                                               
REAL ESTATE-(CONTINUED)                                                        

Spieker Properties, Inc., Medium Term Notes,                                   
  8.00%, 07/19/05(h)                           $    600,000      $      615,390
-------------------------------------------------------------------------------
  Unsec. Unsub. Notes, 6.88%, 02/01/05(h)           400,000             401,224
===============================================================================
                                                                      3,699,792
===============================================================================

REAL ESTATE MANAGEMENT & DEVELOPMENT-0.04%                                     

Southern Investments UK PLC (United Kingdom),                                  
  Sr. Unsec. Unsub. Yankee Notes, 6.80%,                                       
  12/01/06(h)                                       735,000             772,404
===============================================================================

REGIONAL BANKS-1.02%                                                           

Cullen/Frost Capital Trust I, Unsec. Sub.                                      
  Floating Rate Notes, 3.95%, 03/01/34(c)(h)      2,425,000           2,513,852
-------------------------------------------------------------------------------
Greater Bay Bancorp-Series B, Sr. Notes,                                       
  5.25%, 03/31/08(h)                              3,000,000           3,021,720
-------------------------------------------------------------------------------
PNC Capital Trust C, Gtd. Floating Rate                                        
  Notes, 2.97%, 06/01/28(c)(h)                    1,000,000             949,720
-------------------------------------------------------------------------------
Popular North America, Inc., Gtd. Notes,                                       
  4.70%, 06/30/09(h)                              3,125,000           3,188,250
-------------------------------------------------------------------------------
Santander Financial Issuances (Cayman                                          
  Islands), Sec. Sub. Floating Rate Euro                                       
  Notes, 2.87%(h)(j)(k)                           8,000,000           7,953,176
-------------------------------------------------------------------------------
TCF Financial Corp., Sub. Notes, 5.00%,                                        
  06/15/14(h)                                     1,400,000           1,424,444
===============================================================================
                                                                     19,051,162
===============================================================================

RESTAURANTS-0.05%                                                              

McDonald's Corp., Unsec. Deb., 7.05%,                                          
  11/15/25(h)                                       850,000             901,587
===============================================================================

SOVEREIGN DEBT-0.86%                                                           

Japan Bank for International Cooperation                                       
  (Japan), Unsec. Gtd. Euro Bonds, 6.50%,                                      
  10/06/05(h)                                     4,600,000           4,719,572
-------------------------------------------------------------------------------
New Brunswick (Province of) (Canada), Sec.                                     
  Yankee Deb., 6.75%, 08/15/13(h)                   830,000             968,278
-------------------------------------------------------------------------------
Quebec (Province of) (Canada), Sr. Unsec.                                      
  Unsub. Global Deb., 5.75%, 02/15/09(h)          1,400,000           1,502,438
-------------------------------------------------------------------------------
Russian Federation (Russia), Unsec. Unsub.                                     
  Bonds,                                                                       
    7.50%, 03/31/30 (Acquired 05/18/04; Cost                                   
    $1,260,875)(d)(h)(n)                          1,400,000           1,446,760
-------------------------------------------------------------------------------
    8.75%, 07/24/05 (Acquired 09/10/04-                                        
    12/03/04; Cost $1,271,188)(d)(h)              1,225,000           1,259,300
-------------------------------------------------------------------------------
  Unsec. Unsub. Euro Bonds-REGS,                                               
    8.75%, 07/24/05 (Acquired 05/14/04; Cost                                   
    $2,218,650)(d)(h)                             2,100,000           2,160,690
-------------------------------------------------------------------------------
    10.00%, 06/26/07 (Acquired 05/14/04-                                       
    05/18/04; Cost $1,892,475)(d)(h)              1,680,000           1,902,768
-------------------------------------------------------------------------------
United Mexican States (Mexico)-Series A,                                       
  Medium Term Global Notes,                                                    
  6.63%, 03/03/15(h)                                490,000             525,819
-------------------------------------------------------------------------------
  7.50%, 04/08/33(h)                              1,570,000           1,689,556
===============================================================================
                                                                     16,175,181
===============================================================================

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                                                PRINCIPAL            MARKET    
                                                  AMOUNT             VALUE     
-------------------------------------------------------------------------------
                                                                               

THRIFTS & MORTGAGE FINANCE-0.16%                                               

Greenpoint Capital Trust I, Gtd. Sub. Notes,                                   
  9.10%, 06/01/27(h)                           $    950,000      $    1,123,917
-------------------------------------------------------------------------------
Washington Mutual Finance Corp., Sr. Unsec.                                    
  Notes, 8.25%, 06/15/05(h)                       1,775,000           1,817,920
===============================================================================
                                                                      2,941,837
===============================================================================

TOBACCO-0.17%                                                                  

Altria Group, Inc.,                                                            
  Sr. Unsec. Notes, 7.00%, 11/04/13(h)              450,000             486,891
-------------------------------------------------------------------------------
  Unsec. Global Notes, 7.00%, 07/15/05(h)         2,650,000           2,702,444
===============================================================================
                                                                      3,189,335
===============================================================================

TRUCKING-0.16%                                                                 

Roadway Corp., Sr. Unsec. Gtd. Global Notes,                                   
  8.25%, 12/01/08(h)                              2,655,000           2,956,210
===============================================================================

WIRELESS TELECOMMUNICATION SERVICES-0.31%                                      

AT&T Wireless Services Inc., Sr. Unsec.                                        
  Unsub. Global Notes, 6.88%, 04/18/05(h)         1,100,000           1,112,188
-------------------------------------------------------------------------------
TeleCorp PCS, Inc., Sr. Unsec. Gtd. Sub.                                       
  Global Notes, 10.63%, 07/15/10(h)               4,355,000           4,764,370
===============================================================================
                                                                      5,876,558
===============================================================================
    Total Bonds & Notes (Cost $301,177,791)                         302,692,072
===============================================================================

U.S. MORTGAGE-BACKED SECURITIES-9.36%                                          

FEDERAL HOME LOAN MORTGAGE CORP.                                               
  (FHLMC)-1.37%                                                                

Pass Through Ctfs.,                                                            
  5.50%, 05/01/13 to 12/01/33(h)                  2,819,286           2,909,098
-------------------------------------------------------------------------------
  7.00%, 06/01/15 to 06/01/32(h)                  7,379,632           4,643,345
-------------------------------------------------------------------------------
  6.50%, 05/01/16 to 03/01/33(h)                  3,770,547           3,960,176
-------------------------------------------------------------------------------
  6.00%, 04/01/17 to 01/01/34(h)                  8,861,576           9,246,465
-------------------------------------------------------------------------------
  8.00%, 01/01/27(h)                              1,407,647           1,532,643
-------------------------------------------------------------------------------
  7.50%, 12/01/30 to 03/01/32(h)                    806,751             864,968
-------------------------------------------------------------------------------
Pass Through Ctfs., TBA,                                                       
  5.00%, 01/01/15(o)                              2,420,000           2,458,388
===============================================================================
                                                                     25,615,083
===============================================================================

FEDERAL NATIONAL MORTGAGE ASSOCIATION                                          
  (FNMA)-6.99%                                                                 

Pass Through Ctfs.,                                                            
  8.50%, 03/01/10 to 10/01/28(h)                  2,244,012           2,471,769
-------------------------------------------------------------------------------
  6.50%, 04/01/14 to 09/01/34(h)                 19,928,660          20,962,643
-------------------------------------------------------------------------------
  7.50%, 11/01/15 to 05/01/32(h)                  1,621,130           1,733,128
-------------------------------------------------------------------------------
  7.00%, 12/01/15 to 09/01/32(h)                  5,469,257           5,800,455
-------------------------------------------------------------------------------
  6.00%, 01/01/17 to 03/01/22(h)                    520,993             542,238
-------------------------------------------------------------------------------
  5.00%, 11/01/17 to 11/01/18(h)                  2,953,720           3,004,906
-------------------------------------------------------------------------------
  8.00%, 08/01/21 to 10/01/30(h)                  1,286,605           1,400,645
-------------------------------------------------------------------------------
  5.50%, 08/01/33 to 09/01/33(h)                  3,395,457           3,451,121
-------------------------------------------------------------------------------

                                                                [Download Table]
-------------------------------------------------------------------------------

                                                PRINCIPAL            MARKET    
                                                  AMOUNT             VALUE     
                                                                               
FEDERAL NATIONAL MORTGAGE ASSOCIATION-(CONTINUED)                              

Pass Through Ctfs., TBA,                                                       
  5.00%, 01/01/20 to 01/01/35(o)               $ 25,346,640      $   25,591,364
-------------------------------------------------------------------------------
  5.50%, 01/01/20 to 01/01/35(o)                 44,688,574          45,546,247
-------------------------------------------------------------------------------
  6.00%, 01/01/35(o)                             19,643,600          20,316,339
===============================================================================
                                                                    130,820,855
===============================================================================

GOVERNMENT NATIONAL MORTGAGE ASSOCIATION                                       
  (GNMA)-1.00%                                                                 

Pass Through Ctfs.,                                                            
  6.50%, 10/15/08 to 02/15/33(h)                  3,731,806           3,932,388
-------------------------------------------------------------------------------
  7.00%, 10/15/08 to 05/15/32(h)                  2,211,242           2,349,894
-------------------------------------------------------------------------------
  6.00%, 11/15/08 to 10/15/33(h)                  5,808,970           6,030,415
-------------------------------------------------------------------------------
  8.00%, 08/15/22 to 01/20/31(h)                    766,023             837,419
-------------------------------------------------------------------------------
  7.50%, 06/15/23 to 05/15/32(h)                  2,032,869           2,192,997
-------------------------------------------------------------------------------
  8.50%, 11/15/24 to 02/15/25(h)                    122,231             134,121
-------------------------------------------------------------------------------
  5.50%, 06/15/33 to 12/15/33(h)                  3,191,779           3,263,972
===============================================================================
                                                                     18,741,206
===============================================================================
    Total U.S. Mortgage-Backed Securities                                      
      (Cost $173,863,280)                                           175,177,144
===============================================================================

U.S. GOVERNMENT AGENCY SECURITIES-6.37%                                        

FEDERAL HOME LOAN BANK-5.71%                                                   

Unsec. Disc. Notes,                                                            
  1.25%, 01/03/05(p)                            106,887,000         106,879,577
===============================================================================

FEDERAL NATIONAL MORTGAGE ASSOCIATION                                          
  (FNMA)-0.66%                                                                 

Unsec. Floating Rate Global Notes,                                             
  3.68%, 02/17/09(h)(q)                           8,675,000           8,756,372
-------------------------------------------------------------------------------
Unsec. Global Notes,                                                           
  3.38%, 12/15/08(h)                              3,525,000           3,480,479
===============================================================================
                                                                     12,236,851
===============================================================================
    Total U.S. Government Agency Securities                                    
      (Cost $118,963,428)                                           119,116,428
===============================================================================

U.S. TREASURY SECURITIES-4.30%                                                 

U.S. TREASURY NOTES-3.34%                                                      

2.50%, 09/30/06(h)                                2,500,000           2,478,525
-------------------------------------------------------------------------------
6.50%, 10/15/06(h)                               17,165,000          18,197,646
-------------------------------------------------------------------------------
3.50%, 11/15/06 to 11/15/09(h)                   28,850,000          28,913,486
-------------------------------------------------------------------------------
3.13%, 10/15/08(h)                                2,115,000           2,092,518
-------------------------------------------------------------------------------
4.75%, 11/15/08(h)                                5,680,000           5,951,561
-------------------------------------------------------------------------------
5.00%, 02/15/11(h)                                4,525,000           4,816,274
===============================================================================
                                                                     62,450,010
===============================================================================

U.S. TREASURY BONDS-0.90%                                                      

7.25%, 05/15/16 to 08/15/22(h)                   11,555,000          14,588,714
-------------------------------------------------------------------------------
7.50%, 11/15/16(h)                                   60,000              76,697
-------------------------------------------------------------------------------
5.38%, 02/15/31(h)                                2,095,000           2,264,569
===============================================================================
                                                                     16,929,980
===============================================================================

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                                                PRINCIPAL            MARKET    
                                                  AMOUNT             VALUE     
-------------------------------------------------------------------------------
                                                                               

U.S. TREASURY STRIPS-0.06%                                                     

3.03%, 02/15/07(h)(p)                          $  1,175,000      $    1,103,219
===============================================================================
    Total U.S. Treasury Securities (Cost                                       
      $78,706,691)                                                   80,483,209
===============================================================================

ASSET-BACKED SECURITIES-1.32%                                                  

OTHER DIVERSIFIED FINANCIAL SERVICES-1.09%                                     

Citicorp Lease-Series 1999-1, Class A1, Pass                                   
  Through Ctfs., 7.22%, 06/15/05 (Acquired                                     
  05/08/02-02/25/04; Cost $5,734,000)(d)(h)       5,400,171           5,498,724
-------------------------------------------------------------------------------
Citicorp Lease-Series 1999-1, Class A2, Pass                                   
  Through Ctfs., 8.04%, 12/15/19 (Acquired                                     
  06/01/00; Cost $3,901,297)(d)(h)                3,950,000           4,707,626
-------------------------------------------------------------------------------
Patrons' Legacy-Series 2003-III, Ctfs.,                                        
  5.65%, 01/17/17 (Acquired 11/04/04; Cost                                     
  $2,563,525)(d)(f)                               2,500,000           2,543,406
-------------------------------------------------------------------------------
Patrons' Legacy-Series 2004-I, Ctfs., 6.67%,                                   
  02/04/17 (Acquired 04/30/04; Cost                                            
  $5,000,000)(d)(f)                               5,000,000           5,097,013
-------------------------------------------------------------------------------
Twin Reefs Pass Through Trust, Floating Rate                                   
  Pass Through Ctfs., 3.37%, (Acquired                                         
  12/07/04; Cost $1,900,000)(d)(f)(h)(j)(q)       1,900,000           1,910,811
-------------------------------------------------------------------------------
Yorkshire Power Pass-Through Asset Trust                                       
  (Cayman Islands)-Series 2000-1, Pass                                         
  Through Ctfs., 8.25%, 02/15/05 (Acquired                                     
  11/12/03; Cost $640,800)(d)(f)(h)                 600,000             603,294
===============================================================================
                                                                     20,360,874
===============================================================================

PROPERTY & CASUALTY INSURANCE-0.12%                                            

North Front Pass-Through Trust, Bonds, 5.81%,                                  
  12/15/24 (Acquired 12/08/04; Cost                                            
  $2,144,192)(d)(f)(h)                            2,125,000           2,167,351
===============================================================================

                                                                [Download Table]
------------------------------------------------------------------------------- 

                                                PRINCIPAL            MARKET     
                                                  AMOUNT             VALUE      
                                                                                

THRIFTS & MORTGAGE FINANCE-0.11%                                                

Sovereign Bank-Class A-1, Pass Through Ctfs.,                                   
  10.20%, 06/30/05 (Acquired 09/22/04; Cost                                     
  $2,352,075)(d)(f)(h)                         $  2,020,308      $    2,080,331 
=============================================================================== 
    Total Asset-Backed Securities (Cost                                         
      $23,933,783)                                                   24,608,556 
=============================================================================== 
TOTAL INVESTMENTS-103.61% (excluding                                            
  investments purchased with cash collateral                                    
  from securities loaned) (Cost                                                 
  $1,760,597,128)                                                 1,938,266,426 
=============================================================================== 


                                                  SHARES                        
                                                                                
INVESTMENTS PURCHASED WITH CASH COLLATERAL                                      
  FROM SECURITIES LOANED                                                        

MONEY MARKET FUNDS-12.95%                                                       

Liquid Assets Portfolio-Institutional                                           
  Class(r)(s)                                   121,085,396         121,085,396 
------------------------------------------------------------------------------- 
STIC Prime Portfolio-Institutional                                              
  Class(r)(s)                                   121,085,396         121,085,396 
=============================================================================== 
    Total Money Market Funds (purchased with                                    
      cash collateral from securities loaned)                                   
      (Cost $242,170,792)                                           242,170,792 
=============================================================================== 
TOTAL INVESTMENTS-116.56% (Cost                                                 
  $2,002,767,920)                                                 2,180,437,218 
=============================================================================== 
OTHER ASSETS LESS LIABILITIES-(16.56)%                             (309,714,704)
_______________________________________________________________________________ 
=============================================================================== 
NET ASSETS-100.00%                                               $1,870,722,514 
_______________________________________________________________________________ 
=============================================================================== 

Investment Abbreviations:                                                       

                                                                [Download Table]
                                                                      
ADR     - American Depositary Receipt                                 
Ctfs.   - Certificates                                                
Deb.    - Debentures                                                  
Disc.   - Discounted                                                  
Gtd.    - Guaranteed                                                  
Pfd.    - Preferred                                                   
RB      - Revenue Bonds                                               
REGS    - Regulation S                                                
Sec.    - Secured                                                     
Sr.     - Senior                                                      
STRIPS  - Separately Traded Registered Interest and Principal Security
Sub.    - Subordinated                                                
TBA     - To Be Announced                                             
Unsec.  - Unsecured                                                   
Unsub.  - Unsubordinated                                              

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Notes to Schedule of Investments:                                               

(a) Non-income producing security.                                              
(b) All or a portion of this security has been pledged as collateral for        
securities lending transactions at December 31, 2004.                   
(c) Interest rate is redetermined quarterly. Rate shown is the rate in effect on
December 31, 2004.                                                      
(d) Security not registered under the Securities Act of 1933, as amended (e.g., 
the security was purchased in a Rule 144A transaction or a Regulation D 
   transaction). The security may be resold only pursuant to an exemption from
registration under the 1933 Act, typically to qualified institutional   
  buyers. The Fund has no rights to demand registration of these securities.
The aggregate market value of these securities at December 31, 2004 was 
$75,643,050, which represented 4.04% of the Fund's Net Assets. Unless   
otherwise indicated, these securities are not considered illiquid.      
(e) Interest rate is redetermined annually. Rate shown is the rate in effect on 
December 31, 2004.                                                      
(f) Security considered to be illiquid. The aggregate market value of these     
  securities considered illiquid at December 31, 2004 was $46,657,917, which
represented 2.49% of the Fund's Net Assets.                             
(g) In accordance with the procedures established by the Board of Trustees, the 
 foreign security is fair valued using adjusted closing market prices. The
   market value of this security at December 31, 2004 represented 1.94% of the
Fund's Total Investments. See Note 1A.                                  
(h) In accordance with the procedures established by the Board of Trustees,     
   security fair valued based on an evaluated quote provided by an independent
   pricing service. The aggregate market value of these securities at December
31, 2004 was $497,865,734, which represented 22.83% of the Fund's Total 
Investments. See Note 1A.                                               
(i) A portion of the principal balance was pledged as collateral to cover margin
requirements for open futures contracts. See Note 1K and Note 9.        
(j) Perpetual bond with no specified maturity date.                             
(k) Interest rate is redetermined semi-annually. Rate shown is the rate in      
effect on December 31, 2004.                                            
(l) Principal and interest payments are secured by bond insurance provided by   
 one of the following companies: Ambac Assurance Corp., Financial Guaranty
 Insurance Co., Financial Security Assurance Inc., or MBIA Insurance Corp.
(m) Zero coupon bond issued at a discount. The interest rate shown represents   
   the current yield on December 31, 2004. Bond will convert to a fixed coupon
rate at a specified future date.                                        
(n) Step coupon bond at issue. The interest rate represents the coupon rate at  
which the bond will accrue at a specified future date.                  
(o) Security purchased on forward commitment basis. This security is subject to 
dollar roll transactions. See Note 1G.                                  
(p) Security is traded on a discount basis. The interest rate shown represents  
the discount rate at the time of purchase by the Fund.                  
(q) Interest rate is redetermined monthly. Rate shown is the rate in effect on  
December 31, 2004.                                                      
(r) The money market fund and the Fund are affiliated by having the same        
investment advisor. See Note 3.                                         
(s) The security has been segregated to satisfy the forward commitment to return
the cash collateral received in securities lending transactions upon the
borrower's return of the securities loaned. See Note 8.                 

See accompanying notes which are an integral part of the financial statements.  
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STATEMENT OF ASSETS AND LIABILITIES                                             

December 31, 2004                                                               

                                                                [Download Table]
                                                             
ASSETS:                                                      

Investments, at market value (cost                           
  $1,760,597,128)*                            $1,938,266,426 
------------------------------------------------------------ 
Investments in affiliated money market funds                 
  (cost $242,170,792)                            242,170,792 
============================================================ 
  Total investments (cost $2,002,767,920)      2,180,437,218 
============================================================ 
Cash                                                  48,740 
------------------------------------------------------------ 
Foreign currencies, at market value (cost                    
  $61)                                                    74 
------------------------------------------------------------ 
Receivables for:                                             
  Investments sold                                34,642,388 
------------------------------------------------------------ 
  Variation margin                                   231,360 
------------------------------------------------------------ 
  Fund shares sold                                   896,040 
------------------------------------------------------------ 
  Dividends and interest                           7,924,723 
------------------------------------------------------------ 
  Investments matured (Note 11)                    1,535,737 
------------------------------------------------------------ 
  Principal paydowns                                 211,796 
------------------------------------------------------------ 
Investment for trustee deferred compensation                 
  and retirement plans                               198,595 
------------------------------------------------------------ 
Other assets                                          42,274 
============================================================ 
    Total assets                               2,226,168,945 
____________________________________________________________ 
============================================================ 

LIABILITIES:                                                 

Payables for:                                                
  Investments purchased                           98,246,293 
------------------------------------------------------------ 
  Fund shares reacquired                          13,131,602 
------------------------------------------------------------ 
  Trustee deferred compensation and                          
    retirement plans                                 306,986 
------------------------------------------------------------ 
  Collateral upon return of securities                       
    loaned                                       242,170,792 
------------------------------------------------------------ 
Accrued distribution fees                            750,548 
------------------------------------------------------------ 
Accrued transfer agent fees                          580,773 
------------------------------------------------------------ 
Accrued operating expenses                           259,437 
============================================================ 
    Total liabilities                            355,446,431 
============================================================ 
Net assets applicable to shares outstanding   $1,870,722,514 
____________________________________________________________ 
============================================================ 

NET ASSETS CONSIST OF:                                       

Shares of beneficial interest                 $2,360,571,857 
------------------------------------------------------------ 
Undistributed net investment income (loss)        (5,141,012)
------------------------------------------------------------ 
Undistributed net realized gain (loss) from                  
  investment securities, foreign currencies                  
  and futures contracts                         (663,161,487)
------------------------------------------------------------ 
Unrealized appreciation of investment                        
  securities, foreign currencies and futures                 
  contracts                                      178,453,156 
============================================================ 
                                              $1,870,722,514 
____________________________________________________________ 
============================================================ 

NET ASSETS:                                                  

Class A                                       $1,049,415,157 
____________________________________________________________ 
============================================================ 
Class B                                       $  604,378,457 
____________________________________________________________ 
============================================================ 
Class C                                       $  211,297,376 
____________________________________________________________ 
============================================================ 
Class R                                       $    5,620,985 
____________________________________________________________ 
============================================================ 
Institutional Class                           $       10,539 
____________________________________________________________ 
============================================================ 

SHARES OUTSTANDING, $0.01 PAR VALUE PER                      
  SHARE, UNLIMITED NUMBER OF SHARES                          
  AUTHORIZED:                                                

Class A                                           41,473,872 
____________________________________________________________ 
============================================================ 
Class B                                           23,938,724 
____________________________________________________________ 
============================================================ 
Class C                                            8,356,529 
____________________________________________________________ 
============================================================ 
Class R                                              221,893 
____________________________________________________________ 
============================================================ 
Institutional Class                                    416.3 
____________________________________________________________ 
============================================================ 
Class A:                                                     
  Net asset value per share                   $        25.30 
------------------------------------------------------------ 
  Offering price per share:                                  
    (Net asset value of $25.30 divided by                    
      95.25%)                                 $        26.56 
____________________________________________________________ 
============================================================ 
Class B:                                                     
  Net asset value and offering price per                     
    share                                     $        25.25 
____________________________________________________________ 
============================================================ 
Class C:                                                     
  Net asset value and offering price per                     
    share                                     $        25.29 
____________________________________________________________ 
============================================================ 
Class R:                                                     
  Net asset value and offering price per                     
    share                                     $        25.33 
____________________________________________________________ 
============================================================ 
Institutional Class:                                         
  Net asset value and offering price per                     
    share                                     $        25.32 
____________________________________________________________ 
============================================================ 

* At December 31, 2004, securities with an aggregate market value of            
$236,707,159 were on loan to brokers.                                       

See accompanying notes which are an integral part of the financial statements.  
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STATEMENT OF OPERATIONS                                                         

For the year ended December 31, 2004                                            

                                                                [Download Table]
                                                                           
INVESTMENT INCOME:                                                         

Interest                                                      $ 30,801,224 
-------------------------------------------------------------------------- 
Dividends (net of foreign withholding tax of $285,253)          19,345,706 
-------------------------------------------------------------------------- 
Dividends from affiliated money market funds (including                    
  securities lending income of $323,468*)                          323,468 
========================================================================== 
    Total investment income                                     50,470,398 
========================================================================== 

EXPENSES:                                                                  

Advisory fees                                                   10,703,307 
-------------------------------------------------------------------------- 
Administrative services fees                                       458,536 
-------------------------------------------------------------------------- 
Custodian fees                                                     302,990 
-------------------------------------------------------------------------- 
Distribution fees:                                                         
  Class A                                                        2,887,535 
-------------------------------------------------------------------------- 
  Class B                                                        6,710,792 
-------------------------------------------------------------------------- 
  Class C                                                        2,349,482 
-------------------------------------------------------------------------- 
  Class R                                                           23,049 
-------------------------------------------------------------------------- 
Transfer agent fees -- Class A, B, C and R                       4,790,611 
-------------------------------------------------------------------------- 
Transfer agent fees -- Institutional Class                              23 
-------------------------------------------------------------------------- 
Trustees' fees and retirement benefits                              68,735 
-------------------------------------------------------------------------- 
Other                                                              742,795 
========================================================================== 
    Total expenses                                              29,037,855 
========================================================================== 
Less: Fees waived, expenses reimbursed and expense offset                  
  arrangement                                                     (258,923)
========================================================================== 
    Net expenses                                                28,778,932 
========================================================================== 
Net investment income                                           21,691,466 
========================================================================== 

REALIZED AND UNREALIZED GAIN FROM INVESTMENT SECURITIES,                   
  FOREIGN CURRENCIES AND FUTURES CONTRACTS:                                

Net realized gain from:                                                    
  Investment securities                                         90,280,637 
-------------------------------------------------------------------------- 
  Foreign currencies                                                 7,933 
-------------------------------------------------------------------------- 
  Futures contracts                                              1,430,062 
========================================================================== 
                                                                91,718,632 
========================================================================== 
Change in net unrealized appreciation of:                                  
  Investment securities                                         25,925,592 
-------------------------------------------------------------------------- 
  Foreign currencies                                                44,599 
-------------------------------------------------------------------------- 
  Futures contracts                                                783,890 
========================================================================== 
                                                                26,754,081 
========================================================================== 
Net gain from investment securities, foreign currencies and                
  futures contracts                                            118,472,713 
========================================================================== 
Net increase in net assets resulting from operations          $140,164,179 
__________________________________________________________________________ 
========================================================================== 

* Dividends from affiliated money market funds are net of income rebate paid to 
securities lending counterparties.                                          

See accompanying notes which are an integral part of the financial statements.  
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STATEMENT OF CHANGES IN NET ASSETS                                              

For the years ended December 31, 2004 and 2003                                  

                                                        [Enlarge/Download Table]

                                                                   2004              2003      
---------------------------------------------------------------------------------------------- 
                                                                                               
OPERATIONS:                                                                                    

  Net investment income                                       $   21,691,466    $   30,431,107 
---------------------------------------------------------------------------------------------- 
  Net realized gain from investment securities, foreign                                        
    currencies and futures contracts                              91,718,632       107,782,700 
---------------------------------------------------------------------------------------------- 
  Change in net unrealized appreciation of investment                                          
    securities, foreign currencies, futures contracts and                                      
    option contracts                                              26,754,081       228,117,385 
============================================================================================== 
    Net increase in net assets resulting from operations         140,164,179       366,331,192 
============================================================================================== 
Distributions to shareholders from net investment income:                                      
  Class A                                                        (20,418,776)      (26,240,036)
---------------------------------------------------------------------------------------------- 
  Class B                                                         (6,979,759)       (8,673,183)
---------------------------------------------------------------------------------------------- 
  Class C                                                         (2,425,648)       (3,288,903)
---------------------------------------------------------------------------------------------- 
  Class R                                                            (75,777)          (48,722)
---------------------------------------------------------------------------------------------- 
  Institutional Class                                                   (220)             (209)
============================================================================================== 
    Decrease in net assets resulting from distributions          (29,900,180)      (38,251,053)
============================================================================================== 
Share transactions-net:                                                                        
  Class A                                                       (310,464,020)     (325,786,055)
---------------------------------------------------------------------------------------------- 
  Class B                                                       (170,136,078)     (127,772,946)
---------------------------------------------------------------------------------------------- 
  Class C                                                        (65,588,422)      (75,676,154)
---------------------------------------------------------------------------------------------- 
  Class R                                                          1,510,478         3,149,619 
---------------------------------------------------------------------------------------------- 
  Institutional Class                                                    220               209 
============================================================================================== 
    Net increase (decrease) in net assets resulting from                                       
     share transactions                                         (544,677,822)     (526,085,327)
============================================================================================== 
    Net increase (decrease) in net assets                       (434,413,823)     (198,005,188)
============================================================================================== 

NET ASSETS:                                                                                    

  Beginning of year                                            2,305,136,337     2,503,141,525 
============================================================================================== 
  End of year (including undistributed net investment income                                   
    (loss) of $(5,141,012) and $(2,977,290), respectively)    $1,870,722,514    $2,305,136,337 
______________________________________________________________________________________________ 
============================================================================================== 

See accompanying notes which are an integral part of the financial statements.  
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NOTES TO FINANCIAL STATEMENTS                                                   

December 31, 2004                                                               

NOTE 1--SIGNIFICANT ACCOUNTING POLICIES                                         

AIM Balanced Fund (the "Fund") is a series portfolio of AIM Funds Group (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 nine separate portfolios,    
each authorized to issue an unlimited number of shares of beneficial interest.  
The Fund currently offers multiple classes of shares. Matters affecting each    
portfolio or class will be voted on exclusively by the shareholders of such     
portfolio or class. The assets, liabilities and operations of each portfolio are
accounted for separately. Information presented in these financial statements   
pertains only to the Fund.                                                      

The Fund's investment objective is to achieve as high a total return as 
possible, consistent with preservation of capital. Each company listed in the   
Schedule of Investments is organized in the United States of America unless     
otherwise noted.                                                                

   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. However, the Fund has not had prior claims or losses pursuant to these
contracts.                                                                      

The preparation of financial statements in conformity with accounting   
principles generally accepted in the United States of America requires          
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported 
amounts of revenues and expenses during the reporting period. Actual results    
could differ from those estimates. The following is a summary of the significant
accounting policies followed by the Fund in the preparation of its financial    
statements.                                                                     

A.   SECURITY VALUATIONS -- Securities, including restricted securities, are    
valued according to the following policy.                             

      A security listed or traded on an exchange (except convertible bonds) is
 valued at its last sales price as of the close of the customary trading
session on the exchange where the security is principally traded, or  
lacking any sales on a particular day, the security is valued at the  
     closing bid price on that day. Each security traded in the over-the-counter
   market (but not securities reported on the NASDAQ National Market System)
    is valued on the basis of prices furnished by independent pricing services
or market makers. Each security reported on the NASDAQ National Market
  System is valued at the NASDAQ Official Closing Price ("NOCP") as of the
  close of the customary trading session on the valuation date or absent a
NOCP, at the closing bid price.                                       

  Futures contracts are valued at the final settlement price set by an
     exchange on which they are principally traded. Listed options are valued at
     the mean between the last bid and the ask prices from the exchange on which
   they are principally traded. Options not listed on an exchange are valued
   by an independent source at the mean between the last bid and ask prices.
   For purposes of determining net asset value per share, futures and option
contracts generally will be valued 15 minutes after the close of the  
customary trading session of the New York Stock Exchange ("NYSE").    

    Investments in open-end registered investment companies and closed-end
     registered investment companies that do not trade on an exchange are valued
at the end of day net asset value per share. Investments in closed-end
     registered investment companies that trade on an exchange are valued at the
  last sales price as of the close of the customary trading session on the
exchange where the security is principally traded.                    

     Debt obligations (including convertible bonds) are fair valued using an
evaluated quote provided by an independent pricing service. Evaluated 
    quotes provided by the pricing service may be determined without exclusive
reliance on quoted prices, and may reflect appropriate factors such as
institution-size trading in similar groups of securities, developments
related to specific securities, dividend rate, yield, quality, type of
    issue, coupon rate, maturity, individual trading characteristics and other
    market data. Short-term obligations having 60 days or less to maturity and
 commercial paper are valued at amortized cost which approximates market
value.                                                                

     Securities for which market prices are not provided by any of the above
   methods are valued based upon quotes furnished by independent sources and
  are valued at the last bid price in the case of equity securities and in
the case of debt obligations, the mean between the last bid and asked 
prices.                                                               

     Foreign securities (including foreign exchange contracts) are converted
into U.S. dollar amounts using the applicable exchange rates as of the
close of the NYSE. Generally, trading in foreign securities is        
     substantially completed each day at various times prior to the close of the
   NYSE. The values of such securities used in computing the net asset value
of the Fund's shares are determined as of the close of the respective 
   markets. Events affecting the values of such foreign securities may occur
 between the times at which the particular foreign market closes and the
close of the customary trading session of the NYSE which would not    
   ordinarily be reflected in the computation of the Fund's net asset value.
    If the event is likely to have affected the closing price of the security,
  the security will be valued at fair value in good faith using procedures
     approved by the Board of Trustees. Adjustments to closing prices to reflect
fair value may also be based on a screening process of an independent 
  pricing service to indicate the degree of certainty, based on historical
data, that the closing price in the principal market where a foreign  
security trades is not the current market value as of the close of the
    NYSE. Foreign securities meeting the approved degree of certainty that the
price is not reflective of current market value will be priced at the 
 indication of fair value from the independent pricing service. Multiple
     factors may be considered by the independent pricing service in determining
   adjustments to reflect fair value and may include information relating to
sector indices, ADRs, domestic and foreign index futures and          
exchange-traded funds.                                                

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     Securities for which market quotations are not readily available or are
     unreliable are valued at fair value as determined in good faith by or under
  the supervision of the Trust's officers following procedures approved by
the Board of Trustees. Issuer specific events, market trends, bid/ask 
  quotes of brokers and information providers and other market data may be
     reviewed in the course of making a good faith determination of a security's
fair value.                                                           

B.   SECURITIES TRANSACTIONS AND INVESTMENT INCOME -- Securities transactions   
    are accounted for on a trade date basis. Realized gains or losses on sales
are computed on the basis of specific identification of the securities
sold. Interest income is recorded on the accrual basis from settlement
  date. Dividend income is recorded on the ex-dividend date. Bond premiums
and discounts are amortized and/or accreted for financial reporting   
purposes.                                                             

     Brokerage commissions and mark ups are considered transaction costs and
are recorded as an increase to the cost basis of securities purchased 
  and/or a reduction of proceeds on a sale of securities. Such transaction
 costs are included in the determination of realized and unrealized gain
   (loss) from investment securities reported in the Statement of Operations
    and the Statement of Changes in Net Assets and the realized and unrealized
 net gains (losses) on securities per share in the Financial Highlights.
   Transaction costs are included in the calculation of the Fund's net asset
value and, accordingly, they reduce the Fund's total returns. These   
transaction costs are not considered operating expenses and are not   
    reflected in net investment income reported in the Statement of Operations
  and Statement of Changes in Net Assets, or the net investment income per
share and ratios of expenses and net investment income reported in the
Financial Highlights, nor are they limited by any expense limitation  
arrangements between the Fund and the advisor.                        

     The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.     

C.   DISTRIBUTIONS -- Distributions from income are declared and paid quarterly 
and are recorded on ex-dividend date. Distributions from net realized 
capital gain, if any, are generally paid annually and recorded on     
    ex-dividend date. The Fund may elect to use a portion of the proceeds from
redemptions as distributions for federal income tax purposes.         

D.   FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of
Subchapter M of the Internal Revenue Code necessary to qualify as a   
   regulated investment company and, as such, will not be subject to federal
  income taxes on otherwise taxable income (including net realized capital
 gain) which is distributed to shareholders. Therefore, no provision for
federal income taxes is recorded in the financial statements.         

E.   EXPENSES -- Fees provided for under the Rule 12b-1 plan of a particular    
 class of the Fund are charged to the operations of such class. Transfer
agency fees and expenses and other shareholder recordkeeping fees and 
     expenses attributable to the Institutional Class are charged to such class.
    Transfer agency fees and expenses and other shareholder recordkeeping fees
and expenses relating to all other classes are allocated among those  
classes based on relative net assets. All other expenses are allocated
among the classes based on relative net assets.                       

F.   REPURCHASE AGREEMENTS -- The Fund may enter into repurchase agreements.    
     Collateral on repurchase agreements, including the Fund's pro-rata interest
   in joint repurchase agreements, is taken into possession by the Fund upon
    entering into the repurchase agreement. Eligible securities for collateral
  are U.S. Government Securities, U.S. Government Agency Securities and/or
    Investment Grade Debt Securities. Collateral consisting of U.S. Government
    Securities and U.S. Government Agency Securities is marked to market daily
to ensure its market value is at least 102% of the sales price of the 
repurchase agreement. Collateral consisting of Investment Grade Debt  
     Securities is marked to market daily to ensure its market value is at least
 105% of the sales price of the repurchase agreement. The investments in
some repurchase agreements, pursuant to an exemptive order from the   
  Securities and Exchange Commission, are through participation with other
mutual funds, private accounts and certain non-registered investment  
companies managed by the investment advisor or its affiliates ("Joint 
   repurchase agreements"). If the seller of a repurchase agreement fails to
    repurchase the security in accordance with the terms of the agreement, the
 Fund might incur expenses in enforcing its rights, and could experience
 losses, including a decline in the value of the underlying security and
loss of income.                                                       

G.   DOLLAR ROLL TRANSACTIONS -- The Fund may engage in dollar roll transactions
    with respect to mortgage-backed securities issued by GNMA, FNMA and FHLMC.
 In a dollar roll transaction, the Fund sells a mortgage-backed security
held in the Fund to a financial institution such as a bank or         
broker-dealer, and simultaneously agrees to purchase a substantially  
   similar security (same type, coupon and maturity) from the institution at
    an agreed upon price and future date. The mortgage-backed securities to be
 purchased will bear the same interest rate as those sold, but generally
will be collateralized by different pools of mortgages with different 
prepayment histories. The difference between the selling price and the
    future purchase price is generally amortized to income between the date of
   the sell and the future purchase date. During the period between the sale
and purchase, the Fund will not be entitled to receive interest and   
     principal payments on securities sold. Proceeds of the sale may be invested
    in short-term instruments, and the income from these investments, together
    with any additional fee income received on the sale, could generate income
for the Fund exceeding the yield on the security sold. Dollar roll    
    transactions are considered borrowings under the 1940 Act. At the time the
    Fund enters into the dollar roll, it will segregate liquid assets having a
dollar value equal to the purchase price.                             

    Dollar roll transactions involve the risk that the market value of the
securities retained by the Fund may decline below the price of the    
  securities that the Fund has sold but is obligated to purchase under the
agreement. In the event that the buyer of securities in a dollar roll 
  transaction files for bankruptcy or becomes insolvent, the Fund's use of
  the proceeds from the sale of the securities may be restricted pending a
  determination by the other party, or its trustee or receiver, whether to
     enforce the Fund's obligation to purchase the securities. The return earned
     by the Fund with the proceeds of the dollar roll transaction may not exceed
transaction costs.                                                    

H.   FOREIGN CURRENCY TRANSLATIONS -- Foreign currency is valued at the close of
  the NYSE based on quotations posted by banks and major currency dealers.
Portfolio securities and other assets and liabilities denominated in  
foreign currencies are translated into U.S. dollar amounts at date of 
valuation. Purchases and sales of portfolio securities (net of foreign
taxes withheld on disposition) and income items denominated in foreign
    currencies are translated into U.S. dollar amounts on the respective dates
    of such transactions. The Fund does not separately account for the portion

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 of the results of operations resulting from changes in foreign exchange
  rates on investments and the fluctuations arising from changes in market
prices of securities held. The combined results of changes in foreign 
    exchange rates and the fluctuation of market prices on investments (net of
   estimated foreign tax withholding) are included with the net realized and
  unrealized gain or loss from investments in the Statement of Operations.
Reported net realized foreign currency gains or losses arise from, (i)
     sales of foreign currencies, (ii) currency gains or losses realized between
  the trade and settlement dates on securities transactions, and (iii) the
difference between the amounts of dividends, interest, and foreign    
withholding taxes recorded on the Fund's books and the U.S. dollar    
     equivalent of the amounts actually received or paid. Net unrealized foreign
   currency gains and losses arise from changes in the fair values of assets
     and liabilities, other than investments in securities at fiscal period end,
resulting from changes in exchange rates.                             

I.   FOREIGN CURRENCY CONTRACTS -- A foreign currency contract is an obligation 
to purchase or sell a specific currency for an agreed-upon price at a 
     future date. The Fund may enter into a foreign currency contract to attempt
   to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency   
  contract for the purchase or sale of a security denominated in a foreign
    currency in order to "lock in" the U.S. dollar price of that security. The
     Fund could be exposed to risk if counterparties to the contracts are unable
to meet the terms of their contracts or if the value of the foreign   
currency changes unfavorably.                                         

J.   COVERED CALL OPTIONS -- The Fund may write call options, on a covered      
  basis; that is, the Fund will own the underlying security. When the Fund
  writes a covered call option, an amount equal to the premium received by
     the Fund is recorded as an asset and an equivalent liability. The amount of
 the liability is subsequently "marked-to-market" to reflect the current
   market value of the option written. The current market value of a written
    option is the mean between the last bid and asked prices on that day. If a
  written call option expires on the stipulated expiration date, or if the
   Fund enters into a closing purchase transaction, the Fund realizes a gain
     (or a loss if the closing purchase transaction exceeds the premium received
    when the option was written) without regard to any unrealized gain or loss
 on the underlying security, and the liability related to such option is
     extinguished. If a written option is exercised, the Fund realizes a gain or
 a loss from the sale of the underlying security and the proceeds of the
    sale are increased by the premium originally received. A risk in writing a
 call option is that the Fund gives up the opportunity for profit if the
market price of the security increases and the option is exercised.   

K.   FUTURES CONTRACTS -- The Fund may purchase or sell futures contracts as a  
hedge against changes in market conditions. Initial margin deposits   
required upon entering into futures contracts are satisfied by the    
 segregation of specific securities as collateral for the account of the
 broker (the Fund's agent in acquiring the futures position). During the
period the futures contracts are open, changes in the value of the    
contracts are recognized as unrealized gains or losses by "marking to 
  market" on a daily basis to reflect the market value of the contracts at
the end of each day's trading. Variation margin payments are made or  
  received depending upon whether unrealized gains or losses are incurred.
    When the contracts are closed, the Fund recognizes a realized gain or loss
    equal to the difference between the proceeds from, or cost of, the closing
   transaction and the Fund's basis in the contract. If the Fund were unable
 to liquidate a futures contract and/or enter into an offsetting closing
transaction, the Fund would continue to be subject to market risk with
respect to the value of the contracts and continue to be required to  
maintain the margin deposits on the futures contracts.                

NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES                         

The Trust has entered into a master investment advisory agreement with A I M    
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,   
the Fund pays an advisory fee to AIM at the annual rate of 0.75% of the first   
$150 million of the Fund's average daily net assets, plus 0.50% of the Fund's   
average daily net assets in excess of $150 million. AIM has voluntarily agreed  
to waive advisory fees of the Fund in the amount of 25% of the advisory fee AIM 
receives from the affiliated money market funds on investments by the Fund in   
such affiliated money market funds (excluding investments made in affiliated    
money market funds with cash collateral from securities loaned by the Fund).    
Voluntary fee waivers or reimbursements may be modified or discontinued at any  
time upon consultation with the Board of Trustees without further notice to     
investors. For the year ended December 31, 2004, AIM waived fees of $3,064.     

   For the year ended December 31, 2004, at the request of the Trustees of the
Trust, AMVESCAP PLC ("AMVESCAP") agreed to reimburse $228,813 of expenses       
incurred by the Fund related to market timing matters in the AIM Funds,         
including legal, audit, shareholder servicing, communication and trustee        
expenses. These expenses along with the related expense reimbursement, are      
included in the Statement of Operations.                                        

  The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing    
accounting services to the Fund. For the year ended December 31, 2004, AIM was  
paid $458,536 for such services.                                                

    The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay AIM Investment Services, Inc. ("AISI") a fee for providing transfer agency  
and shareholder services to the Fund and reimburse AISI for certain expenses    
incurred by AISI in the course of providing such services. For the Institutional
Class, the transfer agent has contractually agreed to reimburse class specific  
transfer agent fees and expenses to the extent necessary to limit transfer agent
fees to 0.10% of the average net assets. For the year ended December 31, 2004,  
the Fund paid AISI $4,790,611 for Class A, Class B, Class C and Class R shares  
and $10 for Institutional Class shares after AISI reimbursed fees for the       
Institutional Class shares of $13. AISI may make payments to intermediaries that
provide omnibus account services, sub-accounting services and/or networking     
services.                                                                       

The Trust has entered into master distribution agreements with A I M    
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the     
Class A, Class B, Class C, Class R and Institutional Class shares of the Fund.  
The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act with      
respect to the Fund's Class A, Class B, Class C and Class R shares (collectively
the "Plans"). The Fund, pursuant to the Plans, pays AIM Distributors            
compensation at the annual rate of 0.25% of the Fund's average daily net assets 
of Class A shares, 1.00% of the average daily net assets of Class B and         
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Class C shares and 0.50% of the average daily net assets of Class R shares. Of  
these amounts, up to 0.25% of the average daily net assets of the Class A, Class
B, Class C or Class R shares may be paid to furnish continuing personal         
shareholder services to customers who purchase and own shares of such classes.  
Any amounts not paid as a service fee under the Plans would constitute an       
asset-based sales charge. NASD Rules also impose a cap on the total sales       
charges, including asset-based sales charges that may be paid by any class of   
shares of the Fund. Pursuant to the Plans, for the year ended December 31, 2004,
the Class A, Class B, Class C and Class R shares paid $2,887,535, $6,710,792,   
$2,349,482 and $23,049, respectively.                                           

  Front-end sales commissions and contingent deferred sales charges ("CDSC")
(collectively the "sales charges") are not recorded as expenses of the Fund.    
Front-end sales commissions are deducted from proceeds from the sales of Fund   
shares prior to investment in Class A shares of the Fund. CDSC are deducted from
redemption proceeds prior to remittance to the shareholder. During year ended   
December 31, 2004, AIM Distributors advised the Fund that it retained $164,698  
in front-end sales commissions from the sale of Class A shares and $39,022,     
$70,788, $11,262 and $0 from Class A, Class B, Class C and Class R shares,      
respectively, for CDSC imposed upon redemptions by shareholders.                

Certain officers and trustees of the Trust are officers and directors of
AIM, AISI and/or AIM Distributors.                                              

NOTE 3--INVESTMENTS IN AFFILIATES                                               

The Fund is permitted, pursuant to an exemptive order from the Securities and   
Exchange Commission ("SEC"), to invest cash collateral from securities lending  
transactions in affiliated money market funds. The Fund and the money market    
funds below have the same investment advisor and therefore, are considered to be
affiliated. The tables below show the transactions in and earnings from         
investments in affiliated money market funds for the year ended December 31,    
2004.                                                                           

INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:            

                                                        [Enlarge/Download Table]

                                                                               UNREALIZED                                           
                            MARKET VALUE      PURCHASES        PROCEEDS       APPRECIATION    MARKET VALUE    DIVIDEND    REALIZED  
FUND                          12/31/03         AT COST        FROM SALES     (DEPRECIATION)     12/31/04      INCOME*    GAIN (LOSS)
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                    
Liquid Assets Portfolio-                                                                                                            
  Institutional Class       $ 60,195,599    $494,830,149    $(433,940,352)       $   --       $121,085,396    $162,566     $   --   
------------------------------------------------------------------------------------------------------------------------------------
STIC Prime Portfolio-                                                                                                               
  Institutional Class         60,195,599     493,356,038     (432,466,241)           --        121,085,396    160,902          --   
====================================================================================================================================
  Total                     $120,391,198    $988,186,187    $(866,406,593)       $   --       $242,170,792    $323,468     $   --   
____________________________________________________________________________________________________________________________________
====================================================================================================================================

* Dividend income is net of income rebate paid to securities lending            
counterparties.                                                             

NOTE 4--SECURITY TRANSACTIONS WITH AFFILIATED FUNDS                             

The Fund is permitted to purchase or sell securities from or to certain other   
AIM Funds under specified conditions outlined in procedures adopted by the Board
of Trustees of the Trust. The procedures have been designed to ensure that any  
purchase or sale of securities by the Fund from or to another fund or portfolio 
that is or could be considered an affiliate by virtue of having a common        
investment advisor (or affiliated investment advisors), common Trustees and/or  
common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined   
under the procedures each transaction is effected at the current market price.  
Pursuant to these procedures, during the year ended December 31, 2004, the Fund 
engaged in purchases and sales of securities of $13,409,798 and $11,680,665,    
respectively.                                                                   

NOTE 5--EXPENSE OFFSET ARRANGEMENT                                              

The expense offset arrangement is comprised of transfer agency credits which    
result from balances in Demand Deposit Accounts (DDA) used by the transfer agent
for clearing shareholder transactions. For the year ended December 31, 2004, the
Fund received credits in transfer agency fees of $27,033 under an expense offset
arrangement, which resulted in a reduction of the Fund's total expenses of      
$27,033.                                                                        

NOTE 6--TRUSTEES' FEES                                                          

Trustees' fees represent remuneration paid to each Trustee of the Trust who is  
not an "interested person" of AIM. Trustees have the option to defer            
compensation payable by the Trust. Those Trustees who defer compensation have   
the option to select various AIM Funds in which their deferral accounts shall be
deemed to be invested.                                                          

Current Trustees are eligible to participate in a retirement plan that  
provides for benefits to be paid upon retirement to Trustees over a period of   
time based on the number of years of service. The Fund may have certain former  
Trustees that also participate in a retirement plan and receive benefits under  
such plan.                                                                      

  Obligations under the deferred compensation and retirement plans represent
unsecured claims against the general assets of the Fund.                        

   During the year ended December 31, 2004, the Fund paid legal fees of $7,707
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.          

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NOTE 7--BORROWINGS                                                              

Pursuant to an exemptive order from the SEC, the Fund may participate in an     
interfund lending facility that AIM has established for temporary borrowings by 
the AIM Funds. An interfund loan will be made under this facility only if the   
loan rate (an average of the rate available on bank loans and the rate available
on investments in overnight repurchase agreements) is favorable to both the     
lending fund and the borrowing fund. A loan will be secured by collateral if the
Fund's aggregate borrowings from all sources exceeds 10% of the Fund's total    
assets. To the extent that the loan is required to be secured by collateral, the
collateral is marked to market daily to ensure that the market value is at least
102% of the outstanding principal value of the loan.                            

The Fund is a participant in an uncommitted unsecured revolving credit  
facility with State Street Bank and Trust Company ("SSB"). The Fund may borrow  
up to the lesser of (i) $125,000,000, or (ii) the limits set by its prospectus  
for borrowings. The Fund and other funds advised by AIM which are parties to the
credit facility can borrow on a first come, first served basis. Principal on    
each loan outstanding shall bear interest at the bid rate quoted by SSB at the  
time of the request for the loan.                                               

During the year ended December 31, 2004, the Fund did not borrow or lend
under the interfund lending facility or borrow under the uncommitted unsecured  
revolving credit facility.                                                      

Additionally, the Fund is permitted to temporarily carry a negative or  
overdrawn balance in its account with SSB, the custodian bank. To compensate the
custodian bank for such overdrafts, the overdrawn Fund may either (i) leave     
funds in the account so the custodian can be compensated by earning the         
additional interest; or (ii) compensate by paying the custodian bank. In either 
case, the custodian bank will be compensated at an amount equal to the Federal  
Funds rate plus 100 basis points.                                               

NOTE 8--PORTFOLIO SECURITIES LOANED                                             

The Fund may lend portfolio securities having a market value up to one-third of 
the Fund's total assets. Such loans are secured by collateral equal to no less  
than the market value of the loaned securities determined daily. Such collateral
will be cash or debt securities issued or guaranteed by the U.S. Government or  
any of its agencies. Cash collateral received in connection with these loans is 
invested in short-term money market instruments or affiliated money market      
funds. It is the Fund's policy to obtain additional collateral from or return   
excess collateral to the borrower by the end of the next business day, following
the valuation date of the securities loaned. Therefore, the value of the        
collateral held may be temporarily less than the value of the securities on     
loan. Lending securities entails a risk of loss to the Fund if and to the extent
that the market value of the securities loaned were to increase and the borrower
did not increase the collateral accordingly, and the borrower fails to return   
the securities. The Fund could also experience delays and costs in gaining      
access to the collateral. The Fund bears the risk of any deficiency in the      
amount of the collateral available for return to the borrower due to a loss on  
the collateral invested.                                                        

At December 31, 2004, securities with an aggregate value of $236,707,159
were on loan to brokers. The loans were secured by cash collateral of           
$242,170,792, received by the Fund and subsequently invested in affiliated money
market funds. For the year ended December 31, 2004, the Fund received dividends 
on cash collateral net of income rebate paid to counterparties of $323,468 for  
securities lending transactions.                                                

NOTE 9--FUTURES CONTRACTS                                                       

On December 31, 2004, $4,150,000 principal amount of corporate obligations were 
pledged as collateral to cover margin requirements for open futures contracts.  

                                                        [Enlarge/Download Table]

                                             OPEN FUTURES CONTRACTS AT PERIOD END                                             
------------------------------------------------------------------------------------------------------------------------------
                                                                                                                  UNREALIZED  
                                                               NO. OF          MONTH/            MARKET          APPRECIATION 
CONTRACT                                                      CONTRACTS      COMMITMENT          VALUE          (DEPRECIATION)
------------------------------------------------------------------------------------------------------------------------------
                                                                                                                              
U.S. Treasury 2 Year Notes                                        335        Mar-05/Long      $ 70,213,906         $ 98,528   
------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury 5 Year Notes                                      1,075        Mar-05/Long       117,746,094          711,482   
------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury 10 Year Notes                                        85        Mar-05/Long         9,514,688          (53,550)  
------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury 30 Year Bond                                         14        Mar-05/Long         1,575,000           27,430   
==============================================================================================================================
                                                                                              $199,049,688         $783,890   
______________________________________________________________________________________________________________________________
==============================================================================================================================

NOTE 10--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS         

DISTRIBUTIONS TO SHAREHOLDERS:                                                  

The tax character of distributions paid during the years ended December 31, 2004
and 2003 was as follows:                                                        

                                                        [Enlarge/Download Table]

                                                                 2004           2003    
----------------------------------------------------------------------------------------
                                                                                        
Distributions paid from ordinary income                       $29,900,180    $38,251,053
________________________________________________________________________________________
========================================================================================

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TAX COMPONENTS OF NET ASSETS:                                                   

As of December 31, 2004, the components of net assets on a tax basis were as    
follows:                                                                        

                                                                [Download Table]

                                                                     2004      
------------------------------------------------------------------------------ 
                                                                               
Undistributed ordinary income                                   $      875,650 
------------------------------------------------------------------------------ 
Unrealized appreciation -- investments                             151,278,938 
------------------------------------------------------------------------------ 
Temporary book/tax differences                                        (215,634)
------------------------------------------------------------------------------ 
Capital loss carryforward                                         (641,788,297)
------------------------------------------------------------------------------ 
Shares of beneficial interest                                    2,360,571,857 
============================================================================== 
Total net assets                                                $1,870,722,514 
______________________________________________________________________________ 
============================================================================== 

The difference between book-basis and tax-basis unrealized appreciation 
(depreciation) is due to differences in the timing of recognition of gains and  
losses on investments for tax and book purposes. The Fund's unrealized          
appreciation (depreciation) difference is attributable primarily to losses on   
wash sales, bond premium amortization and the treatment of defaulted bonds. The 
tax-basis unrealized appreciation on investments amount includes appreciation   
(depreciation) on foreign currencies of $(32).                                  

The temporary book/tax differences are a result of timing differences   
between book and tax recognition of income and/or expenses. The Fund's temporary
book/tax differences are the result of the trustee deferral of compensation and 
retirement plan expenses, bond premium amortization and the treatment of        
defaulted bonds.                                                                

   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 $86,385,387 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 December 31, 2004 which expires as   
follows:                                                                        

                                                                [Download Table]

                                  CAPITAL LOSS 
EXPIRATION                        CARRYFORWARD*
-----------------------------------------------
                                               
December 31, 2009                 $107,895,455 
-----------------------------------------------
December 31, 2010                  533,892,842 
===============================================
Total capital loss carryforward   $641,788,297 
_______________________________________________
===============================================

* Capital loss carryforward as of the date listed above is reduced for          
limitations, if any, to the extent required by the Internal Revenue Code.   

NOTE 11--INVESTMENT SECURITIES                                                  

The aggregate amount of investment securities (other than short-term securities 
and money market funds) purchased and sold by the Fund during the year ended    
December 31, 2004 was $784,347,274 and $1,435,293,929, respectively.            

   Receivable for investments matured represents the estimated proceeds to the
Fund by Candescent Technologies Corp., which is in default with respect to the  
principal payments on $25,012,000 par value, Senior Unsecured Subordinated      
Debentures, 8.00%, which was due May 1, 2003. This estimate was determined in   
accordance with the fair valuation procedures authorized by the Board of        
Trustees.                                                                       

                                                                [Download Table]

UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS
------------------------------------------------------------------------------
                                                                              
Aggregate unrealized appreciation of investment securities       $184,437,932 
------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities      (33,158,962)
==============================================================================
Net unrealized appreciation of investment securities             $151,278,970 
______________________________________________________________________________
==============================================================================
Cost of investments for tax purposes is $2,029,158,248.                       

NOTE 12--RECLASSIFICATION OF PERMANENT DIFFERENCES                              

Primarily as a result of differing book/tax treatment of foreign currency       
transactions, paydowns on mortgage-backed securities and bond premium           
amortization, on December 31, 2004, undistributed net investment income was     
increased by $6,044,992 and undistributed net realized gain was decreased by    
$6,044,996 and shares of beneficial interest increased by $4. This              
reclassification had no effect on the net assets of the Fund.                   

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NOTE 13--SHARE INFORMATION                                                      

The Fund currently offers five different classes of shares: Class A shares,     
Class B shares, Class C shares, Class R shares and Institutional Class shares.  
Class A shares are sold with a front-end sales charge. Class B shares and Class 
C shares are sold with CDSC. Class R shares and Institutional Class shares are  
sold at net asset value. Under certain circumstances, Class A shares and Class R
shares are subject to CDSC. Generally, Class B shares will automatically convert
to Class A shares eight years after the end of the calendar month of purchase.  

                                                        [Enlarge/Download Table]

                                                CHANGES IN SHARES OUTSTANDING(a)                                                 
-------------------------------------------------------------------------------------------------------------------------------- 
                                                                                   YEAR ENDED DECEMBER 31,                       
                                                              ------------------------------------------------------------------ 
                                                                           2004                                2003              
                                                              ------------------------------      ------------------------------ 
                                                                SHARES            AMOUNT            SHARES            AMOUNT     
-------------------------------------------------------------------------------------------------------------------------------- 
                                                                                                                                 
Sold:                                                                                                                            
  Class A                                                       6,838,794      $ 166,219,511       14,724,408      $ 317,421,511 
-------------------------------------------------------------------------------------------------------------------------------- 
  Class B                                                       1,882,739         45,641,148        2,822,623         61,571,171 
-------------------------------------------------------------------------------------------------------------------------------- 
  Class C                                                         657,550         15,991,892        1,078,856         23,496,738 
-------------------------------------------------------------------------------------------------------------------------------- 
  Class R                                                         114,119          2,778,219          184,779          4,039,188 
-------------------------------------------------------------------------------------------------------------------------------- 
  Institutional Class                                                  --                 --               --                 -- 
================================================================================================================================ 
Issued as reinvestment of dividends:                                                                                             
  Class A                                                         797,987         19,482,748        1,155,459         25,548,489 
-------------------------------------------------------------------------------------------------------------------------------- 
  Class B                                                         261,464          6,372,168          362,180          7,982,445 
-------------------------------------------------------------------------------------------------------------------------------- 
  Class C                                                          89,256          2,177,540          134,213          2,951,526 
-------------------------------------------------------------------------------------------------------------------------------- 
  Class R                                                           3,073             75,238            2,176             48,722 
-------------------------------------------------------------------------------------------------------------------------------- 
  Institutional Class                                                   9                220                9                209 
================================================================================================================================ 
Automatic conversion of Class B shares to Class A shares:                                                                        
  Class A                                                       2,252,935         54,796,120        1,104,079         24,477,117 
-------------------------------------------------------------------------------------------------------------------------------- 
  Class B                                                      (2,259,121)       (54,796,120)      (1,106,931)       (24,477,117)
================================================================================================================================ 
Reacquired:                                                                                                                      
  Class A                                                     (22,639,799)      (550,962,399)     (31,672,931)      (693,233,172)
-------------------------------------------------------------------------------------------------------------------------------- 
  Class B                                                      (6,917,270)      (167,353,274)      (8,005,292)      (172,849,445)
-------------------------------------------------------------------------------------------------------------------------------- 
  Class C                                                      (3,452,796)       (83,757,854)      (4,686,941)      (102,124,418)
-------------------------------------------------------------------------------------------------------------------------------- 
  Class R                                                         (54,447)        (1,342,979)         (41,885)          (938,291)
-------------------------------------------------------------------------------------------------------------------------------- 
  Institutional Class                                                  --                 --               --                 -- 
================================================================================================================================ 
                                                              (22,425,507)     $(544,677,822)     (23,945,198)     $(526,085,327)
________________________________________________________________________________________________________________________________ 
================================================================================================================================ 

(a) There is one entity that is a record owner of more than 5% of the           
  outstanding shares of the Fund and it owns 7% of the outstanding shares of
 the Fund. AIM has an agreement with this entity to sell shares. The Fund,
AIM and/or AIM affiliates may make payments to this entity, which is    
 considered to be related to the Fund, for providing services to the Fund,
AIM and/or AIM affiliates including but not limited to services such as 
  securities brokerage, distribution, third party record keeping and account
 servicing. The Trust has no knowledge as to whether all or any portion of
  the shares owned of record by this shareholder is also owned beneficially.

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NOTE 14--FINANCIAL HIGHLIGHTS                                                   

The following schedule presents financial highlights for a share of the Fund    
outstanding throughout the periods indicated.                                   

                                                        [Enlarge/Download Table]

                                                                                        CLASS A                                     
                                                       --------------------------------------------------------------------------   
                                                                                YEAR ENDED DECEMBER 31,                             
                                                       --------------------------------------------------------------------------   
                                                          2004               2003          2002          2001             2000      
---------------------------------------------------------------------------------------------------------------------------------   
                                                                                                                                    
Net asset value, beginning of period                   $    23.93         $    20.81    $    25.94    $    30.10       $    32.69   
---------------------------------------------------------------------------------------------------------------------------------   
Income from investment operations:                                                                                                  
  Net investment income                                      0.32               0.35(a)       0.49(a)       0.71(a)(b)       0.92(a)
---------------------------------------------------------------------------------------------------------------------------------   
  Net gains (losses) on securities (both realized and                                                                               
    unrealized)                                              1.49               3.20         (5.09)        (4.14)           (2.23)  
=================================================================================================================================   
    Total from investment operations                         1.81               3.55         (4.60)        (3.43)           (1.31)  
=================================================================================================================================   
Less distributions:                                                                                                                 
  Dividends from net investment income                      (0.44)             (0.43)        (0.53)        (0.73)           (0.79)  
---------------------------------------------------------------------------------------------------------------------------------   
  Distributions from net realized gains                        --                 --            --            --            (0.49)  
=================================================================================================================================   
    Total distributions                                     (0.44)             (0.43)        (0.53)        (0.73)           (1.28)  
=================================================================================================================================   
Net asset value, end of period                         $    25.30         $    23.93    $    20.81    $    25.94       $    30.10   
_________________________________________________________________________________________________________________________________   
=================================================================================================================================   
Total return(c)                                              7.65%             17.23%       (17.85)%      (11.36)%          (4.18)% 
_________________________________________________________________________________________________________________________________   
=================================================================================================================================   
Ratios/supplemental data:                                                                                                           
Net assets, end of period (000s omitted)               $1,049,415         $1,297,378    $1,434,164    $2,284,776       $2,507,641   
_________________________________________________________________________________________________________________________________   
=================================================================================================================================   
Ratio of expenses to average net assets                      1.07%(d)(e)        1.10%         1.06%         1.01%            0.96%  
=================================================================================================================================   
Ratio of net investment income to average net assets         1.38%(d)           1.60%         2.11%         2.60%(b)         2.80%  
_________________________________________________________________________________________________________________________________   
=================================================================================================================================   
Portfolio turnover rate                                        39%               114%           78%           73%              55%  
_________________________________________________________________________________________________________________________________   
=================================================================================================================================   

(a)  Calculated using average shares outstanding.                               
(b)  As required, effective January 1, 2001, the Fund adopted the provisions    
of the AICPA Audit and Accounting Guide for Investment Companies and  
  began amortizing premiums on debt securities. Had the Fund not amortized
premiums on debt securities, the net investment income per share would
have been $0.73 and the ratio of net investment income to average net 
assets would have been 2.67%. In accordance with the AICPA Audit and  
Accounting Guide for Investment Companies, Per share and ratios for   
 periods prior to January 1, 2001 have not been restated to reflect this
change in presentation.                                               
(c)  Includes adjustments in accordance with accounting principles generally    
accepted in the United States of America and as such, the net asset   
 value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for  
shareholder transactions. Does not include sales charges.             
(d)  Ratios are based on average daily net assets of $1,155,013,999.            
(e)  After fee waivers and/or expense reimbursements. Ratio of expenses to      
  average net assets prior to fee waivers and/or expense reimbursements is
1.08%.                                                                

  F-19

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NOTE 14--FINANCIAL HIGHLIGHTS (CONTINUED)                                       

                                                        [Enlarge/Download Table]

                                                                                           CLASS B                                  
                                                             --------------------------------------------------------------------   
                                                                                   YEAR ENDED DECEMBER 31,                          
                                                             --------------------------------------------------------------------   
                                                               2004             2003        2002         2001             2000      
---------------------------------------------------------------------------------------------------------------------------------   
                                                                                                                                    
Net asset value, beginning of period                         $  23.87         $  20.77    $  25.88    $    30.01       $    32.61   
---------------------------------------------------------------------------------------------------------------------------------   
Income from investment operations:                                                                                                  
  Net investment income                                          0.14             0.19(a)     0.31(a)       0.50(a)(b)       0.66(a)
---------------------------------------------------------------------------------------------------------------------------------   
  Net gains (losses) on securities (both realized and                                                                               
    unrealized)                                                  1.50             3.17       (5.06)        (4.11)           (2.23)  
=================================================================================================================================   
    Total from investment operations                             1.64             3.36       (4.75)        (3.61)           (1.57)  
=================================================================================================================================   
Less distributions:                                                                                                                 
  Dividends from net investment income                          (0.26)           (0.26)      (0.36)        (0.52)           (0.54)  
---------------------------------------------------------------------------------------------------------------------------------   
  Distributions from net realized gains                            --               --          --            --            (0.49)  
=================================================================================================================================   
    Total distributions                                         (0.26)           (0.26)      (0.36)        (0.52)           (1.03)  
=================================================================================================================================   
Net asset value, end of period                               $  25.25         $  23.87    $  20.77    $    25.88       $    30.01   
_________________________________________________________________________________________________________________________________   
=================================================================================================================================   
Total return(c)                                                  6.91%           16.29%     (18.46)%      (12.01)%          (4.93)% 
_________________________________________________________________________________________________________________________________   
=================================================================================================================================   
Ratios/supplemental data:                                                                                                           
Net assets, end of period (000s omitted)                     $604,378         $739,424    $766,330    $1,176,679       $1,358,823   
_________________________________________________________________________________________________________________________________   
=================================================================================================================================   
Ratio of expenses to average net assets                          1.82%(d)(e)      1.85%       1.81%         1.76%            1.73%  
=================================================================================================================================   
Ratio of net investment income to average net assets             0.63%(d)         0.85%       1.36%         1.86%(b)         2.03%  
_________________________________________________________________________________________________________________________________   
=================================================================================================================================   
Portfolio turnover rate                                            39%             114%         78%           73%              55%  
_________________________________________________________________________________________________________________________________   
=================================================================================================================================   

(a)  Calculated using average shares outstanding.                               
(b)  As required, effective January 1, 2001, the Fund adopted the provisions    
of the AICPA Audit and Accounting Guide for Investment Companies and  
  began amortizing premiums on debt securities. Had the Fund not amortized
premiums on debt securities, the net investment income per share would
have been $0.52 and the ratio of net investment income to average net 
assets would have been 1.93%. In accordance with the AICPA Audit and  
Accounting Guide for Investment Companies, per share and ratios for   
 periods prior to January 1, 2001 have not been restated to reflect this
change in presentation.                                               
(c)  Includes adjustments in accordance with accounting principles generally    
accepted in the United States of America and as such, the net asset   
 value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for  
shareholder transactions. Does not include sales charges.             
(d)  Ratios are based on average daily net assets of $671,079,230.              
(e)  After fee waivers and/or expense reimbursements. Ratio of expenses to      
  average net assets prior to fee waivers and/or expense reimbursements is
1.83%.                                                                

  F-20

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NOTE 14--FINANCIAL HIGHLIGHTS (CONTINUED)                                       

                                                        [Enlarge/Download Table]

                                                                                          CLASS C                                
                                                              ----------------------------------------------------------------   
                                                                                  YEAR ENDED DECEMBER 31,                        
                                                              ----------------------------------------------------------------   
                                                                2004             2003        2002        2001           2000     
------------------------------------------------------------------------------------------------------------------------------   
                                                                                                                                 
Net asset value, beginning of period                          $  23.91         $  20.80    $  25.92    $  30.05       $  32.65   
------------------------------------------------------------------------------------------------------------------------------   
Income from investment operations:                                                                                               
  Net investment income                                           0.14             0.19(a)     0.31(a)     0.50(a)(b)     0.66(a)
------------------------------------------------------------------------------------------------------------------------------   
  Net gains (losses) on securities (both realized and                                                                            
    unrealized)                                                   1.50             3.18       (5.07)      (4.11)         (2.23)  
==============================================================================================================================   
    Total from investment operations                              1.64             3.37       (4.76)      (3.61)         (1.57)  
==============================================================================================================================   
Less distributions:                                                                                                              
  Dividends from net investment income                           (0.26)           (0.26)      (0.36)      (0.52)         (0.54)  
------------------------------------------------------------------------------------------------------------------------------   
  Distributions from net realized gains                             --               --          --          --          (0.49)  
==============================================================================================================================   
    Total distributions                                          (0.26)           (0.26)      (0.36)      (0.52)         (1.03)  
==============================================================================================================================   
Net asset value, end of period                                $  25.29         $  23.91    $  20.80    $  25.92       $  30.05   
______________________________________________________________________________________________________________________________   
==============================================================================================================================   
Total return(c)                                                   6.90%           16.32%     (18.46)%    (11.99)%        (4.93)% 
______________________________________________________________________________________________________________________________   
==============================================================================================================================   
Ratios/supplemental data:                                                                                                        
Net assets, end of period (000s omitted)                      $211,297         $264,513    $302,346    $483,644       $365,510   
______________________________________________________________________________________________________________________________   
==============================================================================================================================   
Ratio of expenses to average net assets                           1.82%(d)(e)      1.85%       1.81%       1.76%          1.73%  
==============================================================================================================================   
Ratio of net investment income to average net assets              0.63%(d)         0.85%       1.36%       1.85%(b)       2.03%  
______________________________________________________________________________________________________________________________   
==============================================================================================================================   
Portfolio turnover rate                                             39%             114%         78%         73%            55%  
______________________________________________________________________________________________________________________________   
==============================================================================================================================   

(a)  Calculated using average shares outstanding.                               
(b)  As required, effective January 1, 2001, the Fund adopted the provisions    
of the AICPA Audit and Accounting Guide for Investment Companies and  
  began amortizing premiums on debt securities. Had the Fund not amortized
premiums on debt securities, the net investment income per share would
have been $0.52 and the ratio of net investment income to average net 
assets would have been 1.92%. In accordance with the AICPA Audit and  
Accounting Guide for Investment Companies, per share and ratios for   
 periods prior to January 1, 2001 have not been restated to reflect this
change in presentation.                                               
(c)  Includes adjustments in accordance with accounting principles generally    
accepted in the United States of America and as such, the net asset   
 value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for  
shareholder transactions. Does not include sales charges.             
(d)  Ratios are based on average daily net assets of $234,948,213.              
(e)  After fee waivers and/or expense reimbursements. Ratio of expenses to      
  average net assets prior to fee waivers and/or expense reimbursements is
1.83%.                                                                

  F-21

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NOTE 14--FINANCIAL HIGHLIGHTS (CONTINUED)                                       

                                                        [Enlarge/Download Table]

                                                                             CLASS R                 
                                                              -------------------------------------- 
                                                                                       JUNE 3, 2002  
                                                                   YEAR ENDED           (DATE SALES  
                                                                  DECEMBER 31,         COMMENCED) TO 
                                                              ---------------------    DECEMBER 31,  
                                                               2004           2003         2002      
---------------------------------------------------------------------------------------------------- 
                                                                                                     
Net asset value, beginning of period                          $23.95         $20.83       $ 23.73    
---------------------------------------------------------------------------------------------------- 
Income from investment operations:                                                                   
  Net investment income                                         0.29           0.30(a)       0.22(a) 
---------------------------------------------------------------------------------------------------- 
  Net gains (losses) on securities (both realized and                                                
    unrealized)                                                 1.47           3.19         (2.78)   
==================================================================================================== 
    Total from investment operations                            1.76           3.49         (2.56)   
==================================================================================================== 
Less distributions from net investment income                  (0.38)         (0.37)        (0.34)   
==================================================================================================== 
Net asset value, end of period                                $25.33         $23.95       $ 20.83    
____________________________________________________________________________________________________ 
==================================================================================================== 
Total return(b)                                                 7.43%         16.92%       (10.82)%  
____________________________________________________________________________________________________ 
==================================================================================================== 
Ratios/supplemental data:                                                                            
Net assets, end of period (000s omitted)                      $5,621         $3,812       $   293    
____________________________________________________________________________________________________ 
==================================================================================================== 
Ratio of expenses to average net assets                         1.32%(c)(d)    1.35%         1.33%(e)
==================================================================================================== 
Ratio of net investment income to average net assets            1.13%(c)       1.35%         1.83%(e)
____________________________________________________________________________________________________ 
==================================================================================================== 
Portfolio turnover rate(f)                                        39%           114%           78%   
____________________________________________________________________________________________________ 
==================================================================================================== 

(a)  Calculated using average shares outstanding.                               
(b)  Includes adjustments in accordance with accounting principles generally    
accepted in the United States of America and as such, the net asset   
 value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for  
  shareholder transactions. Not annualized for periods less than one year.
(c)  Ratios are based on average daily net assets of $4,609,890.                
(d)  After fee waivers and/or expense reimbursements. Ratio of expenses to      
  average net assets prior to fee waivers and/or expense reimbursements is
1.33%.                                                                
(e)  Annualized.                                                                
(f)  Not annualized for periods less than one year.                             

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NOTE 14--FINANCIAL HIGHLIGHTS (CONTINUED)                                       

                                                        [Enlarge/Download Table]

                                                                      INSTITUTIONAL CLASS          
                                                              ------------------------------------ 
                                                                                       MARCH 15,   
                                                                                         2002      
                                                                  YEAR ENDED          (DATE SALES  
                                                                 DECEMBER 31,        COMMENCED) TO 
                                                              -------------------    DECEMBER 31,  
                                                               2004         2003         2002      
-------------------------------------------------------------------------------------------------- 
                                                                                                   
Net asset value, beginning of period                          $23.94       $20.82       $ 25.81    
-------------------------------------------------------------------------------------------------- 
Income from investment operations:                                                                 
  Net investment income                                         0.43         0.44(a)       0.44(a) 
-------------------------------------------------------------------------------------------------- 
  Net gains (losses) on securities (both realized and                                              
    unrealized)                                                 1.49         3.20         (4.83)   
================================================================================================== 
    Total from investment operations                            1.92         3.64         (4.39)   
================================================================================================== 
Less dividends from net investment income                      (0.54)       (0.52)        (0.60)   
================================================================================================== 
Net asset value, end of period                                $25.32       $23.94       $ 20.82    
__________________________________________________________________________________________________ 
================================================================================================== 
Total return(b)                                                 8.10%       17.71%       (17.16)%  
__________________________________________________________________________________________________ 
================================================================================================== 
Ratios/supplemental data:                                                                          
Net assets, end of period (000s omitted)                      $   11       $   10       $     8    
__________________________________________________________________________________________________ 
================================================================================================== 
Ratio of expenses to average net assets:                                                           
  With fee waivers and/or expense reimbursements                0.68%(c)     0.68%         0.67%(d)
-------------------------------------------------------------------------------------------------- 
  Without fee waivers and/or expense reimbursements             0.83%(c)     1.13%         0.80%(d)
================================================================================================== 
Ratio of net investment income to average net assets            1.77%(c)     2.02%         2.50%(d)
__________________________________________________________________________________________________ 
================================================================================================== 
Portfolio turnover rate(e)                                        39%         114%           78%   
__________________________________________________________________________________________________ 
================================================================================================== 

(a)  Calculated using average shares outstanding.                               
(b)  Includes adjustments in accordance with accounting principles generally    
accepted in the United States of America and as such, the net asset   
 value for financial reporting purposes and the returns based upon those
net asset values may differ from the net asset value and returns for  
  shareholder transactions. Not annualized for periods less than one year.
(c)  Ratios are based on average daily net assets of $9,981.                    
(d)  Annualized.                                                                
(e)  Not annualized for periods less than one year.                             

NOTE 15--LEGAL PROCEEDINGS                                                      

Terms used in the Legal Proceedings Note are defined terms solely for the       
purpose of this note.                                                           

SETTLED ENFORCEMENT ACTIONS AND INVESTIGATIONS RELATED TO MARKET TIMING         

On October 8, 2004, INVESCO Funds Group, Inc. ("IFG") (the former investment
advisor to certain AIM Funds) and A I M Advisors, Inc. ("AIM") (the Fund's      
investment advisor) reached final settlements with certain regulators, including
without limitation the Securities and Exchange Commission ("SEC"), the New York 
Attorney General ("NYAG") and the Colorado Attorney General ("COAG"), to resolve
civil enforcement actions and investigations related to market timing activity  
and related issues in the AIM Funds, including those formerly advised by IFG.   
These regulators alleged, in substance, that IFG and AIM failed to disclose in  
the prospectuses for the AIM Funds that they advised and to the independent     
directors/trustees of such Funds that they had entered into certain arrangements
permitting market timing of such Funds, thereby breaching their fiduciary duties
to such Funds. As a result of the foregoing, the regulators alleged that IFG and
AIM breached various Federal and state securities, business and consumer        
protection laws. On the same date, A I M Distributors, Inc. ("ADI") (the        
distributor of the retail AIM Funds) reached a final settlement with the SEC to 
resolve an investigation relating to market timing activity and related issues  
in the AIM Funds. The SEC also alleged that ADI violated various Federal        
securities laws. The SEC also has settled related market timing enforcement     
actions brought against certain former officers and employees of IFG.           

  Under the terms of the settlements, IFG agreed to pay a total of $325 million,
of which $110 million is civil penalties. Of this $325 million total payment,   
half has been paid and the remaining half will be paid on or before December 31,
2005. AIM and ADI agreed to pay a total of $50 million, of which $30 million is 
civil penalties, all of which has been paid. The entire $325 million IFG        
settlement payment will be made available for distribution to the shareholders  
of those AIM Funds that IFG formerly advised that were harmed by market timing  
activity, and the entire $50 million settlement payment by AIM and ADI will be  
made available for distribution to the shareholders of those AIM Funds advised  
by AIM that were harmed by market timing activity, all as to be determined by an
independent distribution consultant. The settlement payments will be distributed
in accordance with a methodology to be determined by the independent            
distribution consultant, in consultation with AIM and the independent trustees  
of the AIM Funds and acceptable to the staff of the SEC. Under the settlements  
with the NYAG and COAG, AIM has agreed to reduce management fees on certain     
equity and balanced AIM Funds by $15 million per year for the next five years,  
based upon effective fee rates and assets under management as of July 1, 2004,  
and not to increase certain management fees.                                    

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NOTE 15--LEGAL PROCEEDINGS (CONTINUED)                                          

Under the terms of the settlements, AIM will make certain governance and    
compliance reforms, including maintaining an internal controls committee and    
retaining an independent compliance consultant and a corporate ombudsman. Also, 
commencing in 2007 and at least once every other year thereafter, AIM will      
undergo a compliance review by an independent third party. In addition, under   
the terms of the settlements, AIM has undertaken to cause the AIM Funds to      
operate in accordance with certain governance policies and practices, including 
retaining a full-time independent senior officer whose duties will include      
monitoring compliance and managing the process by which proposed management fees
to be charged the AIM Funds are negotiated. Also, commencing in 2008 and not    
less than every fifth calendar year thereafter, the AIM Funds will hold         
shareholder meetings at which their Boards of Trustees will be elected.         

At the request of the trustees of the AIM Funds, AMVESCAP PLC ("AMVESCAP"), 
the parent company of IFG and AIM, has agreed to pay expenses incurred by such  
Funds related to market timing matters.                                         

 The SEC has also settled market timing enforcement actions against Raymond R.
Cunningham (the former president and chief executive officer of IFG and a former
member of the board of directors of the AIM Funds formerly advised by IFG),     
Timothy J. Miller (the former chief investment officer and a former portfolio   
manager for IFG), Thomas A. Kolbe (the former national sales manager of IFG) and
Michael D. Legoski (a former assistant vice president in IFG's sales            
department). As part of these settlements, the SEC ordered these individuals to 
pay restitution and civil penalties in various amounts and prohibited them from 
associating with, or serving as an officer or director of, an investment        
advisor, broker, dealer and/or investment company, as applicable, for certain   
periods of time.                                                                

 The payments made in connection with the above-referenced settlements by IFG,
AIM and ADI will total approximately $375 million (not including AIM's agreement
to reduce management fees on certain equity and balanced AIM Funds by $15       
million per year for the next five years, based upon effective fee rates and    
assets under management as of July 1, 2004). The manner in which the settlement 
payments will be distributed is unknown at the present time and will be         
determined by an independent distribution consultant appointed under the        
settlement agreements. Therefore, management of AIM and the Fund are unable at  
the present time to estimate the impact, if any, that the distribution of the   
settlement payments may have on the Fund or whether such distribution will have 
an impact on the Fund's financial statements in the future.                     

  At the present time, management of AIM and the Fund are unable to estimate the
impact, if any, that the outcome of the Regulatory Inquiries and Pending        
Litigation described below may have on AIM, ADI or the Fund.                    

REGULATORY INQUIRIES AND PENDING LITIGATION                                     

The mutual fund industry as a whole is currently subject to regulatory      
inquiries and litigation related to a wide range of issues. These issues        
include, among others, market timing activity, late trading, fair value pricing,
excessive or improper advisory and/or distribution fees, mutual fund sales      
practices, including but not limited to revenue sharing and directed-brokerage  
arrangements, investments in securities of other registered investment          
companies, contractual plans, issues related to Section 529 college savings     
plans, procedures for locating lost security holders and participation in class 
action settlements.                                                             

As described more fully below, IFG and AIM are the subject of a number of   
ongoing regulatory inquiries and civil lawsuits related to one or more of the   
issues currently being scrutinized by various Federal and state regulators,     
including but not limited to those issues described above. Additional regulatory
actions and/or civil lawsuits related to the above or other issues may be filed 
against the AIM Funds, IFG, AIM and/or related entities and individuals in the  
future. Additional regulatory inquiries related to the above or other issues    
also may be received by the AIM Funds, IFG, AIM and/or related entities and     
individuals in the future.                                                      

Ongoing Regulatory Inquiries Concerning IFG and AIM                             

IFG, certain related entities, certain of their current and former officers 
and/or certain of the AIM Funds formerly advised by IFG have received regulatory
inquiries in the form of subpoenas or other oral or written requests for        
information and/or documents related to one or more of the following issues,    
some of which concern one or more such Funds: market timing activity, late      
trading, fair value pricing, excessive or improper advisory and/or distribution 
fees, mutual fund sales practices, including revenue sharing and                
directed-brokerage arrangements, and investments in securities of other         
registered investment companies. These regulators include the SEC, the NASD,    
Inc. ("NASD"), the Florida Department of Financial Services, the Attorney       
General of the State of West Virginia, the West Virginia Securities Commission  
and the Bureau of Securities of the State of New Jersey. IFG and certain of     
these other parties also have received more limited inquiries from the United   
States Department of Labor ("DOL") and the United States Attorney's Office for  
the Southern District of New York, some of which concern one or more of the AIM 
Funds formerly advised by IFG. IFG is providing full cooperation with respect to
these inquiries.                                                                

AIM, certain related entities, certain of their current and former officers 
and/or certain of the AIM Funds have received regulatory inquiries in the form  
of subpoenas or other oral or written requests for information and/or documents 
related to one or more of the following issues, some of which concern one or    
more AIM Funds: market timing activity, late trading, fair value pricing,       
excessive or improper advisory and/or distribution fees, mutual fund sales      
practices, including revenue sharing and directed-brokerage arrangements,       
investments in securities of other registered investment companies, contractual 
plans, issues related to Section 529 college savings plans and procedures for   
locating lost securityholders. These regulators include the SEC, the NASD, the  
Department of Banking for the State of Connecticut, the Attorney General of the 
State of West Virginia, the West Virginia Securities Commission and the Bureau  
of Securities of the State of New Jersey. AIM and certain of these other parties
also have received more limited inquiries from the SEC, the NASD, the DOL, the  
Internal Revenue Service, the United States Attorney's Office for the Southern  
District of New York, the United States Attorney's Office for the Central       
District of California, the United States Attorney's Office for the District of 
Massachusetts, the Massachusetts Securities Division, the U.S. Postal           

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NOTE 15--LEGAL PROCEEDINGS (CONTINUED)                                          

Inspection Service and the Commodity Futures Trading Commission, some of which  
concern one or more AIM Funds. AIM is providing full cooperation with respect to
these inquiries.                                                                

Private Civil Actions Alleging Market Timing                                    

Multiple civil lawsuits, including purported class action and shareholder   
derivative suits, have been filed against various parties (including, depending 
on the lawsuit, certain AIM Funds, IFG, AIM, AIM Management, AMVESCAP, certain  
related entities, certain of their current and former officers and/or certain   
unrelated third parties) making allegations that are similar in many respects to
those in the settled regulatory actions brought by the SEC, the NYAG and the    
COAG concerning market timing activity in the AIM Funds. These lawsuits allege a
variety of theories of recovery, including but not limited to: (i) violation of 
various provisions of the Federal and state securities laws; (ii) violation of  
various provisions of ERISA; (iii) breach of fiduciary duty; and/or (iv) breach 
of contract. These lawsuits were initiated in both Federal and state courts and 
seek such remedies as compensatory damages; restitution; injunctive relief;     
disgorgement of management fees; imposition of a constructive trust; removal of 
certain directors and/or employees; various corrective measures under ERISA;    
rescission of certain Funds' advisory agreements; interest; and attorneys' and  
experts' fees.                                                                  

 All lawsuits based on allegations of market timing, late trading, and related
issues have been transferred to the United States District Court for the        
District of Maryland (the "MDL Court") for consolidated or coordinated pre-trial
proceedings. Pursuant to an Order of the MDL Court, plaintiffs consolidated     
their claims for pre-trial purposes into three amended complaints against       
various AIM- and IFG-related parties: (i) a Consolidated Amended Class Action   
Complaint purportedly brought on behalf of shareholders of the AIM Funds; (ii) a
Consolidated Amended Fund Derivative Complaint purportedly brought on behalf of 
the AIM Funds and fund registrants; and (iii) an Amended Class Action Complaint 
for Violations of the Employee Retirement Income Securities Act ("ERISA")       
purportedly brought on behalf of participants in AMVESCAP's 401(k) plan. The    
plaintiffs in one of the underlying lawsuits continue to seek remand of their   
lawsuit to state court.                                                         

Private Civil Actions Alleging Improper Use of Fair Value Pricing               

Multiple civil class action lawsuits have been filed against various parties
(including, depending on the lawsuit, certain AIM Funds, IFG and/or AIM)        
alleging that certain AIM Funds inadequately employed fair value pricing. These 
lawsuits allege a variety of theories of recovery, including but not limited to:
(i) violations of various provisions of the Federal securities laws; (ii) common
law breach of duty; and (iii) common law negligence and gross negligence. These 
lawsuits have been filed in both Federal and state courts and seek such remedies
as compensatory and punitive damages; interest; and attorneys' fees and costs.  

Private Civil Actions Alleging Excessive Advisory and/or Distribution Fees      

Multiple civil lawsuits, including purported class action and shareholder   
derivative suits, have been filed against various parties (including, depending 
on the lawsuit, IFG, AIM, INVESCO Institutional (N.A.), Inc. ("IINA"), ADI      
and/or INVESCO Distributors, Inc. ("INVESCO Distributors")) alleging that the   
defendants charged excessive advisory and/or distribution fees and failed to    
pass on to shareholders the perceived savings generated by economies of scale.  
Certain of these lawsuits also allege that the defendants adopted unlawful      
distribution plans. These lawsuits allege a variety of theories of recovery,    
including but not limited to: (i) violation of various provisions of the Federal
securities laws; (ii) breach of fiduciary duty; and/or (iii) breach of contract.
These lawsuits have been filed in Federal courts and seek such remedies as      
damages; injunctive relief; rescission of certain Funds' advisory agreements and
distribution plans; interest; prospective relief in the form of reduced fees;   
and attorneys' and experts' fees. All of these lawsuits have been transferred to
the United States District Court for the Southern District of Texas, Houston    
Division by order of the applicable United States District Court in which they  
were initially filed. The plaintiff in one of these lawsuits has challenged this
order.                                                                          

Private Civil Actions Alleging Improper Charging of Distribution Fees on Limited
Offering Funds or Share Classes                                                 

Multiple civil lawsuits, including shareholder derivative suits, have been  
filed against various parties (including, depending on the lawsuit, IFG, AIM,   
ADI and/or certain of the trustees of the AIM Funds) alleging that the          
defendants breached their fiduciary duties by charging distribution fees while  
funds and/or specific share classes were closed generally to new investors      
and/or while other share classes of the same fund were not charged the same     
distribution fees. These lawsuits allege a variety of theories of recovery,     
including but not limited to: (i) violation of various provisions of the Federal
securities laws; and (ii) breach of fiduciary duty. These lawsuits have been    
filed in Federal courts and seek such remedies as damages; injunctive relief;   
and attorneys' and experts' fees.                                               

Private Civil Actions Alleging Improper Mutual Fund Sales Practices and         
Directed-Brokerage Arrangements                                                 

Multiple civil lawsuits, including purported class action and shareholder   
derivative suits, have been filed against various parties (including, depending 
on the lawsuit, AIM Management, IFG, AIM, AIM Investment Services, Inc. ("AIS") 
and/or certain of the trustees of the AIM Funds) alleging that the defendants   
improperly used the assets of the AIM Funds to pay brokers to aggressively      
promote the sale of the AIM Funds over other mutual funds and that the          
defendants concealed such payments from investors by disguising them as         
brokerage commissions. These lawsuits allege a variety of theories of recovery, 
including but not limited to: (i) violation of various provisions of the Federal
securities laws; (ii) breach of fiduciary duty; and (iii) aiding and abetting a 
breach of fiduciary duty. These lawsuits have been filed in Federal courts and  
seek such remedies as compensatory and punitive damages; rescission of certain  
Funds' advisory agreements and distribution plans and recovery of all fees paid;
an accounting of all fund-related fees, commissions and soft dollar payments;   
restitution of all unlawfully or discriminatorily obtained fees and charges; and
attorneys' and experts' fees.                                                   

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NOTE 15--LEGAL PROCEEDINGS (CONTINUED)                                          

Private Civil Action Alleging Failure to Ensure Participation in Class Action   
Settlements                                                                     

A civil lawsuit, purporting to be a class action lawsuit, has been filed    
against AIM, IINA, A I M Capital Management, Inc. and the trustees of the AIM   
Funds alleging that the defendants breached their fiduciary duties by failing to
ensure that the AIM Funds participated in class action settlements in which the 
AIM Funds were eligible to participate. This lawsuit alleges as theories of     
recovery: (i) violation of various provisions of the Federal securities laws;   
(ii) common law breach of fiduciary duty; and (iii) common law negligence. This 
lawsuit has been filed in Federal court and seeks such remedies as compensatory 
and punitive damages; forfeiture of all commissions and fees paid by the class  
of plaintiffs; and costs and attorneys' fees.                                   
*                                       *                                      *
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

As a result of the matters discussed above, investors in the AIM Funds might
react by redeeming their investments. This might require the Funds to sell      
investments to provide for sufficient liquidity and could also have an adverse  
effect on the investment performance of the Funds.                              

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                         

To the Board of Trustees and Shareholders of                                    
AIM Balanced 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 Balanced Fund (one of the funds
constituting AIM Funds Group hereafter referred to as the "Fund") at December   
31, 2004, the results of its operations for the year then ended, the changes in 
its net assets for each of the two years in the period then ended and the       
financial highlights for each of the five years in the period then ended, in    
conformity with accounting principles generally accepted in the United States of
America. These financial statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of the Fund's management;  
our responsibility is to express an opinion on these financial statements based 
on our audits. We conducted our audits of these financial statements in         
accordance with the standards of the Public Company Accounting Oversight Board  
(United States). Those standards require that we plan and perform the audit to  
obtain reasonable assurance about whether the financial statements are free of  
material misstatement. An audit includes examining, on a test basis, evidence   
supporting the amounts and disclosures in the financial statements, assessing   
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our    
audits, which included confirmation of securities at December 31, 2004 by       
correspondence with the custodian and brokers, provide a reasonable basis for   
our opinion.                                                                    

/S/ PRICEWATERHOUSECOOPERS LLP                                                  

February 18, 2005                                                               
Houston, Texas                                                                  

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OTHER INFORMATION                                                               

TRUSTEES AND OFFICERS                                                           

As of December 31, 2004                                                         

The address of each trustee and officer of AIM Funds Group (the "Trust"), is 11 
Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 114      
portfolios in the AIM Funds complex. The trustees serve for the life of the     
Trust, subject to their earlier death, incapacitation, resignation, retirement  
or removal as more specifically provided in the Trust's organizational          
documents. Column two below includes length of time served with predecessor     
entities, if any.                                                               

                                                        [Enlarge/Download Table]

                                   TRUSTEE AND/                                                                                  
NAME, YEAR OF BIRTH AND            OR OFFICER       PRINCIPAL OCCUPATION(S)                    OTHER DIRECTORSHIP(S)             
POSITION(S) HELD WITH THE TRUST    SINCE            DURING PAST 5 YEARS                        HELD BY TRUSTEE                   
---------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                 

   INTERESTED PERSONS                                                                                                            
---------------------------------------------------------------------------------------------------------------------------------

   Robert H. Graham(1) -- 1946     1992             Director and Chairman, A I M Management    None                              
   Trustee, Vice Chair and                          Group Inc. (financial services holding                                       
   President                                        company); Director and Vice Chairman,                                        
                                                    AMVESCAP PLC and Chairman, AMVESCAP                                          
                                                    PLC -- AIM Division (parent of AIM and a                                     
                                                    global investment management firm)                                           
                                                    Formerly: President and Chief Executive                                      
                                                    Officer, A I M Management Group Inc.;                                        
                                                    Director, Chairman and President, A I M                                      
                                                    Advisors, Inc. (registered investment                                        
                                                    advisor); Director and Chairman, A I M                                       
                                                    Capital Management, Inc. (registered                                         
                                                    investment advisor), A I M Distributors,                                     
                                                    Inc. (registered broker dealer), AIM                                         
                                                    Investment Services, Inc., (registered                                       
                                                    transfer agent), and Fund Management                                         
                                                    Company (registered broker dealer); and                                      
                                                    Chief Executive Officer, AMVESCAP                                            
                                                    PLC -- Managed Products                                                      
---------------------------------------------------------------------------------------------------------------------------------

   Mark H. Williamson(2) -- 1951   2003             Director, President and Chief Executive    None                              
   Trustee and Executive Vice                       Officer, A I M Management Group Inc.                                         
   President                                        (financial services holding company);                                        
                                                    Director, Chairman and President, A I M                                      
                                                    Advisors, Inc. (registered investment                                        
                                                    advisor); Director, A I M Capital                                            
                                                    Management, Inc. (registered investment                                      
                                                    advisor) and A I M Distributors, Inc.                                        
                                                    (registered broker dealer); Director and                                     
                                                    Chairman, AIM Investment Services, Inc.                                      
                                                    (registered transfer agent), Fund                                            
                                                    Management Company (registered broker                                        
                                                    dealer) and INVESCO Distributors, Inc.                                       
                                                    (registered broker dealer); and Chief                                        
                                                    Executive Officer, AMVESCAP PLC -- AIM                                       
                                                    Division (parent of AIM and a global                                         
                                                    investment management firm)                                                  
                                                    Formerly: Director, Chairman, President                                      
                                                    and Chief Executive Officer, INVESCO                                         
                                                    Funds Group, Inc.; President and Chief                                       
                                                    Executive Officer, INVESCO Distributors,                                     
                                                    Inc.; Chief Executive Officer, AMVESCAP                                      
                                                    PLC -- Managed Products; Chairman and                                        
                                                    Chief Executive Officer of NationsBanc                                       
                                                    Advisors, Inc.; and Chairman of                                              
                                                    NationsBanc Investments, Inc.                                                
---------------------------------------------------------------------------------------------------------------------------------

   INDEPENDENT TRUSTEES                                                                                                          
---------------------------------------------------------------------------------------------------------------------------------

   Bruce L. Crockett(3) -- 1944    1987             Chairman, Crockett Technology Associates   ACE Limited (insurance company);  
   Trustee and Chair                                (technology consulting company)            and Captaris, Inc. (unified       
                                                                                               messaging provider)               
---------------------------------------------------------------------------------------------------------------------------------

   Bob R. Baker -- 1936            2003             Retired                                    None                              
   Trustee                                                                                                                       
                                                    Formerly: President and Chief Executive                                      
                                                    Officer, AMC Cancer Research Center; and                                     
                                                    Chairman and Chief Executive Officer,                                        
                                                    First Columbia Financial Corporation                                         
---------------------------------------------------------------------------------------------------------------------------------

   Frank S. Bayley -- 1939         2001             Retired                                    Badgley Funds, Inc. (registered   
   Trustee                                                                                     investment company)               
                                                    Formerly: Partner, law firm of Baker &                                       
                                                    McKenzie                                                                     
---------------------------------------------------------------------------------------------------------------------------------

   James T. Bunch -- 1942          2003             Co-President and Founder, Green, Manning   None                              
   Trustee                                          & Bunch Ltd., (investment banking firm);                                     
                                                    and Director, Policy Studies, Inc. and                                       
                                                    Van Gilder Insurance Corporation                                             
---------------------------------------------------------------------------------------------------------------------------------

   Albert R. Dowden -- 1941        2000             Director of a number of public and         Cortland Trust, Inc. (Chairman)   
   Trustee                                          private business corporations, including   (registered investment company);  
                                                    the Boss Group Ltd. (private investment    Annuity and Life Re (Holdings),   
                                                    and management) and Magellan Insurance     Ltd. (insurance company)          
                                                    Company                                                                      
                                                    Formerly: Director, President and Chief                                      
                                                    Executive Officer, Volvo Group North                                         
                                                    America, Inc.; Senior Vice President, AB                                     
                                                    Volvo; and director of various                                               
                                                    affiliated Volvo companies                                                   
---------------------------------------------------------------------------------------------------------------------------------

   Edward K. Dunn, Jr. -- 1935     1998             Retired                                    None                              
   Trustee                                                                                                                       
                                                    Formerly: Chairman, Mercantile Mortgage                                      
                                                    Corp.; President and Chief Operating                                         
                                                    Officer, Mercantile-Safe Deposit & Trust                                     
                                                    Co.; and President, Mercantile                                               
                                                    Bankshares Corp.                                                             
---------------------------------------------------------------------------------------------------------------------------------

   Jack M. Fields -- 1952          1997             Chief Executive Officer, Twenty First      Administaff, and Discovery Global 
   Trustee                                          Century Group, Inc. (government affairs    Education Fund (non-profit)       
                                                    company) and Texana Timber LP                                                
                                                    (sustainable forestry company)                                               
---------------------------------------------------------------------------------------------------------------------------------

(1) Mr. Graham is considered an interested person of the Trust because he is a  
director of AMVESCAP PLC, parent of the advisor to the Trust. Prior to  
  October 4, 2004, Mr. Graham served as Chairman of the Board of Trustees of
the Trust.                                                              
(2) Mr. Williamson is considered an interested person of the Trust because he is
    an officer and a director of the advisor to, and a director of the principal
underwriter of, the Trust.                                              
(3) Mr. Crockett was elected Chair of the Board of Trustees of the Trust        
effective October 4, 2004.                                              

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TRUSTEES AND OFFICERS (continued)                                               

As of December 31, 2004                                                         

The address of each trustee and officer of AIM Funds Group (the "Trust"), is 11 
Greenway Plaza, Suite 100, Houston, Texas 77046. Each trustee oversees 114      
portfolios in the AIM Funds complex. The trustees serve for the life of the     
Trust, subject to their earlier death, incapacitation, resignation, retirement  
or removal as more specifically provided in the Trust's organizational          
documents. Column two below includes length of time served with predecessor     
entities, if any.                                                               

                                                        [Enlarge/Download Table]

Name, Year of Birth and            Trustee and/       Principal Occupation(s)                    Other Directorship(s)             
Position(s) Held with the Trust    or Officer Since   During Past 5 Years                        Held by Trustee                   
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                   

   Carl Frischling -- 1937         1993               Partner, law firm of Kramer Levin          Cortland Trust, Inc. (registered  
   Trustee                                            Naftalis and Frankel LLP                   investment company)               
-----------------------------------------------------------------------------------------------------------------------------------

   Gerald J. Lewis -- 1933         2003               Chairman, Lawsuit Resolution Services      General Chemical Group, Inc.      
   Trustee                                            (California)                                                                 
                                                      Formerly: Associate Justice of the                                           
                                                      California Court of Appeals                                                  
-----------------------------------------------------------------------------------------------------------------------------------

   Prema Mathai-Davis -- 1950      1998               Formerly: Chief Executive Officer, YWCA    None                              
   Trustee                                            of the USA                                                                   
-----------------------------------------------------------------------------------------------------------------------------------

   Lewis F. Pennock -- 1942        1992               Partner, law firm of Pennock & Cooper      None                              
   Trustee                                                                                                                         
-----------------------------------------------------------------------------------------------------------------------------------

   Ruth H. Quigley -- 1935         2001               Retired                                    None                              
   Trustee                                                                                                                         
-----------------------------------------------------------------------------------------------------------------------------------

   Louis S. Sklar(4) -- 1939       1993               Executive Vice President, Development      None                              
   Trustee                                            and Operations, Hines Interests Limited                                      
                                                      Partnership (real estate development                                         
                                                      company)                                                                     
-----------------------------------------------------------------------------------------------------------------------------------

   Larry Soll -- 1942              2003               Retired                                    None                              
   Trustee                                                                                                                         
-----------------------------------------------------------------------------------------------------------------------------------

   OTHER OFFICERS                                                                                                                  
-----------------------------------------------------------------------------------------------------------------------------------

   Lisa O. Brinkley(5) -- 1959     2004               Senior Vice President, A I M Management    N/A                               
   Senior Vice President and                          Group Inc. (financial services holding                                       
   Chief Compliance Officer                           company); Senior Vice President and                                          
                                                      Chief Compliance Officer, A I M                                              
                                                      Advisors, Inc.; Vice President and Chief                                     
                                                      Compliance Officer, A I M Capital                                            
                                                      Management, Inc. and A I M Distributors,                                     
                                                      Inc.; and Vice President, AIM Investment                                     
                                                      Services, Inc. and Fund Management                                           
                                                      Company                                                                      
                                                      Formerly: Senior Vice President and                                          
                                                      Compliance Director, Delaware                                                
                                                      Investments Family of Funds                                                  
-----------------------------------------------------------------------------------------------------------------------------------

   Kevin M. Carome -- 1956         2003               Director, Senior Vice President,           N/A                               
   Senior Vice President,                             Secretary and General Counsel, A I M                                         
   Secretary and Chief Legal                          Management Group Inc. (financial                                             
   Officer                                            services holding company) and A I M                                          
                                                      Advisors, Inc.; Director and Vice                                            
                                                      President, INVESCO Distributors, Inc.;                                       
                                                      Vice President, A I M Capital                                                
                                                      Management, Inc., and AIM Investment                                         
                                                      Services, Inc.; Director, Vice President                                     
                                                      and General Counsel, Fund Management                                         
                                                      Company and Senior Vice President, A I M                                     
                                                      Distributors, Inc.                                                           
                                                      Formerly: Senior Vice President and                                          
                                                      General Counsel, Liberty Financial                                           
                                                      Companies, Inc.; and Senior Vice                                             
                                                      President and General Counsel, Liberty                                       
                                                      Funds Group, LLC and Vice President,                                         
                                                      A I M Distributors, Inc.                                                     
-----------------------------------------------------------------------------------------------------------------------------------

   Robert G. Alley -- 1948         1992               Managing Director, Chief Fixed Income      N/A                               
   Vice President                                     Officer and Senior Investment Officer,                                       
                                                      A I M Capital Management, Inc. and Vice                                      
                                                      President, A I M Advisors, Inc.                                              
-----------------------------------------------------------------------------------------------------------------------------------

   Stuart W. Coco -- 1955          1992               Managing Director and Director of Money    N/A                               
   Vice President                                     Market Research and Special Projects,                                        
                                                      A I M Capital Management, Inc.; and Vice                                     
                                                      President, A I M Advisors, Inc.                                              
-----------------------------------------------------------------------------------------------------------------------------------

   Sidney M. Dilgren -- 1961       2004               Vice President and Fund Treasurer, A I M   N/A                               
   Vice President and Treasurer                       Advisors, Inc.                                                               
                                                      Formerly: Senior Vice President, AIM                                         
                                                      Investment Services, Inc.; and Vice                                          
                                                      President, A I M Distributors, Inc.                                          
-----------------------------------------------------------------------------------------------------------------------------------

   Karen Dunn Kelley -- 1960       1992               Director of Cash Management, Managing      N/A                               
   Vice President                                     Director and Chief Cash Management                                           
                                                      Officer, A I M Capital Management, Inc;                                      
                                                      Director and President, Fund Management                                      
                                                      Company; and Vice President, A I M                                           
                                                      Advisors, Inc.                                                               
-----------------------------------------------------------------------------------------------------------------------------------

   Edgar M. Larsen(4) -- 1940      1999               Executive Vice President, A I M            N/A                               
   Vice President                                     Management Group, Inc.; Senior Vice                                          
                                                      President, A I M Advisors, Inc., and                                         
                                                      President, Director of Investments,                                          
                                                      Chief Executive Officer and Chief                                            
                                                      Investment Officer, A I M Capital                                            
                                                      Management, Inc. (See footnote (4)                                           
                                                      below.)                                                                      
                                                      Formerly: Director of A I M Advisors,                                        
                                                      Inc. and A I M Management Group Inc.,                                        
                                                      A I M Advisors, Inc.; and Director and                                       
                                                      Chairman, A I M Capital Management, Inc.                                     
-----------------------------------------------------------------------------------------------------------------------------------

(4) Mr. Sklar and Mr. Larsen retired effective December 31, 2004.               
(5) Ms. Brinkley was elected Senior Vice President and Chief Compliance Officer 
of the Trust effective September 20, 2004.                              

The Statement of Additional Information of the Trust includes additional        
information about the Fund's Trustees and is available upon request, without    
charge, by calling 1.800.959.4246.                                              

                                                        [Enlarge/Download Table]
                                                                                                      
OFFICE OF THE FUND           INVESTMENT ADVISOR       DISTRIBUTOR             AUDITORS                
11 Greenway Plaza            A I M Advisors, Inc.     A I M Distributors,     PricewaterhouseCoopers  
Suite 100                    11 Greenway Plaza        Inc.                    LLP                     
Houston, TX 77046-1173       Suite 100                11 Greenway Plaza       1201 Louisiana Street   
                             Houston, TX 77046-1173   Suite 100               Suite 2900              
                                                      Houston, TX 77046-1173  Houston, Texas          
                                                                              77002-5678              
COUNSEL TO THE FUND          COUNSEL TO THE           TRANSFER AGENT          CUSTODIAN               
                             INDEPENDENT TRUSTEES                                                     
Ballard Spahr                                         AIM Investment          State Street Bank and   
Andrews & Ingersoll, LLP     Kramer, Levin, Naftalis  Services, Inc.          Trust Company           
1735 Market Street           & Frankel LLP            P.O. Box 4739           225 Franklin Street     
Philadelphia, PA 19103-7599  919 Third Avenue         Houston, TX 77210-4739  Boston, MA 02110-2801   
                             New York, NY 10022-3852                                                  

REQUIRED FEDERAL INCOME TAX INFORMATION (UNAUDITED)                             

Of ordinary dividends paid to shareholders during the Fund's tax year ended     
December 31, 2004, 49.67% is eligible for the dividends received deduction for  
corporations.                                                                   

For its tax year ended December 31, 2004, the Fund designates 56.0% of the      
maximum amount allowable of its dividend distributions as qualified dividend    
income. Your actual amount of qualified dividend income for the calendar year   
will be reported on form 1099-DIV. You should consult your tax advisor regarding
treatment of the amounts.                                                       

REQUIRED STATE INCOME TAX INFORMATION (UNAUDITED)                               

Of the ordinary dividends paid, 9.31% was derived from U.S. Treasury            
Obligations.                                                                    

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                                                        [Enlarge/Download Table]
                                                                                                                         
           DOMESTIC EQUITY             INTERNATIONAL/GLOBAL EQUITY                        FIXED INCOME                   

AIM Aggressive Growth Fund        AIM Asia Pacific Growth Fund                 TAXABLE                                   
AIM Balanced Fund*                AIM Developing Markets Fund                                                            
AIM Basic Balanced Fund*          AIM European Growth Fund                     AIM Floating Rate Fund                    
AIM Basic Value Fund              AIM European Small Company Fund(5)           AIM High Yield Fund                       
AIM Blue Chip Fund                AIM Global Aggressive Growth Fund            AIM Income Fund                           
AIM Capital Development Fund      AIM Global Equity Fund(6)                    AIM Intermediate Government Fund          
AIM Charter Fund                  AIM Global Growth Fund                       AIM Limited Maturity Treasury Fund        
AIM Constellation Fund            AIM Global Value Fund                        AIM Money Market Fund                     
AIM Core Stock Fund(1)            AIM International Core Equity Fund(1)        AIM Short Term Bond Fund                  
AIM Dent Demographic Trends Fund  AIM International Growth Fund                AIM Total Return Bond Fund                
AIM Diversified Dividend Fund     AIM International Small Company Fund(7)      Premier U.S. Government Money Portfolio(1)
AIM Dynamics Fund(1)              AIM Trimark Fund                                                                       
AIM Emerging Growth Fund                                                       TAX-FREE                                  
AIM Large Cap Basic Value Fund               SECTOR EQUITY                                                               
AIM Large Cap Growth Fund                                                      AIM High Income Municipal Fund            
AIM Libra Fund                    AIM Advantage Health Sciences Fund(1)        AIM Municipal Bond Fund                   
AIM Mid Cap Basic Value Fund      AIM Energy Fund(1)                           AIM Tax-Exempt Cash Fund                  
AIM Mid Cap Core Equity Fund(2)   AIM Financial Services Fund(1)               AIM Tax-Free Intermediate Fund            
AIM Mid Cap Growth Fund           AIM Global Health Care Fund                                                            
AIM Mid Cap Stock Fund(1)         AIM Gold & Precious Metals Fund(1)                  AIM ALLOCATION SOLUTIONS           
AIM Opportunities I Fund          AIM Health Sciences Fund(1)                                                            
AIM Opportunities II Fund         AIM Leisure Fund(1)                          AIM Aggressive Allocation Fund            
AIM Opportunities III Fund        AIM Multi-Sector Fund(1)                     AIM Conservative Allocation Fund          
AIM Premier Equity Fund           AIM Real Estate Fund                         AIM Moderate Allocation Fund              
AIM S&P 500 Index Fund(1)         AIM Technology Fund(1)                                                                 
AIM Select Equity Fund            AIM Utilities Fund(1)                                                                  
AIM Small Cap Equity Fund(3)                                                                                             
AIM Small Cap Growth Fund(4)      ================================================================================       
AIM Small Company Growth Fund(1)  CONSIDER THE INVESTMENT OBJECTIVES, RISKS, AND CHARGES AND EXPENSES CAREFULLY.         
AIM Total Return Fund*(1)         FOR THIS AND OTHER INFORMATION ABOUT AIM FUNDS, OBTAIN A PROSPECTUS FROM YOUR          
AIM Trimark Endeavor Fund         FINANCIAL ADVISOR AND READ IT THOROUGHLY BEFORE INVESTING.                             
AIM Trimark Small Companies Fund  ================================================================================       
AIM Weingarten Fund                                                                                                      

* Domestic equity and income fund                                               

(1) The following name changes became effective October 15, 2004: INVESCO       
Advantage Health Sciences Fund to AIM Advantage Health Sciences Fund, INVESCO   
Core Equity Fund to AIM Core Stock Fund, INVESCO Dynamics Fund to AIM Dynamics  
Fund, INVESCO Energy Fund to AIM Energy Fund, INVESCO Financial Services Fund to
AIM Financial Services Fund, INVESCO Gold & Precious Metals Fund to AIM Gold &  
Precious Metals Fund, INVESCO Health Sciences Fund to AIM Health Sciences Fund, 
INVESCO International Core Equity Fund to AIM International Core Equity Fund,   
INVESCO Leisure Fund to AIM Leisure Fund, INVESCO Mid-Cap Growth Fund to AIM Mid
Cap Stock Fund, INVESCO Multi-Sector Fund to AIM Multi-Sector Fund, INVESCO S&P 
500 Index Fund to AIM S&P 500 Index Fund, INVESCO Small Company Growth Fund to  
AIM Small Company Growth Fund, INVESCO Technology Fund to AIM Technology Fund,  
INVESCO Total Return Fund to AIM Total Return Fund, INVESCO U.S. Government     
Money Fund to Premier U.S. Government Money Portfolio, INVESCO Utilities Fund to
AIM Utilities Fund. (2) As of the close of business on February 27, 2004, AIM   
Mid Cap Core Equity Fund is available to new investors on a limited basis. For  
information on who may continue to invest in AIM Mid Cap Core Equity Fund,      
please contact your financial advisor. (3) Effective December 13, 2004, AIM     
Small Cap Equity Fund is open to all investors. (4) AIM Small Cap Growth Fund   
was closed to most investors on March 18, 2002. For information on who may      
continue to invest in AIM Small Cap Growth Fund, please contact your financial  
advisor. (5) AIM European Small Company Fund will close to new investors when   
net assets reach $500 million. (6) Effective March 31, 2004, AIM Global Trends  
Fund was renamed AIM Global Equity Fund. (7) Effective December 30, 2004, AIM   
International Emerging Growth Fund was renamed AIM International Small Company  
Fund. The fund will close to new investors when net assets reach $500 million.  

If used after April 20, 2005, this report must be accompanied by a fund   
Performance & Commentary or by an AIM Quarterly Performance Review for the most 
recent quarter-end. Mutual funds distributed by A I M Distributors, Inc.        

A I M Management Group Inc. has provided leadership in the investment management
industry since 1976 and manages $138 billion in assets. AIM is a subsidiary of  
AMVESCAP PLC, one of the world's largest independent financial services         
companies with $382 billion in assets under management. Data as of December 31, 
2004.                                                                           

AIMinvestments.com                  BAL-AR-1            A I M Distributors, Inc.

                                                        [Enlarge/Download Table]
                                                                                                            
                             [YOUR GOALS. OUR SOLUTIONS.] --Registered Trademark--                          
--------------------------------------------------------------------------------                            
Mutual   Retirement   Annuities   College   Separately   Offshore   Cash             [AIM INVESTMENTS LOGO] 
Funds    Products                 Savings   Managed      Products   Management      --Registered Trademark--
                                  Plans     Accounts                                                        
--------------------------------------------------------------------------------                            

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                                                                  APPENDIX III

                                                     INVESCO TOTAL RETURN FUND
                               Annual Report to Shareholders . August 31, 2004
[COVER IMAGE] 
[YOUR GOALS. OUR SOLUTIONS.]  
- REGISTERED TRADEMARK -  

        [AIM INVESTMENTS LOGO]
        - REGISTERED TRADEMARK -

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INVESCO TOTAL RETURN FUND SEEKS HIGH TOTAL RETURN THROUGH BOTH GROWTH AND       
CURRENT INCOME.                                                                 
.   Unless otherwise stated, information presented in this report is as of
8/31/04 and is based on total net assets.                         
.   Effective October 15, 2004, after the close of the reporting period,  
INVESCO Total Return Fund was renamed AIM Total Return Fund.      
ABOUT SHARE CLASSES                                                             
  .   Effective 9/30/03, Class B shares are not available as an investment for
 retirement plans maintained pursuant to Section 401 of the Internal
    Revenue Code, including 401(k) plans, money purchase pension plans and
 profit sharing plans. Plans that have existing accounts invested in
      Class B shares will continue to be allowed to make additional purchases.
  .   Investor Class shares are closed to most investors. For more information
    on who may continue to invest in the Investor Class shares, please see
the prospectus.                                                   
PRINCIPAL RISKS OF INVESTING IN THE FUND                                        
  .   At any given time, the fund may be subject to sector risk, which means a
     certain sector may underperform other sectors or the market as a whole.
 The fund is not limited with respect to the sectors in which it can
invest.                                                           
 .   The fund invests in securities issued or backed by the U.S. government,
   its agencies or instrumentalities. They offer a high degree of safety
    and, in the case of government securities, are guaranteed as to timely
    payment of principal and interest if held to maturity. Fund shares are
     not insured, and their value or yield will vary with market conditions.
.   The fund may invest a portion of its assets in mortgage-backed        
      securities, which may lose value if mortgages are prepaid in response to
falling interest rates.                                           
.   International investing presents certain risks not associated with    
    investing solely in the United States. These include risks relating to
    fluctuations in the value of the U.S. dollar relative to the values of
    other currencies, the custody arrangements made for the fund's foreign
 holdings, differences in accounting, political risks and the lesser
degree of public information required to be provided by non-U.S.  
      companies. The fund may invest up to 25% of its assets in the securities
of non-U.S. issuers. Securities of Canadian issuers and American  
Depositary Receipts are not subject to this 25% limitation.       
ABOUT INDEXES USED IN THIS REPORT                                               
.   The unmanaged Standard & Poor's Composite Index of 500 Stocks (the S&P
500 --REGISTERED TRADEMARK-- Index) is an index of common stocks  
    frequently used as a general measure of U.S. stock market performance.
.   The unmanaged Lehman U.S. Aggregate Bond Index, which represents the  
    U.S. investment-grade fixed-rate bond market (including government and
     corporate securities, mortgage pass-through securities and asset-backed
    securities), is compiled by Lehman Brothers, a global investment bank.
 .   The unmanaged Lehman Government/Credit Bond Index, which represents the
performance of intermediate- and long-term government and         
investment-grade corporate debt securities, is compiled by Lehman 
Brothers, a global investment bank.                               
  .   The unmanaged Lipper Balanced Fund Index represents an average of the 30
   largest balanced funds tracked by Lipper, Inc., an independent mutual
    fund performance monitor. It is calculated daily, with adjustments for
distributions as of the ex-dividend dates.                        
  .   The fund uses a custom index composed of 60% Standard & Poor's Composite
   Index of 500 Stocks (the S&P 500 Index) and 40% Lehman U.S. Aggregate
Bond Index.                                                       
.   A direct investment cannot be made in an index. Unless otherwise      
    indicated, index results include reinvested dividends, and they do not
   reflect sales charges. Performance of an index of funds reflects fund
expenses; performance of a market index does not.                 
.   The fund is not managed to track the performance of any particular    
index, including the indexes defined here, and consequently, the  
    performance of the fund may deviate significantly from the performance
of the indexes.                                                   
OTHER INFORMATION                                                               
 .   Industry classifications used in this report are generally according to
     the Global Industry Classification Standard, which was developed by and
    is the exclusive property and a service mark of Morgan Stanley Capital
International Inc. and Standard & Poor's.                         
  .   The returns shown in the Management's Discussion of Fund Performance are
based on net asset values calculated for shareholder transactions.
     Generally accepted accounting principles require adjustments to be made
 to the net assets of the fund at period end for financial reporting
      purposes, and as such, the net asset values for shareholder transactions
     and the returns based on those net asset values may differ from the net
asset values and returns reported in the Financial Highlights.    
  .   Bloomberg, Inc. is an independent financial research and reporting firm.
.   Effective duration is a measure, as estimated by the fund's portfolio 
 managers, of a bond fund's price sensitivity to changes in interest
      rates. Weighted average effective maturity is a measure, as estimated by
    the fund's portfolio managers, of the length of time until the average
    security in a bond fund will mature or be redeemed by its issuer. Both
measures take into account mortgage prepayments, puts, adjustable 
coupons and potential call dates.                                 
A description of the policies and procedures that the fund uses to determine    
how to vote proxies relating to portfolio securities is available without       
charge, upon request, from our Client Services department at 800-959-4246, or   
on the AIM Web site, AIMinvestments.com. Scroll down on the home page and click 
on AIM Funds Proxy Policy. The information is also available on the Securities  
and Exchange Commission's Web site, sec.gov.                                    
Information about how the fund voted proxies related to its portfolio           
securities during the 12 months ended 6/30/04 is available at our Web site. Go  
to AIMinvestments.com, access the About Us tab, click on Required Notices and   
then click on Proxy Voting Activity.                                            
Next, select your fund from the drop-down menu.                                 
THIS REPORT MUST BE ACCOMPANIED OR PRECEDED BY A CURRENTLY EFFECTIVE FUND       
PROSPECTUS, WHICH CONTAINS MORE COMPLETE INFORMATION, INCLUDING SALES CHARGES   
AND EXPENSES. READ IT CAREFULLY BEFORE YOU INVEST.                              
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE                               
AIMINVESTMENTS.COM                                                              

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TO OUR SHAREHOLDERS                                                             

                                                        [Enlarge/Download Table]
                                                                                                                    
                  DEAR FELLOW SHAREHOLDER IN THE AIM FAMILY OF FUNDS --REGISTERED TRADEMARK--:                      
                  NEW BOARD CHAIRMAN                                                                                
     [GRAHAM      It is my pleasure to introduce you to Bruce Crockett, the new Chair of the Board of Trustees of   
     PHOTO]       the AIM Funds. It has been my honor to have served as Chairman of the Board of Trustees of the AIM
                  Funds ever since Ted Bauer retired from that position in 2000. However, as you may be aware, the  
                  U.S. Securities and Exchange Commission recently adopted a rule requiring that an independent fund
ROBERT H. GRAHAM  trustee, meaning a trustee who is not an officer of the fund's investment advisor, serve as       
                  chairman of the funds' board. In addition, a similar provision was included in the terms of AIM   
                  Advisors' recent settlements with certain regulators. Accordingly, the AIM Funds' board recently  
                  elected Mr. Crockett as Chair. His appointment became effective on October 4. I will remain on the
                  funds' board, as will Mark Williamson, President and Chief Executive Officer of AIM. We both      
                  pledge our full support to Mr. Crockett. As before, the AIM Funds board will consist of 14        
                  independent directors and Mark Williamson and me. I will also remain Chairman of A I M Management 
                  Group Inc.                                                                                        
    [CROCKETT        Mr. Crockett has been a member of the AIM Funds' board since 1992, when AIM acquired certain   
     PHOTO]       funds that had been advised by CIGNA. He had been a member of the board of those funds since 1978.
                  Mr. Crockett has more than 30 years of experience in finance and general management and has been  
                  Chairman of Crockett Technologies Associates since 1996. He is the first independent chairman of  
BRUCE L. CROCKETT the Funds' board in AIM's history, as he is not affiliated with AIM or AMVESCAP in any way. He is 
                  committed to ensuring that the AIM funds adhere to the highest standards of corporate governance  
                  for the benefit of fund shareholders, and we at AIM share that commitment.                        
                  MARKET CONDITIONS DURING THE FISCAL YEAR                                                          
                  After a run-up in 2003, equity markets paused in 2004. Sentiment shifted from enthusiasm over an  
                  economic recovery to caution. Rising interest rates, inflation--particularly surging oil          
                  prices--the war on terrorism and an upcoming presidential election created uncertainty, resulting 
                  in relatively flat returns year to date in 2004.                                                  
                     The S&P 500 Index gained 11.45% over the 12 months ended August 31, 2004, but much of the      
                  upswing occurred in the latter part of 2003. Year to date as of August 31, 2004, the S&P 500 Index
                  has returned just 0.42%. Fixed income markets, which rallied late in the fiscal year, ended up    
                  providing more attractive performance. The Lehman U.S. Aggregate Bond Index returned 6.13% for the
                  fiscal year, 3.07% year to date.                                                                  
                     In uncertain periods like the one covered by this report, we encourage shareholders to look    
                  past short-term market performance and remain focused on their long-term investment goals. Whether
                  markets rise, fall or go sideways, the only sure thing is their unpredictability. Historically,   
                  markets have risen over the long run, with the S&P 500 Index returning 13.10% per year on average 
                  over the past 25 years and the Lehman U.S. Aggregate Bond Index returning 9.33%.* While past      
                  performance cannot guarantee future results, we believe staying invested for the long term offers 
                  the best opportunity for capital growth.                                                          
                  YOUR FUND                                                                                         
                  In the following pages you will find an explanation of how your fund was managed during the year  
                  and how it performed in comparison to various benchmarks. We hope you find this discussion        
                  informative. Current information about your fund and about the markets in general is always       
                  available on our Web site, AIMinvestments.com.                                                    
                     AIM remains committed, as ever, to building solutions for your investment goals, and we thank  
                  you for your continued participation in AIM Investments --SERVICE MARK--. If you have any         
                  questions, please contact our Client Service representatives at 800-959-4246.                     

Sincerely,                                                                      
/s/ Robert H. Graham......                                                      
-------------------------                                                       
Robert H. Graham                                                                
Chairman                                                                        
A I M Management Group                                                          
Inc.                                                                        
October 15, 2004                                                                
* Average annual total return August 31, 1979 to August 31, 2004. Source:       
Lipper, Inc.                                                                
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TO OUR SHAREHOLDERS                                                             

                                                        [Enlarge/Download Table]
                                                                                                                      
                   Dear Fellow Shareholder in The AIM Family of Funds --registered trademark--:                       
                   On October 8, 2004, AMVESCAP PLC, the parent company of INVESCO Funds Group, Inc., the former      
   [WILLIAMSON     investment advisor to certain AIM Funds, and A I M Advisors, Inc. the Funds' investment advisor,   
      PHOTO]       announced that final settlements had been reached with the Securities and Exchange Commission, the 
                   New York Attorney General, the Colorado Attorney General and the Secretary of State of Georgia     
                   regarding the company's previously disclosed civil enforcement actions and investigations related  
MARK H. WILLIAMSON to market timing.                                                                                  
                      The monetary amounts and other terms of the final settlements are consistent with AMVESCAP's    
                   previously announced agreements in principle with state regulators and the SEC staff on September  
                   7, 2004.                                                                                           
                      It is important to note that none of the costs of the settlements will be borne by the INVESCO  
                   and AIM funds or fund shareholders. These costs will be borne by AMVESCAP.                         
                      We deeply regret the harm done to fund shareholders. We also pledge to rededicate ourselves to  
                   maintaining the highest ethical standards and ensuring we consistently place our shareholders'     
                   interests first. With that in mind, we have taken a number of significant steps to improve our     
                   policies and procedures. They include:                                                             
                      .   Strengthened daily monitoring of trading activities.                                        
                      .   The imposition of a 2% redemption fee on short-term trades in selected funds we believe are 
                          most likely to be vulnerable to short-term trading activity.                                
                      .   The implementation of an enhanced exchange policy designed to limit exchanges between funds.
                      .   An enhanced fair value pricing policy for foreign securities, when appropriate, to take     
                          into account events that may occur after the close of foreign markets, but prior to the     
                          close of U.S. markets.                                                                      
                      Details of the financial terms and answers to many commonly asked questions can be found on the 
                   home page of AIMinvestments.com.                                                                   
                      Now that we have reached these final settlements, we look forward to moving ahead with the      
                   business of building quality investment solutions for our clients.                                 

Sincerely,                                                                      
/s/ Mark H. Williamson                                                          
-------------------------                                                       
Mark H. Williamson                                                              
President and Chief                                                             
Executive Officer                                                           
A I M Management Group                                                          
Inc.                                                                        
October 15, 2004                                                                
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MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE                                     
FUND STRATEGY FOCUSED ON ECONOMIC GROWTH                                        
INVESCO Total Return Fund's Investor Class shares returned 4.50% for the fiscal 
year ended August 31, 2004. (Investor Class shares have no front-end or         
contingent sales charges; therefore, performance is at net asset value.)        
Results for other share classes and benchmark indexes are found in the table on 
page 5.                                                                         
The fund underperformed the S&P 500 Index's total return of 11.45% for the
period, largely because the S&P 500 Index is composed only of equities, while   
the fund also holds bonds. The period's strong economic data were generally     
favorable for equities, but encouraged rising interest rates and inflation      
concerns that created a negative climate for the fixed-income market.           
  The fund's results also lagged the 9.10% total return of the Lipper Balanced
Fund Index, representing the fund's peers, and the 9.43% total return of its    
custom index. The custom index consists of 60% S&P 500 Index and 40% Lehman     
U.S. Aggregate Bond Index, approximating the composition of the fund's          
portfolio. The performance discrepancy occurred largely because the market      
favored value stocks by a wide margin, while most of the fund's equities were   
growth stocks. The fund's bullish strategy was based on the strong economic     
data that prevailed during the period. The market, however, appeared            
preoccupied with negative factors such as rising crude oil prices and the       
continuing conflict in Iraq. Additionally, the weak climate for bonds during    
the period led to rather modest returns from fixed-income securities.           
MARKET CONDITIONS                                                               
According to the U.S. Department of Commerce, the economy recorded positive     
growth throughout the fiscal year, although that growth slowed in the second    
quarter of 2004. Gross domestic product, the broadest measure of economic       
activity, grew at an annualized rate of 7.4% in the third quarter and 4.2% in   
the fourth quarter of 2003; it grew at an annualized rate of 4.5% and 3.3% in   
the first and second quarters of 2004, respectively.                            
The U.S. Federal Reserve (the Fed), acting on evidence that economic      
conditions were generally improving and that inflation was increasing, raised   
its key federal funds target rate from 1.00% to 1.25% in late June, and from    
1.25% to 1.50% in August. Both actions were much anticipated by markets.        
Corporate earnings were robust. Bloomberg reported that almost 86% of S&P 
500 Index firms that had reported second quarter earnings through the end of    
August either met or exceeded analysts' expectations.                           
YOUR FUND                                                                       
Portfolio turnover was higher than usual this year as fund management           
responsibilities were transferred to a different team of seasoned portfolio     
managers. This transition required portfolio restructuring that increased       
portfolio turnover to a level that is atypical for the Fund's new equity and    
fixed income strategies.                                                        
In our Core Multiple Attribute strategy, stocks can be eligible for our   
selection if they possess at least one of three attributes that are attractive  
relative to the S&P 500 Index: a low price-to-earnings ratio, a high dividend   
yield or consistently above-average earnings growth.                            
The fund maintained a diversified position among fixed-income sectors and 
issuers. As continued economic growth made interest rate hikes increasingly     
likely, we shortened the duration. This action helped fund performance relative 
to the Lehman U.S. Aggregate Bond Index as the Fed raised interest rates in the 
latter part of the fiscal year.                                                 
In view of the evidence of economic strength and corporate profits, we    
increased the fund's exposure to economically sensitive equity sectors such as  
materials, information technology and industrials while reducing holdings in    
the more defensive areas such as consumer staples and energy. While the fund    
maintained an overweight position in corporate bonds over the year, which       
proved beneficial, we reduced involvement in the cable and automotive           
industries toward the end of the fiscal year, either to capture profits as      
relative value became less attractive or because we anticipated potential event 
risks.                                                                          
The fund's results were helped by being overweight relative to the S&P 500
Index (holding a higher proportion than the index)                              
--------------------------------------------------------------------------------

                                                                [Download Table]
                                
PORTFOLIO COMPOSITION           
By type of security.......      
[PIE CHART]...............      
Common Stock.............. 59.7%
Corporate Bonds & Notes... 13.2 
Government Bonds..........  9.8 
Mortgage-Backed Securities 13.9 
Other.....................  3.4 

--------------------------------------------------------------------------------

                                                                [Download Table]
                                        
TOTAL NET ASSETS......... $684.5 MILLION
TOTAL NUMBER OF HOLDINGS*            152

--------------------------------------------------------------------------------

                                                                [Download Table]
                                                             
TOP 10 EQUITY HOLDINGS*.................................     
 1. Johnson & Johnson................................... 2.7%
 2. Pfizer Inc.......................................... 2.4 
 3. Microsoft Corp...................................... 2.0 
 4. Home Depot, Inc. (The).............................. 1.8 
 5. Fannie Mae.......................................... 1.7 
 6. General Electric Co................................. 1.7 
 7. Cisco Systems, Inc.................................. 1.7 
 8. Citigroup Inc....................................... 1.7 
 9. Eaton Corp.......................................... 1.5 
10. Goldman Sachs Group, Inc. (The)..................... 1.5 
TOP 10 FIXED INCOME ISSUERS*............................     
 1. U.S. Treasury....................................... 8.1%
 2. Federal National Mortgage Association (FNMA)........ 5.4 
 3. Government National Mortgage Association (GNMA)..... 1.9 
 4. Structured Asset Securities Corp.................... 1.5 
 5. General Motors Acceptance Corp...................... 1.2 
 6. Verizon Global Funding Corp......................... 0.9 
 7. Credit Suisse First Boston Mortgage Securities Corp. 0.8 
 8. Wells Fargo & Co.................................... 0.8 
 9. Citigroup Inc....................................... 0.7 
10. Chase Funding Mortgage Loan......................... 0.6 

* Excludes money market fund holdings.                                          
The fund's holdings are subject to change, and there is no assurance that the   
fund will continue to hold any particular security.                             
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in the materials and industrials equity sectors, which investors favored, and   
by positive stock selection in the industrials sector. An overweight position   
and stock selection in the information technology sector detracted from         
results, as did an underweight position in the energy sector. In the financials 
sector, the fund's focus on market-related companies also hurt performance, as  
those equities declined due to lower trading volume.                            
Fund results benefited from an overweight position in corporate credit,   
which was the outperformer in the fixed-income market. Underweight positions in 
the mortgage-backed and U.S. government agency sectors reduced return relative  
to the index, as these performed unexpectedly well.                             
The top equity contributor to fund results was QUALCOMM, whose stock price
rose briskly with the success of digital wireless communications products based 
on the company's code-division multiple access (CDMA) technology. Semiconductor 
giant Intel detracted from fund results because investors worried how long the  
current semiconductor chip cycle might last. However, in our opinion these      
concerns were exaggerated, and we retained a position in Intel stock.           
Fixed-income holdings that boosted fund performance included              
telecommunications provider Sprint, whose bonds benefited from the company's    
strong revenue, profit and free cash flow performance during the second quarter 
of 2004. We began selling our shares of reinsurer Converium after an erosion of 
capital, which resulted in a credit downgrade.                                  
IN CLOSING                                                                      
We continued to invest in stocks we believe to be of high quality, primarily    
those of large-cap companies with a history of paying regular dividends, and in 
investment-grade debt securities. Based on the Fed's economic assessment that   
"output is continuing to expand at a solid pace," we positioned the fund to     
benefit from continued economic growth by placing an emphasis on cyclical       
stocks and on lower-rated investment-grade bonds. We also kept average bond     
duration short in the expectation that economic expansion will generate rising  
inflation, which will necessitate additional Fed interest rate increases.       
The views and opinions expressed in Management's Discussion of Fund Performance 
are those of A I M Advisors, Inc. These views and opinions are subject to       
change at any time based on factors such as market and economic conditions.     
These views and opinions may not be relied upon as investment advice or         
recommendations, or as an offer for a particular security. The information is   
not a complete analysis of every aspect of any market, country, industry,       
security or the Fund. Statements of fact are from sources considered reliable,  
but A I M Advisors, Inc. makes no representation or warranty as to their        
completeness or accuracy. Although historical performance is no guarantee of    
future results, these insights may help you understand our investment           
management philosophy.                                                          
See important fund and index disclosures on the first page of this report.  
Portfolio management changes became effective August 2, 2004. The equity        
portion of the fund continues to be managed using a team approach. The          
investment team includes five portfolio managers who concentrate on stock       
selection, four investment professionals who concentrate on portfolio           
strategies, and three research analysts. The following individuals are          
primarily responsible for the day-to-day management of the fund's fixed-income  
portfolio holdings: Kenneth R. Bowling, Stephen M. Johnson and Richard J. King. 

                                                        [Enlarge/Download Table]
                                                                                                           
[BOWLING KENNETH R. BOWLING                                                                                
 PHOTO]  Kenneth R. Bowling, Chartered Financial Analyst, is a portfolio manager for INVESCO Total Return  
         Fund. He joined INVESCO in 1993. He holds a B.S. in mechanical engineering and an M.S. in         
         engineering from the University of Louisville.                                                    
[JOHNSON STEPHEN M. JOHNSON                                                                                
 PHOTO]  Stephen M. Johnson, Chartered Financial Analyst, is a portfolio manager for INVESCO Total Return  
         Fund. He began his investment career in 1986 and joined INVESCO in May of 1991. He holds a B.S. in
         Petroleum Engineering from the University of Kansas and an M.B.A. from Rice University.           
 [KING   RICHARD J. KING                                                                                   
 PHOTO]  Richard J. King, Chartered Financial Analyst, is a portfolio manager for INVESCO Total Return     
         Fund. He started his investment career in 1984 and joined INVESCO in 2000. He holds a B.S. in     
         business administration from Ohio State University.                                               

--------------------------------------------------------------------------------

                                                                [Download Table]
                                             
TOP 10 INDUSTRIES*                           
 1. Collateralized Mortgage Obligations. 8.4%
 2. U.S. Treasury Securities............ 8.1 
 3. Pharmaceuticals..................... 6.3 
 4. U.S. Mortgage-Backed Securities..... 5.5 
 5. Investment Banking & Brokerage...... 4.7 
 6. Thrifts & Mortgage Finance.......... 4.2 
 7. Other Diversified Financial Services 3.6 
 8. Industrial Machinery................ 3.6 
 9. Semiconductors...................... 3.6 
10. Consumer Finance.................... 3.4 

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
FUND VS. INDEXES                                                                
Total returns, 8/31/03-8/31/04, excluding applicable sales charges. If sales    
charges were included, returns would be lower.                                  

                                                        [Enlarge/Download Table]
                                                                                                  
Class A Shares.............................................................................  4.29%
Class B Shares.............................................................................  3.71 
Class C Shares.............................................................................  3.68 
Investor Class Shares......................................................................  4.50 
S&P 500 Index (Broad Market Index)......................................................... 11.45 
Custom Index: 60% S&P 500 Index/40% Lehman U.S. Aggregate Bond Index (Style-specific Index)  9.43 
Lipper Balanced Fund Index (Peer Group Index)..............................................  9.10 
Source: Lipper, Inc........................................................................       

--------------------------------------------------------------------------------
[RIGHT ARROW GRAPHIC] 
FOR A PRESENTATION OF YOUR FUND'S LONG-TERM PERFORMANCE RECORD, PLEASE TURN TO  
PAGE 7.                                                                         
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INFORMATION ABOUT YOUR FUND'S EXPENSES                                          
CALCULATING YOUR ONGOING FUND EXPENSES                                          
EXAMPLE                                                                         
As a shareholder of the Fund, you incur two types of costs: (1) transaction     
costs, which may include sales charges (loads) on purchase payments; contingent 
deferred sales charges on redemptions; and redemption fees, if any; and (2)     
ongoing costs, including management fees; distribution and/or service fees      
(12b-1); and other Fund expenses. This Example is intended to help you          
understand your ongoing costs (in dollars) of investing in the Fund and to      
compare these costs with ongoing costs of investing in other mutual funds. The  
Example is based on an investment of $1,000 invested at the beginning of the    
period and held for the entire period, March 1, 2004-August 31, 2004.           
ACTUAL EXPENSES                                                                 
The table below provides information about actual account values and actual     
expenses. You may use the information in this table, together with the amount   
you invested, to estimate the expenses that you paid over the period. Simply    
divide your account value by $1,000 (for example, an $8,600 account value       
divided by $1,000 = 8.6), then multiply the result by the number in the table   
under the heading entitled "Actual Expenses Paid During Period" to estimate the 
expenses you paid on your account during this period.                           
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES                                    
The table below also provides information about hypothetical account values and 
hypothetical expenses based on the Fund's actual expense ratio and an assumed   
rate of return of 5% per year before expenses, which is not the Fund's actual   
return. The hypothetical account values and expenses may not be used to         
estimate the actual ending account balance or expenses you paid for the period. 
You may use this information to compare the ongoing costs of investing in the   
Fund and other funds. To do so, compare this 5% hypothetical example with the   
5% hypothetical examples that appear in the shareholder reports of the other    
funds.                                                                          
  Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales    
charges (loads) on purchase payments, contingent deferred sales charges on      
redemptions, and redemption fees, if any. Therefore, the hypothetical           
information is useful in comparing ongoing costs only, and will not help you    
determine the relative total costs of owning different funds. In addition, if   
these transactional costs were included, your costs would have been higher.     
--------------------------------------------------------------------------------

                                                        [Enlarge/Download Table]

                                                             HYPOTHETICAL               
                                     ACTUAL           (5% ANNUAL RETURN BEFORE EXPENSES)
                           -----------------------------------------------------------  
         BEGINNING ACCOUNT ENDING ACCOUNT  EXPENSES   ENDING ACCOUNT      EXPENSES      
               VALUE           VALUE      PAID DURING     VALUE          PAID DURING    
             (3/1/04)       (8/31/04)/1/  PERIOD/2,3/   (8/31/04)        PERIOD/2,4/    
         -----------------------------------------------------     -----------          
                                                                                        
Class A.     $1,000.00        $967.60        $6.63      $1,018.40          $ 6.80       
Class B.      1,000.00         964.20         9.83       1,015.13           10.08       
Class C.      1,000.00         964.40         9.83       1,015.13           10.08       
Investor      1,000.00         968.10         6.04       1,019.00            6.19       

/1/  The actual ending account value is based on the actual total return of the 
    Fund for the period March 1, 2004 to August 31, 2004 after actual expenses
   and will differ from the hypothetical ending account value which is based
   on the Fund's expense ratio and a hypothetical annual return of 5% before
  expenses. The actual cumulative return at net asset value for the period
    March 1, 2004 to August 31, 2004 was -3.24%, -3.58%, -3.56% and -3.19% for
Class A, B, C and Investor class shares, respectively.                
/2/  Expenses are equal to the Fund's annualized expense ratio (1.34%, 1.99%,   
    1.99% and 1.22% for Class A, B, C and Investor class shares, respectively)
multiplied by the average account value over the period, multiplied by
   184/366 (to reflect the one-half year period). During the period March 1,
2004 to August 31, 2004 the Investor Class annualized expense ratio   
restated as if the current contractual Rule 12b-1 fee rate had been in
effect throughout the entire most recent fiscal half year is 1.24%.   
/3/  The Investor Class actual expenses restated as if the current contractual  
  Rule 12b-1 fee rate had been in effect throughout the entire most recent
fiscal half year is $6.13.                                            
/4/  The Investor Class hypothetical expenses restated as if the current        
  contractual Rule 12b-1 fee rate had been in effect throughout the entire
most recent fiscal half year is $6.29.                                
--------------------------------------------------------------------------------
                               [ARROW             For More Information
                       BUTTON                    Visit
                              IMAGE]              AIMINVESTMENTS.COM
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LONG-TERM PERFORMANCE                                                           
YOUR FUND'S LONG-TERM PERFORMANCE                                               
Past performance cannot guarantee comparable future results.                    
Your fund's total return includes reinvested distributions, fund expenses 
and management fees. Index results include reinvested dividends. Performance of 
an index of funds reflects fund expenses and management fees; performance of a  
market index does not. Performance shown in the chart does not reflect          
deduction of taxes a shareholder would pay on fund distributions or sale of     
fund shares. Performance of the indexes does not reflect the effects of taxes.  
Since the last reporting period, we have decided not to use the Lehman    
Government/Credit Bond Index. Because this is the first reporting period since  
the change was made, we are showing the Lehman Government/Credit Bond Index     
here. We now compare the fund to the S&P 500 Index as a Broad Market Index, a   
custom Style-specific Index composed of 60% S&P 500 Index and 40% Lehman U.S.   
Aggregate Bond Index, and the Lipper Balanced Fund Index as a Peer Group Index. 
In evaluating this chart, please note that the chart uses a logarithmic   
scale along the vertical axis (the value scale). This means that each scale     
increment always represents the same percent change in price; in a linear chart 
each scale increment always represents the same absolute change in price. In    
this example, the scale increment between $5,000 and $10,000 is the same as     
that between $10,000 and $20,000. In a linear chart, the latter scale increment 
would be twice as large. The benefit of using a logarithmic scale is that it    
better illustrates performance during the fund's early years before reinvested  
distributions and compounding create the potential for the original investment  
to grow to very large numbers. Had the chart used a linear scale along its      
vertical axis, you would not be able to see as clearly the movements in the     
value of the fund and the indexes during the fund's early years. We use a       
logarithmic scale in financial reports of funds that have more than five years  
of performance history.                                                         
RESULTS OF A $10,000 INVESTMENT                                                 
9/22/87-8/31/04.                                                                
Index results are from 9/30/87.                                                 
[MOUNTAIN CHART]  

                                                        [Enlarge/Download Table]

        INVESCO TOTAL RETURN    LIPPER          LEHMAN                 60% S&*P 500 INDEX/  
           FUND INVESTOR     BALANCED FUND GOVERNMENT/CREDIT S&P 500 40% LEHMAN US AGGREGATE
 DATE       CLASS SHARES         INDEX        BOND INDEX      INDEX        BOND INDEX       
 ----   ----------------------------------------------------------------------------        
                                                                                            
9/22/87        $10000           $10000          $10000       $10000          $10000         
   8/88         10839             9196           11036         8403            9494         
   8/89         13373            11395           12499        11695           12184         
   8/90         12873            11133           13291        11111           12176         
   8/91         15623            13637           15209        14094           14857         
   8/92         17593            14970           17345        15210           16385         
   8/93         20048            17364           19526        17519           18605         
   8/94         21498            17738           19071        18475           19100         
   8/95         25268            20117           21262        22432           22409         
   8/96         28319            22212           22053        26631           25261         
   8/97         35973            27708           24218        37450           32275         
   8/98         38141            28953           26985        40491           35393         
   8/99         44387            34719           27063        56609           43520         
   8/00         42252            38899           29037        65840           49191         
   8/01         40668            35871           32685        49791           43819         
   8/02         36776            32744           35266        40836           40352         
   8/03         39541            36035           37191        45759           44189         
   8/04        $41321           $39313          $39510       $50997          $48355         

                                                          SOURCE: LIPPER, INC.
AVERAGE ANNUAL TOTAL RETURNS                                                    
As of 8/31/04, including applicable sales charges                               

                                                                [Download Table]
                            
CLASS A SHARES              
Inception (3/28/02).. -2.97%
1 Year............... -1.44 
CLASS B SHARES              
Inception (3/28/02).. -2.42%
1 Year............... -1.29 
CLASS C SHARES              
Inception (2/14/00).. -0.85%
1 Year...............  2.68 
INVESTOR CLASS SHARES       
Inception (9/22/87)..  8.74%
10 Years.............  6.75 
5 Years.............. -1.42 
1 Year...............  4.50 

In addition to returns as of the close of the fiscal year, industry regulations 
require us to provide average annual total returns as of 6/30/04, the most      
recent calendar quarter-end.                                                    
AVERAGE ANNUAL TOTAL RETURNS                                                    
As of 6/30/04, most recent calendar quarter-end, including applicable sales     
 charges......................................................................

                                                                [Download Table]
                            
CLASS A SHARES              
Inception (3/28/02).. -2.44%
1 Year...............  1.99 
CLASS B SHARES              
Inception (3/28/02).. -1.78%
1 Year...............  2.37 
CLASS C SHARES              
Inception (2/14/00).. -0.46%
1 Year...............  6.34 
INVESTOR CLASS SHARES       
Inception (9/22/87)..  8.95%
10 Years.............  7.55 
5 Years.............. -2.12 
1 Year...............  8.14 

The performance data quoted represent past performance and cannot guarantee     
comparable future results; current performance may be lower or higher. Please   
visit AIMinvestments.com for the most recent month-end performance. Performance 
figures reflect reinvested distributions, changes in net asset value and the    
effect of the maximum sales charge unless otherwise stated. Investment return   
and principal value will fluctuate so that you may have a gain or loss when you 
sell shares.                                                                    
  Class A share performance reflects the maximum 5.50% sales charge, and Class
B and Class C share performance reflects the applicable contingent deferred     
sales charge (CDSC) for the period involved. The CDSC on Class B shares         
declines from 5% beginning at the time of purchase to 0% at the beginning of    
the seventh year. The CDSC on Class C shares is 1% for the first year after     
purchase. Investor Class shares do not have a front-end sales charge or a CDSC; 
therefore, performance is at net asset value.                                   
The performance of the fund's share classes will differ due to different  
sales charge structures and class expenses Had the advisor not waived fees      
and/or reimbursed expenses, performance would have been lower.                  
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FINANCIALS                                                                      
SCHEDULE OF INVESTMENTS                                                         
August 31, 2004                                                                 

                                                                [Download Table]

                                                      MARKET    
                                         SHARES       VALUE     
----------------------------------------------------------------
                                                                
COMMON STOCKS-59.67%                                            
AEROSPACE & DEFENSE-2.41%                                       
Honeywell International Inc.               205,400 $   7,390,292
----------------------------------------------------------------
United Technologies Corp.                   97,230     9,130,869
----------------------------------------------------------------
                                                      16,521,161
----------------------------------------------------------------
ALUMINUM-0.84%                                                  
Alcoa Inc.                                 177,450     5,745,831
----------------------------------------------------------------
ASSET MANAGEMENT & CUSTODY                                      
 BANKS-0.84%                                                    
Bank of New York Co., Inc. (The)           193,250     5,758,850
----------------------------------------------------------------
BIOTECHNOLOGY-0.69%                                             
Amgen Inc./(a)/                             80,220     4,756,244
----------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-2.86%                                  
Cisco Systems, Inc./(a)/                   617,420    11,582,799
----------------------------------------------------------------
Motorola, Inc.                             173,330     2,799,279
----------------------------------------------------------------
QUALCOMM Inc.                              136,120     5,179,366
----------------------------------------------------------------
                                                      19,561,444
----------------------------------------------------------------
COMPUTER HARDWARE-2.03%                                         
Dell Inc./(a)/                             249,160     8,680,734
----------------------------------------------------------------
International Business Machines Corp.       61,980     5,249,086
----------------------------------------------------------------
                                                      13,929,820
----------------------------------------------------------------
COMPUTER STORAGE &                                              
 PERIPHERALS-0.91%                                              
EMC Corp./(a)/                             576,070     6,204,274
----------------------------------------------------------------
CONSTRUCTION & FARM MACHINERY &                                 
 HEAVY TRUCKS-0.70%                                             
Deere & Co.                                 75,350     4,767,394
----------------------------------------------------------------
CONSUMER FINANCE-0.95%                                          
MBNA Corp.                                 268,600     6,484,004
----------------------------------------------------------------
DATA PROCESSING & OUTSOURCED                                    
 SERVICES-0.85%                                                 
First Data Corp.                           137,340     5,802,615
----------------------------------------------------------------
DIVERSIFIED CHEMICALS-1.40%                                     
E. I. du Pont de Nemours & Co.             125,190     5,290,529
----------------------------------------------------------------
PPG Industries, Inc.                        71,710     4,286,107
----------------------------------------------------------------
                                                       9,576,636
----------------------------------------------------------------
DRUG RETAIL-1.46%                                               
Walgreen Co.                               273,460     9,967,617
----------------------------------------------------------------
ELECTRICAL COMPONENTS &                                         
 EQUIPMENT-0.92%                                                
Emerson Electric Co.                       100,878     6,279,655
----------------------------------------------------------------
                                                                [Download Table]

                                                                MARKET    
                                                   SHARES       VALUE     
--------------------------------------------------------------------------
                                                                          
ELECTRONIC EQUIPMENT                                                      
 MANUFACTURERS-0.81%                                                      
Flextronics International Ltd. (Singapore)/(a)/      228,850 $   2,840,028
--------------------------------------------------------------------------
Sanmina-SCI Corp./(a)/                               394,410     2,729,317
--------------------------------------------------------------------------
                                                                 5,569,345
--------------------------------------------------------------------------
FOREST PRODUCTS-0.75%                                                     
Weyerhaeuser Co.                                      82,650     5,166,452
--------------------------------------------------------------------------
GENERAL MERCHANDISE STORES-1.28%                                          
Target Corp.                                         196,890     8,777,356
--------------------------------------------------------------------------
HEALTH CARE EQUIPMENT-1.18%                                               
Boston Scientific Corp./(a)/                         103,310     3,691,266
--------------------------------------------------------------------------
Medtronic, Inc.                                       88,740     4,414,815
--------------------------------------------------------------------------
                                                                 8,106,081
--------------------------------------------------------------------------
HOME IMPROVEMENT RETAIL-2.14%                                             
Home Depot, Inc. (The)                               338,280    12,367,517
--------------------------------------------------------------------------
Sherwin-Williams Co. (The)                            54,610     2,255,393
--------------------------------------------------------------------------
                                                                14,622,910
--------------------------------------------------------------------------
HOUSEHOLD PRODUCTS-0.74%                                                  
Procter & Gamble Co. (The)                            89,942     5,034,054
--------------------------------------------------------------------------
HYPERMARKETS & SUPER CENTERS-                                             
 0.54%                                                                    
Wal-Mart Stores, Inc.                                 70,490     3,712,708
--------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES-1.70%                                            
General Electric Co.                                 354,900    11,637,171
--------------------------------------------------------------------------
INDUSTRIAL GASES-2.33%                                                    
Air Products & Chemicals, Inc.                       120,320     6,302,362
--------------------------------------------------------------------------
Praxair, Inc.                                        238,220     9,666,968
--------------------------------------------------------------------------
                                                                15,969,330
--------------------------------------------------------------------------
INDUSTRIAL MACHINERY-3.61%                                                
Eaton Corp.                                          172,586    10,415,565
--------------------------------------------------------------------------
Illinois Tool Works Inc.                              69,280     6,324,571
--------------------------------------------------------------------------
Ingersoll-Rand Co.-Class A (Bermuda)                 122,750     7,979,978
--------------------------------------------------------------------------
                                                                24,720,114
--------------------------------------------------------------------------
INTERNET RETAIL-0.91%                                                     
eBay Inc./(a)/                                        71,710     6,205,783
--------------------------------------------------------------------------
INVESTMENT BANKING &                                                      
 BROKERAGE-3.96%                                                          
Goldman Sachs Group, Inc. (The)                      113,030    10,133,140
--------------------------------------------------------------------------
Lehman Brothers Holdings Inc.                        134,420     9,932,294
--------------------------------------------------------------------------
Merrill Lynch & Co., Inc.                            137,340     7,013,954
--------------------------------------------------------------------------
                                                                27,079,388
--------------------------------------------------------------------------

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                                                                [Download Table]

                                                     MARKET    
                                       SHARES        VALUE     
---------------------------------------------------------------
                                                               
MOVIES & ENTERTAINMENT-0.65%                                   
Viacom Inc.-Class B                       133,690 $   4,453,214
---------------------------------------------------------------
OTHER DIVERSIFIED FINANCIAL                                    
 SERVICES-2.47%                                                
Citigroup Inc.                            247,940    11,549,045
---------------------------------------------------------------
JPMorgan Chase & Co.                      136,120     5,387,630
---------------------------------------------------------------
                                                     16,936,675
---------------------------------------------------------------
PAPER PRODUCTS-0.74%                                           
International Paper Co.                   126,400     5,058,528
---------------------------------------------------------------
PHARMACEUTICALS-6.26%                                          
Johnson & Johnson                         313,570    18,218,417
---------------------------------------------------------------
Lilly (Eli) & Co.                          63,210     4,010,675
---------------------------------------------------------------
Pfizer Inc.                               498,310    16,279,788
---------------------------------------------------------------
Wyeth                                     117,890     4,311,237
---------------------------------------------------------------
                                                     42,820,117
---------------------------------------------------------------
SEMICONDUCTOR EQUIPMENT-0.69%                                  
Applied Materials, Inc./(a)/              296,560     4,712,338
---------------------------------------------------------------
SEMICONDUCTORS-3.57%                                           
Altera Corp./(a)/                         235,790     4,461,147
---------------------------------------------------------------
Analog Devices, Inc.                       77,320     2,684,550
---------------------------------------------------------------
Intel Corp.                               393,790     8,383,789
---------------------------------------------------------------
Linear Technology Corp.                   158,000     5,651,660
---------------------------------------------------------------
Maxim Integrated Products, Inc.            75,350     3,272,451
---------------------------------------------------------------
                                                     24,453,597
---------------------------------------------------------------
SOFT DRINKS-0.64%                                              
PepsiCo, Inc.                              87,510     4,375,500
---------------------------------------------------------------
SPECIALTY STORES-1.06%                                         
Bed Bath & Beyond Inc./(a)/               117,890     4,411,444
---------------------------------------------------------------
Tiffany & Co.                              91,150     2,821,093
---------------------------------------------------------------
                                                      7,232,537
---------------------------------------------------------------
SYSTEMS SOFTWARE-2.81%                                         
Microsoft Corp.                           498,310    13,603,863
---------------------------------------------------------------
Symantec Corp./(a)/                       117,890     5,654,004
---------------------------------------------------------------
                                                     19,257,867
---------------------------------------------------------------
THRIFTS & Mortgage Finance-3.97%                               
Fannie Mae                                160,459    11,946,173
---------------------------------------------------------------
PMI Group, Inc. (The)                     178,660     7,419,750
---------------------------------------------------------------
Radian Group Inc.                         176,230     7,806,989
---------------------------------------------------------------
                                                     27,172,912
---------------------------------------------------------------
    Total Common Stocks                                        
     (Cost $394,465,198)                            408,429,522
---------------------------------------------------------------
                                      PRINCIPAL                
                                       AMOUNT                  
BONDS & NOTES-13.17%                                           
Air Freight & Logistics-0.14%                                  
FedEx Corp., Notes, 9.65%, 06/15/12 $     730,000       955,555
---------------------------------------------------------------
                                                                [Download Table]

                                                       PRINCIPAL      MARKET    
                                                        AMOUNT        VALUE     
--------------------------------------------------------------------------------
                                                                                
AUTOMOBILE MANUFACTURERS-0.32%                                                  
DaimlerChrysler North America Holding Corp.,                                    
 Global Notes, 6.50%, 11/15/13                       $   1,000,000 $   1,079,930
--------------------------------------------------------------------------------
  Unsec. Gtd. Global Notes, 8.50%, 01/18/31                915,000     1,118,261
--------------------------------------------------------------------------------
                                                                       2,198,191
--------------------------------------------------------------------------------
BROADCASTING & Cable TV--0.65%                                                  
Clear Channel Communications, Inc.,                                             
 Sr. Unsec. Notes, 5.00%, 03/15/12                         700,000       689,857
--------------------------------------------------------------------------------
Comcast Cable Communications, Inc.,                                             
 Sr. Unsec. Unsub. Notes, 6.75%, 01/30/11                1,570,000     1,738,273
--------------------------------------------------------------------------------
Continental Cablevision, Inc.,                                                  
 Sr. Unsec. Deb., 9.50%, 08/01/13                        1,690,000     1,877,472
--------------------------------------------------------------------------------
Cox Communications, Inc.,                                                       
 Sr. Unsec. Notes, 6.75%, 03/15/11                         150,000       159,106
--------------------------------------------------------------------------------
                                                                       4,464,708
--------------------------------------------------------------------------------
CONSUMER FINANCE-2.47%                                                          
Capital One Bank, Sub. Notes, 6.50%, 06/13/13            1,990,000     2,147,389
--------------------------------------------------------------------------------
Ford Motor Credit Co.,                                                          
 Global Notes, 7.88%, 06/15/10                           1,170,000     1,302,187
--------------------------------------------------------------------------------
  Unsec. Global Notes, 7.38%, 10/28/09                     865,000       945,393
--------------------------------------------------------------------------------
General Motors Acceptance Corp.,                                                
 Floating Rate Notes, 2.56%, 07/16/07/(b)/                 975,000       976,728
--------------------------------------------------------------------------------
  Unsec. Unsub. Global Notes,                                                   
   6.13%, 02/01/07                                       5,000,000     5,269,700
--------------------------------------------------------------------------------
    6.13%, 08/28/07                                      1,690,000     1,788,797
--------------------------------------------------------------------------------
Household Finance Corp., Sr. Unsec. Global Notes,                               
 6.75%, 05/15/11                                         1,100,000     1,234,387
--------------------------------------------------------------------------------
MBNA Corp., Notes, 6.13%, 03/01/13                       3,000,000     3,238,380
--------------------------------------------------------------------------------
                                                                      16,902,961
--------------------------------------------------------------------------------
DIVERSIFIED BANKS-1.03%                                                         
Bank of America Corp., Jr. Unsec. Sub. Global Notes,                            
 7.40%, 01/15/11                                         1,500,000     1,749,390
--------------------------------------------------------------------------------
Wells Fargo & Co., Unsec. Global Notes,                                         
 5.25%, 12/01/07                                         5,030,000     5,301,570
--------------------------------------------------------------------------------
                                                                       7,050,960
--------------------------------------------------------------------------------
ELECTRIC UTILITIES-1.14%                                                        
Columbus Southern Power Co.-Series C,                                           
 Sr. Unsec. Global Notes, 5.50%, 03/01/13                2,400,000     2,506,440
--------------------------------------------------------------------------------
Pacific Gas & Electric Co., First Mortgage Bonds,                               
 6.05%, 03/01/34                                         1,720,000     1,729,181
--------------------------------------------------------------------------------
PPL Energy Supply LLC-Series A, Sr. Unsec. Global                               
 Notes, 6.40%, 11/01/11                                    550,000       599,423
--------------------------------------------------------------------------------
TXU Energy Co., Sr. Global Notes,                                               
 6.13%, 03/15/08                                         1,045,000     1,119,947
--------------------------------------------------------------------------------
  7.00%, 03/15/13                                        1,640,000     1,842,835
--------------------------------------------------------------------------------
                                                                       7,797,826
--------------------------------------------------------------------------------
FOOD RETAIL-0.59%                                                               
Kroger Co. (The), Sr. Unsec. Gtd. Global Notes,                                 
 7.50%, 04/01/31                                         1,500,000     1,738,395
--------------------------------------------------------------------------------
Safeway Inc., Sr. Unsec. Notes, 5.80%, 08/15/12          2,200,000     2,301,420
--------------------------------------------------------------------------------
                                                                       4,039,815
--------------------------------------------------------------------------------

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                                                          PRINCIPAL      MARKET    
                                                           AMOUNT        VALUE     
-----------------------------------------------------------------------------------
                                                                                   
FOREST PRODUCTS-0.23%                                                              
Weyerhaeuser Co., Unsec. Global Deb.,                                              
 7.38%, 03/15/32                                         $  1,360,000 $   1,559,090
-----------------------------------------------------------------------------------
HOMEBUILDING-0.21%                                                                 
Centex Corp., Sr. Unsec. Notes,                                                    
 5.70%, 05/15/14                                            1,390,000     1,418,328
-----------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS-0.38%                                                           
Procter & Gamble Co. (The), Global Notes,                                          
 4.75%, 06/15/07                                            2,520,000     2,631,863
-----------------------------------------------------------------------------------
INTEGRATED TELECOMMUNICATION                                                       
 SERVICES-1.37%                                                                    
British Telecommunications PLC (United Kingdom),                                   
 Global Bonds, 8.88%, 12/15/30                                355,000       462,384
-----------------------------------------------------------------------------------
Deutsche Telekom International Finance B.V.                                        
 (Netherlands), Unsec. Gtd. Unsub. Global Bonds,                                   
 8.75%, 06/15/30                                              785,000     1,006,048
-----------------------------------------------------------------------------------
Sprint Capital Corp., Unsec. Gtd. Global Notes,                                    
 8.75%, 03/15/32                                              280,000       354,463
-----------------------------------------------------------------------------------
Telecom Italia Capital (Luxembourg)-Class B, Gtd. Notes,                           
 5.25%, 11/15/13 (Acquired 10/22/03;                                               
 Cost $1,680,653)/(c)/                                      1,685,000     1,715,027
-----------------------------------------------------------------------------------
Verizon Global Funding Corp.,                                                      
 Sr. Unsec. Global Notes,                                                          
 6.13%, 06/15/07                                            5,030,000     5,420,429
-----------------------------------------------------------------------------------
  Sr. Unsec. Unsub. Global Notes,                                                  
  7.75%, 12/01/30                                             380,000       449,996
-----------------------------------------------------------------------------------
                                                                          9,408,347
-----------------------------------------------------------------------------------
INVESTMENT BANKING & BROKERAGE-0.74%                                               
Goldman Sachs Group, Inc. (The), Global Notes,                                     
 4.75%, 07/15/13                                              930,000       913,046
-----------------------------------------------------------------------------------
Lehman Brothers Holdings Inc., Unsec. Unsub. Global                                
 Notes, 3.50%, 08/07/08                                       715,000       710,789
-----------------------------------------------------------------------------------
Merrill Lynch & Co., Inc.-Series B, Medium Term                                    
 Notes, 5.30%, 09/30/15                                       345,000       352,055
-----------------------------------------------------------------------------------
Morgan Stanley, Sr. Unsec. Unsub. Global Notes,                                    
 5.30%, 03/01/13                                            3,000,000     3,077,070
-----------------------------------------------------------------------------------
                                                                          5,052,960
-----------------------------------------------------------------------------------
MOVIES & ENTERTAINMENT-0.19%                                                       
News America Inc., Sr. Unsec. Gtd. Global Notes,,                                  
 6.55%, 03/15/33                                            1,220,000     1,278,141
-----------------------------------------------------------------------------------
MULTI-LINE INSURANCE-0.40%                                                         
American General Finance Corp-Series H,                                            
 Medium Term Global Notes, 4.00%, 03/15/11                  1,135,000     1,104,832
-----------------------------------------------------------------------------------
Loews Corp., Unsec. Unsub. Notes, 5.25%, 03/15/16           1,655,000     1,602,785
-----------------------------------------------------------------------------------
                                                                          2,707,617
-----------------------------------------------------------------------------------
MULTI-UTILITIES & UNREGULATED POWER-0.66%                                          
Duke Energy Field Services Corp.,                                                  
 Sr. Unsec. Notes, 8.13%, 08/16/30                          2,115,000     2,615,938
-----------------------------------------------------------------------------------
PSE&G Power LLC, Sr. Unsec. Gtd. Global Notes,                                     
 6.95%, 06/01/12                                            1,735,000     1,926,648
-----------------------------------------------------------------------------------
                                                                          4,542,586
-----------------------------------------------------------------------------------
                                                                [Download Table]

                                                       PRINCIPAL      MARKET    
                                                        AMOUNT        VALUE     
--------------------------------------------------------------------------------
                                                                                
OIL & GAS EXPLORATION &                                                         
 PRODUCTION-0.17%                                                               
XTO Energy, Inc., Unsec. Notes, 4.90%, 02/01/14      $   1,175,000 $   1,162,322
--------------------------------------------------------------------------------
OIL & GAS REFINING, MARKETING &                                                 
 TRANSPORTATION-0.14%                                                           
Valero Energy Corp., Unsec. Notes,                                              
 7.50%, 04/15/32                                           800,000       931,400
--------------------------------------------------------------------------------
OTHER DIVERSIFIED FINANCIAL                                                     
 SERVICES-1.17%                                                                 
Citigroup Inc., Sr. Unsec. Global Notes,                                        
 4.13%, 06/30/05                                         5,030,000     5,105,098
--------------------------------------------------------------------------------
JPMorgan Chase & Co., Sub. Global Notes,                                        
 6.75%, 02/01/11                                         1,740,000     1,954,055
--------------------------------------------------------------------------------
Pemex Project Funding Master Trust, Unsec. Gtd.                                 
 Unsub. Global Notes, 8.00%, 11/15/11                      840,000       962,766
--------------------------------------------------------------------------------
                                                                       8,021,919
--------------------------------------------------------------------------------
PROPERTY & CASUALTY INSURANCE-0.09%                                             
St. Paul Cos., Inc. (The), Sr. Unsec. Notes,                                    
 5.75%, 03/15/07                                           600,000       633,030
--------------------------------------------------------------------------------
REAL ESTATE-0.37%                                                               
Simon Property Group, L.P., Unsec. Unsub. Global                                
 Notes, 6.35%, 08/28/12                                  2,335,000     2,542,371
--------------------------------------------------------------------------------
REINSURANCE-0.13%                                                               
Zurich Reinsurance Centre Holdings, Inc., Sr. Notes,                            
 7.13%, 10/15/23                                         1,000,000       893,000
--------------------------------------------------------------------------------
SOVEREIGN DEBT-0.27%                                                            
United Mexican States (Mexico),                                                 
 Global Notes, 7.50%, 01/14/12                           1,500,000     1,698,225
--------------------------------------------------------------------------------
  Series A, Medium Term Global Notes,                                           
   7.50%, 04/08/33                                         145,000       153,504
--------------------------------------------------------------------------------
                                                                       1,851,729
--------------------------------------------------------------------------------
THRIFTS & MORTGAGE FINANCE-0.25%                                                
Washington Mutual Bank, FA, Series 11,                                          
 Sub. Global Notes,                                                             
 6.88%, 06/15/11                                         1,500,000     1,695,045
--------------------------------------------------------------------------------
WIRELESS TELECOMMUNICATION                                                      
 SERVICES-0.06%                                                                 
AT&T Wireless Services Inc., Sr. Unsec. Unsub.                                  
 Global Notes, 8.75%, 03/01/31                             325,000       421,050
--------------------------------------------------------------------------------
    Bonds & Notes                                                               
     (Cost $87,761,381)                                               90,160,814
--------------------------------------------------------------------------------
ASSET-BACKED SECURITIES-8.40%                                                   
Collateralized Mortgage                                                         
 Obligations-8.40%                                                              
ABN AMRO Mortgage Corp.-Series 2003-10,                                         
 Class A1, Pass Through Ctfs., 4.50%, 09/25/18           3,016,891     3,004,546
--------------------------------------------------------------------------------
Accredited Mortgage Loan Trust-Series 2003-3,                                   
 Class A3, Floating Rate Pass Through Ctfs.,                                    
 2.00%, 01/25/34/(d)/                                    3,206,116     3,213,959
--------------------------------------------------------------------------------
Capital One Multi-Asset Execution Trust-Series 2003-                            
 B4, Floating Rate Pass Through Ctfs.,                                          
 2.40%, 07/15/11/(d)/                                    2,195,000     2,235,139
--------------------------------------------------------------------------------

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                                                                [Download Table]

                                                        PRINCIPAL      MARKET    
                                                         AMOUNT        VALUE     
---------------------------------------------------------------------------------
                                                                                 
COLLATERALIZED MORTGAGE                                                          
 OBLIGATIONS-(CONTINUED)                                                         
Chase Funding Mortgage Loan-Series 2003-6,                                       
 Class 2A2, Floating Rate Pass Through Ctfs.,                                    
 1.91%, 11/25/34 /(d)/                                $   4,000,000 $   4,002,392
---------------------------------------------------------------------------------
Countrywide Asset-Backed Ctfs.-Series 2004-6,                                    
 Class 2A5, Floating Rate Pass Through Ctfs.,                                    
 2.01%, 11/25/34 /(d)/                                    2,960,996     2,962,765
---------------------------------------------------------------------------------
Credit Suisse First Boston Mortgage Securities Corp.,                            
 Series 2004-AR3, Class 5A1, Pass Through Ctfs.,                                 
 4.83%, 04/25/34                                          2,776,820     2,828,015
---------------------------------------------------------------------------------
 Series 2004-AR7, Class 2A1, Pass Through Ctfs.,                                 
 4.91%, 11/25/34                                          2,808,698     2,842,656
---------------------------------------------------------------------------------
Fannie Mae Grantor Trust-Series 2004-T1, Class 2A,                               
 Pass Through Ctfs., 3.80%, 08/25/43                      2,085,714     2,179,081
---------------------------------------------------------------------------------
Fannie Mae Whole Loan,                                                           
 Series 2003-W19, Class 1A3, Pass Through Ctfs.,                                 
 4.78%, 11/25/33                                          1,290,000     1,324,153
---------------------------------------------------------------------------------
 Series 2004-W2, Class 4A, Pass Through Ctfs.,                                   
 4.32%, 02/25/44                                          2,161,140     2,215,630
---------------------------------------------------------------------------------
Impac CMB Trust-Class A1,                                                        
 Series 2003-12, Floating Rate Pass Through Ctfs.,                               
 2.00%,12/25/33/(d)/                                        861,259       861,773
---------------------------------------------------------------------------------
 Series 2004-1, Floating Rate Pass Through Ctfs.,                                
 1.95%, 03/25/34/(d)/                                     2,612,254     2,632,287
---------------------------------------------------------------------------------
Long Beach Mortgage Loan Trust-Series 2004-1,                                    
 Class A3, Floating Rate Pass Through Ctfs.,                                     
 1.91%, 02/25/34/(d)/                                     2,445,207     2,447,836
---------------------------------------------------------------------------------
MLCC Mortgage Investors, Inc.-Series 2003-G,                                     
 Class A1, Floating Rate Pass Through Ctfs.,                                     
 1.93%, 01/25/29/(d)/                                     3,670,800     3,671,727
---------------------------------------------------------------------------------
Morgan Stanley Mortgage Loan Trust-Series 2004-                                  
 6AR, Class 2A2, Pass Through Ctfs.,                                             
 4.22%, 08/25/34                                          2,935,914     2,960,686
---------------------------------------------------------------------------------
Residential Asset Mortgage Products, Inc.-Series                                 
 2003-RS2, Class AII, Floating Rate Pass Through                                 
 Ctfs., 1.96%, 03/25/33/(d)/                              2,246,632     2,251,934
---------------------------------------------------------------------------------
Specialty Underwriting & Residential Finance Trust-                              
 Series 2003-BC3, Class A, Floating Rate Pass                                    
 Through Ctfs., 1.97%, 08/25/34/(d)/                      1,881,229     1,887,177
---------------------------------------------------------------------------------
Structured Adjustable Rate Mortgage Loan-Series                                  
 2004-3AC, Class A1, Pass Through Ctfs.,                                         
 4.94%, 03/25/34                                          2,684,045     2,718,592
---------------------------------------------------------------------------------
Structured Asset Securities Corp.,                                               
 Series 2003-37A, Class 7A, Pass Through Ctfs.,                                  
 4.89%, 12/25/33                                          3,270,342     3,337,365
---------------------------------------------------------------------------------
 Series 2003-S2, Class A1, Floating Rate Pass                                    
 Through Ctfs., 1.87%, 12/25/33/(d)/                      1,550,382     1,552,563
---------------------------------------------------------------------------------
 Series 2004-2AC, Class A1, Pass Through Ctfs.,                                  
 5.06%, 02/25/34                                          5,077,187     5,162,411
---------------------------------------------------------------------------------
Vanderbuilt Mortgage & Finance, Inc.-Series 2002-                                
 B, Class A4, Pass Through Ctfs., 5.84%, 02/07/26         1,160,000     1,168,204
---------------------------------------------------------------------------------
    Total Asset-Backed Securities                                                
     (Cost $57,399,012)                                                57,460,891
---------------------------------------------------------------------------------
                                                                [Download Table]

                                                PRINCIPAL       MARKET    
                                                 AMOUNT         VALUE     
--------------------------------------------------------------------------
                                                                          
U.S. GOVERNMENT AGENCY                                                    
 SECURITIES-1.74%                                                         
FEDERAL NATIONAL MORTGAGE ASSOCIATION                                     
 (FNMA)-1.74%                                                             
Unsec. Global Notes,                                                      
 3.25%, 08/15/08 (Cost $11,877,024)           $  12,000,000 $  11,939,102 
--------------------------------------------------------------------------
U.S. MORTGAGE-BACKED                                                      
 SECURITIES-5.52%                                                         
FEDERAL NATIONAL MORTGAGE ASSOCIATION                                     
 (FNMA)-3.62%                                                             
Floating Rate Pass Through Ctfs.,/(d)/                                    
 4.33%, 08/01/33                                  6,723,633     6,843,935 
--------------------------------------------------------------------------
  4.60%, 11/01/33                                 4,190,772     4,304,642 
--------------------------------------------------------------------------
  5.16%, 11/01/33                                 1,966,439     2,035,759 
--------------------------------------------------------------------------
  4.32%, 03/01/34                                 2,837,507     2,893,278 
--------------------------------------------------------------------------
Pass Through Ctfs.                                                        
 4.50%, 06/01/18 to 09/01/33                      2,948,539     2,846,025 
--------------------------------------------------------------------------
  5.00%, 02/01/19                                 5,709,725     5,835,270 
--------------------------------------------------------------------------
                                                               24,758,909 
--------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE                                              
 ASSOCIATION (GNMA)-1.90%                                                 
Pass Through Ctfs.,                                                       
 5.00%, 03/15/18                                  3,065,441     3,156,041 
--------------------------------------------------------------------------
  6.00%, 07/15/28 to 04/15/29                     6,427,434     6,701,173 
--------------------------------------------------------------------------
  5.50%, 12/15/31                                 3,099,966     3,169,436 
--------------------------------------------------------------------------
                                                               13,026,650 
--------------------------------------------------------------------------
    Total U.S. Mortgage-Backed Securities                                 
     (Cost $37,077,790)                                        37,785,559 
--------------------------------------------------------------------------
U.S. TREASURY SECURITIES-8.06%                                            
U.S. TREASURY BONDS-2.98%                                                 
  7.25%, 05/15/16                                 3,965,000     4,985,987 
--------------------------------------------------------------------------
  6.00%, 02/15/26                                13,610,000    15,406,946 
--------------------------------------------------------------------------
                                                               20,392,933 
--------------------------------------------------------------------------
U.S. TREASURY NOTES-5.08%                                                 
  3.63%, 07/15/09                                 6,735,000     6,829,694 
--------------------------------------------------------------------------
  4.25%, 11/15/13                                27,575,000    27,911,139 
--------------------------------------------------------------------------
                                                               34,740,833 
--------------------------------------------------------------------------
    Total U.S. Treasury Securities                                        
     (Cost $54,299,100)                                        55,133,766 
--------------------------------------------------------------------------
                                                 SHARES                   
MONEY MARKET FUNDS-4.04%                                                  
MONEY MARKET FUNDS-4.04%                                                  
INVESCO Treasurer's Money Market Reserve Fund                             
 (Cost $27,662,098)/(e)(f)/                      27,662,098    27,662,098 
--------------------------------------------------------------------------
    Total Money Market Funds                                              
     (Cost $27,662,098)                                        27,662,098 
--------------------------------------------------------------------------
TOTAL INVESTMENTS-100.60%                                                 
 (Cost $670,541,603)                                          688,571,752 
--------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-(0.60%)                          (4,107,725)
--------------------------------------------------------------------------
NET ASSETS-100.00%                                          $ 684,464,027 
--------------------------------------------------------------------------

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Investment Abbreviations:                                                       
Ctfs.Certificates                                                               
Deb.Debentures                                                                  
Gtd.Guaranteed                                                                  
Jr. Junior                                                                      
Sr. Senior                                                                      
Sub.Subordinated                                                                
Unsec.Unsecured                                                                 
Unsub.Unsubordinated                                                            
Notes to Schedule of Investments:                                               
(a) Non-income producing security.                                              
(b) Interest rate is redetermined quarterly. Rate shown is the rate in effect   
on August 31, 2004.                                                     
(c) Security not registered under the Securities Act of 1933, as amended (e.g., 
the security was purchased in a Rule 144A transaction or a Regulation D 
   transaction). The security may be resold only pursuant to an exemption from
registration under the 1933 Act, typically to qualified institutional   
   buyers. The Fund has no rights to demand registration of this security. The
 market value of this security at August 31, 2004 represented 0.25% of the
Fund's net assets. This security is considered to be illiquid.          
(d) Interest rate is redetermined monthly. Rate shown is the rate in effect on  
August 31, 2004.                                                        
(e) The money market fund and the fund are affiliated by having the same        
investment advisor. See Note 3.                                         
(f) Effective October 15, 2004, INVESCO Treasurer's Money Market Reserve Fund   
was renamed Premier Portfolio.                                          
See accompanying notes which are an integral part of the financial statements.  
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STATEMENT OF ASSETS AND LIABILITIES                                             
August 31, 2004                                                                 

                                                                [Download Table]

ASSETS:                                                                         
                                                                                
Investments, at market value (cost $642,879,505)                  $ 660,909,654 
--------------------------------------------------------------------------------
Investments in affiliated money market funds (cost $27,662,098)      27,662,098 
--------------------------------------------------------------------------------
    Total investments (cost $670,541,603)                           688,571,752 
--------------------------------------------------------------------------------
Receivables for:                                                                
  Investments sold                                                    6,804,612 
--------------------------------------------------------------------------------
  Fund shares sold                                                      654,560 
--------------------------------------------------------------------------------
  Dividends and interest                                              2,714,079 
--------------------------------------------------------------------------------
  Amount due from advisor                                                31,547 
--------------------------------------------------------------------------------
Investment for trustee deferred compensation and retirement plans       250,998 
--------------------------------------------------------------------------------
Other assets                                                             33,774 
--------------------------------------------------------------------------------
    Total assets                                                    699,061,322 
--------------------------------------------------------------------------------
LIABILITIES:                                                                    
Payables for:                                                                   
  Investments purchased                                              11,390,674 
--------------------------------------------------------------------------------
  Fund shares reacquired                                              1,628,591 
--------------------------------------------------------------------------------
  Dividends                                                                 666 
--------------------------------------------------------------------------------
  Trustee deferred compensation and retirement plans                    319,417 
--------------------------------------------------------------------------------
Accrued distribution fees                                               142,258 
--------------------------------------------------------------------------------
Accrued trustees' fees                                                    2,666 
--------------------------------------------------------------------------------
Accrued transfer agent fees                                             968,793 
--------------------------------------------------------------------------------
Accrued operating expenses                                              144,230 
--------------------------------------------------------------------------------
    Total liabilities                                                14,597,295 
--------------------------------------------------------------------------------
Net assets applicable to shares outstanding                       $ 684,464,027 
--------------------------------------------------------------------------------
NET ASSETS CONSIST OF:                                                          
Shares of beneficial interest                                     $ 773,094,103 
--------------------------------------------------------------------------------
Undistributed net investment income                                   1,122,098 
--------------------------------------------------------------------------------
Undistributed net realized gain from investment securities         (107,782,323)
--------------------------------------------------------------------------------
Unrealized appreciation of investment securities                     18,030,149 
--------------------------------------------------------------------------------
                                                                  $ 684,464,027 
--------------------------------------------------------------------------------
                                                                [Download Table]

NET ASSETS:                                                 
                                                            
Class A                                         $  4,393,063
------------------------------------------------------------
Class B                                         $  1,675,876
------------------------------------------------------------
Class C                                         $  2,448,531
------------------------------------------------------------
Investor Class                                  $675,936,007
------------------------------------------------------------
Institutional Class                             $     10,550
------------------------------------------------------------
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE,              
 UNLIMITED NUMBER OF SHARES AUTHORIZED:                     
Class A                                              193,044
------------------------------------------------------------
Class B                                               74,179
------------------------------------------------------------
Class C                                              107,534
------------------------------------------------------------
Investor Class                                    29,009,646
------------------------------------------------------------
Institutional Class                                      463
------------------------------------------------------------
Class A :                                                   
  Net asset value per share                     $      22.76
------------------------------------------------------------
  Offering price per share:                                 
    (Net asset value of $22.76 / 94.50%)        $      24.08
------------------------------------------------------------
Class B :                                                   
  Net asset value and offering price per share  $      22.59
------------------------------------------------------------
Class C :                                                   
  Net asset value and offering price per share  $      22.77
------------------------------------------------------------
Investor Class:                                             
  Net asset value and offering price per share  $      23.30
------------------------------------------------------------
Institutional Class:                                        
  Net asset value and offering price per share  $      22.79
------------------------------------------------------------

See accompanying notes which are an integral part of the financial statements.  
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STATEMENT OF OPERATIONS                                                         
For the year ended August 31, 2004                                              

                                                        [Enlarge/Download Table]

INVESTMENT INCOME:                                                                                               
                                                                                                                 
Interest                                                                                            $ 13,712,716 
-----------------------------------------------------------------------------------------------------------------
Dividends                                                                                              8,044,670 
-----------------------------------------------------------------------------------------------------------------
Dividends from affiliated money market funds*                                                            171,440 
-----------------------------------------------------------------------------------------------------------------
   Total investment income                                                                            21,928,826 
-----------------------------------------------------------------------------------------------------------------
EXPENSES:                                                                                                        
Advisory fees                                                                                          6,245,872 
-----------------------------------------------------------------------------------------------------------------
Administrative services fees                                                                             386,543 
-----------------------------------------------------------------------------------------------------------------
Custodian fees                                                                                           114,565 
-----------------------------------------------------------------------------------------------------------------
Distribution fees:                                                                                               
 Class A                                                                                                  19,967 
-----------------------------------------------------------------------------------------------------------------
 Class B                                                                                                  12,403 
-----------------------------------------------------------------------------------------------------------------
 Class C                                                                                                  26,234 
-----------------------------------------------------------------------------------------------------------------
 Investor Class                                                                                        2,186,007 
-----------------------------------------------------------------------------------------------------------------
Transfer agent fees:                                                                                             
 Class A                                                                                                  16,916 
-----------------------------------------------------------------------------------------------------------------
 Class B                                                                                                   4,202 
-----------------------------------------------------------------------------------------------------------------
 Class C                                                                                                  12,312 
-----------------------------------------------------------------------------------------------------------------
 Investor Class                                                                                        3,564,420 
-----------------------------------------------------------------------------------------------------------------
 Institutional Class                                                                                          69 
-----------------------------------------------------------------------------------------------------------------
Trustees' fees and retirement benefits                                                                    25,059 
-----------------------------------------------------------------------------------------------------------------
Other                                                                                                    445,439 
-----------------------------------------------------------------------------------------------------------------
   Total expenses                                                                                     13,060,008 
-----------------------------------------------------------------------------------------------------------------
Less:Fees waived, expenses reimbursed and expense offset arrangement                                  (2,156,515)
-----------------------------------------------------------------------------------------------------------------
   Net expenses                                                                                       10,903,493 
-----------------------------------------------------------------------------------------------------------------
Net investment income                                                                                 11,025,333 
-----------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES:                                                  
Net realized gain from investment securities                                                          61,336,227 
-----------------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of investment securities                        (29,092,439)
-----------------------------------------------------------------------------------------------------------------
Net gain from investment securities                                                                   32,243,788 
-----------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations                                                $ 43,269,121 
-----------------------------------------------------------------------------------------------------------------

*  Dividends from affiliated money market funds are net of income rebate paid   
to security lending counterparties.                                       
See accompanying notes which are an integral part of the financial statements.  
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STATEMENT OF CHANGES IN NET ASSETS                                              
For the year ended August 31, 2004, the three months ended August 31, 2003 and  
the year ended May 31, 2003                                                     

                                                        [Enlarge/Download Table]

                                                         THREE MONTHS                 
                                            YEAR ENDED      ENDED        YEAR ENDED   
                                            AUGUST 31,    AUGUST 31,      MAY 31,     
                                               2004          2003           2003      
--------------------------------------------------------------------------------------
                                                                                      
OPERATIONS:                                                                           
 Net investment income                    $  11,025,333  $  3,024,261  $   16,553,453 
--------------------------------------------------------------------------------------
 Net realized gain (loss) from                                                        
   investment securities                     61,336,227    20,906,503     (45,793,592)
--------------------------------------------------------------------------------------
 Change in net unrealized appreciation                                                
   (depreciation) of investment                                                       
   securities                               (29,092,439)     (112,076)    (34,951,619)
--------------------------------------------------------------------------------------
   Net increase (decrease) in net                                                     
     assets resulting from operations        43,269,121    23,818,688     (64,191,758)
--------------------------------------------------------------------------------------
Distributions to shareholders from net                                                
 investment income:                                                                   
 Class A                                        (67,933)       (1,973)        (25,176)
--------------------------------------------------------------------------------------
 Class B                                         (3,942)       (1,490)        (21,711)
--------------------------------------------------------------------------------------
 Class C                                         (9,899)       (1,541)        (20,992)
--------------------------------------------------------------------------------------
 Investor Class                              (9,694,796)   (3,024,119)    (42,820,938)
--------------------------------------------------------------------------------------
 Institutional Class                               (125)           --              -- 
--------------------------------------------------------------------------------------
   Decrease in net assets resulting                                                   
     from distributions                      (9,776,695)   (3,029,123)    (42,888,817)
--------------------------------------------------------------------------------------
Share transactions-net:                                                               
 Class A                                      3,712,573       (47,230)        466,067 
--------------------------------------------------------------------------------------
 Class B                                      1,061,019        20,223         488,034 
--------------------------------------------------------------------------------------
 Class C                                      1,522,814        33,933         241,031 
--------------------------------------------------------------------------------------
 Investor Class                            (143,480,185)  (45,341,552)   (162,395,164)
--------------------------------------------------------------------------------------
 Institutional Class                             10,572            --              -- 
--------------------------------------------------------------------------------------
   Net increase (decrease) in net                                                     
     assets resulting from share                                                      
     transactions                          (137,173,207)  (45,334,626)   (161,200,032)
--------------------------------------------------------------------------------------
   Net increase (decrease) in net assets   (103,680,781)  (24,545,061)   (268,280,607)
--------------------------------------------------------------------------------------
NET ASSETS:                                                                           
 Beginning of year                          788,144,808   812,689,869   1,080,970,476 
--------------------------------------------------------------------------------------
 End of year (including undistributed                                                 
   net investment income of $1,122,098,                                               
   $(76,542) and $(23,154) for August                                                 
   31, 2004, August 31, 2003 and May                                                  
   31, 2003, respectively)                $ 684,464,027  $788,144,808  $  812,689,869 
--------------------------------------------------------------------------------------

See accompanying notes which are an integral part of the financial statements.  
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NOTES TO FINANCIAL STATEMENTS                                                   
August 31, 2004                                                                 
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES                                         
INVESCO Total Return Fund (the "Fund") is a series portfolio of AIM Combination 
Stock & Bond 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 two    
separate portfolios, each authorized to issue an unlimited number of shares of  
beneficial interest. The Fund currently offers multiple classes of shares.      
Matters affecting each portfolio or class will be voted on exclusively by the   
shareholders of such portfolio or class. The assets, liabilities and operations 
of each portfolio are accounted for separately. Information presented in these  
financial statements pertains only to the Fund. On November 25, 2003, the Fund  
was restructured from a separate series of AIM Combination Stock & Bond Funds,  
Inc., formerly known as INVESCO Combination Stock & Bond Funds, Inc., to a new  
series portfolio of the Trust.                                                  
The Fund's investment objective is to seek high total return through both   
growth and current income. Each company listed in the Schedule of Investments   
is organized in the United States of America unless otherwise noted.            
Under the Trust's organizational documents, the Fund's officers, trustees,  
employees and agents are indemnified against certain liabilities that may arise 
out of performance of their duties to the Fund. Additionally, in the normal     
course of business, the Fund enters into contracts that contain a variety of    
indemnification clauses. The Fund's maximum exposure under these arrangements   
is unknown as this would involve future claims that may be made against the     
Fund that have not yet occurred. However, the Fund has not had prior claims or  
losses pursuant to these contracts.                                             
The preparation of financial statements in conformity with accounting       
principles generally accepted in the United States of America requires          
management to make estimates and assumptions that affect the reported amounts   
of assets and liabilities at the date of the financial statements and the       
reported amounts of revenues and expenses during the reporting period. Actual   
results could differ from those estimates. The following is a summary of the    
significant accounting policies followed by the Fund in the preparation of its  
financial statements.                                                           
A. SECURITY VALUATIONS -- Securities, including restricted securities, are      
 valued according to the following policy. A security listed or traded on an
 exchange (except convertible bonds) is valued at its last sales price as of
the close of the customary trading session on the exchange where the      
security is principally traded, or lacking any sales on a particular day, 
the security is valued at the closing bid price on that day. Each security
traded in the over-the-counter market (but not securities reported on the 
  NASDAQ National Market System) is valued on the basis of prices furnished by
  independent pricing services or market makers. Each security reported on the
  NASDAQ National Market System is valued at the NASDAQ Official Closing Price
("NOCP") as of the close of the customary trading session on the valuation
  date or absent a NOCP, at the closing bid price. Debt obligations (including
convertible bonds) are valued on the basis of prices provided by an       
independent pricing service. Prices 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. Securities for which market prices 
are not provided by any of the above methods are valued based upon quotes 
  furnished by independent sources and are valued at the last bid price in the
case of equity securities and in the case of debt obligations, the mean   
between the last bid and asked prices. Securities for which market        
 quotations are not readily available or are questionable are valued at fair
  value as determined in good faith by or under the supervision of the Trust's
officers in a manner specifically authorized 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. Short-term  
obligations having 60 days or less to maturity and commercial paper are   
valued at amortized cost which approximates market value. For purposes of 
determining net asset value per share, futures and option contracts       
  generally will be valued 15 minutes after the close of the customary trading
session of the New York Stock Exchange ("NYSE"). 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. Investments in    
open-end registered investment companies and closed-end registered        
 investment companies that do not trade on an exchange are valued at the end
of day net asset value per share. Investments in closed-end registered    
 investment companies that trade on an exchange are valued at the last sales
  price as of the close of the customary trading session on the exchange where
the security is principally traded.                                       
 Foreign securities (including foreign exchange contracts) are converted
  into U.S. dollar amounts using the applicable exchange rates as of the close
of the NYSE. Generally, trading in foreign securities is substantially    
completed each day at various times prior to the close of the NYSE. The   
values of such securities used in computing the net asset value of the    
Fund's shares are determined as of the close of the respective markets.   
  Events affecting the values of such foreign securities may occur between the
times at which the particular foreign market closes and the close of the  
customary trading session of the NYSE which would not ordinarily be       
reflected in the computation of the Fund's net asset value. If a          
development/event is so significant such that there is a reasonably high  
 degree of certainty as to both the effect and the degree of effect that the
development/event has actually caused that closing price to no longer     
 reflect actual value, the closing prices, as determined at the close of the
 applicable foreign market, may be adjusted to reflect the fair value of the
affected foreign securities as of the close of the NYSE as determined in  
  good faith by or under the supervision of the Board of Trustees. Adjustments
to closing prices to reflect fair value on affected foreign securities may
be provided by an independent pricing service. Multiple factors may be    
 considered by the independent pricing service in determining adjustments to
reflect fair value and may include information relating to sector indices,
ADRs, domestic and foreign index futures and exchange-traded funds.       
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.                      
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 Brokerage commissions and mark ups are considered transaction costs and
  are recorded as an increase to the cost basis of securities purchased and/or
 a reduction of proceeds on a sale of securities. Such transaction costs are
included in the determination of realized and unrealized gain (loss) from 
investment securities reported in the Statement of Operations and the     
  Statement of Changes in Net Assets and the realized and unrealized net gains
(losses) on securities per share in the Financial Highlights. Transaction 
costs are included in the calculation of the Fund's net asset value and,  
accordingly, they reduce the Fund's total returns. These transaction costs
are not considered operating expenses and are not reflected in net        
investment income reported in the Statement of Operations and Statement of
 Changes in Net Assets, or the net investment income per share and ratios of
  expenses and net investment income reported in the Financial Highlights, nor
  are they limited by any expense limitation arrangements between the Fund and
the advisor.                                                              
 The Fund allocates income and realized and unrealized capital gains and
losses to a class based on the relative net assets of each class.         
C. DISTRIBUTIONS -- Distributions from income are declared and paid quarterly   
and are recorded on ex-dividend date. Distributions from net realized     
capital gain, if any, are generally paid annually and recorded on         
ex-dividend date. The Fund may elect to use a portion of the proceeds from
redemptions as distributions for federal income tax purposes.             
D. FEDERAL INCOME TAXES -- The Fund intends to comply with the requirements of  
Subchapter M of the Internal Revenue Code necessary to qualify as a       
regulated investment company and, as such, will not be subject to federal 
income taxes on otherwise taxable income (including net realized capital  
gain) which is distributed to shareholders. Therefore, no provision for   
federal income taxes is recorded in the financial statements.             
E. EXPENSES -- Until March 31, 2004, each class bore expenses incurred          
  specifically on its behalf (including 12b-1 plan fees) and in addition, each
class bore a portion of general expenses, based on relative net assets of 
 each class. Effective April 1, 2004, fees provided for under the Rule 12b-1
  plan of a particular class of the Fund are charged to the operations of such
  class. Transfer agency fees and expenses and other shareholder recordkeeping
fees and expenses attributable to the Institutional Class are charged to  
 such class. Transfer agency fees and expenses 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.    
NOTE 2--ADVISORY FEES AND OTHER FEES PAID TO AFFILIATES                         
The Trust has entered into a master investment advisory agreement with A I M    
Advisors, Inc. ("AIM"). Under the terms of the investment advisory agreement,   
the Fund pays an advisory fee based on the annual rate of the Fund's average    
net assets as follows:                                                          

                                                                [Download Table]

AVERAGE NET ASSETS               RATE 
--------------------------------------
                                      
First $500 million               0.75%
--------------------------------------
From $500 million to $1 billion  0.65%
--------------------------------------
From $1 billion to $2 billion    0.50%
--------------------------------------
From $2 billion to $4 billion    0.45%
--------------------------------------
From $4 billion to $6 billion    0.40%
--------------------------------------
From $6 billion to $8 billion   0.375%
--------------------------------------
Over $8 billion                  0.35%
--------------------------------------

For the period November 25, 2003 through August 31, 2004, the Fund paid     
advisory fees to AIM of $4,795,328. Prior to November 25, 2003, the Trust had   
an investment advisory agreement with INVESCO Funds Group, Inc. ("IFG"). For    
the period September 1, 2003 through November 24, 2003, the Fund paid advisory  
fees under similar terms to IFG of $1,450,544. Effective November 25, 2003, AIM 
entered into a sub-advisory agreement with INVESCO Institutional (N.A.), Inc.   
("INVESCO") whereby AIM pays INVESCO 40% of the fee paid by the Fund to AIM.    
AIM has voluntarily agreed to waive advisory fees and/or reimburse expenses 
to the extent necessary to limit Total Annual Operating Expenses (excluding     
certain items discussed below) of Class A, Class B, Class C and Investor Class  
shares to 1.34%, 1.99%, 1.99% and 1.24% of net assets, respectively. AIM has    
contractually agreed to waive advisory fees and/or reimburse expenses to the    
extent necessary to limit Total Annual Fund Operating Expenses (excluding       
certain items discussed below) of Class A, Class B and Class C, shares to       
2.10%, 2.75% and 2.75%, of net assets, respectively, through August 31, 2005.   
In determining the advisor's obligation to waive advisory fees and/or reimburse 
expenses, the following expenses are not taken into account, and could cause    
the Total Annual Fund Operating Expenses to exceed the caps stated above: (i)   
interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary 
items (these are expenses that are not anticipated to arise from the Fund's     
day-to-day operations), or items designated as such by the Fund's Board of      
Trustees; (v) expenses related to a merger or reorganization, as approved by    
the Fund's Board of Trustees; and (vi) expenses that the Fund has incurred but  
did not actually pay because of an expense offset arrangement. Currently, the   
only expense offset arrangements from which the Fund benefits are in the form   
of credits that the Fund receives from banks where the Fund or its transfer     
agent has deposit accounts in which it holds uninvested cash. Those credits are 
used to pay certain expenses incurred by the Fund. Further, AIM has voluntarily 
agreed to waive advisory fees of the Fund in the amount of 25% of the advisory  
fee AIM receives from the affiliated money market funds on investments by the   
Fund in such affiliated money market funds (excluding investments made in       
affiliated money market funds with cash collateral from securities loaned by    
the fund). Voluntary fee waivers or reimbursements may be modified or           
discontinued at any time upon consultation with the Board of Trustees without   
further notice to investors. For the year ended August 31, 2004, AIM waived     
fees of $368,769.                                                               
For the period of November 25, 2003 through August 31, 2004, AIM reimbursed 
transfer agency expenses of the Fund of $5,623, $1,642, $2,906, $731,538 and    
$69 for Class A, Class B, Class C, Investor Class and Institutional Class       
shares, respectively. Prior to November 25, 2003, IFG reimbursed transfer       
agency expenses of $5,271, $1,280, $6,506 and $845,877 for Class A, Class B,    
Class C and Investor Class shares, respectively. For the period November 25,    
2003 through August 31, 2004, AIM reimbursed class-specific expenses of the     
Fund of $3,635, $3,274, $0 and $1,642 for Class B, Class C, Investor Class and  
Institutional Class shares, respectively. Prior to November 25, 2003, IFG did   
not reimburse class-specific expenses of the Fund. For the period November 25,  
2003 through August 31, 2004, AIM did not reimburse fund level expenses of the  
Fund. Prior to November 25, 2003, IFG reimbursed fund level expenses of the     
Fund of $36,019.                                                                
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For the year ended August 31, 2004, at the direction of the Trustees of the 
Trust, AMVESCAP PLC ("AMVESCAP") has assumed $58,540 of expenses incurred by    
the Fund in connection with matters related to recently settled regulatory      
actions and investigations concerning market timing activity in the AIM and     
INVESCO Funds including legal, audit, shareholder servicing, communication and  
trustee expenses. These expenses along with the related expense reimbursement,  
are included in the Statement of Operations.                                    
 Pursuant to a master administrative services agreement with AIM, the Fund has
agreed to pay AIM for certain administrative costs incurred in providing        
accounting services to the Fund. For the period November 25, 2003 through       
August 31, 2004, the Fund paid AIM $321,297 for such services. Prior to         
November 25, 2003, the Trust had an administrative services agreement with IFG. 
For the period September 1, 2003 through November 24, 2003, under similar       
terms, the Fund paid IFG $65,246 for such services.                             
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay AIM Investment Services, Inc. ("AISI") a fee for providing transfer agency  
and shareholder services to the Fund and reimburse AISI for certain expenses    
incurred by AISI in the course of providing such services. For the              
Institutional Class, the advisor has voluntarily agreed to reimburse class      
specific transfer agent fees and expenses to the extent necessary to limit      
transfer agency fees to 0.10% of the average net assets. There were no          
reimbursements made pursuant to this agreement during the period. For the       
period September 1, 2003 through September 30, 2003, the Fund paid IFG          
$582,518. For the period October 1, 2003 through August 31, 2004, the Fund paid 
AISI $3,015,401. AISI may make payments to intermediaries to provide omnibus    
account services, sub-accounting services and/or networking services.           
The Trust has entered into a master distribution agreement with A I M       
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the     
Class A, Class B, Class C, Investor Class and Institutional Class shares of the 
Fund. The Trust has adopted plans pursuant to Rule 12b-1 under the 1940 Act     
with respect to the Fund's Class A, Class B, Class C and Investor Class shares  
(collectively the "Plans"). The Fund, pursuant to the Class A, Class B and      
Class C Plans, pays AIM Distributors compensation at the annual rate of 0.35%   
of the Fund's average daily net assets of Class A shares and 1.00% of the       
average daily net assets of Class B and Class C shares. Of these amounts, up to 
0.25% of the average daily net assets of the Class A, Class B, Class C, or      
Invester Class shares may be paid to furnish continuing personal shareholder    
services to customers who purchase and own shares of such classes. Any amounts  
not paid as a service fee under the Plans would constitute an asset-based sales 
charge. NASD Rules also impose a cap on the total sales charges, including      
asset-based sales charges that may be paid by any class of shares of the Fund.  
The Fund, pursuant to the Investor Class Plan, pays AIM Distributors for its    
allocated share of expenses incurred pursuant to the Investor Class Plan for    
the period, up to a maximum annual rate of 0.25% of the average daily net       
assets of the Investor Class shares. Pursuant to the Plans, for the year ended  
August 31, 2004, the Class A, Class B, Class C and Investor Class shares paid   
$19,967, $12,403, $26,234 and $2,186,007, respectively. AIM has reimbursed      
$82,663 of Investor Class expenses for the INVESCO Balanced Fund, which was     
acquired by the Fund, related to an overpayment of prior period Rule 126-1 fees 
paid to INVESCO Distributors, Inc., the prior distributor and an AIM affiliate. 
Front-end sales commissions and contingent deferred sales charges ("CDSC")  
(collectively the "sales charges") are not recorded as expenses of the Fund.    
Front-end sales commissions are deducted from proceeds from the sales of Fund   
shares prior to investment in Class A shares of the Fund. CDSC are deducted     
from redemption proceeds prior to remittance to the shareholder. For the year   
ended August 31, 2004, AIM Distributors advised the Fund that it retained       
$5,214 in front-end sales commissions from the sale of Class A shares and $0,   
$32 and $1,326 from Class A, Class B and Class C shares, respectively, for CDSC 
imposed upon redemptions by shareholders.                                       
 Certain officers and trustees of the Trust are officers and directors of AIM,
AISI, INVESCO and/or AIM Distributors.                                          
NOTE 3--INVESTMENTS IN AFFILIATES                                               
The Fund is permitted, pursuant to an exemptive order from the Securities and   
Exchange Commission ("SEC"), to invest daily available cash balances and cash   
collateral from securities lending transactions in affiliated money market      
funds. The Fund and the money market funds below have the same investment       
advisor and therefore, are considered to be affiliated. The table below shows   
the transactions in and earnings from investments in affiliated money market    
funds for the period ended August 31, 2004.                                     
INVESTMENTS OF DAILY AVAILABLE CASH BALANCES:                                   

                                                        [Enlarge/Download Table]

                                                                UNREALIZED                                    
                     MARKET VALUE  PURCHASES      PROCEEDS     APPRECIATION  MARKET VALUE DIVIDEND  REALIZED  
FUND                   08/31/03     AT COST      FROM SALES   (DEPRECIATION)   08/31/04    INCOME  GAIN (LOSS)
--------------------------------------------------------------------------------------------------------------
                                                                                                              
INVESCO Treasurer's                                                                                           
 Money Market                                                                                                 
 Reserve Fund/(a)/    $8,800,217  $536,071,265 $(517,209,384)      $--       $27,662,098  $170,353     $--    
--------------------------------------------------------------------------------------------------------------

INVESTMENTS OF CASH COLLATERAL FROM SECURITIES LENDING TRANSACTIONS:            

                                                        [Enlarge/Download Table]

                                                                UNREALIZED                                       
                     MARKET VALUE  PURCHASES      PROCEEDS     APPRECIATION  MARKET VALUE  DIVIDEND    REALIZED  
FUND                   08/31/03     AT COST      FROM SALES   (DEPRECIATION)   08/31/04   INCOME/(B)/ GAIN (LOSS)
-----------------------------------------------------------------------------------------------------------------
                                                                                                                 
INVESCO Treasurer's                                                                                              
 Money Market                                                                                                    
 Reserve Fund/(a)/    $       --  $  2,439,445 $  (2,439,445)      $--       $        --   $  1,087       $--    
-----------------------------------------------------------------------------------------------------------------
Total                 $8,800,217  $538,510,710 $(519,648,829)      $--       $27,662,098   $171,440       $--    
-----------------------------------------------------------------------------------------------------------------

/(a) /Effective October 15, 2004, INVESCO Treasurer's Money Market Reserve Fund 
was renamed Premier Portfolio.                                        
/(b) /Dividend income is net of income rebate paid to security lending          
counterparties.                                                       
NOTE 4--EXPENSE OFFSET ARRANGEMENT                                              
The expense offset arrangement is comprised of transfer agency credits which    
result from balances in Demand Deposit Accounts (DDA) used by the transfer      
agent for clearing shareholder transactions. For the year ended August 31,      
2004, the Fund received credits in transfer agency fees of $1,261 under an      
expense offset arrangement, which resulted in a reduction of the Fund's total   
expenses of $1,261.                                                             
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NOTE 5--TRUSTEES' FEES                                                          
Trustees' fees represent remuneration paid to each Trustee of the Trust who is  
not an "interested person" of AIM. Trustees have the option to defer            
compensation payable by the Trust. Those Trustees who defer compensation have   
the option to select various AIM Funds and INVESCO Funds in which their         
deferral accounts shall be deemed to be invested.                               
Current Trustees are eligible to participate in a retirement plan that      
provides for benefits to be paid upon retirement to Trustees over a period of   
time based on the number of years of service. The Fund may have certain former  
Trustees that also participate in a retirement plan and receive benefits under  
such plan.                                                                      
Obligations under the deferred compensation and retirement plans represent  
unsecured claims against the general assets of the Fund.                        
 During the year ended August 31, 2004, the Fund paid legal fees of $3,147 for
services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the    
Independent Trustees. A member of that firm is a Trustee of the Trust.          
NOTE 6--BORROWINGS                                                              
Pursuant to an exemptive order from the SEC, the Fund may participate in an     
interfund lending facility that AIM has established for temporary borrowings by 
the AIM Funds and the INVESCO Funds. An interfund loan will be made under this  
facility only if the loan rate (an average of the rate available on bank loans  
and the rate available on investments in overnight repurchase agreements) is    
favorable to both the lending fund and the borrowing fund. A loan will be       
secured by collateral if the Fund's aggregate borrowings from all sources       
exceeds 10% of the Fund's total assets. To the extent that the loan is required 
to be secured by collateral, the collateral is marked to market daily to ensure 
that the market value is at least 102% of the outstanding principal value of    
the loan. During the year ended August 31, 2004, the Fund had average interfund 
borrowings for the number of days the borrowings were outstanding, in the       
amount of $17,775,000 with a weighted average interest rate of 1.46% and        
interest expense of $709.                                                       
Effective December 9, 2003, the Fund became a participant in an uncommitted 
unsecured revolving credit facility with State Street Bank and Trust Company    
("SSB"). The Fund may borrow up to the lesser of (i) $125,000,000, or (ii) the  
limits set by its prospectus for borrowings. The Fund and other funds advised   
by AIM which are parties to the credit facility can borrow on a first come,     
first served basis. Principal on each loan outstanding shall bear interest at   
the bid rate quoted by SSB at the time of the request for the loan. The Fund    
did not borrow under the facility during the year ended August 31, 2004.        
The Fund had available a committed Redemption Line of Credit Facility       
("LOC"), from a consortium of national banks, to be used for temporary or       
emergency purposes to meet redemption needs. The LOC permitted borrowings to a  
maximum of 10% of the net assets at value of the Fund. Each fund agreed to pay  
annual fees and interest on the unpaid principal balance based on prevailing    
market rates as defined in the agreement. The funds which were party to the LOC 
were charged a commitment fee of 0.10% on the unused balance of the committed   
line. The Fund did not borrow under the LOC during the year ended August 31,    
2004. The agreement expired on December 3, 2003.                                
Additionally, the Fund is permitted to temporarily carry a negative or      
overdrawn balance in its account with SSB, the custodian bank. To compensate    
the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave 
funds in the account so the custodian can be compensated by earning the         
additional interest; or (ii) compensate by paying the custodian bank. In either 
case, the custodian bank will be compensated at an amount equal to the Federal  
Funds rate plus 100 basis points.                                               
NOTE 7--PORTFOLIO SECURITIES LOANED                                             
The Fund may lend portfolio securities having a market value up to one-third of 
the Fund's total assets. Such loans are secured by collateral equal to no less  
than the market value of the loaned securities determined daily. Such           
collateral will be cash or debt securities issued or guaranteed by the U.S.     
Government or any of its agencies. Cash collateral received in connection with  
these loans is invested in short-term money market instruments or affiliated    
money market funds. It is the Fund's policy to obtain additional collateral     
from or return excess collateral to the borrower by the end of the next         
business day, following the valuation date of the securities loaned. Therefore, 
the value of the collateral held may be temporarily less than the value of the  
securities on loan. Lending securities entails a risk of loss to the Fund if    
and to the extent that the market value of the securities loaned were to        
increase and the borrower did not increase the collateral accordingly, and the  
borrower fails to return the securities. The Fund could also experience delays  
and costs in gaining access to the collateral. The Fund bears the risk of any   
deficiency in the amount of the collateral available for return to the borrower 
due to a loss on the collateral invested. At August 31, 2004, there were no     
securities out on loan to brokers. For the year ended August 31, 2004, the Fund 
received dividends on cash collateral net of income rebate paid to              
counterparties of $1,087 for securities lending transactions.                   
NOTE 8--DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF NET ASSETS          
DISTRIBUTIONS TO SHAREHOLDERS:                                                  
The tax character of distributions paid during the years ended August 31, 2004, 
the three months ended August 31, 2003 and the year ended May 31, 2003 was as   
follows:                                                                        

                                                        [Enlarge/Download Table]

                                             YEAR ENDED THREE MONTHS ENDED YEAR ENDED 
                                             AUGUST 31,     AUGUST 31,      MAY 31,   
                                                2004           2003           2003    
--------------------------------------------------------------------------------------
                                                                                      
Distributions paid from:                                                              
Ordinary income                              $9,776,695     $3,029,123     $23,578,246
--------------------------------------------------------------------------------------
Long-term capital gain                               --             --      19,310,571
--------------------------------------------------------------------------------------
Total distributions                          $9,776,695     $3,029,123     $42,888,817
--------------------------------------------------------------------------------------

F-12  

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TAX COMPONENTS OF NET ASSETS:                                                   

                                                        [Enlarge/Download Table]

As of August 31, 2004, the components of net assets on a tax basis were as follows:                     2004     
-----------------------------------------------------------------------------------------------------------------
                                                                                                                 
Undistributed ordinary income                                                                       $  1,385,864 
-----------------------------------------------------------------------------------------------------------------
Unrealized appreciation -- investments                                                                 9,529,487 
-----------------------------------------------------------------------------------------------------------------
Temporary book/tax differences                                                                          (263,766)
-----------------------------------------------------------------------------------------------------------------
Capital loss carryforward                                                                            (99,281,661)
-----------------------------------------------------------------------------------------------------------------
Shares of beneficial interest                                                                        773,094,103 
-----------------------------------------------------------------------------------------------------------------
Total net assets                                                                                    $684,464,027 
-----------------------------------------------------------------------------------------------------------------

The difference between book-basis and tax-basis unrealized appreciation     
(depreciation) is due to differences in the timing of recognition of gains and  
losses on investments for tax and book purposes. The Fund's unrealized          
appreciation (depreciation) difference is attributable primarily to losses on   
wash sales.                                                                     
 The temporary book/tax differences are a result of timing differences between
book and tax recognition of income and/or expenses. The Fund's temporary        
book/tax differences are the result of the trustee deferral of compensation and 
retirement plan expenses.                                                       
Capital loss carryforward is calculated and reported as of a specific date. 
Results of transactions and other activity after that date may affect the       
amount of capital loss carryforward actually available for the Fund to utilize. 
The ability to utilize capital loss carryforward in the future may be limited   
based on the results of future transactions under the Internal Revenue Code and 
related regulations based on the results of future transactions. Under these    
limitation rules, the Fund is limited as of August 31, 2004 to utilizing        
$37,680,573 of capital loss carryforward in the fiscal year ended August 31,    
2005.                                                                           
The Fund utilized $46,172,250 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 August 31, 2004 which expires as     
follows:                                                                        

                                                        [Enlarge/Download Table]

                                                                                                    CAPITAL LOSS 
EXPIRATION                                                                                          CARRYFORWARD*
-----------------------------------------------------------------------------------------------------------------
                                                                                                                 
August 31, 2008                                                                                      $96,201,876 
-----------------------------------------------------------------------------------------------------------------
August 31, 2009                                                                                        3,079,785 
-----------------------------------------------------------------------------------------------------------------
Total capital loss carryforward                                                                      $99,281,661 
-----------------------------------------------------------------------------------------------------------------

*  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 4, 2003, the date of the  
reorganization of INVESCO Balanced Fund into the Fund, are realized on    
  securities held in each fund at such date, the capital loss carryforward may
  be further limited for up to five years from the date of the reorganization.
NOTE 9--INVESTMENT SECURITIES                                                   
The aggregate amount of investment securities (other than short-term securities 
and money market funds) purchased and sold by the Fund during the year ended    
August 31, 2004 was $890,363,922 and $1,082,657,261, respectively.              

                                                        [Enlarge/Download Table]

                 UNREALIZED APPRECIATION (DEPRECIATION) OF INVESTMENT SECURITIES ON A TAX BASIS                  
-----------------------------------------------------------------------------------------------------------------
                                                                                                                 
Aggregate unrealized appreciation of investment securities                                          $ 32,814,985 
-----------------------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities                                         (23,285,498)
-----------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities                                                $  9,529,487 
-----------------------------------------------------------------------------------------------------------------

Cost of investments for tax purposes is $679,042,265.                           
NOTE 10--RECLASSIFICATION OF PERMANENT DIFFERENCES                              
As a result of capital loss carryforward limitations and tax deferrals acquired 
in the reorganization of INVESCO Balanced Fund into the Fund, undistributed net 
investment income was decreased by $49,998, undistributed net realized gain     
(loss) was decreased by $139,775,224 and shares of beneficial interest          
increased by $139,825,222. These reclassifications had no effect on the net     
assets of the Fund.                                                             
F-13  

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NOTE 11--SHARE INFORMATION                                                      
The Fund currently offers five different classes of shares: Class A shares,     
Class B shares, Class C shares, Investor Class and Institutional Class shares.  
Class A shares are sold with a front-end sales charge. Class B shares and Class 
C shares are sold with CDSC. Investor Class shares and Institutional Class      
shares are sold at net asset value. Under certain circumstances, Class A shares 
are subject to CDSC. Generally, Class B shares will automatically convert to    
Class A shares eight years after the end of the calendar month of purchase.     

                                                        [Enlarge/Download Table]

                                           CHANGES IN SHARES OUTSTANDING/(A)/                                             
--------------------------------------------------------------------------------------------------------------------------
                                                 YEAR ENDED             THREE MONTHS ENDED             YEAR ENDED         
                                               AUGUST 31, 2004            AUGUST 31, 2003             MAY 31, 2003        
                                         --------------------------  ------------------------  -------------------------- 
                                            SHARES        AMOUNT       SHARES       AMOUNT        SHARES        AMOUNT    
--------------------------------------------------------------------------------------------------------------------------
                                                                                                                          
Sold:                                                                                                                     
 Class A                                     100,948  $   2,345,620       3,836  $     83,522       97,195  $   2,060,140 
--------------------------------------------------------------------------------------------------------------------------
 Class B                                      52,707      1,205,274       4,240        92,039       23,446        495,653 
--------------------------------------------------------------------------------------------------------------------------
 Class C                                      88,849      2,018,182      58,588     1,283,309      195,554      4,119,897 
--------------------------------------------------------------------------------------------------------------------------
 Investor Class                            5,284,173    123,975,933   1,871,239    41,852,486    9,129,088    196,083,892 
--------------------------------------------------------------------------------------------------------------------------
 Institutional Class/(b)/                          1             75          --            --           --             -- 
--------------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:                                                                                      
 Class A                                       2,906         67,025          79         1,738        1,053         22,066 
--------------------------------------------------------------------------------------------------------------------------
 Class B                                         144          3,296          41           899          754         15,749 
--------------------------------------------------------------------------------------------------------------------------
 Class C                                         386          8,880          64         1,419        1,004         20,775 
--------------------------------------------------------------------------------------------------------------------------
 Investor Class                              406,083      9,584,558     133,107     2,998,901    1,980,593     42.329,594 
--------------------------------------------------------------------------------------------------------------------------
 Institutional Class/(b)/                          5            125          --            --           --             -- 
--------------------------------------------------------------------------------------------------------------------------
Issued in connection with                                                                                                 
 acquisitions:/(c)/                                                                                                       
 Class A                                     358,553      8,129,264          --            --           --             -- 
--------------------------------------------------------------------------------------------------------------------------
 Class B                                      12,188        274,073          --            --           --             -- 
--------------------------------------------------------------------------------------------------------------------------
 Class C                                     141,108      3,196,730          --            --           --             -- 
--------------------------------------------------------------------------------------------------------------------------
 Investor Class                           18,158,568    421,589,898          --            --           --             -- 
--------------------------------------------------------------------------------------------------------------------------
 Institutional Class/(b)/                        457         10,372          --            --           --             -- 
--------------------------------------------------------------------------------------------------------------------------
Automatic conversion of Class B shares                                                                                    
 to Class A shares:/(d)/                                                                                                  
 Class A                                         616         14,249          --            --           --             -- 
--------------------------------------------------------------------------------------------------------------------------
 Class B                                        (620)       (14,249)         --            --           --             -- 
--------------------------------------------------------------------------------------------------------------------------
Reacquired:                                                                                                               
 Class A                                    (293,293)    (6,843,585)     (6,040)     (132,490)     (76,664)    (1,616,139)
--------------------------------------------------------------------------------------------------------------------------
 Class B                                     (17,882)      (407,375)     (3,380)      (72,715)      (1,218)       (23,368)
--------------------------------------------------------------------------------------------------------------------------
 Class C                                    (161,274)    (3,700,978)    (56,839)   (1,250,795)    (184,935)    (3,899,641)
--------------------------------------------------------------------------------------------------------------------------
 Investor Class                          (29,734,616)  (698,630,574) (4,032,844)  (90,192,939) (18,683,127)  (400,808,650)
--------------------------------------------------------------------------------------------------------------------------
                                          (5,599,993) $(137,173,207) (2,027,909) $(45,334,626)  (7,517,257) $(161,200,032)
--------------------------------------------------------------------------------------------------------------------------

/(a)/There are three entities that are each record owners of more than 5% of    
    the outstanding shares of the Fund and in the aggregate they own 27.67% of
 the outstanding shares of the Fund. The Fund, AIM and/or AIM affiliates
  may make payments to these entities, which are considered to be related,
 for providing services to the Fund, AIM and/or AIM affiliates including
  but not limited to services such as, securities brokerage, distribution,
third party record keeping and account servicing. The Trust has no    
  knowledge as to whether all or any portion of the shares owned of record
are also owned beneficially.                                          
/(b)/Institutional Class shares commenced sales on November 3, 2003.            
/(c)/As of the open of business on November 4, 2003, the Fund acquired all of   
the net assets of INVESCO Balanced Fund pursuant to a plan of         
 reorganization approved by the Trustees of the Fund on June 9, 2003 and
 INVESCO Balanced Fund shareholders on October, 21 2003. The acquisition
  was accomplished by a tax-free exchange of 18,670,874 shares of the Fund
    for 31,479,083 shares of INVESCO Balanced Fund outstanding as of the close
of business on October 31, 2003. INVESCO Balanced Fund's net assets at
that date of $433,200,337 including $30,493,394 of unrealized         
appreciation, were combined with those of the Fund. The aggregate net 
  assets of the Fund immediately before the acquisition were $771,031,986.
/(d)/Prior to the year ended August 31, 2004, conversion of Class B shares to   
Class A shares were included in Class A shares sold and Class B shares
reacquired.                                                           
F-14  

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NOTE 12--FINANCIAL HIGHLIGHTS                                                   
The following schedule presents financial highlights for a share of the Fund    
outstanding throughout the periods indicated.                                   

                                                        [Enlarge/Download Table]

                                                                  CLASS A                          
                                         ----------------------------------------------------------
                                                                                   MARCH 28, 2002  
                                                        THREE MONTHS                (DATE SALES    
                                          YEAR ENDED       ENDED        YEAR ENDED COMMENCED) TO   
                                          AUGUST 31,     AUGUST 31,      MAY 31,      MAY 31,      
                                             2004           2003           2003         2002       
---------------------------------------------------------------------------------------------------
                                                                                                   
Net asset value, beginning of period       $22.02          $21.47         $24.08       $25.28      
---------------------------------------------------------------------------------------------------
Income from investment operations:                                                                 
 Net investment income                       0.22            0.05           0.63         0.03      
---------------------------------------------------------------------------------------------------
 Net gains (losses) on securities (both                                                            
   realized and unrealized)                  0.74            0.59          (1.89)       (0.95)     
---------------------------------------------------------------------------------------------------
   Total from investment operations          0.96            0.64          (1.26)       (0.92)     
---------------------------------------------------------------------------------------------------
Less distributions:                                                                                
 Dividends from net investment income       (0.22)          (0.09)         (0.66)       (0.28)     
---------------------------------------------------------------------------------------------------
 Distributions from net realized gain          --              --          (0.69)          --      
---------------------------------------------------------------------------------------------------
   Total distributions                      (0.22)          (0.09)         (1.35)       (0.28)     
---------------------------------------------------------------------------------------------------
Net asset value, end of period             $22.76          $22.02         $21.47       $24.08      
---------------------------------------------------------------------------------------------------
Total return/(a)/                            4.34%           3.00%         (4.99)%      (3.64)%    
---------------------------------------------------------------------------------------------------
Ratios/supplemental data:                                                                          
Net assets, end of period (000s omitted)   $4,393          $  513         $  546       $   93      
---------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets:                                                           
 With fee waivers and/or expense                                                                   
   reimbursements                            1.34%/(b)/      1.34%/(c)/     1.34%        1.18%/(c)/
---------------------------------------------------------------------------------------------------
 Without fee waivers and/or expense                                                                
   reimbursements                            1.58%/(b)/      2.57%/(c)/     1.94%        1.18%/(c)/
---------------------------------------------------------------------------------------------------
Ratio of net investment income to                                                                  
 average net assets                          1.14%/(b)/      1.40%/(c)/     1.76%        2.11%/(c)/
---------------------------------------------------------------------------------------------------
Portfolio turnover rate/(d)/                  156%             47%            45%          54%     
---------------------------------------------------------------------------------------------------

/(a)/Includes adjustments in accordance with accounting principles generally    
   accepted in the United States of America and as such, the net asset value
 for financial reporting purposes and 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.                                           
/(b)/Ratios are based on average daily net assets of $5,704,863.                
/(c)/Annualized.                                                                
/(d)/Not annualized for periods less than one year.                             
F-15  

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NOTE 12--FINANCIAL HIGHLIGHTS (continued)                                       

                                                        [Enlarge/Download Table]

                                                                  CLASS B                          
                                         ----------------------------------------------------------
                                                                                   MARCH 28, 2002  
                                                        THREE MONTHS                (DATE SALES    
                                          YEAR ENDED       ENDED        YEAR ENDED COMMENCED) TO   
                                          AUGUST 31,     AUGUST 31,      MAY 31,      MAY 31,      
                                             2004           2003           2003         2002       
---------------------------------------------------------------------------------------------------
                                                                                                   
Net asset value, beginning of period       $21.85          $21.31         $24.08       $25.28      
---------------------------------------------------------------------------------------------------
Income from investment operations:                                                                 
 Net investment income                       0.10            0.05           0.54         0.02      
---------------------------------------------------------------------------------------------------
 Net gains (losses) on securities (both                                                            
   realized and unrealized)                  0.71            0.54          (1.94)       (0.96)     
---------------------------------------------------------------------------------------------------
   Total from investment operations          0.81            0.59          (1.40)       (0.94)     
---------------------------------------------------------------------------------------------------
Less distributions:                                                                                
 Dividends from net investment income       (0.07)          (0.05)         (0.68)       (0.26)     
---------------------------------------------------------------------------------------------------
 Distributions from net realized gain          --              --          (0.69)          --      
---------------------------------------------------------------------------------------------------
   Total distributions                      (0.07)          (0.05)         (1.37)       (0.26)     
---------------------------------------------------------------------------------------------------
Net asset value, end of period             $22.59          $21.85         $21.31       $24.08      
---------------------------------------------------------------------------------------------------
Total return/(a)/                            3.71%           2.79%         (5.54)%      (3.76)%    
---------------------------------------------------------------------------------------------------
Ratios/supplemental data:                                                                          
Net assets, end of period (000s omitted)   $1,676          $  604         $  570       $   91      
---------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets:                                                           
 With fee waivers and/or expense                                                                   
   reimbursements                            1.99%/(b)/      1.99%/(c)/     2.01%        1.86%/(c)/
---------------------------------------------------------------------------------------------------
 Without fee waivers and/or expense                                                                
   reimbursements                            2.56%/(b)/      3.07%/(c)/     3.33%        1.86%/(c)/
---------------------------------------------------------------------------------------------------
Ratio of net investment income to                                                                  
 average net assets                          0.49%/(b)/      0.73%/(c)/     1.13%        1.27%/(c)/
---------------------------------------------------------------------------------------------------
Portfolio turnover rate/(d)/                  156%             47%            45%          54%     
---------------------------------------------------------------------------------------------------

/(a)/Includes adjustments in accordance with accounting principles generally    
   accepted in the United States of America and as such, the net asset value
 for financial reporting purposes and 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.                                           
/(b)/Ratios are based on average daily net assets of $1,240,287.                
/(c)/Annualized.                                                                
/(d)/Not annualized for periods less than one year.                             
F-16  

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NOTE 12--FINANCIAL HIGHLIGHTS (continued)                                       

                                                        [Enlarge/Download Table]

                                                                           CLASS C                                  
                                         ---------------------------------------------------------------------------
                                                                                                   FEBRUARY 14, 2000
                                                        THREE MONTHS                                  (DATE SALES   
                                          YEAR ENDED       ENDED           YEAR ENDED MAY 31,        COMMENCED) TO  
                                          AUGUST 31,     AUGUST 31,     ------------------------        MAY 31,     
                                             2004           2003         2003     2002     2001          2000       
--------------------------------------------------------------------------------------------------------------------
                                                                                                                    
Net asset value, beginning of period       $22.03          $21.47       $23.60   $26.07   $27.30        $26.71      
--------------------------------------------------------------------------------------------------------------------
Income from investment operations:                                                                                  
 Net investment income                       0.10            0.03         0.12     0.05     0.43          0.29      
--------------------------------------------------------------------------------------------------------------------
 Net gains (losses) on securities (both                                                                             
   realized and unrealized)                  0.71            0.57        (1.54)   (1.71)   (0.94)         0.87      
--------------------------------------------------------------------------------------------------------------------
   Total from investment operations          0.81            0.60        (1.42)   (1.66)   (0.51)         1.16      
--------------------------------------------------------------------------------------------------------------------
Less distributions:                                                                                                 
 Dividends from net investment income       (0.07)          (0.04)       (0.02)   (0.08)   (0.02)        (0.57)     
--------------------------------------------------------------------------------------------------------------------
 Distributions from net realized gain          --              --        (0.69)   (0.73)   (0.70)           --      
--------------------------------------------------------------------------------------------------------------------
   Total distributions                      (0.07)          (0.04)       (0.71)   (0.81)   (0.72)        (0.57)     
--------------------------------------------------------------------------------------------------------------------
Net asset value, end of period             $22.77          $22.03       $21.47   $23.60   $26.07        $27.30      
--------------------------------------------------------------------------------------------------------------------
Total return/(a)/                            3.68%           2.79%       (5.91)%  (6.44)%  (1.78)%        4.40%     
--------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:                                                                                           
Net assets, end of period (000s omitted)   $2,449          $  847       $  787   $  591   $  334        $   10      
--------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets:                                                                            
 With fee waivers and/or expense                                                                                    
   reimbursements                            1.99%/(b)/      1.99%/(c)/   2.24%    2.59%    2.30%         2.94%/(c)/
--------------------------------------------------------------------------------------------------------------------
 Without fee waivers and/or expense                                                                                 
   reimbursements                            2.52%/(b)/      3.26%/(c)/   3.49%    2.59%    2.30%         2.94%/(c)/
--------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to                                                                                   
 average net assets                          0.49%/(b)/      0.60%/(c)/   0.89%    0.46%    0.84%         1.46%/(c)/
--------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate/(d)/                  156%             47%          45%      54%      76%           49%     
--------------------------------------------------------------------------------------------------------------------

/(a)/Includes adjustments in accordance with accounting principles generally    
   accepted in the United States of America and as such, the net asset value
 for financial reporting purposes and 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.                                           
/(b)/Ratios are based on average daily net assets of $2,623,404.                
/(c)/Annualized.                                                                
/(d)/Not annualized for periods less than one year.                             
F-17  

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NOTE 12--FINANCIAL HIGHLIGHTS (continued)                                       

                                                        [Enlarge/Download Table]

                                                                           INVESTOR CLASS                                  
                                         --------------------------------------------------------------------------------  
                                                           THREE MONTHS                                                    
                                           YEAR ENDED         ENDED                       YEAR ENDED MAY 31,               
                                           AUGUST 31,       AUGUST 31,     ----------------------------------------------  
                                              2004             2003        2003       2002         2001        2000        
                                                                                                                           
---------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period      $  22.53          $  21.96       $  24.28   $    26.75   $    27.74  $    32.37  
---------------------------------------------------------------------------------------------------------------------------
Income from investment operations:                                                                                         
 Net investment income                        0.29              0.09           0.40         0.39         0.55        0.81  
---------------------------------------------------------------------------------------------------------------------------
 Net gains (losses) on securities (both                                                                                    
   realized and unrealized)                   0.73              0.57          (1.63)       (1.74)       (0.29)      (3.47) 
---------------------------------------------------------------------------------------------------------------------------
   Total from investment operations           1.02              0.66          (1.23)       (1.35)        0.26       (2.66) 
---------------------------------------------------------------------------------------------------------------------------
Less distributions:                                                                                                        
 Dividends from net investment income        (0.25)            (0.09)         (0.40)       (0.39)       (0.55)      (0.81) 
---------------------------------------------------------------------------------------------------------------------------
 Distributions from net realized gain           --                --          (0.69)       (0.73)       (0.70)      (1.16) 
---------------------------------------------------------------------------------------------------------------------------
   Total distributions                       (0.25)            (0.09)         (1.09)       (1.12)       (1.25)      (1.97) 
---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period            $  23.30          $  22.53       $  21.96   $    24.28   $    26.75  $    27.74  
---------------------------------------------------------------------------------------------------------------------------
Total return/(a)/                             4.50%             2.99%         (4.85)%      (5.13)%       1.08%      (8.29)%
---------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:                                                                                                  
Net assets, end of period (000s omitted)  $675,936          $786,180       $810,787   $1,080,197   $1,462,543  $2,326,899  
---------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets:                                                                                   
 With fee waivers and/or expense                                                                                           
   reimbursements                             1.23%/ (b)/       1.24%/(c)/     1.26%        1.49%        1.27%       1.00% 
---------------------------------------------------------------------------------------------------------------------------
 Without fee waivers and/or expense                                                                                        
   reimbursements                             1.47%/ (b)/       1.41%/(c)/     1.50%        1.49%        1.27%       1.00% 
---------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to                                                                                          
 average net assets                           1.25%/ (b)/       1.48%/(c)/     1.90%        1.57%        1.98%       2.60% 
---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate/(d)/                   156%               47%            45%          54%          76%         49% 
---------------------------------------------------------------------------------------------------------------------------

/(a)/Includes adjustments in accordance with accounting principles generally    
   accepted in the United States of America and as such, the net asset value
 for financial reporting purposes and returns based upon those net asset
values may differ from the net asset value and returns for shareholder
transactions. Not annualized for periods less than one year.          
/(b)/Ratios are based on average daily net assets of $874,402,937.              
/(c)/Annualized.                                                                
/(d)/Not annualized for periods less than one year.                             

                                                                [Download Table]

                                                          INSTITUTIONAL CLASS
                                                          -------------------
                                                           NOVEMBER 3, 2003  
                                                              (DATE SALES    
                                                             COMMENCED) TO   
                                                              AUGUST 31,     
                                                                 2004        
-----------------------------------------------------------------------------
                                                                             
Net asset value, beginning of period                            $22.77       
-----------------------------------------------------------------------------
Income from investment operations:                                           
  Net investment income                                           0.28       
-----------------------------------------------------------------------------
  Net gains on securities (both realized and unrealized)          0.01       
-----------------------------------------------------------------------------
    Total from investment operations                              0.29       
-----------------------------------------------------------------------------
Less dividends from net investment income                        (0.27)      
-----------------------------------------------------------------------------
Net asset value, end of period                                  $22.79       
-----------------------------------------------------------------------------
Total return/(a)/                                                 1.27%      
-----------------------------------------------------------------------------
Ratios/supplemental data:                                                    
Net assets, end of period (000s omitted)                        $   11       
-----------------------------------------------------------------------------
Ratio of expenses to average net assets:                                     
  With fee waivers and/or expense reimbursements                  0.99%/(b)/ 
-----------------------------------------------------------------------------
  Without fee waivers and/or expense reimbursements              20.48%/(b)/ 
-----------------------------------------------------------------------------
Ratio of net investment income to average net assets              1.49%/(b)/ 
-----------------------------------------------------------------------------
Portfolio turnover rate/(c)/                                       156%      
-----------------------------------------------------------------------------

/(a)/Includes adjustments in accordance with accounting principles generally    
   accepted in the United States of America and as such, the net asset value
 for financial reporting purposes and returns based upon those net asset
values may differ from the net asset value and returns for shareholder
transactions. Not annualized for periods less than one year.          
/(b)/Ratios are annualized and based on average daily net assets of $10,630.    
/(c)/Not annualized for periods less than one year.                             
F-18  

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NOTE 13--LEGAL PROCEEDINGS                                                      
Terms used in this Legal Proceedings Note are defined terms solely for the      
purpose of this note.                                                           
The mutual fund industry as a whole is currently subject to regulatory          
inquiries and litigation related to a wide range of issues. These issues        
include, among others, market timing activity, late trading, fair value         
pricing, excessive or improper advisory and/or distribution fees, mutual fund   
sales practices, including revenue sharing and directed-brokerage arrangements, 
investments in securities of other registered investment companies, contractual 
plans, issues related to Section 529 college savings plans and procedures for   
locating lost securityholders.                                                  
As described more fully below, INVESCO Funds Group, Inc. ("IFG"), the former
investment advisor to certain AIM Funds, A I M Advisors, Inc. ("AIM"), the      
Fund's investment advisor, and A I M Distributors, Inc. ("ADI"), the            
distributor of the retail AIM Funds and a wholly owned subsidiary of AIM,       
reached final settlements with the Securities and Exchange Commission ("SEC"),  
the New York Attorney General ("NYAG"), the Colorado Attorney General ("COAG"), 
the Colorado Division of Securities ("CODS") and the Secretary of State of the  
State of Georgia to resolve civil enforcement actions and investigations        
related to market timing activity and related issues in the AIM Funds,          
including those formerly advised by IFG.                                        
In addition, as described more fully below, IFG and AIM are the subject of a
number of ongoing regulatory inquiries and civil lawsuits related to one or     
more of the issues currently being scrutinized by various Federal and state     
regulators, including but not limited to those issues described above.          
Additional regulatory actions and/or civil lawsuits related to the above or     
other issues may be filed against the AIM Funds, IFG, AIM and/or related        
entities and individuals in the future. Additional regulatory inquiries related 
to the above or other issues also may be received by the AIM Funds, IFG, AIM    
and/or related entities and individuals in the future.                          
As a result of the matters discussed below, investors in the AIM Funds might
react by redeeming their investments. This might require the Funds to sell      
investments to provide for sufficient liquidity and could also have an adverse  
effect on the investment performance of the Funds.                              
Settled Enforcement Actions and Investigations Related to Market Timing     
On October 8, 2004, AMVESCAP PLC ("AMVESCAP"), the parent company of IFG and
AIM, announced that final settlements had been reached with the SEC, the NYAG,  
the COAG and the Secretary of State of Georgia to resolve civil enforcement     
actions and investigations related to market timing activity and related issues 
in the AIM Funds, including those formerly advised by IFG. A final settlement   
also has been reached with the Colorado Division of Securities ("CODS") with    
respect to this matter. In their enforcement actions and investigations, these  
regulators alleged, in substance, that IFG and AIM failed to disclose in the    
prospectuses for the AIM Funds that they advised and to the independent         
directors/trustees of such Funds that IFG and AIM had entered into certain      
arrangements permitting market timing of such Funds, thereby breaching their    
fiduciary duties to such Funds. As a result of the foregoing, the regulators    
alleged that IFG, AIM and ADI breached various Federal and state securities,    
business and consumer protection laws. Under the terms of the settlements, IFG, 
AIM and ADI consent to the entry of settlement orders or assurances of          
discontinuance, as applicable, by the regulators containing certain terms, some 
of which are described below, without admitting or denying any wrongdoing.      
Under the terms of the settlements, IFG agreed to pay a total of $325       
million, of which $110 million is civil penalties. Of the $325 million total    
payment, half will be paid on or before December 31, 2004 and the remaining     
half will be paid on or before December 31, 2005. AIM and ADI agreed to pay a   
total of $50 million, of which $30 million is civil penalties. The entire $50   
million payment by AIM and ADI will be paid by November 7, 2004.                
The entire $325 million IFG settlement payment will be available for        
distribution to the shareholders of those AIM Funds that IFG formerly advised   
that were harmed by market timing activity, and the entire $50 million          
settlement payment by AIM and ADI will be available for distribution to the     
shareholders of those AIM Funds advised by AIM that were harmed by market       
timing activity, all as to be determined by an independent distribution         
consultant to be appointed under the settlements. The settlement payments will  
be distributed in accordance with a methodology to be determined by the         
independent distribution consultant, in consultation with AIM and the           
independent trustees of the AIM Funds and acceptable to the staff of the SEC.   
Under the settlements with the NYAG and COAG, AIM has agreed to reduce      
management fees on the AIM Funds by $15 million per year for the next five      
years, based upon effective fee rates and assets under management as of July 1, 
2004, and not to increase certain management fees. IFG will also pay $1.5       
million to the COAG to be used for investor education purposes and to reimburse 
the COAG for actual costs. Finally, IFG and AIM will pay $175,000 to the        
Secretary of State of Georgia to be used for investor education purposes and to 
reimburse the Secretary of State for actual costs.                              
None of the costs of the settlements will be borne by the AIM Funds or by   
Fund shareholders.                                                              
 Under the terms of the settlements, AIM will make certain governance reforms,
including maintaining an internal controls committee and retaining an           
independent compliance consultant, a corporate ombudsman and, as stated above,  
an independent distribution consultant. Also, commencing in 2007 and at least   
once every other year thereafter, AIM will undergo a compliance review by an    
independent third party.                                                        
In addition, under the terms of the settlements, AIM has undertaken to cause
the AIM Funds to operate in accordance with certain governance policies and     
practices, including retaining a full-time independent senior officer whose     
duties will include monitoring compliance and managing the process by which     
proposed management fees to be charged the AIM Funds are negotiated. Also,      
commencing in 2008 and not less than every fifth calendar year thereafter, the  
AIM Funds will hold shareholder meetings at which their Boards of Trustees will 
be elected.                                                                     
On October 8, 2004, the SEC announced that it had settled a market timing   
enforcement action against Raymond R. Cunningham, the former president and      
chief executive officer of IFG and a former member of the board of directors of 
the AIM Funds formerly advised by IFG. As part of the settlement, the SEC       
ordered Mr. Cunningham to pay $1 in restitution and civil penalties in the      
amount of $500,000. In addition, the SEC prohibited Mr. Cunningham from         
associating with an investment advisor, broker, dealer or investment company    
for a period of two years and further prohibited him from serving as an officer 
or director of an investment advisor, broker, dealer or investment company for  
a period of five years.                                                         
On August 31, 2004, the SEC announced that it had settled market timing     
enforcement actions against Timothy J. Miller, the former chief investment      
officer and a former portfolio manager for IFG, Thomas A. Kolbe, the former     
national sales manager of IFG, and Michael D. Legoski, a former assistant vice  
president in IFG's                                                              
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NOTE 13--LEGAL PROCEEDINGS (continued)                                          
sales department. As part of the settlements, the SEC ordered Messrs. Miller,   
Kolbe and Legoski to pay $1 in restitution each and civil penalties in the      
amounts of $150,000, $150,000 and $40,000, respectively. In addition, the SEC   
prohibited each of them from associating with an investment advisor or          
investment company for a period of one year, prohibited Messrs. Miller and      
Kolbe from serving as an officer or director of an investment advisor or        
investment company for three years and two years, respectively, and prohibited  
Mr. Legoski from associating with a broker or dealer for a period of one year.  
 As referenced by the SEC in the SEC's settlement order, one former officer of
ADI and one current officer of AIM (who has taken a voluntary leave of absence) 
have received regulatory inquiries in the form of subpoenas or other oral or    
written requests for information and/or documents related to market timing      
activity in the AIM Funds.                                                      
 At the direction of the trustees of the AIM Funds, AMVESCAP has agreed to pay
all of the expenses incurred by such Funds related to the market timing         
investigations, including expenses incurred in connection with the regulatory   
complaints against IFG alleging market timing and the market timing             
investigations with respect to IFG and AIM.                                     
 The payments made in connection with the above-referenced settlements by IFG,
AIM and ADI will total $375 million. Additionally, management fees on the AIM   
Funds will be reduced by $15 million per year for the next five years. Whether  
and to what extent management fees will be reduced for any particular AIM Fund  
is unknown at the present time. Also, the manner in which the settlement        
payments will be distributed is unknown at the present time and will be         
determined by an independent distribution consultant to be appointed under the  
settlements. Therefore, management of AIM and the Fund are unable at the        
present time to estimate the impact, if any, that the distribution of the       
settlement amounts may have on the Fund or whether such distribution will have  
an impact on the Fund's financial statements in the future.                     
At the present time, management of AIM and the Fund are unable to estimate  
the impact, if any, that the outcome of the ongoing matters described below may 
have on AIM, ADI or the Fund.                                                   
Ongoing Regulatory Inquiries Concerning IFG and AIM                         
IFG, certain related entities, certain of their current and former officers 
and/or certain of the AIM Funds formerly advised by IFG have received           
regulatory inquiries in the form of subpoenas or other oral or written requests 
for information and/or documents related to one or more of the following        
issues, some of which concern one or more such Funds: market timing activity,   
late trading, fair value pricing, excessive or improper advisory and/or         
distribution fees, mutual fund sales practices, including revenue sharing and   
directed-brokerage arrangements, and investments in securities of other         
registered investment companies. These regulators include the SEC, the NASD,    
Inc. ("NASD"), the Florida Department of Financial Services, the Attorney       
General of the State of West Virginia, the West Virginia Securities Commission  
and the Bureau of Securities of the State of New Jersey. IFG and certain of     
these other parties also have received more limited inquiries from the United   
States Department of Labor ("DOL") and the United States Attorney's Office for  
the Southern District of New York, some of which concern one or more of the AIM 
Funds formerly advised by IFG. IFG is providing full cooperation with respect   
to these inquiries.                                                             
AIM, certain related entities, certain of their current and former officers 
and/or certain of the AIM Funds have received regulatory inquiries in the form  
of subpoenas or other oral or written requests for information and/or documents 
related to one or more of the following issues, some of which concern one or    
more AIM Funds: market timing activity, late trading, fair value pricing,       
excessive or improper advisory and/or distribution fees, mutual fund sales      
practices, including revenue sharing and directed-brokerage arrangements,       
investments in securities of other registered investment companies, contractual 
plans, issues related to Section 529 college savings plans and procedures for   
locating lost securityholders. These regulators include the SEC, the NASD, the  
Department of Banking for the State of Connecticut, the Attorney General of the 
State of West Virginia, the West Virginia Securities Commission and the Bureau  
of Securities of the State of New Jersey. AIM and certain of these other        
parties also have received more limited inquiries from the SEC, the NASD, the   
DOL, the Internal Revenue Service, the United States Attorney's Office for the  
Southern District of New York, the United States Attorney's Office for the      
Central District of California, the United States Attorney's Office for the     
District of Massachusetts, the Massachusetts Securities Division and the U.S.   
Postal Inspection Service, some of which concern one or more AIM Funds. AIM is  
providing full cooperation with respect to these inquiries.                     
Private Civil Actions Alleging Market Timing                                
Multiple civil lawsuits, including purported class action and shareholder   
derivative suits, have been filed against various parties (including, depending 
on the lawsuit, certain AIM Funds, IFG, AIM, A I M Management Group Inc. ("AIM  
Management"), AMVESCAP, certain related entities, certain of their current and  
former officers and/or certain unrelated third parties) making allegations that 
are similar in many respects to those in the settled regulatory actions brought 
by the SEC, the NYAG and the COAG concerning market timing activity in the AIM  
Funds. These lawsuits allege a variety of theories of recovery, including but   
not limited to: (i) violation of various provisions of the Federal and state    
securities laws; (ii) violation of various provisions of ERISA; (iii) breach of 
fiduciary duty; and/or (iv) breach of contract. These lawsuits were initiated   
in both Federal and state courts and seek such remedies as compensatory         
damages; restitution; injunctive relief; disgorgement of management fees;       
imposition of a constructive trust; removal of certain directors and/or         
employees; various corrective measures under ERISA; rescission of certain       
Funds' advisory agreements; interest; and attorneys' and experts' fees.         
 All lawsuits based on allegations of market timing, late trading, and related
issues have been transferred to the United States District Court for the        
District of Maryland (the "MDL Court") for consolidated or coordinated          
pre-trial proceedings. Pursuant to an Order of the MDL Court, plaintiffs        
consolidated their claims for pre-trial purposes into three amended complaints  
against various AIM- and IFG-related parties: (i) a Consolidated Amended Class  
Action Complaint purportedly brought on behalf of shareholders of the AIM       
Funds; (ii) a Consolidated Amended Fund Derivative Complaint purportedly        
brought on behalf of the AIM Funds and fund registrants; and (iii) an Amended   
Class Action Complaint for Violations of the Employee Retirement Income         
Securities Act purportedly brought on behalf of participants in AMVESCAP's      
401(k) plan. Plaintiffs in one of the underlying lawsuits transferred to the    
MDL Court continue to seek remand of their action to state court.               
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NOTE 13--LEGAL PROCEEDINGS (continued)                                          
Private Civil Actions Alleging Improper Use of Fair Value Pricing           
Multiple civil class action lawsuits have been filed against various parties
(including, depending on the lawsuit, certain AIM Funds, IFG and/or AIM)        
alleging that certain AIM Funds inadequately employed fair value pricing. These 
lawsuits allege a variety of theories of recovery, including but not limited    
to: (i) violations of various provisions of the Federal securities laws; (ii)   
common law breach of duty; and (iii) common law negligence and gross            
negligence. These lawsuits have been filed in both Federal and state courts and 
seek such remedies as compensatory and punitive damages; interest; and          
attorneys' fees and costs.                                                      
Private Civil Actions Alleging Excessive Advisory and/or Distribution Fees  
Multiple civil lawsuits, including purported class action and shareholder   
derivative suits, have been filed against various parties (including, depending 
on the lawsuit, IFG, AIM, INVESCO Institutional (N.A.), Inc., ADI and/or        
INVESCO Distributors, Inc.) alleging that the defendants charged excessive      
advisory and/or distribution fees and failed to pass on to shareholders the     
perceived savings generated by economies of scale. Certain of these lawsuits    
also allege that the defendants adopted unlawful distribution plans. These      
lawsuits allege a variety of theories of recovery, including but not limited    
to: (i) violation of various provisions of the Federal securities laws; (ii)    
breach of fiduciary duty; and/or (iii) breach of contract. These lawsuits have  
been filed in Federal courts and seek such remedies as damages; injunctive      
relief; rescission of certain Funds' advisory agreements and distribution       
plans; interest; prospective relief in the form of reduced fees; and attorneys' 
and experts' fees.                                                              
Private Civil Actions Alleging Improper Charging of Distribution Fees on    
Closed Funds or Share Classes                                                   
Multiple civil lawsuits, including purported class action and shareholder   
derivative suits, have been filed against various parties (including, depending 
on the lawsuit, IFG, AIM, ADI and/or certain of the trustees of the AIM Funds)  
alleging that the defendants breached their fiduciary duties by charging        
distribution fees while funds and/or specific share classes were closed         
generally to new investors and/or while other share classes of the same fund    
were not charged the same distribution fees. These lawsuits allege a variety of 
theories of recovery, including but not limited to: (i) violation of various    
provisions of the Federal securities laws; and (ii) breach of fiduciary duty.   
These lawsuits have been filed in Federal courts and seek such remedies as      
damages; injunctive relief; and attorneys' and experts' fees.                   
Private Civil Actions Alleging Improper Mutual Fund Sales Practices and     
Directed-Brokerage Arrangements                                                 
Multiple civil lawsuits, including purported class action and shareholder   
derivative suits, have been filed against various parties (including, depending 
on the lawsuit, AIM Management, IFG, AIM, AIM Investment Services, Inc. and/or  
certain of the trustees of the AIM Funds) alleging that the defendants          
improperly used the assets of the AIM Funds to pay brokers to aggressively      
promote the sale of the AIM Funds over other mutual funds and that the          
defendants concealed such payments from investors by disguising them as         
brokerage commissions. These lawsuits allege a variety of theories of recovery, 
including but not limited to: (i) violation of various provisions of the        
Federal securities laws; (ii) breach of fiduciary duty; and (iii) aiding and    
abetting a breach of fiduciary duty. These lawsuits have been filed in Federal  
courts and seek such remedies as compensatory and punitive damages; rescission  
of certain Funds' advisory agreements and distribution plans and recovery of    
all fees paid; an accounting of all fund-related fees, commissions and soft     
dollar payments; restitution of all unlawfully or discriminatorily obtained     
fees and charges; and attorneys' and experts' fees.                             
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 
To the Board of Trustees                                                        
and Shareholders of INVESCO Total Return 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 INVESCO Total Return Fund now      
known as AIM Total Return Fund (one of the funds constituting AIM Combination   
Stock & Bond Funds, formerly known as INVESCO Combination Stock & Bond Funds,   
Inc.; hereafter referred to as the "Fund") at August 31, 2004, the results of   
its operations for the year then ended, the changes in its net assets for the   
periods indicated 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 August 31, 2004 by correspondence with the custodian and       
brokers, provide a reasonable basis for our opinion.                            
PRICEWATERHOUSECOOPERS LLP                                                      
October 22, 2004                                                                
Houston, Texas                                                                  
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PROXY RESULTS (UNAUDITED)                                                       
A Special Meeting of Shareholders of INVESCO Total Return Fund ("Fund"), a      
portfolio of AIM Combination Stock & Bond Funds ("Trust"), (formerly AIM        
Combination Stock & Bond Funds, Inc. and INVESCO Combination Stock & Bond       
Funds, Inc.), ("Company"), Delaware statutory trust, was held on October 21,    
2003. The meeting was adjourned and reconvened on October 28, 2003 and November 
4, 2003. The meeting was held for the following purposes:                       
(1)* To elect sixteen individuals to the Board, each of whom will serve until   
his or her successor is elected and qualified: Bob R. Baker, Frank S. 
Bayley, James T. Bunch, Bruce L. Crockett, Albert R. Dowden, Edward K.
 Dunn, Jr., Jack M. Fields, Carl Frischling, Robert H. Graham, Gerald J.
Lewis, Prema Mathai-Davis, Lewis F. Pennock, Ruth H. Quigley, Louis S.
Sklar, Larry Soll, Ph D. and Mark H. Williamson.                      
(2) To approve a new Investment Advisory Agreement with A I M Advisors, Inc.    
(3) To approve a new Sub-Advisory Agreement between A I M Advisors, Inc. and    
INVESCO Institutional (N.A.), Inc.                                      
(4)* To approve an Agreement and Plan of Reorganization which provides for the  
redomestication of Company as a Delaware statutory trust and, in      
connection therewith, the sale of all of Company's assets and the     
dissolution of Company as a Maryland corporation.                     
The results of the voting on the above matters were as follows:                 

                                                                [Download Table]

                    VOTES   WITHHELD/ 
  MATTER VOTES FOR AGAINST ABSTENTIONS
--------------------------------------
                                      
                                                                [Download Table]

                                                                    WITHHOLDING
     DIRECTORS/MATTER                                    VOTES FOR   AUTHORITY 
-------------------------------------------------------------------------------
                                                                               
(1)* Bob R. Baker...................................... 166,072,606  8,345,394 
     Frank S. Bayley................................... 166,164,364  8,253,636 
     James T. Bunch.................................... 166,212,186  8,205,814 
     Bruce L. Crockett................................. 166,235,538  8,182,462 
     Albert R. Dowden.................................. 166,136,728  8,281,272 
     Edward K. Dunn, Jr................................ 166,130,617  8,287,383 
     Jack M. Fields.................................... 166,157,786  8,260,214 
     Carl Frischling................................... 166,013,925  8,404,075 
     Robert H. Graham.................................. 166,017,725  8,400,275 
     Gerald J. Lewis................................... 165,893,700  8,524,300 
     Prema Mathai-Davis................................ 166,063,905  8,354,095 
     Lewis F. Pennock.................................. 166,165,464  8,252,536 
     Ruth H. Quigley................................... 165,898,170  8,519,830 
     Louis S. Sklar.................................... 166,094,101  8,323,899 
     Larry Soll, Ph.D.................................. 166,202,999  8,215,001 
     Mark H. Williamson................................ 165,982,958  8,435,042 

*  Proposal required approval by a combined vote of all the portfolios of AIM   
Combination Stock & Bond Funds, Inc                                       
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PROXY RESULTS (UNAUDITED) (continued)                                           

                                                                [Download Table]

                                                            VOTES    WITHHELD/  
     MATTER                                    VOTES FOR   AGAINST  ABSTENTIONS 
--------------------------------------------------------------------------------
                                                                                
(2)  To approve a new Investment Advisory                                       
     Agreement with A I M Advisors, Inc......  12,537,007   166,328    236,509  
(3)  To approve a new Sub-Advisory Agreement                                    
     between A I M Advisors, Inc. and                                           
     INVESCO Institutional (N.A.), Inc.......  12,525,090   171,652    243,102  
(4)* To approve an Agreement and Plan of                                        
     Reorganization which provides for the                                      
     redomestication of Company as a                                            
     Delaware statutory trust and, in                                           
     connection therewith, the sale of all                                      
     of Company's assets and the dissolution                                    
     of Company as a Maryland corporation.... 148,629,307 7,983,718 17,804,975**

The Special Meeting of Shareholders of the Company was reconvened on October    
28, 2003. The following matters were then considered:                           

                                                                [Download Table]

                                                            VOTES    WITHHELD/  
     MATTER                                    VOTES FOR   AGAINST  ABSTENTIONS 
--------------------------------------------------------------------------------
                                                                                
(1)* Approval of a new Investment Advisory                                      
     Agreement with A I M Advisors, Inc......  15,558,586   205,409  2,642,698  
(2)  Approval of a new Sub-Advisory                                             
     Agreement between A I M Advisors, Inc.                                     
     and INVESCO Institutional (N.A.), Inc...  15,540,458   199,339  2,666,896  
(3)* To approve an Agreement and Plan of                                        
     Reorganization which provides for the                                      
     redomestication of Company as a                                            
     Delaware statutory trust and, in                                           
     connection therewith, the sale of all                                      
     of Company's assets and the dissolution                                    
     of Company as a Maryland corporation.... 156,957,964 8,515,900 19,869,530**

The Special Meeting of Shareholders of the Company was reconvened on November   
4, 2003. The following matter was then considered:                              

                                                                [Download Table]

                                                            VOTES    WITHHELD/  
     MATTER                                    VOTES FOR   AGAINST  ABSTENTIONS 
--------------------------------------------------------------------------------
                                                                                
(1)* Approval of an Agreement and Plan of                                       
     Reorganization which provides for the                                      
     redomestication of Company as a                                            
     Delaware statutory trust and, in                                           
     connection therewith, the sale of all                                      
     of Company's assets and the dissolution                                    
     of Company as a Maryland corporation.... 160,392,815 8,623,357 20,168,480**

* Proposal required approval by a combined vote of all the portfolios of AIM  
Combination Stock & Bond Funds, Inc.                                      
** Includes Broker Non-Votes                                                    
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OTHER INFORMATION                                                               
TRUSTEES AND OFFICERS                                                           
As of May 31, 2004                                                              
The address of each trustee and officer of AIM Combination Stock & Bond Funds   
(the "Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each      
trustee oversees 112 portfolios in the AIM Funds and INVESCO Funds complex. The 
trustees serve for the life of the Trust, subject to their earlier death,       
incapacitation, resignation, retirement or removal as more specifically         
provided in the Trust's organizational documents. Column two below includes     
length of time served with predecessor entities, if any.                        

                                                        [Enlarge/Download Table]
                                                                                                                             
NAME, YEAR OF BIRTH AND           TRUSTEE AND/     PRINCIPAL OCCUPATION(S) DURING PAST 5    OTHER DIRECTORSHIP(S)            
POSITION(S) HELD WITH THE TRUST   OR OFFICER SINCE YEARS                                    HELD BY TRUSTEE                  
-----------------------------------------------------------------------------------------------------------------------------
  Interested Persons                                                                                                         
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
  Robert H. Graham/1 /-- 1946     2003             Director and Chairman, A I M Management  None                             
  Trustee and President                            Group Inc. (financial services holding                                    
                                                   company); and Director and Vice                                           
                                                   Chairman, AMVESCAP PLC and Chairman,                                      
                                                   AMVESCAP PLC -- AIM Division (parent of                                   
                                                   AIM and a global investment management                                    
                                                   firm)                                                                     
                                                   Formerly: President and Chief Executive                                   
                                                   Officer, A I M Management Group Inc.;                                     
                                                   Director, Chairman and President, A I M                                   
                                                   Advisors, Inc. (registered investment                                     
                                                   advisor); Director and Chairman, A I M                                    
                                                   Capital Management, Inc. (registered                                      
                                                   investment advisor), A I M                                                
                                                   Distributors, Inc. (registered broker                                     
                                                   dealer), AIM Investment Services, Inc.,                                   
                                                   (registered transfer agent), and Fund                                     
                                                   Management Company (registered broker                                     
                                                   dealer); and Chief Executive Officer,                                     
                                                   AMVESCAP PLC -- Managed Products                                          
-----------------------------------------------------------------------------------------------------------------------------
  Mark H. Williamson/2 /-- 1951   1998             Director, President and Chief Executive  None                             
  Trustee and Executive Vice                       Officer, A I M Management Group Inc.                                      
  President                                        (financial services holding company);                                     
                                                   Director, Chairman and President, A I M                                   
                                                   Advisors, Inc. (registered investment                                     
                                                   advisor); Director, A I M Capital                                         
                                                   Management, Inc. (registered investment                                   
                                                   advisor) and A I M Distributors, Inc.                                     
                                                   (registered broker dealer); Director                                      
                                                   and Chairman, AIM Investment Services,                                    
                                                   Inc. (registered transfer agent), Fund                                    
                                                   Management Company (registered broker                                     
                                                   dealer) and INVESCO Distributors Inc.                                     
                                                   (registered broker dealer); and Chief                                     
                                                   Executive Officer, AMVESCAP PLC -- AIM                                    
                                                   Division (parent of AIM and a global                                      
                                                   investment management firm)                                               
                                                   Formerly: Director, Chairman, President                                   
                                                   and Chief Executive Officer, INVESCO                                      
                                                   Funds Group, Inc.; President and Chief                                    
                                                   Executive Officer, INVESCO                                                
                                                   Distributors, Inc.; Chief Executive                                       
                                                   Officer, AMVESCAP PLC -- Managed                                          
                                                   Products; Chairman and Chief Executive                                    
                                                   Officer of NationsBanc Advisors, Inc.;                                    
                                                   and Chairman of NationsBanc                                               
                                                   Investments, Inc.                                                         
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
  Independent Trustees                                                                                                       
-----------------------------------------------------------------------------------------------------------------------------
  Bob R. Baker -- 1936            1983             Retired                                  None                             
  Trustee                                          Formerly: President and Chief Executive                                   
                                                   Officer, AMC Cancer Research Center;                                      
                                                   and Chairman and Chief Executive                                          
                                                   Officer, First Columbia Financial                                         
                                                   Corporation                                                               
-----------------------------------------------------------------------------------------------------------------------------
  Frank S. Bayley -- 1939         2003             Retired                                  Badgley Funds, Inc. (registered  
  Trustee                                                                                   investment company)              
                                                   Formerly: Partner, law firm of Baker &                                    
                                                   McKenzie                                                                  
-----------------------------------------------------------------------------------------------------------------------------
  James T. Bunch -- 1942          2000             Co-President and Founder, Green,         None                             
  Trustee                                          Manning & Bunch Ltd., (investment                                         
                                                   banking firm); and Director, Policy                                       
                                                   Studies, Inc. and Van Gilder Insurance                                    
                                                   Corporation                                                               
-----------------------------------------------------------------------------------------------------------------------------
  Bruce L. Crockett/3 /-- 1944    2003             Chairman, Crockett Technology            ACE Limited (insurance           
  Trustee and Chair                                Associates (technology consulting        company); and Captaris, Inc.     
                                                   company)                                 (unified messaging provider)     
-----------------------------------------------------------------------------------------------------------------------------
  Albert R. Dowden -- 1941        2003             Director of a number of public and       Cortland Trust, Inc. (Chairman)  
  Trustee                                          private business corporations,           (registered investment company); 
                                                   including the Boss Group Ltd. (private   Annuity and Life Re (Holdings),  
                                                   investment and management) and Magellan  Ltd. (insurance company)         
                                                   Insurance Company                                                         
                                                   Formerly: Director, President and Chief                                   
                                                   Executive Officer, Volvo Group North                                      
                                                   America, Inc.; Senior Vice President,                                     
                                                   AB Volvo; and director of various                                         
                                                   affiliated Volvo companies                                                
-----------------------------------------------------------------------------------------------------------------------------
  Edward K. Dunn, Jr. -- 1935     2003             Retired                                  None                             
  Trustee                                          Formerly: Chairman, Mercantile Mortgage                                   
                                                   Corp.; President and Chief Operating                                      
                                                   Officer, Mercantile-Safe Deposit &                                        
                                                   Trust Co.; and President, Mercantile                                      
                                                   Bankshares Corp.                                                          
-----------------------------------------------------------------------------------------------------------------------------
  Jack M. Fields -- 1952          2003             Chief Executive Officer, Twenty First    Administaff, and Discovery Global
  Trustee                                          Century Group, Inc. (government affairs  Education Fund (non-profit)      
                                                   company) and Texana Timber LP                                             
                                                   (sustainable forestry company)                                            

--------------------------------------------------------------------------------
/1/ Mr. Graham is considered an interested person of the Trust because he is a  
director of AMVESCAP PLC, parent of the advisor to the Trust. Prior to  
  October 4, 2004, Mr. Graham served as Chairman of the Board of Trustees of
the Trust.                                                              
/2/ Mr. Williamson is considered an interested person of the Trust because he   
is an officer and a director of the advisor to, and a director of the   
principal underwriter of, the Trust.                                    
/3/ Mr. Crockett was elected Chair of the Board of Trustees of the Trust        
effective October 4, 2004.                                              

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TRUSTEES AND OFFICERS (continued)                                               
As of May 31, 2004                                                              
The address of each trustee and officer of AIM Combination Stock & Bond Funds   
(the "Trust"), is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Each      
trustee oversees 112 portfolios in the AIM Funds and INVESCO Funds complex. The 
trustees serve for the life of the Trust, subject to their earlier death,       
incapacitation, resignation, retirement or removal as more specifically         
provided in the Trust's organizational documents. Column two below includes     
length of time served with predecessor entities, if any.                        

                                                        [Enlarge/Download Table]
                                                                                                                       
                                                                                                   OTHER               
                                                                                                   DIRECTORSHIP(S)     
NAME, YEAR OF BIRTH AND                  TRUSTEE AND/     PRINCIPAL OCCUPATION(S) DURING PAST 5    HELD BY             
POSITION(S) HELD WITH THE TRUST          OR OFFICER SINCE YEARS                                    TRUSTEE             
-----------------------------------------------------------------------------------------------------------------------
 Carl Frischling -- 1937 Trustee         2003             Partner, law firm of Kramer Levin        Cortland Trust, Inc.
                                                          Naftalis and Frankel LLP                 (registered         
                                                                                                   investment          
                                                                                                   company)            
-----------------------------------------------------------------------------------------------------------------------
 Gerald J. Lewis -- 1933 Trustee         2000             Chairman, Lawsuit Resolution Services    General Chemical    
                                                          (California)                             Group, Inc.         
                                                          Formerly: Associate Justice of the                           
                                                          California Court of Appeals                                  
-----------------------------------------------------------------------------------------------------------------------
 Prema Mathai-Davis -- 1950 Trustee      2003             Formerly: Chief Executive Officer, YWCA  None                
                                                          of the USA                                                   
-----------------------------------------------------------------------------------------------------------------------
 Lewis F. Pennock -- 1942 Trustee        2003             Partner, law firm of Pennock & Cooper    None                
-----------------------------------------------------------------------------------------------------------------------
 Ruth H. Quigley -- 1935 Trustee         2003             Retired                                  None                
-----------------------------------------------------------------------------------------------------------------------
 Louis S. Sklar -- 1939 Trustee          2003             Executive Vice President, Development    None                
                                                          and Operations Hines Interests Limited                       
                                                          Partnership (real estate development                         
                                                          company)                                                     
-----------------------------------------------------------------------------------------------------------------------
 Larry Soll -- 1942 Trustee              1997             Retired                                  None                
-----------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------
Other Officers                                                                                                         
-----------------------------------------------------------------------------------------------------------------------
 Kevin M. Carome -- 1956 Senior Vice     2003             Director, Senior Vice President,         N/A                 
 President, Secretary and Chief Legal                     Secretary and General Counsel, A I M                         
 Officer                                                  Management Group Inc. (financial                             
                                                          services holding company) and A I M                          
                                                          Advisors, Inc.; Director and Vice                            
                                                          President, INVESCO Distributors, Inc.;                       
                                                          Vice President, A I M Capital                                
                                                          Management, Inc., A I M Distributors,                        
                                                          Inc. and AIM Investment Services, Inc.;                      
                                                          and Director, Vice President and                             
                                                          General Counsel, Fund Management Company                     
                                                          Formerly: Senior Vice President and                          
                                                          General Counsel, Liberty Financial                           
                                                          Companies, Inc.; and Senior Vice                             
                                                          President and General Counsel, Liberty                       
                                                          Funds Group, LLC                                             
-----------------------------------------------------------------------------------------------------------------------
 Lisa O. Brinkley/4/ -- 1959 Senior      2004             Senior Vice President, A I M Management  N/A                 
 Vice President and Chief Compliance                      Group Inc. (financial services holding                       
 Officer                                                  company) and A I M Advisors, Inc.; and                       
                                                          Vice President, A I M Capital                                
                                                          Management, Inc. and A I M                                   
                                                          Distributors, Inc.                                           
                                                          Formerly: Senior Vice President and                          
                                                          Compliance Director, Delaware                                
                                                          Investments Family of Funds.                                 
-----------------------------------------------------------------------------------------------------------------------
 Robert G. Alley -- 1948 Vice President  2003             Managing Director, Chief Fixed Income    N/A                 
                                                          Officer and Senior Investment Officer,                       
                                                          A I M Capital Management, Inc., and                          
                                                          Vice President, A I M Advisors, Inc.                         
-----------------------------------------------------------------------------------------------------------------------
 Stuart W. Coco -- 1955 Vice President   2003             Managing Director and Director of Money  N/A                 
                                                          Market Research and Special Projects,                        
                                                          A I M Capital Management, Inc.; and                          
                                                          Vice President, A I M Advisors, Inc.                         
-----------------------------------------------------------------------------------------------------------------------
 Melville B. Cox/5 /-- 1943 Vice         2003             Vice President and Chief Compliance      N/A                 
 President                                                Officer, A I M Advisors, Inc. and A I M                      
                                                          Capital Management, Inc.; and Vice                           
                                                          President, AIM Investment Services, Inc.                     
-----------------------------------------------------------------------------------------------------------------------
 Sidney M. Dilgren -- 1961 Vice          2004             Vice President and Fund                  N/A                 
 President and Treasurer                                  Treasurer, A I M Advisors, Inc.                              
                                                          Formerly, Senior Vice President, AIM                         
                                                          Investment Services, Inc.; and Vice                          
                                                          President, AIM Distributors, Inc.                            
-----------------------------------------------------------------------------------------------------------------------
 Karen Dunn Kelley -- 1960 Vice          2003             Director of Cash Management, Managing    N/A                 
 President                                                Director and Chief Cash Management                           
                                                          Officer, A I M Capital Management,                           
                                                          Inc.; Director and President, Fund                           
                                                          Management Company; and Vice President,                      
                                                          A I M Advisors, Inc.                                         
-----------------------------------------------------------------------------------------------------------------------
 Edgar M. Larsen -- 1940 Vice President  2003             Director and Executive Vice President,   N/A                 
                                                          A I M Management Group, Inc., Director                       
                                                          and Senior Vice President, A I M                             
                                                          Advisors, Inc., and Director, Chairman,                      
                                                          President, Director of Investments,                          
                                                          Chief Executive Officer and Chief                            
                                                          Investment Officer, A I M Capital                            
                                                          Management, Inc.                                             

--------------------------------------------------------------------------------
/4/ Ms. Brinkley was elected Senior Vice President and Chief Compliance Officer 
of the Trust effective September 20, 2004.                              
/5/ Mr. Cox resigned from the Trust effective September 17, 2004.               
The Statement of Additional Information of the Trust includes additional        
information about the Fund's Trustees and is available upon request, without    
charge, by calling 1.800.347.4246.                                              

                                                        [Enlarge/Download Table]

OFFICE OF THE FUND             INVESTMENT ADVISOR/*/     DISTRIBUTOR                   AUDITORS                   
                                                                                                                  
11 Greenway Plaza.             A I M Advisors, Inc       A I M Distributors, Inc.      PricewaterhouseCoopers LLP 
Suite 100                      11 Greenway Plaza         11 Greenway Plaza             1201 Louisiana Street      
Houston, TX 77046-1173         Suite 100                 Suite 100                     Suite 2900                 
                               Houston, TX 77046-1173    Houston, TX 77046-1173        Houston, TX 77002-5678     
COUNSEL TO THE FUND            COUNSEL TO THE DIRECTORS  TRANSFER AGENT                CUSTODIAN                  
Ballard Spahr                  Kramer, Levin, Naftalis & AIM Investment Services, Inc. State Street Bank and Trust
Andrews & Ingersoll, LLP       Frankel LLP               P.O. Box 4739                 Company                    
1735 Market Street, 51st Floor 919 Third Avenue          Houston, TX 77210-4739        225 Franklin Street        
Philadelphia, PA 19103-7599    New York, NY 10022-3852                                 Boston, MA 02110-2801      
                                                                [Download Table]

OFFICE OF THE FUND             SUB-ADVISOR                           
                                                                     
11 Greenway Plaza.             INVESCO Institutional (N.A.), Inc.    
Suite 100                      National Asset Management Division and
Houston, TX 77046-1173         Fixed Income/Stable Value Division    
                               The Aegon Center                      
                               400 West Market Street                
COUNSEL TO THE FUND            Suite 2500                            
Ballard Spahr                  Louisville, KY 40202-3349             
Andrews & Ingersoll, LLP                                             
1735 Market Street, 51st Floor                                       
Philadelphia, PA 19103-7599                                          

*On November 25, 2003, A I M Advisors, Inc. became the investment advisor for   
most of the INVESCO mutual funds.                                             
REQUIRED FEDERAL INCOME TAX INFORMATION (UNAUDITED)                             
Of ordinary dividends paid to shareholders during the Fund's tax year ended     
August 31, 2004, 67.75% is eligible for the dividends received deduction for    
corporations.                                                                   
For its tax year ended August 31, 2004, the Fund designated 67.42%, or the      
maximum amount allowable, of its dividend distributions as qualified dividend   
income. The actual percentages for the calendar year will be designated in the  
Fund's year-end tax statement.                                                  
REQUIRED STATE INCOME TAX INFORMATION                                           
Of the ordinary dividends paid, 1.53% was derived from U.S. Treasury            
Obligations.                                                                    

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DOMESTIC EQUITY 
AIM Aggressive Growth Fund                                                      
AIM Balanced Fund                                                               
AIM Basic Balanced Fund*                                                        
AIM Blue Chip Fund                                                              
AIM Capital Development Fund                                                    
AIM Charter Fund                                                                
AIM Constellation Fund                                                          
AIM Core Stock Fund/1/                                                          
AIM Dent Demographic Trends Fund                                                
AIM Diversified Dividend Fund                                                   
AIM Dynamics Fund/1/                                                            
AIM Emerging Growth Fund                                                        
AIM Large Cap Basic Value Fund                                                  
AIM Large Cap Growth Fund                                                       
AIM Libra Fund                                                                  
AIM Mid Cap Basic Value Fund                                                    
AIM Mid Cap Core Equity Fund/2/                                                 
AIM Mid Cap Growth Fund                                                         
AIM Mid Cap Stock Fund/1/                                                       
AIM Opportunities I Fund                                                        
AIM Opportunities II Fund                                                       
AIM Opportunities III Fund                                                      
AIM Premier Equity Fund                                                         
AIM S&P 500 Index Fund/1/                                                       
AIM Select Equity Fund                                                          
AIM Small Cap Equity Fund/3/                                                    
AIM Small Cap Growth Fund/4/                                                    
AIM Small Company Growth Fund/1/                                                
AIM Total Return Fund*/1/                                                       
AIM Trimark Endeavor Fund                                                       
AIM Trimark Small Companies Fund                                                
AIM Weingarten Fund                                                             
* Domestic equity and income fund                                               
INTERNATIONAL/GLOBAL EQUITY 
AIM Asia Pacific Growth Fund                                                    
AIM Developing Markets Fund                                                     
AIM European Growth Fund                                                        
AIM European Small Company Fund/5 /                                             
AIM Global Aggressive Growth Fund                                               
AIM Global Equity Fund/6/                                                       
AIM Global Growth Fund                                                          
AIM Global Value Fund                                                           
AIM International Core Equity Fund/1 /                                          
AIM International Emerging Growth Fund/7 /                                      
AIM International Growth Fund                                                   
AIM Trimark Fund                                                                
SECTOR EQUITY 
AIM Advantage Health Sciences Fund/1/                                           
AIM Energy Fund/1 /                                                             
AIM Financial Services Fund/1 /                                                 
AIM Global Health Care Fund                                                     
AIM Gold & Precious Metals Fund/1 /                                             
AIM Health Sciences Fund/1 /                                                    
AIM Leisure Fund/1 /                                                            
AIM Multi-Sector Fund/1 /                                                       
AIM Real Estate Fund                                                            
AIM Technology Fund/1 /                                                         
AIM Utilities Fund/1/                                                           
FIXED INCOME  
TAXABLE                                                                         
AIM Floating Rate Fund                                                          
AIM High Yield Fund                                                             
AIM Income Fund                                                                 
AIM Intermediate Government Fund                                                
AIM Limited Maturity Treasury Fund                                              
AIM Money Market Fund                                                           
AIM Short Term Bond Fund                                                        
AIM Total Return Bond Fund                                                      
Premier U.S. Government Money Portfolio/1/                                      
TAX-FREE                                                                        
AIM High Income Municipal Fund                                                  
AIM Municipal Bond Fund                                                         
AIM Tax-Exempt Cash Fund                                                        
AIM Tax-Free Intermediate Fund                                                  
AIM ALLOCATION SOLUTIONS  
AIM Aggressive Allocation Fund                                                  
AIM Conservative Allocation Fund                                                
AIM Moderate Allocation Fund                                                    
/1/  The following name changes became effective October 15, 2004: INVESCO      
Advantage Health Sciences Fund to AIM Advantage Health Sciences Fund, 
   INVESCO Core Equity Fund to AIM Core Stock Fund, INVESCO Dynamics Fund to
AIM Dynamics Fund, INVESCO Energy Fund to AIM Energy Fund, INVESCO    
Financial Services Fund to AIM Financial Services Fund, INVESCO Gold &
 Precious Metals Fund to AIM Gold & Precious Metals Fund, INVESCO Health
Sciences Fund to AIM Health Sciences Fund, INVESCO International Core 
    Equity Fund to AIM International Core Equity Fund, INVESCO Leisure Fund to
  AIM Leisure Fund, INVESCO Mid-Cap Growth Fund to AIM Mid Cap Stock Fund,
   INVESCO Multi-Sector Fund to AIM Multi-Sector Fund, INVESCO S&P 500 Index
  Fund to AIM S&P 500 Index Fund, INVESCO Small Company Growth Fund to AIM
    Small Company Growth Fund, INVESCO Technology Fund to AIM Technology Fund,
INVESCO Total Return Fund to AIM Total Return Fund, INVESCO U.S.      
   Government Money Fund to Premier U.S. Government Money Portfolio, INVESCO
Utilities Fund to AIM Utilities Fund.                                 
/2/  As of the close of business on February 27, 2004, AIM Mid Cap Core Equity  
   Fund is available to new investors on a limited basis. For information on
    who may continue to invest in AIM Mid Cap Core Equity Fund, please contact
your financial advisor.                                               
/3/  AIM Small Cap Equity Fund was closed to most investors on December 19,     
2003. For information on who may continue to invest in AIM Small Cap  
Equity Fund, please contact your financial advisor.                   
/4/  AIM Small Cap Growth Fund was closed to most investors on March 18, 2002.  
For information on who may continue to invest in AIM Small Cap Growth 
Fund, please contact your financial advisor.                          
/5/  AIM European Small Company Fund will close to new investors when net       
assets reach $500 million.                                            
/6/  Effective March 31, 2004, AIM Global Trends Fund was renamed AIM Global    
Equity Fund.                                                          
/7/  AIM International Emerging Growth Fund will close to new investors when    
net assets reach $500 million.                                        
If used after December 20, 2004, this report must be accompanied by a fund
Performance & Commentary or by an AIM Quarterly Performance Review for the most 
recent quarter-end. Mutual funds distributed by A I M Distributors, Inc.        
A I M Management Group Inc. has provided leadership in the investment           
management industry since 1976 and manages $139 billion in assets. AIM is a     
subsidiary of AMVESCAP PLC, one of the world's largest independent financial    
services companies with $372 billion in assets under management. Data as of     
June 30, 2004.                                                                  
CONSIDER THE INVESTMENT OBJECTIVES, RISKS, AND CHARGES AND EXPENSES CAREFULLY.  
FOR THIS AND OTHER INFORMATION ABOUT AIM FUNDS, OBTAIN A PROSPECTUS FROM YOUR   
FINANCIAL ADVISOR OR AIMINVESTMENTS.COM AND READ IT THOROUGHLY BEFORE INVESTING.
AIMINVESTMENTS.COM               I-TRE-AR-1         A I M DISTRIBUTORS, INC.  
[YOUR GOALS. OUR SOLUTIONS.]  
- REGISTERED TRADEMARK -  

                                                        [Enlarge/Download Table]
                                                                                     
MUTUAL  RETIREMENT  ANNUITIES  COLLEGE  SEPARATELY  OFFSHORE  ALTERNATIVE    CASH    
FUNDS    PRODUCTS              SAVINGS    MANAGED   PRODUCTS  INVESTMENTS  MANAGEMENT
                                PLANS    ACCOUNTS                                    

  [AIM INVESTMENTS LOGO]
- REGISTERED TRADEMARK -

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                                                                     Appendix IV

 PRO FORMA COMBINING SCHEDULE OF INVESTMENTS *
OF AIM BALANCED FUND AND AIM TOTAL RETURN FUND
INTO AIM BASIC BALANCED FUND
 DECEMBER 31, 2004
 (UNAUDITED)

                                                        [Enlarge/Download Table]

             PRINCIPAL AMOUNT & SHARES                                                             
----------------------------------------------                                                     
                                     AIM                                                           
              AIM       AIM     BASIC BALANCED                                                     
   AIM        TOTAL    BASIC        FUND                                                           
 BALANCED    RETURN   BALANCED    PRO FORMA                                                        
  FUND        FUND     FUND       COMBINING                                                        
---------   -------   --------  --------------                                                     
                                                                                                   
                                                STOCKS & OTHER EQUITY INTERESTS - 65.71%           
                                                ADVERTISING - 2.40%                                
1,650,000         -   168,000     1,818,000     Interpublic Group of Cos., Inc. (The)        (a)(b)
  445,000         -    31,900       476,900     Omnicom Group Inc.                           (b)   

                                                AEROSPACE & DEFENSE - 1.46%                        
  605,000   190,610    51,500       847,110     Honeywell International Inc.                       
        -    90,230         -        90,230     United Technologies Corp.                          

                                                ALUMINUM - 0.87%                                   
  525,300   164,670    50,900       740,870     Alcoa Inc.                                         

                                                APPAREL RETAIL - 0.91%                             
1,063,700         -    97,800     1,161,500     Gap, Inc. (The)                              (b)   

                                                ASSET MANAGEMENT & CUSTODY BANKS - 1.36%           
  830,000   179,330    81,200     1,090,530     Bank of New York Co., Inc. (The)                   

                                                BIOTECHNOLOGY - 0.18%                              
        -    74,440         -        74,440     Amgen Inc.                                   (a)   

                                                BUILDING PRODUCTS - 1.78%                          
  391,700         -    35,800       427,500     American Standard Cos. Inc.                  (a)   
  752,900         -    74,000       826,900     Masco Corp.                                  (b)   

                                                CASINOS & GAMING - 0.18%                           
        -   143,240         -       143,240     International Game Technology                      

                                                COMMUNICATIONS EQUIPMENT - 1.02%                   
        -   413,040         -       413,040     Cisco Systems, Inc.                          (a)   
        -    12,453         -        12,453     Lucent Technologies-Wts., expiring 12/10/07        
  750,000         -    66,300       816,300     Motorola, Inc.                                     
        -   126,320         -       126,320     QUALCOMM Inc.                                      

                                                COMPUTER HARDWARE - 0.57%                          
        -   231,210         -       231,210     Dell Inc.                                    (a)   
        -    57,520         -        57,520     International Business Machines Corp.              


                                                        [Enlarge/Download Table]

                                                                              MARKET VALUE                     
                                                     ----------------------------------------------------------
                                                                                                      AIM      
                                                                         AIM           AIM       BASIC BALANCED
                                                         AIM            TOTAL         BASIC          FUND      
                                                       BALANCED         RETURN       BALANCED      PRO FORMA   
                                                         FUND            FUND          FUND        COMBINING   
                                                     ------------    -----------   -----------   --------------
                                                                                                               
STOCKS & OTHER EQUITY INTERESTS - 65.71%                                                                       
ADVERTISING - 2.40%                                                                                            
Interpublic Group of Cos., Inc. (The)        (a)(b)  $ 22,110,000   $          -   $ 2,251,200   $ 24,361,200  
Omnicom Group Inc.                           (b)       37,522,400              -     2,689,808     40,212,208  
                                                       59,632,400              -     4,941,008     64,573,408  

AEROSPACE & DEFENSE - 1.46%                                                                                    
Honeywell International Inc.                           21,423,050      6,749,500     1,823,615     29,996,165  
United Technologies Corp.                                       -      9,325,271             -      9,325,271  
                                                       21,423,050     16,074,771     1,823,615     39,321,436  

ALUMINUM - 0.87%                                                                                               
Alcoa Inc.                                             16,504,926      5,173,931     1,599,278     23,278,135  

APPAREL RETAIL - 0.91%                                                                                         
Gap, Inc. (The)                              (b)       22,465,344              -     2,065,536     24,530,880  

ASSET MANAGEMENT & CUSTODY BANKS - 1.36%                                                                       
Bank of New York Co., Inc. (The)                       27,738,600      5,993,209     2,713,704     36,445,513  

BIOTECHNOLOGY - 0.18%                                                                                          
Amgen Inc.                                   (a)                -      4,775,326             -      4,775,326  

BUILDING PRODUCTS - 1.78%                                                                                      
American Standard Cos. Inc.                  (a)       16,185,044              -     1,479,256     17,664,300  
Masco Corp.                                  (b)       27,503,437              -     2,703,220     30,206,657  
                                                       43,688,481              -     4,182,476     47,870,957  

CASINOS & GAMING - 0.18%                                                                                       
International Game Technology                                   -      4,924,591             -      4,924,591  

COMMUNICATIONS EQUIPMENT - 1.02%                                                                               
Cisco Systems, Inc.                          (a)                -      7,971,672             -      7,971,672  
Lucent Technologies-Wts., expiring 12/10/07                     -         19,675             -         19,675  
Motorola, Inc.                                         12,900,000              -     1,140,360     14,040,360  
QUALCOMM Inc.                                                   -      5,355,968             -      5,355,968  
                                                       12,900,000     13,347,315     1,140,360     27,387,675  

COMPUTER HARDWARE - 0.57%                                                                                      
Dell Inc.                                    (a)                -      9,743,189             -      9,743,189  
International Business Machines Corp.                           -      5,670,322             -      5,670,322  
                                                                -     15,413,511             -     15,413,511  

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 PRO FORMA COMBINING SCHEDULE OF INVESTMENTS *
OF AIM BALANCED FUND AND AIM TOTAL RETURN FUND
INTO AIM BASIC BALANCED FUND
 DECEMBER 31, 2004
 (UNAUDITED)

                                                        [Enlarge/Download Table]

             PRINCIPAL AMOUNT & SHARES                                                                           
----------------------------------------------                                                                   
                                      AIM                                                                        
              AIM       AIM     BASIC BALANCED                                                                   
   AIM       TOTAL     BASIC         FUND                                                                        
 BALANCED    RETURN   BALANCED     PRO FORMA                                                                     
  FUND        FUND      FUND       COMBINING                                                                     
---------   -------   --------  --------------                                                                   
                                                                                                                 
                                                COMPUTER STORAGE & PERIPHERALS - 0.30%                           
        -   534,610         -       534,610     EMC Corp.                                                     (a)

                                                CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS - 0.23%             
        -    69,930    11,900        81,830     Deere & Co.                                                      

                                                CONSUMER ELECTRONICS - 1.61%                                     
  641,000         -    58,700       699,700     Koninklijke (Royal) Philips Electronics N.V.-New York Shares     
                                                 (Netherlands)                                                   
  581,000         -    54,500       635,500     Sony Corp.-ADR (Japan)                                           

                                                CONSUMER FINANCE - 0.26%                                         
        -   249,260         -       249,260     MBNA Corp.                                                       

                                                DATA PROCESSING & OUTSOURCED SERVICES - 2.48%                    
  975,100         -    88,300     1,063,400     Ceridian Corp.                                                (a)
  900,800   127,450    82,600     1,110,850     First Data Corp.                                                 

                                                DEPARTMENT STORES - 0.66%                                        
  556,300         -    51,100       607,400     May Department Stores Co. (The)                               (b)

                                                DIVERSIFIED CHEMICALS - 0.70%                                    
  201,000         -    18,500       219,500     Dow Chemical Co. (The)                                           
        -    71,060         -        71,060     E. I. du Pont de Nemours & Co.                                   
        -    66,540         -        66,540     PPG Industries, Inc.                                             

                                                DIVERSIFIED COMMERCIAL SERVICES - 1.33%                          
1,393,400         -   133,600     1,527,000     Cendant Corp.                                                    

                                                DRUG RETAIL - 0.36%                                              
        -   253,770         -       253,770     Walgreen Co.                                                     

                                                ELECTRICAL COMPONENTS & EQUIPMENT - 0.24%                        
        -    93,608         -        93,608     Emerson Electric Co.                                             

                                                ENVIRONMENTAL SERVICES - 1.52%                                   
1,244,100         -   116,100     1,360,200     Waste Management, Inc.                                           

                                                        [Enlarge/Download Table]

                                                                                             MARKET VALUE                     
                                                                    ----------------------------------------------------------
                                                                                                                     AIM      
                                                                                        AIM           AIM       BASIC BALANCED
                                                                        AIM            TOTAL         BASIC          FUND      
                                                                      BALANCED         RETURN       BALANCED      PRO FORMA   
                                                                        FUND            FUND          FUND        COMBINING   
                                                                    ------------    -----------   -----------   --------------
                                                                                                                              
COMPUTER STORAGE & PERIPHERALS - 0.30%                                                                                        
EMC Corp.                                                     (a)  $           -    $ 7,949,651   $         -    $ 7,949,651  

CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS - 0.23%                                                                          
Deere & Co.                                                                    -      5,202,792       885,360      6,088,152  

CONSUMER ELECTRONICS - 1.61%                                                                                                  
Koninklijke (Royal) Philips Electronics N.V.-New York Shares                                                                  
 (Netherlands)                                                        16,986,500              -     1,555,550     18,542,050  
Sony Corp.-ADR (Japan)                                                22,635,760              -     2,123,320     24,759,080  
                                                                      39,622,260              -     3,678,870     43,301,130  

CONSUMER FINANCE - 0.26%                                                                                                      
MBNA Corp.                                                                     -      7,026,639             -      7,026,639  

DATA PROCESSING & OUTSOURCED SERVICES - 2.48%                                                                                 
Ceridian Corp.                                                (a)     17,824,828              -     1,614,124     19,438,952  
First Data Corp.                                                      38,320,032      5,421,723     3,513,804     47,255,559  
                                                                      56,144,860      5,421,723     5,127,928     66,694,511  

DEPARTMENT STORES - 0.66%                                                                                                     
May Department Stores Co. (The)                               (b)     16,355,220              -     1,502,340     17,857,560  

DIVERSIFIED CHEMICALS - 0.70%                                                                                                 
Dow Chemical Co. (The)                                                 9,951,510              -       915,935     10,867,445  
E. I. du Pont de Nemours & Co.                                                 -      3,485,493             -      3,485,493  
PPG Industries, Inc.                                                           -      4,535,366             -      4,535,366  
                                                                       9,951,510      8,020,859       915,935     18,888,304  

DIVERSIFIED COMMERCIAL SERVICES - 1.33%                                                                                       
Cendant Corp.                                                         32,577,692              -     3,123,568     35,701,260  

DRUG RETAIL - 0.36%                                                                                                           
Walgreen Co.                                                                   -      9,737,155             -      9,737,155  

ELECTRICAL COMPONENTS & EQUIPMENT - 0.24%                                                                                     
Emerson Electric Co.                                                           -      6,561,921             -      6,561,921  

ENVIRONMENTAL SERVICES - 1.52%                                                                                                
Waste Management, Inc.                                                37,248,354              -     3,476,034     40,724,388  

EX-99.77M MERGERS
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 PRO FORMA COMBINING SCHEDULE OF INVESTMENTS *
OF AIM BALANCED FUND AND AIM TOTAL RETURN FUND
INTO AIM BASIC BALANCED FUND
 DECEMBER 31, 2004
 (UNAUDITED)

                                                        [Enlarge/Download Table]

             PRINCIPAL AMOUNT & SHARES                                                      
----------------------------------------------                                              
                                     AIM                                                    
              AIM       AIM     BASIC BALANCED                                              
   AIM        TOTAL    BASIC        FUND                                                    
 BALANCED    RETURN   BALANCED    PRO FORMA                                                 
  FUND        FUND     FUND       COMBINING                                                 
---------   -------   --------  --------------                                              
                                                                                            
                                                FOOD RETAIL - 1.49%                         
1,264,000         -   120,400     1,384,400     Kroger Co. (The)                      (a)   
  733,000         -    69,000       802,000     Safeway Inc.                          (a)(b)

                                                FOREST PRODUCTS - 0.19%                     
        -    76,690         -        76,690     Weyerhaeuser Co.                            

                                                GENERAL MERCHANDISE STORES - 1.46%          
  594,500   103,760    56,700       754,960     Target Corp.                                

                                                HEALTH CARE DISTRIBUTORS - 2.90%            
  831,000         -    78,300       909,300     Cardinal Health, Inc.                       
  725,000         -    69,000       794,000     McKesson Corp.                              

                                                HEALTH CARE EQUIPMENT - 1.07%               
  549,000         -    50,500       599,500     Baxter International Inc.                   
        -    95,870         -        95,870     Boston Scientific Corp.               (a)   
        -    82,330         -        82,330     Medtronic, Inc.                             
        -         -    12,800        12,800     Waters Corp.                          (a)   

                                                HEALTH CARE FACILITIES - 0.92%              
  565,000         -    51,800       616,800     HCA, Inc.                                   

                                                HEALTH CARE SERVICES - 0.27%                
  289,600         -    24,000       313,600     IMS Health Inc.                             

                                                HOME IMPROVEMENT RETAIL - 0.58%             
        -   146,620         -       146,620     Home Depot, Inc. (The)                      
        -   161,290         -       161,290     Lowe's Cos., Inc.                           

                                                HOUSEHOLD PRODUCTS - 0.17%                  
        -    83,462         -        83,462     Procter & Gamble Co. (The)                  

                                                HYPERMARKETS & SUPER CENTERS - 0.44%        
        -   221,190         -       221,190     Wal-Mart Stores, Inc.                       

                                                        [Enlarge/Download Table]

                                                                       MARKET VALUE                     
                                              ----------------------------------------------------------
                                                                                               AIM      
                                                                  AIM           AIM       BASIC BALANCED
                                                  AIM            TOTAL         BASIC          FUND      
                                                BALANCED         RETURN       BALANCED      PRO FORMA   
                                                  FUND            FUND          FUND        COMBINING   
                                              ------------    -----------   -----------   --------------
                                                                                                        
FOOD RETAIL - 1.49%                                                                                     
Kroger Co. (The)                      (a)     $ 22,170,560     $        -   $ 2,111,816   $ 24,282,376  
Safeway Inc.                          (a)(b)    14,469,420              -     1,362,060     15,831,480  
                                                36,639,980              -     3,473,876     40,113,856  

FOREST PRODUCTS - 0.19%                                                                                 
Weyerhaeuser Co.                                         -      5,155,102             -      5,155,102  

GENERAL MERCHANDISE STORES - 1.46%                                                                      
Target Corp.                                    30,872,385      5,388,257     2,944,431     39,205,073  

HEALTH CARE DISTRIBUTORS - 2.90%                                                                        
Cardinal Health, Inc.                           48,322,650              -     4,553,145     52,875,795  
McKesson Corp.                                  22,808,500              -     2,170,740     24,979,240  
                                                71,131,150              -     6,723,885     77,855,035  

HEALTH CARE EQUIPMENT - 1.07%                                                                           
Baxter International Inc.                       18,962,460              -     1,744,270     20,706,730  
Boston Scientific Corp.               (a)                -      3,408,179             -      3,408,179  
Medtronic, Inc.                                          -      4,089,331             -      4,089,331  
Waters Corp.                          (a)                -              -       598,912        598,912  
                                                18,962,460      7,497,510     2,343,182     28,803,152  

HEALTH CARE FACILITIES - 0.92%                                                                          
HCA, Inc.                                       22,577,400              -     2,069,928     24,647,328  

HEALTH CARE SERVICES - 0.27%                                                                            
IMS Health Inc.                                  6,721,616              -       557,040      7,278,656  

HOME IMPROVEMENT RETAIL - 0.58%                                                                         
Home Depot, Inc. (The)                                   -      6,266,539             -      6,266,539  
Lowe's Cos., Inc.                                        -      9,288,691             -      9,288,691  
                                                         -     15,555,230             -     15,555,230  

HOUSEHOLD PRODUCTS - 0.17%                                                                              
Procter & Gamble Co. (The)                               -      4,597,087             -      4,597,087  

HYPERMARKETS & SUPER CENTERS - 0.44%                                                                    
Wal-Mart Stores, Inc.                                    -     11,683,256             -     11,683,256  

EX-99.77M MERGERS
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 PRO FORMA COMBINING SCHEDULE OF INVESTMENTS *
OF AIM BALANCED FUND AND AIM TOTAL RETURN FUND
INTO AIM BASIC BALANCED FUND
 DECEMBER 31, 2004
 (UNAUDITED)

                                                        [Enlarge/Download Table]

             PRINCIPAL AMOUNT & SHARES                                                                        
----------------------------------------------                                                                
                                     AIM                                                                      
              AIM       AIM     BASIC BALANCED                                                                
   AIM        TOTAL    BASIC        FUND                                                                      
 BALANCED    RETURN   BALANCED    PRO FORMA                                                                   
  FUND        FUND     FUND       COMBINING                                                                   
---------   -------   --------  --------------                                                                
                                                                                                              
                                                INDUSTRIAL CONGLOMERATES - 3.61%                              
  736,200   329,340    70,300     1,135,840     General Electric Co.                                          
1,421,300         -   132,600     1,553,900     Tyco International Ltd. (Bermuda)                       (b)   

                                                INDUSTRIAL GASES - 0.60%                                      
        -   111,660         -       111,660     Air Products & Chemicals, Inc.                                
        -   221,060         -       221,060     Praxair, Inc.                                                 

                                                INDUSTRIAL MACHINERY - 2.13%                                  
        -   160,156         -       160,156     Eaton Corp.                                                   
  300,000    64,290    29,100       393,390     Illinois Tool Works Inc.                                (b)   
        -   113,910         -       113,910     Ingersoll-Rand Co.-Class A (Bermuda)                          

                                                INSURANCE BROKERS - 0.46%                                     
  474,600         -    43,500       518,100     Aon Corp.                                               (b)   

                                                INTEGRATED OIL & GAS - 0.08%                                  
       20         -         2            22     Shell Frontier Oil & Gas Inc.-Series B, 2.91% Floating        
                                                 Rate Pfd.                                              (c)   

                                                INVESTMENT BANKING & BROKERAGE - 3.17%                        
        -   104,890         -       104,890     Goldman Sachs Group, Inc. (The)                               
  411,500   127,450    39,000       577,950     Merrill Lynch & Co., Inc.                               (b)   
  489,000   180,460    46,200       715,660     Morgan Stanley                                                

                                                MANAGED HEALTH CARE - 1.48%                                   
  316,900         -    29,100       346,000     WellPoint Inc.                                          (a)(b)

                                                MOVIES & ENTERTAINMENT - 1.45%                                
        -   124,070         -       124,070     Viacom Inc.-Class B                                           
1,137,000         -   105,500     1,242,500     Walt Disney Co. (The)                                         

                                                MULTI-LINE INSURANCE - 1.20%                                  
        -   163,640         -       163,640     American International Group, Inc.                            
  282,700         -    25,500       308,200     Hartford Financial Services Group, Inc. (The)           (b)   

                                                        [Enlarge/Download Table]

                                                                                         MARKET VALUE                     
                                                                ----------------------------------------------------------
                                                                                                                 AIM      
                                                                                    AIM           AIM       BASIC BALANCED
                                                                    AIM            TOTAL         BASIC          FUND      
                                                                  BALANCED         RETURN       BALANCED      PRO FORMA   
                                                                    FUND            FUND          FUND        COMBINING   
                                                                ------------    -----------   -----------   --------------
                                                                                                                          
INDUSTRIAL CONGLOMERATES - 3.61%                                                                                          
General Electric Co.                                            $ 26,871,300   $ 12,020,910   $ 2,565,950   $ 41,458,160  
Tyco International Ltd. (Bermuda)                       (b)       50,797,262              -     4,739,124     55,536,386  
                                                                  77,668,562     12,020,910     7,305,074     96,994,546  

INDUSTRIAL GASES - 0.60%                                                                                                  
Air Products & Chemicals, Inc.                                             -      6,472,930             -      6,472,930  
Praxair, Inc.                                                              -      9,759,799             -      9,759,799  
                                                                           -     16,232,729             -     16,232,729  

INDUSTRIAL MACHINERY - 2.13%                                                                                              
Eaton Corp.                                                                -     11,588,888             -     11,588,888  
Illinois Tool Works Inc.                                (b)       27,804,000      5,958,397     2,696,988     36,459,385  
Ingersoll-Rand Co.-Class A (Bermuda)                                       -      9,146,973             -      9,146,973  
                                                                  27,804,000     26,694,258     2,696,988     57,195,246  

INSURANCE BROKERS - 0.46%                                                                                                 
Aon Corp.                                               (b)       11,323,956              -     1,037,910     12,361,866  

INTEGRATED OIL & GAS - 0.08%                                                                                              
Shell Frontier Oil & Gas Inc.-Series B, 2.91% Floating                                                                    
 Rate Pfd.                                              (c)        2,000,000              -       200,000      2,200,000  

INVESTMENT BANKING & BROKERAGE - 3.17%                                                                                    
Goldman Sachs Group, Inc. (The)                                            -     10,912,756             -     10,912,756  
Merrill Lynch & Co., Inc.                               (b)       24,595,355      7,617,687     2,331,030     34,544,072  
Morgan Stanley                                                    27,149,280     10,019,139     2,565,024     39,733,443  
                                                                  51,744,635     28,549,582     4,896,054     85,190,271  

MANAGED HEALTH CARE - 1.48%                                                                                               
WellPoint Inc.                                          (a)(b)    36,443,500              -     3,346,500     39,790,000  

MOVIES & ENTERTAINMENT - 1.45%                                                                                            
Viacom Inc.-Class B                                                        -      4,514,907             -      4,514,907  
Walt Disney Co. (The)                                             31,608,600              -     2,932,900     34,541,500  
                                                                  31,608,600      4,514,907     2,932,900     39,056,407  

MULTI-LINE INSURANCE - 1.20%                                                                                              
American International Group, Inc.                                         -     10,746,239             -     10,746,239  
Hartford Financial Services Group, Inc. (The)           (b)       19,593,937              -     1,767,405     21,361,342  
                                                                  19,593,937     10,746,239     1,767,405     32,107,581  

EX-99.77M MERGERS
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 PRO FORMA COMBINING SCHEDULE OF INVESTMENTS *
OF AIM BALANCED FUND AND AIM TOTAL RETURN FUND
INTO AIM BASIC BALANCED FUND
 DECEMBER 31, 2004
 (UNAUDITED)

                                                        [Enlarge/Download Table]

             PRINCIPAL AMOUNT & SHARES                                                                              
----------------------------------------------                                                                      
                                     AIM                                                                            
              AIM       AIM     BASIC BALANCED                                                                      
   AIM        TOTAL    BASIC        FUND                                                                            
 BALANCED    RETURN   BALANCED    PRO FORMA                                                                         
  FUND        FUND     FUND       COMBINING                                                                         
---------   -------   --------  --------------                                                                      
                                                                                                                    
                                                OIL & GAS DRILLING - 1.45%                                          
        -    58,650         -        58,650     ENSCO International Inc.                                            
        -         -    43,100        43,100     Pride International, Inc.                                  (a)      
  678,500   109,400    63,700       851,600     Transocean Inc. (Cayman Islands)                           (a)      

                                                OIL & GAS EQUIPMENT & SERVICES - 2.37%                              
  920,000         -    85,000     1,005,000     Halliburton Co.                                            (b)      
  343,000         -    17,100       360,100     Schlumberger Ltd. (Netherlands)                                     

                                                OTHER DIVERSIFIED FINANCIAL SERVICES - 3.88%                        
       14         -         2            16     ABN AMRO XVIII Custodial Receipts-Series MM18, 2.79%                
                                                 Floating Rate Pfd. (Acquired 09/10/04- 09/13/04; Cost              
                                                 $1,599,975)                                               (d)(e)(f)
  741,933   230,090    70,200     1,042,223     Citigroup Inc.                                                      
1,002,200   126,320    96,928     1,225,448     JPMorgan Chase & Co.                                                
    4,050         -       650         4,700     Zurich RegCaPS Funding Trust III, 2.75% Floating Rate Pfd.          
                                                 (Acquired 06/03/04- 09/28/04; Cost $4,588,322)            (c)(d)(f)

                                                PACKAGED FOODS & MEATS - 0.84%                                      
  578,600         -    51,900       630,500     Kraft Foods Inc.-Class A                                   (b)      

                                                PHARMACEUTICALS - 5.40%                                             
        -   129,700         -       129,700     Forest Laboratories, Inc.                                  (a)      
        -   223,320         -       223,320     Johnson & Johnson                                                   
        -   102,640         -       102,640     Lilly (Eli) & Co.                                                   
1,019,600   462,430    95,500     1,577,530     Pfizer Inc.                                                         
  530,640         -    49,212       579,852     Sanofi-Aventis S.A. (France)                               (a)(g)   
  552,600   109,400    53,200       715,200     Wyeth                                                               

                                                PROPERTY & CASUALTY INSURANCE - 1.17%                               
  676,000         -    62,100       738,100     ACE Ltd. (Cayman Islands)                                           

                                                SEMICONDUCTOR EQUIPMENT - 0.18%                                     
        -   275,200         -       275,200     Applied Materials, Inc.                                    (a)      

                                                        [Enlarge/Download Table]

                                                                                               MARKET VALUE                     
                                                                      ----------------------------------------------------------
                                                                                                                       AIM      
                                                                                          AIM           AIM       BASIC BALANCED
                                                                          AIM            TOTAL         BASIC          FUND      
                                                                        BALANCED         RETURN       BALANCED      PRO FORMA   
                                                                          FUND            FUND          FUND        COMBINING   
                                                                      ------------    -----------   -----------   --------------
                                                                                                                                
OIL & GAS DRILLING - 1.45%                                                                                                      
ENSCO International Inc.                                               $         -    $ 1,861,551    $        -    $ 1,861,551  
Pride International, Inc.                                  (a)                   -              -       885,274        885,274  
Transocean Inc. (Cayman Islands)                           (a)          28,761,615      4,637,466     2,700,243     36,099,324  
                                                                        28,761,615      6,499,017     3,585,517     38,846,149  

OIL & GAS EQUIPMENT & SERVICES - 2.37%                                                                                          
Halliburton Co.                                            (b)          36,100,800              -     3,335,400     39,436,200  
Schlumberger Ltd. (Netherlands)                                         22,963,850              -     1,144,845     24,108,695  
                                                                        59,064,650              -     4,480,245     63,544,895  

OTHER DIVERSIFIED FINANCIAL SERVICES - 3.88%                                                                                    
ABN AMRO XVIII Custodial Receipts-Series MM18, 2.79%                                                                            
 Floating Rate Pfd. (Acquired 09/10/04- 09/13/04; Cost                                                                          
 $1,599,975)                                               (d)(e)(f)     1,400,000              -       200,000      1,600,000  
Citigroup Inc.                                                          35,746,332     11,085,736     3,382,236     50,214,304  
JPMorgan Chase & Co.                                                    39,095,822      4,927,743     3,781,161     47,804,726  
Zurich RegCaPS Funding Trust III, 2.75% Floating Rate Pfd.                                                                      
 (Acquired 06/03/04- 09/28/04; Cost $4,588,322)            (c)(d)(f)     3,997,350              -       641,550      4,638,900  
                                                                        80,239,504     16,013,479     8,004,947    104,257,930  

PACKAGED FOODS & MEATS - 0.84%                                                                                                  
Kraft Foods Inc.-Class A                                   (b)          20,603,946              -     1,848,159     22,452,105  

PHARMACEUTICALS - 5.40%                                                                                                         
Forest Laboratories, Inc.                                  (a)                   -      5,818,342             -      5,818,342  
Johnson & Johnson                                                                -     14,162,954             -     14,162,954  
Lilly (Eli) & Co.                                                                -      5,824,820             -      5,824,820  
Pfizer Inc.                                                             27,417,044     12,434,743     2,567,995     42,419,782  
Sanofi-Aventis S.A. (France)                               (a)(g)       42,339,591              -     3,926,609     46,266,200  
Wyeth                                                                   23,535,234      4,659,346     2,265,788     30,460,368  
                                                                        93,291,869     42,900,205     8,760,392    144,952,466  

PROPERTY & CASUALTY INSURANCE - 1.17%                                                                                           
ACE Ltd. (Cayman Islands)                                               28,899,000              -     2,654,775     31,553,775  

SEMICONDUCTOR EQUIPMENT - 0.18%                                                                                                 
Applied Materials, Inc.                                    (a)                   -      4,705,920             -      4,705,920  

EX-99.77M MERGERS
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 PRO FORMA COMBINING SCHEDULE OF INVESTMENTS *
OF AIM BALANCED FUND AND AIM TOTAL RETURN FUND
INTO AIM BASIC BALANCED FUND
 DECEMBER 31, 2004
 (UNAUDITED)

                                                        [Enlarge/Download Table]

                   PRINCIPAL AMOUNT & SHARES                                                                   
 ------------------------------------------------------------                                                  
                                                     AIM                                                       
                   AIM           AIM           BASIC BALANCED                                                  
   AIM            TOTAL         BASIC               FUND                                                       
 BALANCED         RETURN      BALANCED            PRO FORMA                                                    
   FUND            FUND         FUND              COMBINING                                                    
 --------         ------      --------         --------------                                                  
                                                                                                               

                                                               SEMICONDUCTORS - 1.14%                          
          -         218,810             -             218,810  Altera Corp.                                 (a)
          -         365,430             -             365,430  Intel Corp.                                     
          -         146,620             -             146,620  Linear Technology Corp.                         
          -          69,930             -              69,930  Maxim Integrated Products, Inc.                 
          -         356,410             -             356,410  Texas Instruments Inc.                          

                                                               SOFT DRINKS - 0.16%                             
          -          81,210             -              81,210  PepsiCo, Inc.                                   

                                                               SPECIALTY STORES - 0.26%                        
          -         109,400             -             109,400  Bed Bath & Beyond Inc.                       (a)
          -          84,590             -              84,590  Tiffany & Co.                                   

                                                               SYSTEMS SOFTWARE - 2.26%                        
  1,311,000               -       125,900           1,436,900  Computer Associates International, Inc.      (b)
          -         393,630             -             393,630  Microsoft Corp.                                 
          -         218,810             -             218,810  Symantec Corp.                               (a)

                                                               THRIFTS & MORTGAGE FINANCE - 2.48%              
    531,600         110,529        50,100             692,229  Fannie Mae                                   (b)
     52,000               -         4,850              56,850  Fannie Mae-Series J, 4.72% Pfd.              (h)
     55,000               -         4,850              59,850  Fannie Mae-Series K, 3.00% Pfd.              (h)
          -         116,240             -             116,240  PMI Group, Inc. (The)                           
          -         125,260             -             125,260  Radian Group Inc.                               

                                                               Total Stocks & Other Equity Interests (Cost     
                                                                 $1,541,507,000)                               

                                                               BONDS & NOTES - 15.48%                          
                                                               ADVERTISING - 0.02%                             
                                                               Interpublic Group of Cos., Inc. (The),          
$   393,000        $      -   $    48,000     $       441,000    Sr. Unsec. Notes, 7.88%, 10/15/05          (h)

                                                               AEROSPACE & DEFENSE - 0.01%                     
                                                               Lockheed Martin Corp.-Series A,                 
    300,000               -        35,000             335,000    Medium Term Notes, 8.66%, 11/30/06         (h)


                                                        [Enlarge/Download Table]

                                                                          MARKET VALUE                         
                                                    -----------------------------------------------------------
                                                                                                       AIM     
                                                                      AIM             AIM        BASIC BALANCED
                                                       AIM           TOTAL           BASIC            FUND     
                                                    BALANCED         RETURN         BALANCED        PRO FORMA  
                                                      FUND            FUND            FUND          COMBINING  
                                                    --------         ------         --------     --------------
                                                                                                               

SEMICONDUCTORS - 1.14%                                                                                         
Altera Corp.                                 (a)       $      -    $4,529,367       $     -   $      4,529,367 
Intel Corp.                                                   -     8,547,408             -          8,547,408 
Linear Technology Corp.                                       -     5,682,991             -          5,682,991 
Maxim Integrated Products, Inc.                               -     2,964,333             -          2,964,333 
Texas Instruments Inc.                                        -     8,774,814             -          8,774,814 

                                                              -    30,498,913             -         30,498,913 

SOFT DRINKS - 0.16%                                                                                            
PepsiCo, Inc.                                                 -     4,239,162             -          4,239,162 

SPECIALTY STORES - 0.26%                                                                                       
Bed Bath & Beyond Inc.                       (a)              -     4,357,402             -          4,357,402 
Tiffany & Co.                                                 -     2,704,342             -          2,704,342 

                                                              -     7,061,744             -          7,061,744 

SYSTEMS SOFTWARE - 2.26%                                                                                       
Computer Associates International, Inc.      (b)     40,719,660             -     3,910,454         44,630,114 
Microsoft Corp.                                               -    10,513,857             -         10,513,857 
Symantec Corp.                               (a)              -     5,636,546             -          5,636,546 

                                                     40,719,660    16,150,403     3,910,454         60,780,517 

THRIFTS & MORTGAGE FINANCE - 2.48%                                                                             
Fannie Mae                                   (b)     37,855,236     7,870,770     3,567,621         49,293,627 
Fannie Mae-Series J, 4.72% Pfd.              (h)      2,626,000             -       244,925          2,870,925 
Fannie Mae-Series K, 3.00% Pfd.              (h)      2,782,659             -       245,380          3,028,039 
PMI Group, Inc. (The)                                         -     4,853,020             -          4,853,020 
Radian Group Inc.                                             -     6,668,842             -          6,668,842 

                                                     43,263,895    19,392,632     4,057,926         66,714,453 

Total Stocks & Other Equity Interests (Cost                                                                    
  $1,541,507,000)                                 1,236,189,017   411,719,936   116,773,600      1,764,682,553 

BONDS & NOTES - 15.48%                                                                                         
ADVERTISING - 0.02%                                                                                            
Interpublic Group of Cos., Inc. (The),                                                                         
  Sr. Unsec. Notes, 7.88%, 10/15/05          (h)        405,454             -        49,521            454,975 

AEROSPACE & DEFENSE - 0.01%                                                                                    
Lockheed Martin Corp.-Series A,                                                                                
  Medium Term Notes, 8.66%, 11/30/06         (h)        328,188             -        38,289            366,477 


EX-99.77M MERGERS
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 PRO FORMA COMBINING SCHEDULE OF INVESTMENTS *
OF AIM BALANCED FUND AND AIM TOTAL RETURN FUND
INTO AIM BASIC BALANCED FUND
 DECEMBER 31, 2004
 (UNAUDITED)

                                                        [Enlarge/Download Table]

                   PRINCIPAL AMOUNT & SHARES                                                                                   
--------------------------------------------------------------                                                                 
                                                      AIM                                                                      
                     AIM           AIM          BASIC BALANCED                                                                 
     AIM            TOTAL         BASIC              FUND                                                                      
   BALANCED         RETURN      BALANCED           PRO FORMA                                                                   
     FUND            FUND         FUND             COMBINING                                                                   
  ----------      ---------   ------------      --------------                                                                 
                                                                                                                               
                                                                AUTO PARTS & EQUIPMENT - 0.06%                                 
                                                                Lear Corp.-Series B, Sr. Unsec. Gtd Notes,                     
   $1,560,000       $       -   $   145,000   $      1,705,000    7.96%, 05/15/05                                      (h)     

                                                                AUTOMOBILE MANUFACTURERS - 0.11%                               
                                                                DaimlerChrysler N.A. Holding Corp., Unsec. Gtd.                
    1,990,000               -       110,000          2,100,000    Global  Notes, 7.40%, 01/20/05                       (h)     
                                                                DaimlerChrysler North America Holding Corp.,                   
            -         250,000             -            250,000    Unsec. Gtd. Global Notes, 8.50%, 01/18/31            (h)     
                                                                General Motors Corp., Unsec. Global Notes, 6.25%,              
      450,000               -       100,000            550,000    05/01/05                                             (h)     

                                                                BROADCASTING & CABLE TV - 0.90%                                
                                                                Clear Channel Communications, Inc., Sr. Unsec.                 
            -         700,000             -            700,000    Notes, 5.00%, 03/15/12                               (h)     
                                                                Comcast Cable Communications, Inc., Sr. Unsec.                 
            -       1,570,000             -          1,570,000    Unsub. Notes, 6.75%, 01/30/11                        (h)     
            -         320,000             -            320,000  Comcast Corp., Unsec. Gtd. Bonds, 7.05%, 03/15/33      (h)     
                                                                Continental Cablevision, Inc., Sr. Unsec. Deb.,                
    5,200,000               -       500,000          5,700,000    8.88%, 09/15/05                                      (h)     
    1,710,000       1,690,000       100,000          3,500,000    9.50%, 08/01/13                                      (h)     
                                                                Cox Communications, Inc.,                                      
                                                                 Notes, 4.62%, 01/15/10 (Acquired 12/10/04; Cost               
            -         795,000             -            795,000    $794,180)                                          (d)(h)    
      600,000               -        65,000            665,000  Unsec Notes, 6.88%, 06/15/05                           (h)     
                                                                Cox Radio, Inc., Sr. Unsec. Notes,  6.63%,                     
      750,000               -        75,000            825,000    02/15/06                                             (h)     
                                                                Lenfest Communications, Inc., Sr. Unsec. Notes,                
    1,000,000               -       120,000          1,120,000    8.38%, 11/01/05                                      (h)     
                                                                TCI Communications, Inc.,                                      
    1,175,000               -       175,000          1,350,000    Sr. Notes, 7.25%, 08/01/05                           (h)     
      575,000               -       125,000            700,000    Sr. Unsec. Notes, 8.00%, 08/01/05                    (h)     
                                                                Time Warner Cos., Inc.,                                        
      250,000               -        65,000            315,000    Sr. Unsec. Gtd. Deb., 7.57%, 02/01/24                (h)     
    2,150,000               -       350,000          2,500,000    Unsec. Deb., 9.15%, 02/01/23                         (h)     
    2,232,000               -       150,000          2,382,000    Unsec. Notes, 7.75%, 06/15/05                        (h)     

                                                                CONSUMER FINANCE - 3.22%                                       
                                                                Associates Corp. of North America, Sr. Global                  
    1,525,000               -       175,000          1,700,000    Deb., 6.95%, 11/01/18                                (h)     
                                                                Capital One Bank,                                              
    3,250,000               -       325,000          3,575,000  Sr. Global Notes, 8.25%, 06/15/05                      (h)     
            -         990,000             -            990,000  Sub. Notes, 6.50%, 06/13/13                            (h)     
                                                                Capital One Capital I, Sub. Floating Rate Bonds,               
                                                                  3.71%, 02/01/27 (Acquired 09/16/04; Cost                     
    4,300,000               -       425,000          4,725,000    $4,816,665)                                      (c)(d)(f)(h)
                                                                Capital One Financial Corp.,                                   
    1,820,000               -       275,000          2,095,000    Sr. Unsec. Notes, 7.25%, 05/01/06                    (h)     
    1,000,000               -       150,000          1,150,000    Unsec. Notes, 7.13%, 08/01/08                        (h)     

                                                        [Enlarge/Download Table]

                                                                                        MARKET VALUE                       
                                                                                        ------------                       
                                                                                                                  AIM      
                                                                                   AIM             AIM      BASIC BALANCED 
                                                                     AIM          TOTAL           BASIC          FUND      
                                                                  BALANCED        RETURN         BALANCED      PRO FORMA   
                                                                    FUND           FUND            FUND        COMBINING   
                                                                 ----------     ----------    ------------   --------------
                                                                                                                           
AUTO PARTS & EQUIPMENT - 0.06%                                                                                             
Lear Corp.-Series B, Sr. Unsec. Gtd Notes,                                                                                 
  7.96%, 05/15/05                                      (h)        $ 1,591,933  $         -    $  147,968     $  1,739,901  

AUTOMOBILE MANUFACTURERS - 0.11%                                                                                           
DaimlerChrysler N.A. Holding Corp., Unsec. Gtd.                                                                            
  Global  Notes, 7.40%, 01/20/05                       (h)          1,994,438            -       110,245        2,104,683  
DaimlerChrysler North America Holding Corp.,                                                                               
  Unsec. Gtd. Global Notes, 8.50%, 01/18/31            (h)                  -      312,235             -          312,235  
General Motors Corp., Unsec. Global Notes, 6.25%,                                                                          
  05/01/05                                             (h)            454,252            -       100,945          555,197  

                                                                    2,448,690      312,235       211,190        2,972,115  

BROADCASTING & CABLE TV - 0.90%                                                                                            
Clear Channel Communications, Inc., Sr. Unsec.                                                                             
  Notes, 5.00%, 03/15/12                               (h)                 -       693,861             -          693,861  
Comcast Cable Communications, Inc., Sr. Unsec.                                                                             
  Unsub. Notes, 6.75%, 01/30/11                        (h)                 -     1,762,231             -        1,762,231  
Comcast Corp., Unsec. Gtd. Bonds, 7.05%, 03/15/33      (h)                 -       367,651             -          367,651  
Continental Cablevision, Inc., Sr. Unsec. Deb.,                                                                            
  8.88%, 09/15/05                                      (h)          5,397,080            -       518,950        5,916,030  
  9.50%, 08/01/13                                      (h)          1,823,629    1,802,301       106,645        3,732,575  
Cox Communications, Inc.,                                                                                                  
 Notes, 4.62%, 01/15/10 (Acquired 12/10/04; Cost                                                                           
  $794,180)                                          (d)(h)                 -      793,450             -          793,450  
Unsec Notes, 6.88%, 06/15/05                           (h)            610,200            -        66,105          676,305  
Cox Radio, Inc., Sr. Unsec. Notes,  6.63%,                                                                                 
  02/15/06                                             (h)            773,212            -        77,321          850,533  
Lenfest Communications, Inc., Sr. Unsec. Notes,                                                                            
  8.38%, 11/01/05                                      (h)          1,045,750            -       125,490        1,171,240  
TCI Communications, Inc.,                                                                                                  
  Sr. Notes, 7.25%, 08/01/05                           (h)          1,203,165            -       179,195        1,382,360  
  Sr. Unsec. Notes, 8.00%, 08/01/05                    (h)            591,209            -       128,524          719,733  
Time Warner Cos., Inc.,                                                                                                    
  Sr. Unsec. Gtd. Deb., 7.57%, 02/01/24                (h)            294,082            -        76,461          370,543  
  Unsec. Deb., 9.15%, 02/01/23                         (h)          2,874,485            -       467,939        3,342,424  
  Unsec. Notes, 7.75%, 06/15/05                        (h)          2,277,778            -       153,076        2,430,854  

                                                                   16,890,590    5,419,494     1,899,706       24,209,790  

CONSUMER FINANCE - 3.22%                                                                                                   
Associates Corp. of North America, Sr. Global                                                                              
  Deb., 6.95%, 11/01/18                                (h)          1,768,878            -       202,986        1,971,864  
Capital One Bank,                                                                                                          
Sr. Global Notes, 8.25%, 06/15/05                      (h)          3,322,085            -       332,208        3,654,293  
Sub. Notes, 6.50%, 06/13/13                            (h)                  -    1,084,119             -        1,084,119  
Capital One Capital I, Sub. Floating Rate Bonds,                                                                           
  3.71%, 02/01/27 (Acquired 09/16/04; Cost                          4,371,681                                              
  $4,816,665)                                      (c)(d)(f)(h)                          -       432,085        4,803,766  
Capital One Financial Corp.,                                                                                               
  Sr. Unsec. Notes, 7.25%, 05/01/06                    (h)          1,906,887            -       288,128        2,195,015  
  Unsec. Notes, 7.13%, 08/01/08                        (h)          1,095,310            -       164,296        1,259,606  

EX-99.77M MERGERS
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 PRO FORMA COMBINING SCHEDULE OF INVESTMENTS *
OF AIM BALANCED FUND AND AIM TOTAL RETURN FUND
INTO AIM BASIC BALANCED FUND
 DECEMBER 31, 2004
 (UNAUDITED)

                                                        [Enlarge/Download Table]

                     PRINCIPAL AMOUNT & SHARES                                                                                
---------------------------------------------------------------                                                               
                                                       AIM                                                                    
                     AIM           AIM           BASIC BALANCED                                                               
     AIM            TOTAL         BASIC               FUND                                                                    
   BALANCED         RETURN      BALANCED            PRO FORMA                                                                 
     FUND            FUND         FUND              COMBINING                                                                 
   --------         ------      --------         --------------                                                               
                                                                                                                              
                                                                  Ford Motor Credit Co.,                                      
                                                                    Global Notes,                                             

 $  6,750,000      $        -   $   600,000    $      7,350,000         7.60%, 08/01/05                                 (h)   
            -       1,170,000             -           1,170,000         7.88%, 06/15/10                                 (h)   
    2,425,000               -       300,000           2,725,000      Notes, 6.75%, 05/15/05                             (h)   
                                                                    Unsec. Floating Rate Global Notes, 2.31%,                 
    3,261,000               -       350,000           3,611,000     04/28/05                                          (c)(h)  
                                                                    Unsec. Global Notes,                                      
    1,890,000               -       200,000           2,090,000       6.50%, 01/25/07                                   (h)   
    6,690,000               -       450,000           7,140,000       6.88%, 02/01/06                                   (h)   
            -         865,000             -             865,000       7.38%, 10/28/09                                   (h)   
    2,690,000               -       275,000           2,965,000       7.50%, 03/15/05                                   (h)   
    2,205,000               -       370,000           2,575,000     Unsec. Notes, 7.75%, 03/15/05                       (h)   
                                                                  General Motors Acceptance Corp.,                            
                                                                    Floating Rate Medium Term Notes,                          
    6,250,000               -       550,000           6,800,000       4.23%, 05/19/05                                 (c)(h)  
    7,100,000(i)            -       625,000           7,725,000       4.44%, 03/04/05                                 (c)(h)  
            -         975,000             -             975,000     Floating Rate Notes, 3.02%, 07/16/07              (c)(h)  
                                                                    Global Notes,                                             
    2,000,000               -       190,000           2,190,000       4.50%, 07/15/06                                   (h)   
      400,000               -       100,000(i)          500,000       7.50%, 07/15/05                                   (h)   
                                                                    Medium Term Notes,                                        
    1,650,000               -       150,000           1,800,000       4.15%, 02/07/05                                   (h)   
    4,600,000               -       405,000           5,005,000       5.25%, 05/16/05                                   (h)   
                                                                     Unsec. Unsub. Global Notes,                              
            -       5,000,000             -           5,000,000        6.13%, 02/01/07                                  (h)   
            -       1,690,000             -           1,690,000        6.13%, 08/28/07                                  (h)   
    3,500,000(i)            -       300,000(i)         3,800,000       6.75%, 01/15/06                                  (h)   
                                                                  Household Finance Corp., Sr. Unsec. Global Notes,           
            -       1,100,000             -           1,100,000     6.75%, 05/15/11                                     (h)   
            -       3,000,000             -           3,000,000   MBNA Corp., Notes, 6.13%, 03/01/13                    (h)   

                                                                  DEPARTMENT STORES - 0.06%                                   
                                                                  Federated Department Stores, Inc., Bonds, 6.79%,            
            -       1,360,000             -           1,360,000     07/15/27                                            (h)   

                                                                  DIVERSIFIED BANKS - 1.87%                                   
                                                                  AB Spintab (Sweden), Bonds, 7.50%  (Acquired                
    3,300,000               -       220,000           3,520,000     02/12/04; Cost $3,928,390)                       (d)(h)(j)
                                                                  American Savings Bank, Notes, 6.63%, 02/15/06               
      500,000               -        25,000             525,000     (Acquired 03/05/03; Cost $582,251)               (d)(f)(h)
                                                                  Banco Nacional de Comercio Exterior S.N.C.                  
                                                                    (Mexico), Notes, 3.88%, 01/21/09 (Acquired                
    1,000,000               -       100,000           1,100,000     02/25/04; Cost $1,082,125)                       (d)(f)(h)
                                                                  Bank of America Corp., Jr. Unsec. Sub. Global               
            -       1,500,000             -           1,500,000     Notes, 7.40%, 01/15/11                              (h)   

                                                        [Enlarge/Download Table]

                                                                                     MARKET VALUE                         
                                                               -----------------------------------------------------------
                                                                                                                  AIM     
                                                                                 AIM             AIM        BASIC BALANCED
                                                                  AIM           TOTAL           BASIC            FUND     
                                                               BALANCED         RETURN         BALANCED        PRO FORMA  
                                                                 FUND            FUND            FUND          COMBINING  
                                                               --------         ------         --------     --------------
                                                                                                                          
Ford Motor Credit Co.,                                                                                                    
  Global Notes,                                                                                                           

      7.60%, 08/01/05                                 (h)     $  6,903,832  $          -   $   613,674   $      7,517,506 
      7.88%, 06/15/10                                 (h)                -     1,287,632             -          1,287,632 
   Notes, 6.75%, 05/15/05                             (h)        2,455,409             -       303,762          2,759,171 
  Unsec. Floating Rate Global Notes, 2.31%,                                                                               
  04/28/05                                          (c)(h)       3,259,859             -       349,877          3,609,736 
  Unsec. Global Notes,                                                                                                    
    6.50%, 01/25/07                                   (h)        1,966,261             -       208,070          2,174,331 
    6.88%, 02/01/06                                   (h)        6,898,260             -       464,008          7,362,268 
    7.38%, 10/28/09                                   (h)                -       933,378             -            933,378 
    7.50%, 03/15/05                                   (h)        2,714,129             -       277,467          2,991,596 
  Unsec. Notes, 7.75%, 03/15/05                       (h)        2,225,352             -       373,415          2,598,767 
General Motors Acceptance Corp.,                                                                                          
  Floating Rate Medium Term Notes,                                                                                        
    4.23%, 05/19/05                                 (c)(h)       6,272,125             -       551,947          6,824,072 
    4.44%, 03/04/05                                 (c)(h)       7,115,265             -       626,344          7,741,609 
  Floating Rate Notes, 3.02%, 07/16/07              (c)(h)               -       960,122             -            960,122 
  Global Notes,                                                                                                           
    4.50%, 07/15/06                                   (h)        2,004,320             -       190,410          2,194,730 
    7.50%, 07/15/05                                   (h)          408,488             -       102,122            510,610 
  Medium Term Notes,                                                                                                      
    4.15%, 02/07/05                                   (h)        1,651,864             -       150,169          1,802,033 
    5.25%, 05/16/05                                   (h)        4,632,200             -       407,835          5,040,035 
   Unsec. Unsub. Global Notes,                                                                                            
     6.13%, 02/01/07                                  (h)                -     5,143,800             -          5,143,800 
     6.13%, 08/28/07                                  (h)                -     1,742,475             -          1,742,475 
     6.75%, 01/15/06                                  (h)        3,592,330             -       307,914          3,900,244 
Household Finance Corp., Sr. Unsec. Global Notes,                                                                         
  6.75%, 05/15/11                                     (h)                -     1,242,681             -          1,242,681 
MBNA Corp., Notes, 6.13%, 03/01/13                    (h)                -     3,217,740             -          3,217,740 

                                                                64,564,535    15,611,947     6,346,717         86,523,199 

DEPARTMENT STORES - 0.06%                                                                                                 
Federated Department Stores, Inc., Bonds, 6.79%,                                                                          
  07/15/27                                            (h)                -     1,496,544             -          1,496,544 

DIVERSIFIED BANKS - 1.87%                                                                                                 
AB Spintab (Sweden), Bonds, 7.50%  (Acquired                                                                              
  02/12/04; Cost $3,928,390)                       (d)(h)(j)     3,505,263             -       233,684          3,738,947 
American Savings Bank, Notes, 6.63%, 02/15/06                                                                             
  (Acquired 03/05/03; Cost $582,251)               (d)(f)(h)       514,425             -        25,721            540,146 
Banco Nacional de Comercio Exterior S.N.C.                                                                                
  (Mexico), Notes, 3.88%, 01/21/09 (Acquired                                                                              
  02/25/04; Cost $1,082,125)                       (d)(f)(h)       963,810             -        96,381          1,060,191 
Bank of America Corp., Jr. Unsec. Sub. Global                                                                             
  Notes, 7.40%, 01/15/11                              (h)                -     1,749,870             -          1,749,870 

EX-99.77M MERGERS
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 PRO FORMA COMBINING SCHEDULE OF INVESTMENTS *
OF AIM BALANCED FUND AND AIM TOTAL RETURN FUND
INTO AIM BASIC BALANCED FUND
 DECEMBER 31, 2004
 (UNAUDITED)

                                                        [Enlarge/Download Table]

                   PRINCIPAL AMOUNT & SHARES                                                                                
 ------------------------------------------------------------                                                               
                                                     AIM                                                                    
                   AIM           AIM           BASIC BALANCED                                                               
   AIM            TOTAL         BASIC               FUND                                                                    
 BALANCED         RETURN      BALANCED            PRO FORMA                                                                 
   FUND            FUND         FUND              COMBINING                                                                 
 --------         ------      --------         -------------                                                                
                                                                                                                            
                                                               BankBoston Capital Trust IV, Gtd. Floating Rate              
$ 3,215,000       $       -   $   250,000    $      3,465,000    Notes, 3.04%, 06/08/28                             (c)(h)  
                                                               Barclays Bank PLC (United Kingdom), Bonds, 8.55%             
    530,000               -       100,000             630,000    (Acquired 11/05/03; Cost $775,303)                (d)(h)(j)
                                                               Centura Capital Trust I, Gtd. Notes, 8.85%,                  
  1,400,000               -        60,000           1,460,000    06/01/27 (Acquired 05/22/03; Cost $1,847,528)     (d)(f)(h)
                                                               Chohung Bank (South Korea), Unsec. Sub. Second               
                                                                 Tier Notes, 11.50%, 04/01/10 (Acquired                     
  3,200,000               -       250,000           3,450,000    07/01/04; Cost $3,673,181)                        (d)(f)(h)
                                                               Corporacion Andina de Fomento (Venezuela),                   
    900,000               -       150,000           1,050,000    Unsec. Global Notes, 6.88%, 03/15/12                 (h)   
  1,835,000               -       200,000           2,035,000    Unsec. Yankee Notes, 8.88%, 06/01/05                 (h)   
                                                               Daiwa P.B. Ltd. (Cayman Islands), Gtd. Sub.                  
  1,200,000               -       100,000           1,300,000    Floating Rate Medium Term Euro Notes,  3.09%       (j)(k)  
                                                               Danske Bank A/S (Denmark), First Tier Bonds,                 
  1,245,000               -       100,000           1,345,000    5.91%  (Acquired 06/07/04; Cost $1,345,000)       (d)(h)(j)
                                                               HSBC Capital Funding L.P. (United Kingdom), Gtd.             
    400,000               -        50,000             450,000    Bonds, 4.61%  (Acquired 11/05/03; Cost $419,634)  (d)(h)(j)
                                                               Lloyds Bank PLC (United Kingdom)-Series 1, Unsec.            
  3,870,000               -       140,000           4,010,000    Sub. Euro Dollar Notes, 2.94%                     (h)(j)(k)
                                                               National Bank of Canada (Canada), Floating Rate              
  1,500,000               -        80,000           1,580,000    Euro Deb., 2.13%, 08/29/87                         (h)(k)  
                                                               National Westminster Bank PLC (United                        
                                                                 Kingdom)-Series B, Unsec. Sub. Floating Rate               
  1,000,000               -       150,000           1,150,000    Euro Notes, 2.13%                                 (h)(j)(k)
                                                               NBD Bank N.A. Michigan, Unsec. Sub. Deb., 8.25%,             
  1,715,000               -       100,000           1,815,000    11/01/24                                             (h)   
    400,000               -        50,000             450,000  RBS Capital Trust I, Bonds, 4.71%                    (h)(j)  
                                                               Wachovia Bank N.A., Sub. Global Notes, 4.80%,                
          -         500,000             -             500,000    11/01/14                                             (h)   
                                                               Wells Fargo & Co.,                                           
  6,750,000               -       275,000           7,025,000     Sr. Unsec. Global Notes, 3.75%, 10/15/07            (h)   
          -       5,030,000             -           5,030,000     Unsec. Global Notes, 5.25%, 12/01/07                (h)   
                                                               Wells Fargo Bank, N.A., Unsec. Sub. Global Notes,            
  2,100,000               -       250,000           2,350,000    7.80%, 06/15/10                                      (h)   
                                                               Woori Bank (South Korea), Unsec. Sub. Second Tier            
                                                                 Notes, 11.75%, 03/01/10 (Acquired 07/01/04;                
  3,200,000               -       250,000           3,450,000    Cost $3,653,205)                                  (d)(f)(h)

                                                               DIVERSIFIED CAPITAL MARKETS - 0.05%                          
                                                               UBS Preferred Funding Trust I, Gtd. Global Bonds,            
  1,000,000               -       185,000           1,185,000    8.62%                                              (h)(j)  

                                                               ELECTRIC UTILITIES - 0.64%                                   
                                                               AmerenEnergy Generating Co.-Series C, Sr. Unsec.             
    350,000               -        20,000             370,000    Global Notes, 7.75%, 11/01/05                        (h)   
                                                               Consolidated Edison Co. of New York-Series 96A,              
    900,000               -        55,000             955,000    Unsec. Deb.,  7.75%, 06/01/26                      (h)(l)  
                                                               Hydro-Quebec-Series B (Canada), Gtd. Medium Term             
  2,150,000               -             -           2,150,000    Notes, 8.62%, 12/15/11                               (h)   

                                                        [Enlarge/Download Table]

                                                                                      MARKET VALUE                         
                                                                 ----------------------------------------------------------
                                                                                                                   AIM     
                                                                                  AIM             AIM        BASIC BALANCED
                                                                   AIM           TOTAL           BASIC            FUND     
                                                                BALANCED         RETURN         BALANCED        PRO FORMA  
                                                                  FUND            FUND            FUND          COMBINING  
                                                                --------         ------         --------     --------------
                                                                                                                           
BankBoston Capital Trust IV, Gtd. Floating Rate                                                                            
  Notes, 3.04%, 06/08/28                             (c)(h)    $  3,104,436     $       -   $   241,402      $   3,345,838 
Barclays Bank PLC (United Kingdom), Bonds, 8.55%                                                                           
  (Acquired 11/05/03; Cost $775,303)                (d)(h)(j)       642,296             -       121,188            763,484 
Centura Capital Trust I, Gtd. Notes, 8.85%,                                                                                
  06/01/27 (Acquired 05/22/03; Cost $1,847,528)     (d)(f)(h)     1,652,028             -        70,801          1,722,829 
Chohung Bank (South Korea), Unsec. Sub. Second                                                                             
  Tier Notes, 11.50%, 04/01/10 (Acquired                                                                                   
  07/01/04; Cost $3,673,181)                        (d)(f)(h)     3,260,672             -       254,740          3,515,412 
Corporacion Andina de Fomento (Venezuela),                                                                                 
  Unsec. Global Notes, 6.88%, 03/15/12                 (h)        1,004,382             -       167,397          1,171,779 
  Unsec. Yankee Notes, 8.88%, 06/01/05                 (h)        1,875,150             -       204,376          2,079,526 
Daiwa P.B. Ltd. (Cayman Islands), Gtd. Sub.                                                                                
  Floating Rate Medium Term Euro Notes,  3.09%       (j)(k)       1,188,000             -        99,000          1,287,000 
Danske Bank A/S (Denmark), First Tier Bonds,                                                                               
  5.91%  (Acquired 06/07/04; Cost $1,345,000)       (d)(h)(j)     1,320,186             -       106,039          1,426,225 
HSBC Capital Funding L.P. (United Kingdom), Gtd.                                                                           
  Bonds, 4.61%  (Acquired 11/05/03; Cost $419,634)  (d)(h)(j)       379,508             -        47,438            426,946 
Lloyds Bank PLC (United Kingdom)-Series 1, Unsec.                                                                          
  Sub. Euro Dollar Notes, 2.94%                     (h)(j)(k)     3,451,537             -       124,862          3,576,399 
National Bank of Canada (Canada), Floating Rate                                                                            
  Euro Deb., 2.13%, 08/29/87                         (h)(k)       1,234,780             -        65,855          1,300,635 
National Westminster Bank PLC (United                                                                                      
  Kingdom)-Series B, Unsec. Sub. Floating Rate                                                                             
  Euro Notes, 2.13%                                 (h)(j)(k)       882,831             -       132,425          1,015,256 
NBD Bank N.A. Michigan, Unsec. Sub. Deb., 8.25%,                                                                           
  11/01/24                                             (h)        2,238,298             -       130,513          2,368,811 
RBS Capital Trust I, Bonds, 4.71%                    (h)(j)         382,948             -        47,869            430,817 
Wachovia Bank N.A., Sub. Global Notes, 4.80%,                                                                              
  11/01/14                                             (h)                -       498,095             -            498,095 
Wells Fargo & Co.,                                                                                                         
   Sr. Unsec. Global Notes, 3.75%, 10/15/07            (h)        6,781,455             -       276,282          7,057,737 
   Unsec. Global Notes, 5.25%, 12/01/07                (h)                -     5,262,336             -          5,262,336 
Wells Fargo Bank, N.A., Unsec. Sub. Global Notes,                                                                          
  7.80%, 06/15/10                                      (h)        2,148,300             -       255,750          2,404,050 
Woori Bank (South Korea), Unsec. Sub. Second Tier                                                                          
  Notes, 11.75%, 03/01/10 (Acquired 07/01/04;                                                                              
  Cost $3,653,205)                                  (d)(f)(h)     3,283,840             -       256,550          3,540,390 

                                                                 39,814,145     7,510,301     2,958,273         50,282,719 

DIVERSIFIED CAPITAL MARKETS - 0.05%                                                                                        
UBS Preferred Funding Trust I, Gtd. Global Bonds,                                                                          
  8.62%                                              (h)(j)       1,198,690             -       221,758          1,420,448 

ELECTRIC UTILITIES - 0.64%                                                                                                 
AmerenEnergy Generating Co.-Series C, Sr. Unsec.                                                                           
  Global Notes, 7.75%, 11/01/05                        (h)          363,590             -        20,777            384,367 
Consolidated Edison Co. of New York-Series 96A,                                                                            
  Unsec. Deb.,  7.75%, 06/01/26                      (h)(l)         979,380             -        59,851          1,039,231 
Hydro-Quebec-Series B (Canada), Gtd. Medium Term                                                                           
  Notes, 8.62%, 12/15/11                               (h)        2,669,633             -             -          2,669,633 

EX-99.77M MERGERS
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 PRO FORMA COMBINING SCHEDULE OF INVESTMENTS *
OF AIM BALANCED FUND AND AIM TOTAL RETURN FUND
INTO AIM BASIC BALANCED FUND
 DECEMBER 31, 2004
 (UNAUDITED)

                                                        [Enlarge/Download Table]

              PRINCIPAL AMOUNT & SHARES                                                                            
              -------------------------                                                                            
                                                AIM                                                                
              AIM           AIM           BASIC BALANCED                                                           
  AIM        TOTAL         BASIC               FUND                                                                
BALANCED     RETURN      BALANCED            PRO FORMA                                                             
  FUND        FUND         FUND              COMBINING                                                             
  ----        ----         ----              ---------                                                             
                                                                                                                   
                                                          Kansas City Power & Light Co., Sr. Unsec. Notes,         
$        -  $        -   $   350,000     $       350,000    7.13%, 12/15/05                                    (h) 
                                                          MidAmerican Energy Holdings Co., Sr. Unsec.              
 4,100,000           -       300,000           4,400,000    Notes, 7.23%, 09/15/05                             (h) 
                                                          Ohio Power Co.-Series G, Sr. Unsec. Global Notes,        
         -     875,000             -             875,000    6.60%, 02/15/33                                    (h) 
                                                          Pacific Gas & Electric Co.,                              
         -   1,720,000             -           1,720,000     First Mortgage Bonds, 6.05%, 03/01/34             (h) 
                                                             First Mortgage Floating Rate Notes, 2.72%,            
   500,000           -        87,000             587,000     04/03/06                                        (c)(h)
                                                          PPL Energy Supply LLC,                                   
                                                             Series A, Sr. Unsec. Global Notes, 6.40%,             
         -     550,000             -             550,000     11/01/11                                          (h) 
         -     380,000             -             380,000     Sr. Unsec. Notes, 5.40%, 08/15/14                 (h) 
         -   1,640,000             -           1,640,000  TXU Energy Co., Sr. Global Notes, 7.00%, 03/15/13    (h) 
                                                          Yorkshire Power Finance (Cayman Islands)-Series          
                                                            B, Sr. Unsec. Gtd. Unsub. Global Notes, 6.50%,         
 1,875,000           -       175,000           2,050,000    02/25/08                                           (h) 

                                                          FOOD RETAIL - 0.03%                                      
   775,000           -       100,000             875,000  Safeway Inc., Sr. Unsec. Notes, 2.50%, 11/01/05      (h) 

                                                          FOREST PRODUCTS - 0.06%                                  
                                                          Weyerhaeuser Co., Unsec. Global Deb., 7.38%,             
         -   1,360,000             -           1,360,000    03/15/32                                           (h) 

                                                          GAS UTILITIES - 0.26%                                    
                                                          CenterPoint Energy Resources Corp., Unsec. Deb.,         
 1,990,000           -       165,000           2,155,000    6.50%, 02/01/08                                    (h) 
                                                          Columbia Energy Group-Series C, Notes, 6.80%,            
 3,540,000           -       225,000           3,765,000    11/28/05                                           (h) 
                                                          NiSource Capital Markets, Inc., Medium Term              
   745,000           -       150,000             895,000    Notes, 7.68%, 04/15/05                             (h) 

                                                          HOMEBUILDING - 0.31%                                     
         -   1,390,000             -           1,390,000  Centex Corp., Sr. Unsec. Notes, 5.70%, 05/15/14      (h) 
                                                          D.R. Horton, Inc., Sr. Unsec. Notes, 7.88%,              
   800,000           -       200,000           1,000,000    08/15/11                                           (h) 
                                                          Lennar Corp.-Series B, Sr. Unsec. Gtd. Global            
 3,855,000           -       275,000           4,130,000    Notes, 9.95%, 05/01/10                             (h) 
                                                          Pulte Homes, Inc., Unsec. Gtd. Notes, 7.30%,             
   520,000           -       150,000             670,000    10/24/05                                           (h) 
                                                          Ryland Group, Inc. (The), Sr. Unsec. Unsub.              
   500,000           -        75,000             575,000    Notes, 9.75%, 09/01/10                             (h) 

                                                          HOUSEHOLD PRODUCTS - 0.10%                               
                                                          Procter & Gamble Co. (The), Global Notes, 4.75%,         
         -   2,520,000             -           2,520,000    06/15/07                                           (h) 

                                                        [Enlarge/Download Table]

                                                                               MARKET VALUE                        
                                                                               ------------                        
                                                                                                           AIM     
                                                                           AIM             AIM       BASIC BALANCED
                                                              AIM         TOTAL           BASIC           FUND     
                                                           BALANCED       RETURN         BALANCED       PRO FORMA  
                                                             FUND          FUND            FUND         COMBINING  
                                                             ----          ----            ----         ---------  
                                                                                                                   
Kansas City Power & Light Co., Sr. Unsec. Notes,                                                                   
  7.13%, 12/15/05                                    (h)    $        -  $        -   $   362,418   $       362,418 
MidAmerican Energy Holdings Co., Sr. Unsec.                                                                        
  Notes, 7.23%, 09/15/05                             (h)     4,207,994           -       307,902         4,515,896 
Ohio Power Co.-Series G, Sr. Unsec. Global Notes,                                                                  
  6.60%, 02/15/33                                    (h)             -     977,611             -           977,611 
Pacific Gas & Electric Co.,                                                                                        
   First Mortgage Bonds, 6.05%, 03/01/34             (h)             -   1,792,085             -         1,792,085 
   First Mortgage Floating Rate Notes, 2.72%,                                                                      
  04/03/06                                         (c)(h)      500,447           -        87,078           587,525 
PPL Energy Supply LLC,                                                                                             
   Series A, Sr. Unsec. Global Notes, 6.40%,                                                                       
   11/01/11                                          (h)             -     600,633             -           600,633 
   Sr. Unsec. Notes, 5.40%, 08/15/14                 (h)             -     387,178             -           387,178 
TXU Energy Co., Sr. Global Notes, 7.00%, 03/15/13    (h)             -   1,834,930             -         1,834,930 
Yorkshire Power Finance (Cayman Islands)-Series                                                                    
  B, Sr. Unsec. Gtd. Unsub. Global Notes, 6.50%,                                                                   
  02/25/08                                           (h)     1,980,037           -       184,804         2,164,841 

                                                            10,701,081   5,592,437     1,022,830        17,316,348 

FOOD RETAIL - 0.03%                                                                                                
Safeway Inc., Sr. Unsec. Notes, 2.50%, 11/01/05      (h)       769,908           -        99,343           869,251 

FOREST PRODUCTS - 0.06%                                                                                            
Weyerhaeuser Co., Unsec. Global Deb., 7.38%,                                                                       
  03/15/32                                           (h)             -   1,612,470             -         1,612,470 

GAS UTILITIES - 0.26%                                                                                              
CenterPoint Energy Resources Corp., Unsec. Deb.,                                                                   
  6.50%, 02/01/08                                    (h)     2,132,603           -       176,824         2,309,427 
Columbia Energy Group-Series C, Notes, 6.80%,                                                                      
  11/28/05                                           (h)     3,645,917           -       231,732         3,877,649 
NiSource Capital Markets, Inc., Medium Term                                                                        
  Notes, 7.68%, 04/15/05                             (h)       754,536           -       151,920           906,456 

                                                             6,533,056           -       560,476         7,093,532 

HOMEBUILDING - 0.31%                                                                                               
Centex Corp., Sr. Unsec. Notes, 5.70%, 05/15/14      (h)             -   1,441,166             -         1,441,166 
D.R. Horton, Inc., Sr. Unsec. Notes, 7.88%,                                                                        
  08/15/11                                           (h)       921,000           -       230,250         1,151,250 
Lennar Corp.-Series B, Sr. Unsec. Gtd. Global                                                                      
  Notes, 9.95%, 05/01/10                             (h)     4,133,794           -       294,888         4,428,682 
Pulte Homes, Inc., Unsec. Gtd. Notes, 7.30%,                                                                       
  10/24/05                                           (h)       535,038           -       154,338           689,376 
Ryland Group, Inc. (The), Sr. Unsec. Unsub.                                                                        
  Notes, 9.75%, 09/01/10                             (h)       544,975           -        81,746           626,721 

                                                             6,134,807   1,441,166       761,222         8,337,195 

HOUSEHOLD PRODUCTS - 0.10%                                                                                         
Procter & Gamble Co. (The), Global Notes, 4.75%,                                                                   
  06/15/07                                           (h)             -   2,598,674             -         2,598,674 

EX-99.77M MERGERS
601st “Page” of 620
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 PRO FORMA COMBINING SCHEDULE OF INVESTMENTS *
OF AIM BALANCED FUND AND AIM TOTAL RETURN FUND
INTO AIM BASIC BALANCED FUND
 DECEMBER 31, 2004
 (UNAUDITED)

                                                        [Enlarge/Download Table]

              PRINCIPAL AMOUNT & SHARES                                                                                
              -------------------------                                                                                
                                                AIM                                                                    
              AIM             AIM          BASIC BALANCED                                                              
   AIM       TOTAL           BASIC              FUND                                                                   
 BALANCED    RETURN        BALANCED           PRO FORMA                                                                
   FUND       FUND           FUND             COMBINING                                                                
   ----       ----           ----             ---------                                                                
                                                                                                                       

                                                           INDUSTRIAL CONGLOMERATES - 0.16%                            
                                                           Tyco International Group S.A. (Luxembourg),                 
                                                             Unsec. Unsub. Gtd. Yankee Notes, 6.38%,                   
$ 3,050,000  $       -   $   375,000    $     3,425,000      06/15/05                                            (h)   
                                                           URC Holdings Corp., Sr. Notes, 7.88%, 06/30/06              
    750,000          -        50,000            800,000      (Acquired 10/08/03; Cost $905,817)               (d)(f)(h)

                                                           INTEGRATED OIL & GAS - 0.28%                                
  1,800,000          -       150,000          1,950,000    Amerada Hess Corp., Unsec. Notes, 7.13%, 03/15/33     (h)   
  1,000,000          -       100,000          1,100,000    ConocoPhillips, Unsec. Deb., 7.13%, 03/15/28          (h)   
                                                           Husky Oil Ltd. (Canada), Yankee Bonds, 8.90%,               
  2,009,000          -       200,000          2,209,000      08/15/28                                            (h)   
                                                           Repsol International Finance B.V. (Netherlands),            
  1,590,000          -        45,000          1,635,000      Unsec. Gtd. Global Notes, 7.45%, 07/15/05           (h)   

                                                           INTEGRATED TELECOMMUNICATION SERVICES - 1.47%               
                                                           BellSouth Corp.,                                            
          -    930,000             -            930,000       Bonds, 6.55%, 06/15/34                             (h)   
          -    920,000             -            920,000       Global Bonds, 5.20%, 09/15/14                      (h)   
                                                           Deutsche Telekom International Finance B.V.                 
                                                             (Netherlands),                                            
                                                            Unsec. Gtd. Unsub. Global Bonds,                           
  4,550,000          -       350,000          4,900,000        8.25%, 06/15/05                                   (h)   
          -    785,000             -            785,000         8.75%, 06/15/30                                  (h)   
                                                           France Telecom S.A. (France), Sr. Unsec. Global             
    930,000          -        60,000            990,000      Notes, 8.50%, 03/01/31                              (h)   
                                                           Koninklijke (Royal) KPN N.V. (Netherlands), Sr.             
          -    915,000             -            915,000      Unsec. Unsub. Global Notes, 8.00%, 10/01/10         (h)   
                                                           SBC Communications Inc.,                                    
                                                              Global Notes,                                            
          -  1,150,000             -          1,150,000          5.10%, 09/15/14                                 (h)   
          -    310,000             -            310,000          6.15%, 09/15/34                                 (h)   
                                                               Notes, 4.21%, 06/05/05 (Acquired 12/10/04;              
  1,325,000          -       100,000          1,425,000      Cost $1,433,579)                                 (d)(f)(h)
                                                           Southwestern Bell Telephone Co.-Series B,  Medium           
    350,000          -       100,000            450,000      Term Notes, 6.25%, 07/07/05                         (h)   
                                                           Sprint Capital Corp.,                                       
  2,210,000          -       275,000          2,485,000      Sr. Unsec. Gtd. Global Notes, 7.13%, 01/30/06       (h)   
                                                             Unsec. Gtd. Global Notes,                                 
  3,730,000          -       480,000          4,210,000          7.90%, 03/15/05                                 (h)   
          -    280,000             -            280,000          8.75%, 03/15/32                                 (h)   
  1,000,000          -        90,000          1,090,000    Sprint Corp., Deb., 9.25%, 04/15/22                   (h)   
                                                           TELUS Corp. (Canada), Yankee Notes,                         
    635,000          -       250,000            885,000      7.50%, 06/01/07                                     (h)   
    500,000          -        60,000            560,000      8.00%, 06/01/11                                     (h)   
                                                           Verizon California Inc.-Series F, Unsec. Deb.,              
  1,000,000          -       100,000          1,100,000      6.75%, 05/15/27                                     (h)   
                                                           Verizon Communications Inc., Unsec. Deb.,                   
  2,570,000          -       400,000          2,970,000      6.36%, 04/15/06                                     (h)   
  1,350,000          -        85,000          1,435,000      8.75%, 11/01/21                                     (h)   
          -          -       125,000            125,000      Unsec. Gtd. Deb., 6.94%, 04/15/28                   (h)   

                                                        [Enlarge/Download Table]

                                                                                   MARKET VALUE                         
                                                                                   ------------                         
                                                                                                                AIM     
                                                                               AIM             AIM        BASIC BALANCED
                                                                  AIM         TOTAL           BASIC            FUND     
                                                               BALANCED       RETURN         BALANCED        PRO FORMA  
                                                                 FUND          FUND            FUND          COMBINING  
                                                                 ----          ----            ----          ---------  
                                                                                                                        
INDUSTRIAL CONGLOMERATES - 0.16%                                                                                        
Tyco International Group S.A. (Luxembourg),                                                                             
  Unsec. Unsub. Gtd. Yankee Notes, 6.38%,                                                                               
  06/15/05                                            (h)     $  3,095,842  $        -   $   380,636   $      3,476,478 
URC Holdings Corp., Sr. Notes, 7.88%, 06/30/06                                                                          
  (Acquired 10/08/03; Cost $905,817)               (d)(f)(h)       798,548           -        53,237            851,785 

                                                                 3,894,390           -       433,873          4,328,263 

INTEGRATED OIL & GAS - 0.28%                                                                                            
Amerada Hess Corp., Unsec. Notes, 7.13%, 03/15/33     (h)        1,981,458           -       165,122          2,146,580 
ConocoPhillips, Unsec. Deb., 7.13%, 03/15/28          (h)        1,074,580           -       107,458          1,182,038 
Husky Oil Ltd. (Canada), Yankee Bonds, 8.90%,                                                                           
  08/15/28                                            (h)        2,290,461           -       228,020          2,518,481 
Repsol International Finance B.V. (Netherlands),                                                                        
  Unsec. Gtd. Global Notes, 7.45%, 07/15/05           (h)        1,631,054           -        46,162          1,677,216 

                                                                 6,977,553           -       546,762          7,524,315 

INTEGRATED TELECOMMUNICATION SERVICES - 1.47%                                                                           
BellSouth Corp.,                                                                                                        
   Bonds, 6.55%, 06/15/34                             (h)                -   1,020,573             -          1,020,573 
   Global Bonds, 5.20%, 09/15/14                      (h)                -     938,308             -            938,308 
Deutsche Telekom International Finance B.V.                                                                             
  (Netherlands),                                                                                                        
 Unsec. Gtd. Unsub. Global Bonds,                                                                                       
    8.25%, 06/15/05                                   (h)        4,656,743           -       358,211          5,014,954 
     8.75%, 06/15/30                                  (h)                -   1,035,148             -          1,035,148 
France Telecom S.A. (France), Sr. Unsec. Global                                                                         
  Notes, 8.50%, 03/01/31                              (h)        1,262,001           -        81,419          1,343,420 
Koninklijke (Royal) KPN N.V. (Netherlands), Sr.                                                                         
  Unsec. Unsub. Global Notes, 8.00%, 10/01/10         (h)                -   1,079,206             -          1,079,206 
SBC Communications Inc.,                                                                                                
   Global Notes,                                                                                                        
      5.10%, 09/15/14                                 (h)                -   1,163,317             -          1,163,317 
      6.15%, 09/15/34                                 (h)                -     320,757             -            320,757 
    Notes, 4.21%, 06/05/05 (Acquired 12/10/04;                                                                          
  Cost $1,433,579)                                 (d)(f)(h)     1,332,757           -       100,585          1,433,342 
Southwestern Bell Telephone Co.-Series B,  Medium                                                                       
  Term Notes, 6.25%, 07/07/05                         (h)          355,681           -       101,623            457,304 
Sprint Capital Corp.,                                                                                                   
  Sr. Unsec. Gtd. Global Notes, 7.13%, 01/30/06       (h)        2,298,776           -       286,047          2,584,823 
  Unsec. Gtd. Global Notes,                                                                                             
      7.90%, 03/15/05                                 (h)        3,769,277           -       485,054          4,254,331 
      8.75%, 03/15/32                                 (h)                      375,290             -            375,290 
Sprint Corp., Deb., 9.25%, 04/15/22                   (h)        1,332,550           -       119,930          1,452,480 
TELUS Corp. (Canada), Yankee Notes,                                                                                     
  7.50%, 06/01/07                                     (h)          690,074           -       271,683            961,757 
  8.00%, 06/01/11                                     (h)          592,440           -        71,093            663,533 
Verizon California Inc.-Series F, Unsec. Deb.,                                                                          
  6.75%, 05/15/27                                     (h)        1,041,070           -       104,107          1,145,177 
Verizon Communications Inc., Unsec. Deb.,                                                                               
  6.36%, 04/15/06                                     (h)        2,667,557           -       415,184          3,082,741 
  8.75%, 11/01/21                                     (h)        1,705,280           -       107,369          1,812,649 
  Unsec. Gtd. Deb., 6.94%, 04/15/28                   (h)                -           -       139,570            139,570 

EX-99.77M MERGERS
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 PRO FORMA COMBINING SCHEDULE OF INVESTMENTS *
OF AIM BALANCED FUND AND AIM TOTAL RETURN FUND
INTO AIM BASIC BALANCED FUND
 DECEMBER 31, 2004
 (UNAUDITED)

                                                        [Enlarge/Download Table]

               PRINCIPAL AMOUNT & SHARES                                                                                
               -------------------------                                                                                
                                                  AIM                                                                   
               AIM             AIM          BASIC BALANCED                                                              
   AIM        TOTAL           BASIC              FUND                                                                   
 BALANCED     RETURN        BALANCED           PRO FORMA                                                                
   FUND        FUND           FUND             COMBINING                                                                
   ----        ----           ----             ---------                                                                
                                                                                                                        
                                                            Verizon Florida Inc.-Series F, Sr. Unsec. Deb.,             
$ 1,635,000  $        -   $   200,000    $     1,835,000      6.13%, 01/15/13                                     (h)   
                                                            Verizon Global Funding Corp., Sr. Unsec. Unsub.             
                                                              Global Notes,                                             
          -   5,035,000             -          5,035,000      7.25%, 12/01/10                                     (h)   
          -     380,000             -            380,000      7.75%, 12/01/30                                     (h)   
                                                            Verizon Virginia Inc.-Series A, Unsec. Global               
    950,000           -       100,000          1,050,000      Deb., 4.63%, 03/15/13                               (h)   

                                                            INVESTMENT BANKING & BROKERAGE - 0.39%                      
                                                            Goldman Sachs Group, Inc. (The), Global Notes,              
          -     930,000             -            930,000      4.75%, 07/15/13                                     (h)   
                                                            Lehman Brothers Inc.,                                       
  2,585,000           -        75,000          2,660,000      Sr. Sub. Deb., 11.63%, 05/15/05                     (h)   
  1,000,000           -        50,000          1,050,000      Sr. Unsec. Sub. Notes, 7.63%, 06/01/06              (h)   
                                                            Lehman Brothers Holdings Inc., Unsec. Unsub.                
          -     715,000             -            715,000      Global Notes, 3.50%, 08/07/08                       (h)   
                                                            Merrill Lynch & Co., Inc.-Series B, Medium Term             
                                                              Notes,                                                    
  1,415,000                    40,000          1,455,000        4.54%, 03/08/05                                   (h)   
          -     345,000             -            345,000        5.30%, 09/30/15                                   (h)   
                                                            Morgan Stanley, Sr. Unsec. Unsub. Global Notes,             
          -   3,000,000             -          3,000,000      5.30%, 03/01/13                                     (h)   

                                                            LIFE & HEALTH INSURANCE - 0.21%                             
                                                            Prudential Holdings, LLC-Series B, Bonds, 7.25%,            
                                                              12/18/23 (Acquired 01/22/04-01/29/04; Cost                
  4,000,000           -       275,000          4,275,000      $5,041,881)                                      (d)(h)(l)
                                                            ReliaStar Financial Corp., Unsec. Notes, 8.00%,             
    600,000           -        25,000            625,000      10/30/06                                            (h)   

                                                            MOVIES & ENTERTAINMENT - 0.18%                              
                                                            News America Inc., Sr. Unsec. Gtd. Global Notes,,           
          -   1,220,000             -          1,220,000      6.55%, 03/15/33                                     (h)   
                                                            Time Warner Inc.,                                           
  2,220,000           -       350,000          2,570,000       Sr. Unsec. Gtd. Global Notes, 5.63%, 05/01/05      (h)   
                                                               Sr. Unsec. Gtd. Unsub. Global Notes, 7.63%,              
          -     680,000             -            680,000       04/15/31                                            (h)  

                                                            MULTI-LINE INSURANCE - 0.07%                                
                                                            American General Finance Corp-Series H, Medium              
          -   1,135,000             -          1,135,000      Term Global Notes, 4.00%, 03/15/11                  (h)   
          -     865,000             -            865,000    Loews Corp., Unsec. Unsub. Notes, 5.25%, 03/15/16     (h)   

                                                            MULTI-UTILITIES & UNREGULATED POWER - 0.07%                 
                                                            Dominion Resources, Inc.-Series B, Sr. Unsec.               
  1,710,000           -       125,000          1,835,000      Unsub. Global Notes, 7.63%, 07/15/05                (h)   


                                                        [Enlarge/Download Table]

                                                                                   MARKET VALUE                         
                                                                                   ------------                         
                                                                                                                AIM     
                                                                               AIM             AIM        BASIC BALANCED
                                                                  AIM         TOTAL           BASIC            FUND     
                                                               BALANCED       RETURN         BALANCED        PRO FORMA  
                                                                 FUND          FUND            FUND          COMBINING  
                                                                 ----          ----            ----          ---------  
                                                                                                                        
Verizon Florida Inc.-Series F, Sr. Unsec. Deb.,                                                                         
  6.13%, 01/15/13                                     (h)     $  1,742,305  $        -   $   213,126   $      1,955,431 
Verizon Global Funding Corp., Sr. Unsec. Unsub.                                                                         
  Global Notes,                                                                                                         
  7.25%, 12/01/10                                     (h)                -   5,775,850             -          5,775,850 
  7.75%, 12/01/30                                     (h)                -     472,389             -            472,389 
Verizon Virginia Inc.-Series A, Unsec. Global                                                                           
  Deb., 4.63%, 03/15/13                               (h)          929,547           -        97,847          1,027,394 

                                                                24,376,058  12,180,838     2,952,848         39,509,744 

INVESTMENT BANKING & BROKERAGE - 0.39%                                                                                  
Goldman Sachs Group, Inc. (The), Global Notes,                                                                          
  4.75%, 07/15/13                                     (h)                -     921,770             -            921,770 
Lehman Brothers Inc.,                                                                                                   
  Sr. Sub. Deb., 11.63%, 05/15/05                     (h)        2,659,370           -        77,158          2,736,528 
  Sr. Unsec. Sub. Notes, 7.63%, 06/01/06              (h)        1,060,010           -        53,001          1,113,011 
Lehman Brothers Holdings Inc., Unsec. Unsub.                                                                            
  Global Notes, 3.50%, 08/07/08                       (h)                -     708,551             -            708,551 
Merrill Lynch & Co., Inc.-Series B, Medium Term                                                                         
  Notes,                                                                             -                                  
    4.54%, 03/08/05                                   (h)        1,420,773           -        40,163          1,460,936 
    5.30%, 09/30/15                                   (h)                -     351,231             -            351,231 
Morgan Stanley, Sr. Unsec. Unsub. Global Notes,                                                                         
  5.30%, 03/01/13                                     (h)                -   3,108,720             -          3,108,720 

                                                                 5,140,153   5,090,272       170,322         10,400,747 

LIFE & HEALTH INSURANCE - 0.21%                                                                                         
Prudential Holdings, LLC-Series B, Bonds, 7.25%,                                                                        
  12/18/23 (Acquired 01/22/04-01/29/04; Cost                                                                            
  $5,041,881)                                      (d)(h)(l)     4,771,320           -       328,028          5,099,348 
ReliaStar Financial Corp., Unsec. Notes, 8.00%,                                                                         
  10/30/06                                            (h)          647,736           -        26,989            674,725 

                                                                 5,419,056           -       355,017          5,774,073 

MOVIES & ENTERTAINMENT - 0.18%                                                                                          
News America Inc., Sr. Unsec. Gtd. Global Notes,,                                                                       
  6.55%, 03/15/33                                     (h)                -   1,289,760             -          1,289,760 
Time Warner Inc.,                                                                                                       
   Sr. Unsec. Gtd. Global Notes, 5.63%, 05/01/05      (h)        2,239,736           -       353,112          2,592,848 
   Sr. Unsec. Gtd. Unsub. Global Notes, 7.63%,                                                                          
  04/15/31                                            (h)                -     821,610             -            821,610 

                                                                 2,239,736   2,111,370       353,112          4,704,218 

MULTI-LINE INSURANCE - 0.07%                                                                                            
American General Finance Corp-Series H, Medium                                                                          
  Term Global Notes, 4.00%, 03/15/11                  (h)                -   1,103,674                        1,103,674 
Loews Corp., Unsec. Unsub. Notes, 5.25%, 03/15/16     (h)                -     848,643                          848,643 

                                                                         -   1,952,317             -          1,952,317 

MULTI-UTILITIES & UNREGULATED POWER - 0.07%                                                                             
Dominion Resources, Inc.-Series B, Sr. Unsec.                                                                           
  Unsub. Global Notes, 7.63%, 07/15/05                (h)        1,752,904           -       128,136          1,881,040 


EX-99.77M MERGERS
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 PRO FORMA COMBINING SCHEDULE OF INVESTMENTS *
OF AIM BALANCED FUND AND AIM TOTAL RETURN FUND
INTO AIM BASIC BALANCED FUND
 DECEMBER 31, 2004
 (UNAUDITED)

                                                        [Enlarge/Download Table]

                    PRINCIPAL AMOUNT & SHARES                                                                               
--------------------------------------------------------------                                                              
                                                      AIM                                                                   
                    AIM           AIM           BASIC BALANCED                                                              
    AIM            TOTAL         BASIC               FUND                                                                   
  BALANCED         RETURN      BALANCED            PRO FORMA                                                                
    FUND            FUND         FUND              COMBINING                                                                
 ---------         ------      --------         --------------                                                              
                                                                                                                            
                                                                MUNICIPALITIES - 0.44%                                      
                                                                Chicago (City of), Illinois O'Hare International            
  $                                                               Airport; Refunding Taxable General Airport                
   2,400,000       $       -   $   350,000    $      2,750,000    Third Lien Series 2004 E RB, 3.88%, 01/01/08      (h)(l)  
                                                                Industry (City of), California Urban Development            
                                                                  Agency (Project 3); Taxable Allocation Series             
   1,910,000               -       150,000           2,060,000    2003 Bonds, 6.10%, 05/01/24                       (h)(l)  
                                                                Phoenix (City of), Arizona Civic Improvement                
                                                                  Corp.; Taxable Rental Car Facility Series 2004            
                                                                  RB,                                                       
   1,000,000               -        80,000           1,080,000    3.69%, 07/01/07                                   (h)(l)  
   1,185,000               -       100,000           1,285,000    4.21%, 07/01/08                                   (h)(l)  
                                                                Sacramento (County of), California; Taxable                 
                                                                  Pension Funding Series 2004 C-1 RB, 0.27%,                
   4,425,000               -       375,000           4,800,000    07/10/30                                         (h)(l)(m)

                                                                OIL & GAS EXPLORATION & PRODUCTION - 0.27%                  
                                                                Pemex Project Funding Master Trust, Unsec. Gtd.             
                                                                  Unsub. Global Notes,                                      
   3,535,000         655,000       300,000           4,490,000    7.38%, 12/15/14                                     (h)   
           -               -       225,000             225,000    8.63%, 02/01/22                                     (h)   
                                                                XTO Energy, Inc.,                                           
                                                                   Notes, 5.00%, 01/31/15 (Acquired 09/20/04;       (h)(d)  
           -         835,000             -             835,000    Cost $834,315)                                            
           -       1,175,000             -           1,175,000     Unsec. Notes, 4.90%, 02/01/14                      (h)   

                                                                OIL & GAS REFINING, MARKETING & TRANSPORTATION -            
                                                                  0.05%                                                     
                                                                Valero Energy Corp.,                                        

           -         460,000             -             460,000    Sr. Unsec. Notes, 4.75%, 04/01/14                         

           -         800,000             -             800,000    Unsec. Notes, 7.50%, 04/15/32                       (h)   

                                                                OTHER DIVERSIFIED FINANCIAL SERVICES - 1.17%                
                                                                Citigroup Inc., Sr. Unsec. Global Notes, 4.13%,             
           -       5,030,000             -           5,030,000    06/30/05                                            (h)   
                                                                General Electric Capital Corp.-Series A, Medium             
                                                                  Term Global Notes,                                        
     305,000               -        20,000             325,000       2.85%, 01/30/06                                  (h)   
           -         875,000             -             875,000       3.75%, 12/15/09                                  (h)   
                                                                Heller Financial, Inc., Sr. Unsec. Global Notes,            
   2,425,000               -       100,000           2,525,000    8.00%, 06/15/05                                     (h)   
                                                                ING Capital Funding Trust III, Gtd. Global Bonds,           
     900,000               -       125,000           1,025,000    8.44%                                             (h)(j)  
                                                                JPMorgan Chase & Co., Sub. Global Notes, 6.75%,             
           -       1,740,000                         1,740,000    02/01//11                                           (h)   
                                                                Mizuho JGB Investment LLC-Series A, Bonds, 9.87%            
   1,200,000               -       125,000           1,325,000    (Acquired 06/16/04; Cost $1,498,906)             (d)(h)(j)
                                                                Pemex Finance Ltd. (Cayman Islands),                        
   1,833,333               -       125,000           1,958,333    Sr. Unsec. Global Notes, 8.02%, 05/15/07            (h)   
                                                                  Series 1999-2, Class A1, Global Bonds, 9.69%,             
   2,755,000               -       171,000           2,926,000    08/15/09                                            (h)   

                                                        [Enlarge/Download Table]

                                                                                PRINCIPAL AMOUNT & SHARES                 
                                                              ----------------------------------------------------------- 
                                                                                                                 AIM      
                                                                                  AIM            AIM       BASIC BALANCED 
                                                                   AIM           TOTAL          BASIC           FUND      
                                                                 BALANCED        RETURN       BALANCED        PRO FORMA   
                                                                   FUND           FUND          FUND          COMBINING   
                                                                ---------        ------       --------     -------------- 
                                                                                                                          
MUNICIPALITIES - 0.44%                                                                                                    
Chicago (City of), Illinois O'Hare International                                                                          
  Airport; Refunding Taxable General Airport                                                                              
  Third Lien Series 2004 E RB, 3.88%, 01/01/08      (h)(l)     $  2,404,992     $       -   $   350,728   $      2,755,720
Industry (City of), California Urban Development                                                                          
  Agency (Project 3); Taxable Allocation Series                                                                           
  2003 Bonds, 6.10%, 05/01/24                       (h)(l)        1,967,300             -      154,500          2,121,800 
Phoenix (City of), Arizona Civic Improvement                                                                              
  Corp.; Taxable Rental Car Facility Series 2004                                                                          
  RB,                                                                                                                     
  3.69%, 07/01/07                                   (h)(l)        1,001,650             -        80,132          1,081,782
  4.21%, 07/01/08                                   (h)(l)        1,193,888             -       100,750          1,294,638
Sacramento (County of), California; Taxable                                                                               
  Pension Funding Series 2004 C-1 RB, 0.27%,                                                                              
  07/10/30                                         (h)(l)(m)      4,190,475             -       355,125          4,545,600

                                                                 10,758,305             -     1,041,235         11,799,540

OIL & GAS EXPLORATION & PRODUCTION - 0.27%                                                                                
Pemex Project Funding Master Trust, Unsec. Gtd.                                                                           
  Unsub. Global Notes,                                                                                                    
  7.38%, 12/15/14                                     (h)         3,922,083       726,723       332,850          4,981,656
  8.63%, 02/01/22                                     (h)                 -             -       261,608            261,608
XTO Energy, Inc.,                                                                                                         
   Notes, 5.00%, 01/31/15 (Acquired 09/20/04;       (h)(d)                                                                
  Cost $834,315)                                                          -       831,259             -            831,259
   Unsec. Notes, 4.90%, 02/01/14                      (h)                 -     1,174,413             -          1,174,413

                                                                  3,922,083     2,732,395       594,458          7,248,936

OIL & GAS REFINING, MARKETING & TRANSPORTATION -                                                                          
  0.05%                                                                                                                   
Valero Energy Corp.,                                                                                                      

  Sr. Unsec. Notes, 4.75%, 04/01/14                                       -       450,993             -            450,993

  Unsec. Notes, 7.50%, 04/15/32                       (h)                 -       964,480             -            964,480
                                                                          -     1,415,473             -          1,415,473

OTHER DIVERSIFIED FINANCIAL SERVICES - 1.17%                                                                              
Citigroup Inc., Sr. Unsec. Global Notes, 4.13%,                                                                           
  06/30/05                                            (h)                 -     5,064,506             -          5,064,506
General Electric Capital Corp.-Series A, Medium                                                                           
  Term Global Notes,                                                                                                      
     2.85%, 01/30/06                                  (h)           304,256             -        19,951            324,207
     3.75%, 12/15/09                                  (h)                 -       862,803             -            862,803
Heller Financial, Inc., Sr. Unsec. Global Notes,                                                                          
  8.00%, 06/15/05                                     (h)         2,481,260             -       102,320          2,583,580
ING Capital Funding Trust III, Gtd. Global Bonds,                                                                         
  8.44%                                             (h)(j)        1,073,340             -       149,075          1,222,415
JPMorgan Chase & Co., Sub. Global Notes, 6.75%,                                                                           
  02/01//11                                           (h)                 -     1,957,865             -          1,957,865
Mizuho JGB Investment LLC-Series A, Bonds, 9.87%                                                                          
  (Acquired 06/16/04; Cost $1,498,906)             (d)(h)(j)      1,390,692             -       144,864          1,535,556
Pemex Finance Ltd. (Cayman Islands),                                                                                      
  Sr. Unsec. Global Notes, 8.02%, 05/15/07            (h)         1,940,547             -       132,310          2,072,857
  Series 1999-2, Class A1, Global Bonds, 9.69%,                                                                           
  08/15/09                                            (h)         3,088,355             -       191,691          3,280,046

EX-99.77M MERGERS
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 PRO FORMA COMBINING SCHEDULE OF INVESTMENTS *
OF AIM BALANCED FUND AND AIM TOTAL RETURN FUND
INTO AIM BASIC BALANCED FUND
 DECEMBER 31, 2004
 (UNAUDITED)

                                                        [Enlarge/Download Table]

              PRINCIPAL AMOUNT & SHARES                                                                                   
              -------------------------                                                                                   
                                                AIM                                                                       
              AIM           AIM           BASIC BALANCED                                                                  
   AIM       TOTAL         BASIC               FUND                                                                       
 BALANCED    RETURN      BALANCED            PRO FORMA                                                                    
   FUND       FUND         FUND              COMBINING                                                                    
   ----       ----         ----              ---------                                                                    
                                                                                                                          
                                                             Pemex Project Funding Master Trust, Unsec. Gtd.              
$ 2,475,000  $       -     $       -     $        2,475,000    Unsub. Global Notes, 8.63%, 02/01/22                 (h)   
                                                             PLC Trust 2003-1, Sec. Notes, 2.71%, 03/31/06                
  1,205,877          -             -              1,205,877    (Acquired 03/23/04; Cost $1,259,552)              (d)(f)(h)
                                                             Premium Asset Trust-Series 2004-04, Sr. Notes,               
                                                               4.13%, 03/12/09 (Acquired 03/04/04; Cost                   
  3,575,000          -       250,000              3,825,000    $3,822,438)                                       (d)(f)(h)
                                                             Regional Diversified Funding (Cayman Islands), Sr.           
                                                               Notes, 9.25%, 03/15/30 (Acquired 09/22/04; Cost            
  2,723,333          -       238,889              2,962,222    $3,504,605))                                      (d)(f)(h)
                                                             UFJ Finance Aruba AEC (Aruba), Gtd. Sub. Second              
    945,000          -        75,000              1,020,000    Tier Euro Bonds, 8.75%                              (h)(j) 

                                                             PACKAGED FOODS & Meats - 0.03%                               

    750,000          -       125,000                875,000  Nabisco, Inc., Notes, 6.38%, 02/01/05                  (h)   

                                                             PROPERTY & Casualty Insurance - 0.33%                        
                                                             FGIC Corp., Sr. Unsec. Unsub. Notes, 6.00%,                  
  1,800,000          -       175,000              1,975,000     01/15/34 (Acquired 12/07/04; Cost $2,006,027)    (d)(f)(h)
                                                             First American Capital Trust I, Gtd. Notes, 8.50%,           
  4,295,000          -       325,000              4,620,000     04/15/12                                            (h)   
                                                             Oil Insurance Ltd. (Bermuda), Unsec. Sub. Deb.,              
                                                                5.15%, 08/15/33 (Acquired 03/23/04;                       
    865,000          -        75,000                940,000     Cost $986,907)                                   (d)(f)(h)
                                                             Travelers Property Casualty Corp., Sr. Unsec.                
    700,000          -             -                700,000     Notes, 6.75%, 11/15/06                              (h)   

                                                             RAILROADS - 0.03%                                            
                                                             Union Pacific Corp., Sr. Unsec. Notes, 4.88%,                
          -    750,000             -                750,000     01/15/15                                            (h)   

                                                             REAL ESTATE - 0.26%                                          
                                                             CarrAmerica Realty Corp., Sr. Unsec. Gtd. Notes,             
    420,000          -        50,000                470,000     6.63%, 03/01/05                                     (h)   
                                                             EOP Operating L.P., Sr. Unsec. Notes, 6.63%,                 
    430,000          -       200,000                630,000     02/15/05                                            (h)   
                                                             Health Care Property Investors, Inc., Sr. Unsec.             
    380,000          -       150,000                530,000     Notes, 6.88%, 06/08/05                              (h)   
                                                             HRPT Properties Trust, Sr. Unsec. Notes, 6.70%,              
  1,435,000          -       125,000              1,560,000     02/23/05                                            (h)   
                                                             Simon Property Group, L.P., Unsec. Unsub. Global             
          -  2,335,000             -              2,335,000     Notes, 6.35%, 08/28/12                              (h)   
                                                             Spieker Properties, Inc.,                                    
    600,000          -        50,000                650,000  Medium Term Notes, 8.00%, 07/19/05                     (h)   
    400,000          -       100,000                500,000  Unsec. Unsub. Notes, 6.88%, 02/01/05                   (h)   

                                                             REAL ESTATE MANAGEMENT & Development - 0.03%                 
                                                             Southern Investments UK PLC (United Kingdom), Sr.            
    735,000          -        75,000                810,000     Unsec. Unsub. Yankee Notes, 6.80%, 12/01/06         (h)   

                                                        [Enlarge/Download Table]

                                                                                         MARKET VALUE                       
                                                                                         ------------                       
                                                                                                                    AIM     
                                                                                     AIM             AIM      BASIC BALANCED
                                                                       AIM          TOTAL           BASIC          FUND     
                                                                    BALANCED        RETURN         BALANCED      PRO FORMA  
                                                                      FUND           FUND            FUND        COMBINING  
                                                                      ----           ----            ----        ---------  
                                                                                                                            
 Pemex Project Funding Master Trust, Unsec. Gtd.                                                                            
   Unsub. Global Notes, 8.63%, 02/01/22                (h)     $  2,877,683   $        -    $        -   $    2,877,683     
 PLC Trust 2003-1, Sec. Notes, 2.71%, 03/31/06                                                                              
   (Acquired 03/23/04; Cost $1,259,552)             (d)(f)(h)     1,201,151            -             -        1,201,151     
 Premium Asset Trust-Series 2004-04, Sr. Notes,                                                                             
   4.13%, 03/12/09 (Acquired 03/04/04; Cost                                                                                 
   $3,822,438)                                      (d)(f)(h)     3,499,174            -       244,698        3,743,872     
 Regional Diversified Funding (Cayman Islands), Sr.                                                                         
   Notes, 9.25%, 03/15/30 (Acquired 09/22/04; Cost                                                                          
   $3,504,605))                                     (d)(f)(h)     3,244,470            -       284,603        3,529,073     
 UFJ Finance Aruba AEC (Aruba), Gtd. Sub. Second                                                                            
   Tier Euro Bonds, 8.75%                             (h)(j)      1,055,979            -        83,808        1,139,787     

                                                                 22,156,907    7,885,174     1,353,320       31,395,401     

 PACKAGED FOODS & Meats - 0.03%                                                                                             

 Nabisco, Inc., Notes, 6.38%, 02/01/05                 (h)          754,928            -       125,821          880,749     

 PROPERTY & Casualty Insurance - 0.33%                                                                                      
FGIC Corp., Sr. Unsec. Unsub. Notes, 6.00%,                                                                                 
   01/15/34 (Acquired 12/07/04; Cost $2,006,027)    (d)(f)(h)     1,862,856            -       181,111        2,043,967     
First American Capital Trust I, Gtd. Notes, 8.50%,                                                                          
   04/15/12                                            (h)        4,879,592            -       369,236        5,248,828     
Oil Insurance Ltd. (Bermuda), Unsec. Sub. Deb.,                                                                             
   5.15%, 08/15/33 (Acquired 03/23/04;                                                                                      
   Cost $986,907)                                   (d)(f)(h)       872,949            -        75,689          948,638     
Travelers Property Casualty Corp., Sr. Unsec.                                                                               
   Notes, 6.75%, 11/15/06                              (h)          739,459            -             -          739,459     

                                                                  8,354,856            -       626,036        8,980,892     

RAILROADS - 0.03%                                                                                                           
Union Pacific Corp., Sr. Unsec. Notes, 4.88%,                                                                               
   01/15/15                                            (h)                -      749,160             -          749,160     

REAL ESTATE - 0.26%                                                                                                         
CarrAmerica Realty Corp., Sr. Unsec. Gtd. Notes,                                                                            
   6.63%, 03/01/05                                     (h)          422,453            -        50,292          472,745     
EOP Operating L.P., Sr. Unsec. Notes, 6.63%,                                                                                
   02/15/05                                            (h)          431,883            -       200,876          632,759     
Health Care Property Investors, Inc., Sr. Unsec.                                                                            
   Notes, 6.88%, 06/08/05                              (h)          386,122            -       152,417          538,539     
HRPT Properties Trust, Sr. Unsec. Notes, 6.70%,                                                                             
   02/23/05                                            (h)        1,442,720            -       125,673        1,568,393     
Simon Property Group, L.P., Unsec. Unsub. Global                                                                            
   Notes, 6.35%, 08/28/12                              (h)                -    2,536,324             -        2,536,324     
Spieker Properties, Inc.,                                                                                                   
Medium Term Notes, 8.00%, 07/19/05                     (h)          615,390            -        51,283          666,673     
Unsec. Unsub. Notes, 6.88%, 02/01/05                   (h)          401,224            -       100,306          501,530     

                                                                  3,699,792    2,536,324       680,847        6,916,963     

REAL ESTATE MANAGEMENT & Development - 0.03%                                                                                
Southern Investments UK PLC (United Kingdom), Sr.                                                                           
   Unsec. Unsub. Yankee Notes, 6.80%, 12/01/06         (h)          772,404            -        78,817          851,221     

EX-99.77M MERGERS
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 PRO FORMA COMBINING SCHEDULE OF INVESTMENTS *
OF AIM BALANCED FUND AND AIM TOTAL RETURN FUND
INTO AIM BASIC BALANCED FUND
 DECEMBER 31, 2004
 (UNAUDITED)

                                                        [Enlarge/Download Table]

              PRINCIPAL AMOUNT & SHARES                                                                                  
              -------------------------                                                                                  
                                                AIM                                                                      
              AIM           AIM           BASIC BALANCED                                                                 
   AIM       TOTAL         BASIC               FUND                                                                      
 BALANCED    RETURN      BALANCED            PRO FORMA                                                                   
   FUND       FUND         FUND              COMBINING                                                                   
   ----       ----         ----              ---------                                                                   
                                                                                                                         
                                                            REGIONAL BANKS - 0.79%                                       
                                                            Cullen/Frost Capital Trust I, Unsec. Sub. Floating           
$ 2,425,000          -   $   325,000    $        2,750,000     Rate Notes, 3.95%, 03/01/34                       (c)(h)  
                                                            Greater Bay Bancorp-Series B, Sr. Notes, 5.25%,              
  3,000,000          -       350,000             3,350,000     03/31/08                                            (h)   
                                                            PNC Capital Trust C, Gtd. Floating Rate Notes,               
  1,000,000          -       175,000             1,175,000     2.97%, 06/01/28                                    (c)(h) 
                                                            Popular North America, Inc., Gtd. Notes, 4.70%,              
  3,125,000          -       325,000             3,450,000     06/30/09                                            (h)   
                                                            Santander Financial Issuances (Cayman Islands),              
  8,000,000          -       750,000             8,750,000     Sec. Sub. Floating Rate Euro Notes, 2.87%        (h)(j)(k)
  1,400,000          -       100,000             1,500,000  TCF Financial Corp., Sub. Notes, 5.00%, 06/15/14       (h)   

                                                            RESTAURANTS - 0.04%                                          
                     -                                                                                                   
    850,000                   55,000               905,000  McDonald's Corp., Unsec. Deb., 7.05%, 11/15/25         (h)   

                                                            SOVEREIGN DEBT - 0.74%                                       
                     -                                      Japan Bank for International Cooperation (Japan),            
  4,600,000                  100,000             4,700,000     Unsec. Gtd. Euro Bonds, 6.50%, 10/06/05             (h)   
                     -                                      New Brunswick (Province of) (Canada), Sec. Yankee            
    830,000                   40,000               870,000     Deb., 6.75%, 08/15/13                               (h)   
                     -                                      Quebec (Province of) (Canada), Sr. Unsec. Unsub.             
  1,400,000                   55,000             1,455,000     Global Deb., 5.75%, 02/15/09                        (h)   
                                                            Russian Federation (Russia),                                 
                                                              Unsec. Unsub. Bonds,                                       
                     -                                        5.00%, 03/31/30 (Acquired 05/18/04, Cost                   
          -                  115,000               115,000     $103,572)                                          (d)(h) 
                     -                                        7.50%, 03/31/30 (Acquired 05/18/04; Cost                   
  1,400,000                        -             1,400,000     $1,260,875)                                      (d)(h)(n)
                     -                                        8.75%, 07/24/05 (Acquired 09/10/04-12/03/04; Cost          
  1,225,000                  175,000             1,400,000     $1,453,151)                                        (d)(h) 
                                                              Unsec. Unsub. Euro Bonds-REGS,                             
                     -                                        8.75%, 07/24/05 (Acquired 05/14/04; Cost                   
  2,100,000                  175,000             2,275,000     $2,403,538)                                        (d)(h) 
                     -                                        10.00%, 06/26/07 (Acquired 05/14/04-05/18/04;              
  1,680,000                  140,000             1,820,000    Cost $2,050,181)                                   (d)(h)  
                                                            United Mexican States (Mexico),                              
          -  1,500,000             -             1,500,000    Global Notes, 7.50%, 01/14/12                        (h)   
                                                              Series A, Medium Term Global Notes,                        
    490,000          -        60,000               550,000    6.63%, 03/03/15                                      (h)   
          -  1,005,000             -             1,005,000    6.75%, 03/27/34                                      (h)   
  1,570,000          -       120,000             1,690,000    7.50%, 04/08/33                                      (h)   


                                                        [Enlarge/Download Table]

                                                                                   MARKET VALUE                        
                                                                                   ------------                        
                                                                                                               AIM     
                                                                               AIM             AIM       BASIC BALANCED
                                                                     AIM      TOTAL           BASIC           FUND     
                                                                  BALANCED    RETURN         BALANCED       PRO FORMA  
                                                                    FUND       FUND            FUND         COMBINING  
                                                                    ----       ----            ----         ---------  
                                                                                                                       
REGIONAL BANKS - 0.79%                                                                                                 
Cullen/Frost Capital Trust I, Unsec. Sub. Floating                                                                     
   Rate Notes, 3.95%, 03/01/34                       (c)(h)    $  2,513,852  $       -    $  336,908   $     2,850,760 
Greater Bay Bancorp-Series B, Sr. Notes, 5.25%,                                                                        
   03/31/08                                            (h)        3,021,720          -       352,534         3,374,254 
PNC Capital Trust C, Gtd. Floating Rate Notes,                                                                         
   2.97%, 06/01/28                                    (c)(h)        949,720          -       166,201         1,115,921 
Popular North America, Inc., Gtd. Notes, 4.70%,                                                                        
   06/30/09                                            (h)        3,188,250          -       331,578         3,519,828 
Santander Financial Issuances (Cayman Islands),                                                                        
   Sec. Sub. Floating Rate Euro Notes, 2.87%        (h)(j)(k)     7,953,176          -       745,610         8,698,786 
TCF Financial Corp., Sub. Notes, 5.00%, 06/15/14       (h)        1,424,444          -       101,746         1,526,190 

                                                                 19,051,162          -     2,034,577        21,085,739 

RESTAURANTS - 0.04%                                                                                                    

McDonald's Corp., Unsec. Deb., 7.05%, 11/15/25         (h)          901,587          -        58,338           959,925 

SOVEREIGN DEBT - 0.74%                                                                                                 
Japan Bank for International Cooperation (Japan),                                                                      
   Unsec. Gtd. Euro Bonds, 6.50%, 10/06/05             (h)        4,719,572          -       102,599         4,822,171 
New Brunswick (Province of) (Canada), Sec. Yankee                                                                      
   Deb., 6.75%, 08/15/13                               (h)          968,278          -        46,664         1,014,942 
Quebec (Province of) (Canada), Sr. Unsec. Unsub.                                                                       
   Global Deb., 5.75%, 02/15/09                        (h)        1,502,438          -        59,024         1,561,462 
Russian Federation (Russia),                                                                                           
  Unsec. Unsub. Bonds,                                                                                                 
  5.00%, 03/31/30 (Acquired 05/18/04, Cost                                                                             
   $103,572)                                          (d)(h)              -          -       118,841           118,841 
  7.50%, 03/31/30 (Acquired 05/18/04; Cost                                                                             
   $1,260,875)                                      (d)(h)(n)     1,446,760          -             -         1,446,760 
  8.75%, 07/24/05 (Acquired 09/10/04-12/03/04; Cost                                                                    
   $1,453,151)                                        (d)(h)      1,259,300          -       179,900         1,439,200 
  Unsec. Unsub. Euro Bonds-REGS,                                                                                       
  8.75%, 07/24/05 (Acquired 05/14/04; Cost                                                                             
   $2,403,538)                                        (d)(h)      2,160,690          -       180,058         2,340,748 
  10.00%, 06/26/07 (Acquired 05/14/04-05/18/04;                                                                        
  Cost $2,050,181)                                   (d)(h)       1,902,768          -       158,564         2,061,332 
United Mexican States (Mexico),                                                                                        
  Global Notes, 7.50%, 01/14/12                        (h)                -  1,703,475             -         1,703,475 
  Series A, Medium Term Global Notes,                                                                                  
  6.63%, 03/03/15                                      (h)          525,819          -        64,386           590,205 
  6.75%, 03/27/34                                      (h)                -    994,950             -           994,950 
  7.50%, 04/08/33                                      (h)        1,689,556          -       129,138         1,818,694 

                                                                 16,175,181  2,698,425     1,039,174        19,912,780 

EX-99.77M MERGERS
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 PRO FORMA COMBINING SCHEDULE OF INVESTMENTS *
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INTO AIM BASIC BALANCED FUND
 DECEMBER 31, 2004
 (UNAUDITED)

                                                        [Enlarge/Download Table]

             PRINCIPAL AMOUNT & SHARES                                                                                            
----------------------------------------------------                                                                              
                                             AIM                                                                                  
                                            BASIC                                                                                 
                   AIM         AIM         BALANCED                                                                               
     AIM          TOTAL       BASIC          FUND                                                                                 
  BALANCED       RETURN      BALANCED     PRO FORMA                                                                               
    FUND          FUND         FUND       COMBINING                                                                               
----------------------------------------------------                                                                              
                                                                                                                                  

                                                      THRIFTS & MORTGAGE FINANCE - 0.24%                                          
                                                      Countrywide Home Loans, Inc.,-Series M, Gtd. Medium Term Global Notes,      
   $       -  $  1,700,000   $       -  $  1,700,000  4.13%, 09/15/09                                                          (h)
     950,000             -      75,000     1,025,000  Greenpoint Capital Trust I, Gtd. Sub. Notes, 9.10%, 06/01/27             (h)
                                                      Washington Mutual Bank, FA, Series 11, Sub. Global Notes, 6.88%,            
           -     1,500,000           -     1,500,000  06/15/11                                                                 (h)
   1,775,000             -     100,000     1,875,000  Washington Mutual Finance Corp., Sr. Unsec. Notes, 8.25%, 06/15/05       (h)

                                                      TOBACCO - 0.13%                                                             
                                                      Altria Group, Inc.,                                                         

     450,000             -      40,000       490,000    Sr. Unsec. Notes, 7.00%, 11/04/13                                      (h)
   2,650,000             -     200,000     2,850,000    Unsec. Global Notes, 7.00%, 07/15/05                                   (h)
           -             -      20,000        20,000    Unsec. Notes, 6.38%, 02/01/06                                          (h)

                                                      TRUCKING - 0.12%                                                            

   2,655,000             -     150,000     2,805,000  Roadway Corp., Sr. Unsec. Gtd. Global Notes, 8.25%, 12/01/08             (h)

                                                      WIRELESS TELECOMMUNICATION SERVICES - 0.26%                                 
                                                      AT&T Wireless Services Inc., Sr. Unsec. Unsub. Global Notes,                

   1,100,000             -     200,000     1,300,000     6.88%, 04/18/05                                                       (h)
           -       325,000           -       325,000     8.75%, 03/01/31                                                       (h)

   4,355,000             -     420,000     4,775,000  TeleCorp PCS, Inc., Sr. Unsec. Gtd. Sub. Global Notes, 10.63%, 07/15/10  (h)

                                                      Total Bonds & Notes (Cost $412,038,597)                                     

                                                      U.S. MORTGAGE-BACKED SECURITIES - 9.34%                                     
                                                      FEDERAL HOME LOAN MORTGAGE CORP. (FHLMC) - 1.14%                            
                                                      Pass Through Ctfs.,                                                         
   2,819,286             -   1,144,266     3,963,552   5.50%, 05/01/13 to 12/01/33                                             (h)
   7,379,632             -     293,660     7,673,292   7.00%, 06/01/15 to 06/01/32                                             (h)
   3,770,547             -     100,196     3,870,743   6.50%, 01/01/16 to 03/01/33                                             (h)

   8,861,576             -   1,714,523    10,576,099   6.00%, 03/01/17 to 01/01/34                                             (h)
           -             -     355,851       355,851   4.50%, 10/01/18                                                         (h)
   1,407,647             -           -     1,407,647   8.00%, 01/01/27                                                         (h)
     806,751             -      19,391       826,142   7.50%, 11/01/30 to 03/01/32                                             (h)
           -             -     416,383       416,383   5.00%, 10/01/33                                                         (h)

                                                        [Enlarge/Download Table]

                                                                                                   MARKET VALUE                   
                                                                              ----------------------------------------------------
                                                                                                                         AIM      
                                                                                              AIM           AIM     BASIC BALANCED
                                                                                  AIM        TOTAL         BASIC        FUND      
                                                                                BALANCED    RETURN       BALANCED     PRO FORMA   
                                                                                  FUND       FUND          FUND       COMBINING   
                                                                              ----------------------------------------------------
                                                                                                                                  

THRIFTS & MORTGAGE FINANCE - 0.24%                                                                                                
Countrywide Home Loans, Inc.,-Series M, Gtd. Medium Term Global Notes,                                                            
4.13%, 09/15/09                                                          (h)    $       -  $ 1,695,206   $       -  $  1,695,206  
Greenpoint Capital Trust I, Gtd. Sub. Notes, 9.10%, 06/01/27             (h)    1,123,917                   88,730     1,212,647  
Washington Mutual Bank, FA, Series 11, Sub. Global Notes, 6.88%,                                                                  
06/15/11                                                                 (h)                 1,692,885                 1,692,885  
Washington Mutual Finance Corp., Sr. Unsec. Notes, 8.25%, 06/15/05       (h)    1,817,920                  102,418     1,920,338  
                                                                                2,941,837    3,388,091     191,148     6,521,076  

TOBACCO - 0.13%                                                                                                                   
Altria Group, Inc.,                                                                                                               

  Sr. Unsec. Notes, 7.00%, 11/04/13                                      (h)      486,891                   43,279       530,170  
  Unsec. Global Notes, 7.00%, 07/15/05                                   (h)    2,702,444                  203,958     2,906,402  
  Unsec. Notes, 6.38%, 02/01/06                                          (h)                                20,529        20,529  
                                                                                3,189,335            -     267,766     3,457,101  

TRUCKING - 0.12%                                                                                                                  

Roadway Corp., Sr. Unsec. Gtd. Global Notes, 8.25%, 12/01/08             (h)    2,956,210            -     167,018     3,123,228  

WIRELESS TELECOMMUNICATION SERVICES - 0.26%                                                                                       
AT&T Wireless Services Inc., Sr. Unsec. Unsub. Global Notes,                                                                      

   6.88%, 04/18/05                                                       (h)    1,112,188                  202,216     1,314,404  
   8.75%, 03/01/31                                                       (h)                   438,640                   438,640  

TeleCorp PCS, Inc., Sr. Unsec. Gtd. Sub. Global Notes, 10.63%, 07/15/10  (h)    4,764,370                  459,480     5,223,850  
                                                                                5,876,558      438,640     661,696     6,976,894  

Total Bonds & Notes (Cost $412,038,597)                                       302,692,072   84,773,747  28,177,614   415,643,433  

U.S. MORTGAGE-BACKED SECURITIES - 9.34%                                                                                           
FEDERAL HOME LOAN MORTGAGE CORP. (FHLMC) - 1.14%                                                                                  
Pass Through Ctfs.,                                                                                                               

 5.50%, 05/01/13 to 12/01/33                                             (h)    2,909,098            -   1,166,380     4,075,478  
 7.00%, 06/01/15 to 06/01/32                                             (h)    4,643,345            -     311,335     4,954,680  
 6.50%, 01/01/16 to 03/01/33                                             (h)    3,960,176            -     105,568     4,065,744  
 6.00%, 03/01/17 to 01/01/34                                             (h)    9,246,465            -   1,778,672    11,025,137  
 4.50%, 10/01/18                                                         (h)            -            -     355,621       355,621  
 8.00%, 01/01/27                                                         (h)    1,532,643            -           -     1,532,643  
 7.50%, 11/01/30 to 03/01/32                                             (h)      864,968            -      20,791       885,759  
 5.00%, 10/01/33                                                         (h)            -            -     414,491       414,491  

EX-99.77M MERGERS
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 PRO FORMA COMBINING SCHEDULE OF INVESTMENTS *
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INTO AIM BASIC BALANCED FUND
 DECEMBER 31, 2004
 (UNAUDITED)

                                                        [Enlarge/Download Table]

             PRINCIPAL AMOUNT & SHARES                                                                              
----------------------------------------------------                                                                
                                             AIM                                                                    
                                            BASIC                                                                   
                   AIM         AIM         BALANCED                                                                 
     AIM          TOTAL       BASIC          FUND                                                                   
  BALANCED       RETURN      BALANCED     PRO FORMA                                                                 
    FUND          FUND         FUND       COMBINING                                                                 
----------------------------------------------------                                                                
                                                                                                                    
                                                      Pass Through Ctfs., TBA,                                      
$  2,420,000     $       -  $  924,000  $  3,344,000   5.00%, 01/01/15                                           (o)

                                                      FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) - 6.99%          
                                                      Floating Rate Pass Through Ctfs.,  (e)                        

           -     8,723,217           -     8,723,217   4.31%, 08/01/33 to 03/01/34                               (h)
           -     3,812,021           -     3,812,021   4.60%, 11/01/33                                           (h)
           -     1,683,380           -     1,683,380   5.16%, 11/01/33                                           (h)
                                                      Pass Through Ctfs.,                                           
   2,244,012             -           -     2,244,012   8.50%, 03/01/10 to 10/01/28                               (h)
  19,928,660             -   1,643,060    21,571,720   6.50%, 04/01/14 to 09/01/34                               (h)
   1,621,130             -      95,262     1,716,391   7.50%, 11/01/15 to 05/01/32                               (h)
   5,469,257             -     169,559     5,638,816   7.00%, 12/01/15 to 09/01/32                               (h)
     520,993             -     589,576     1,110,569   6.00%, 01/01/17 to 03/01/22                               (h)
   2,953,720    18,136,586      18,568    21,108,874   5.00%, 11/01/17 to 03/01/34                               (h)
   3,395,457    13,617,541     299,748    17,312,746   5.50%, 07/01/19 to 10/01/34                               (h)
   1,286,605             -      17,694     1,304,299   8.00%, 08/01/21 to 10/01/30                               (h)
           -     2,836,890           -                 2,836,890   4.50%, 09/01/33                               (h)
                                                      Pass Through Ctfs., TBA,                                      
  25,346,640             -   1,210,520    26,557,160   5.00%, 01/01/20 to 01/01/35                               (o)
  44,688,574             -   1,994,234    46,682,808   5.50%, 01/01/20 to 01/01/35                               (o)
  19,643,600             -   1,171,300    20,814,900   6.00%, 01/01/35                                           (o)

                                                      GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) - 1.21%       
                                                      Pass Through Ctfs.,                                           
   3,731,806             -     376,742     4,108,548   6.50%, 10/15/08 to 12/15/33                               (h)
   2,211,242             -     174,644     2,385,886   7.00%, 10/15/08 to 05/15/32                               (h)
   5,808,970     5,676,663     597,397    12,083,030   6.00%, 11/15/08 to 10/15/33                               (h)
           -     2,905,619           -     2,905,619   5.00%, 03/15/18                                           (h)
     766,023             -      17,904       783,927   8.00%, 08/15/22 to 01/20/31                               (h)
   2,032,869             -      67,864     2,100,733   7.50%, 06/15/23 to 05/15/32                               (h)
     122,231             -      35,448       157,679   8.50%, 11/15/24 to 02/15/25                               (h)
   3,191,779     2,932,937     429,358     6,554,074   5.50%, 12/15/31 to 02/15/34                               (h)

                                                      Total U.S. Mortgage-Backed Securities (Cost $248,773,978)     

                                                        [Enlarge/Download Table]

                                                                                     MARKET VALUE                   
                                                                ----------------------------------------------------
                                                                                                           AIM      
                                                                                  AIM         AIM     BASIC BALANCED
                                                                     AIM         TOTAL       BASIC        FUND      
                                                                   BALANCED     RETURN     BALANCED     PRO FORMA   
                                                                     FUND        FUND        FUND       COMBINING   
                                                                ----------------------------------------------------
                                                                                                                    
Pass Through Ctfs., TBA,                                                                                            
 5.00%, 01/01/15                                           (o)  $  2,458,388   $       -  $   938,657   $  3,397,045
                                                                  25,615,083           -    5,091,515     30,706,598
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) - 6.99%                                                                
Floating Rate Pass Through Ctfs.,  (e)                                                                              

 4.31%, 08/01/33 to 03/01/34                               (h)             -   8,863,404            -      8,863,404
 4.60%, 11/01/33                                           (h)             -   3,893,193            -      3,893,193
 5.16%, 11/01/33                                           (h)             -   1,762,670            -      1,762,670
Pass Through Ctfs.,                                                                                                 
 8.50%, 03/01/10 to 10/01/28                               (h)     2,471,769           -            -      2,471,769
 6.50%, 04/01/14 to 09/01/34                               (h)    20,962,643           -    1,725,924     22,688,567
 7.50%, 11/01/15 to 05/01/32                               (h)     1,733,128           -      102,042      1,835,170
 7.00%, 12/01/15 to 09/01/32                               (h)     5,800,455           -      179,846      5,980,301
 6.00%, 01/01/17 to 03/01/22                               (h)       542,238           -      618,339      1,160,577
 5.00%, 11/01/17 to 03/01/34                               (h)     3,004,906  18,164,746       18,889     21,188,541
 5.50%, 07/01/19 to 10/01/34                               (h)     3,451,121  13,924,609      304,662     17,680,392
 8.00%, 08/01/21 to 10/01/30                               (h)     1,400,645           -       19,192      1,419,837
 2,836,890   4.50%, 09/01/33                               (h)             -   2,747,806            -      2,747,806
Pass Through Ctfs., TBA,                                                                                            
 5.00%, 01/01/20 to 01/01/35                               (o)    25,591,364           -    1,220,855     26,812,219
 5.50%, 01/01/20 to 01/01/35                               (o)    45,546,247           -    2,046,822     47,593,069
 6.00%, 01/01/35                                           (o)    20,316,339           -    1,211,414     21,527,753
                                                                 130,820,855  49,356,428    7,447,985    187,625,268

GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA) - 1.21%                                                             
Pass Through Ctfs.,                                                                                                 
 6.50%, 10/15/08 to 12/15/33                               (h)     3,932,388           -      397,003      4,329,391
 7.00%, 10/15/08 to 05/15/32                               (h)     2,349,894           -      185,679      2,535,573
 6.00%, 11/15/08 to 10/15/33                               (h)     6,030,415   5,904,000      619,880     12,554,295
 5.00%, 03/15/18                                           (h)             -   2,982,462            -      2,982,462
 8.00%, 08/15/22 to 01/20/31                               (h)       837,419           -       19,530        856,949
 7.50%, 06/15/23 to 05/15/32                               (h)     2,192,997           -       73,196      2,266,193
 8.50%, 11/15/24 to 02/15/25                               (h)       134,121           -       38,873        172,994
 5.50%, 12/15/31 to 02/15/34                               (h)     3,263,972   3,002,308      438,947      6,705,227
                                                                  18,741,206  11,888,770    1,773,108     32,403,084

Total U.S. Mortgage-Backed Securities (Cost $248,773,978)        175,177,144  61,245,198   14,312,608    250,734,950

EX-99.77M MERGERS
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 PRO FORMA COMBINING SCHEDULE OF INVESTMENTS *
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INTO AIM BASIC BALANCED FUND
 DECEMBER 31, 2004
 (UNAUDITED)

                                                        [Enlarge/Download Table]

             PRINCIPAL AMOUNT & SHARES                                                                                   
----------------------------------------------------                                                                     
                                             AIM                                                                         
                                            BASIC                                                                        
                   AIM         AIM         BALANCED                                                                      
     AIM          TOTAL       BASIC          FUND                                                                        
  BALANCED       RETURN      BALANCED     PRO FORMA                                                                      
    FUND          FUND         FUND       COMBINING                                                                      
----------------------------------------------------                                                                     
                                                                                                                         
                                                      U.S. GOVERNMENT AGENCY SECURITIES - 4.79%                          
                                                      FEDERAL HOME LOAN BANK (FHLB) - 4.30%                              
                                                      Unsec. Disc. Notes,                                                
$106,887,000     $       -  $8,670,000  $115,557,000   1.25%, 01/03/05                                             (p)   

                                                      FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) - 0.48%               
                                                      Unsec. Floating Rate Global Notes,                                 
   8,675,000             -     460,000     9,135,000   3.68%, 02/17/09                                             (h)(q)
                                                      Unsec. Global Notes,                                               
   3,525,000             -     300,000     3,825,000   3.38%, 12/15/08                                             (h)   

                                                      Total U.S. Government Agency Securities (Cost $128,382,941)        

                                                      U.S. TREASURY SECURITIES - 3.88%                                   
                                                      U.S. TREASURY NOTES - 2.80%                                        
           -     5,500,000           -     5,500,000   1.88%, 11/30/05                                             (h)   
   2,500,000             -     600,000     3,100,000   2.50%, 09/30/06                                             (h)   
  17,165,000             -   2,500,000    19,665,000   6.50%, 10/15/06                                             (h)   
  28,850,000             -   1,100,000    29,950,000   3.50%, 11/15/06 to 11/15/09                                 (h)   
   2,115,000             -     760,000     2,875,000   3.13%, 10/15/08                                             (h)   
   5,680,000             -   2,100,000     7,780,000   4.75%, 11/15/08                                             (h)   
   4,525,000             -      50,000     4,575,000   5.00%, 02/15/11                                             (h)   

                                                      U.S. TREASURY BONDS - 1.03%                                        
  11,555,000             -   1,000,000    12,555,000   7.25%, 05/15/16 to 08/15/22                                 (h)   
      60,000             -     160,000       220,000   7.50%, 11/15/16                                             (h)   
           -     3,420,000           -     3,420,000   8.13%, 08/15/19                                             (h)   
           -     3,430,000           -     3,430,000   6.00%, 02/15/26                                             (h)   
   2,095,000             -     595,000     2,690,000   5.38%, 02/15/31                                             (h)   

                                                      U.S. TREASURY STRIPS - 0.05%                                       
   1,175,000             -     200,000     1,375,000   3.03%, 02/15/07                                             (h)(p)

                                                      Total U.S. Treasury Securities (Cost $102,406,964)                 

                                                        [Enlarge/Download Table]

                                                                                          MARKET VALUE                    
                                                                     -----------------------------------------------------
                                                                                                                 AIM      
                                                                                        AIM         AIM     BASIC BALANCED
                                                                          AIM          TOTAL       BASIC        FUND      
                                                                        BALANCED      RETURN     BALANCED     PRO FORMA   
                                                                          FUND         FUND        FUND       COMBINING   
                                                                     -----------------------------------------------------
                                                                                                                          
U.S. GOVERNMENT AGENCY SECURITIES - 4.79%                                                                                 
FEDERAL HOME LOAN BANK (FHLB) - 4.30%                                                                                     
Unsec. Disc. Notes,                                                                                                       
 1.25%, 01/03/05                                             (p)     $ 106,879,577    $       -  $8,669,398  $ 115,548,975

FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA) - 0.48%                                                                      
Unsec. Floating Rate Global Notes,                                                                                        
 3.68%, 02/17/09                                             (h)(q)      8,756,372            -     464,315      9,220,687
Unsec. Global Notes,                                                                                                      
 3.38%, 12/15/08                                             (h)         3,480,479            -     296,211      3,776,690
                                                                        12,236,851            -     760,526     12,997,377

Total U.S. Government Agency Securities (Cost $128,382,941)            119,116,428            -   9,429,924    128,546,352

U.S. TREASURY SECURITIES - 3.88%                                                                                          
U.S. TREASURY NOTES - 2.80%                                                                                               
 1.88%, 11/30/05                                             (h)                 -    5,454,020           -      5,454,020
 2.50%, 09/30/06                                             (h)         2,478,525            -     594,846      3,073,371
 6.50%, 10/15/06                                             (h)        18,197,646            -   2,650,400     20,848,046
 3.50%, 11/15/06 to 11/15/09                                 (h)        28,913,486            -   1,100,265     30,013,751
 3.13%, 10/15/08                                             (h)         2,092,518            -     751,921      2,844,439
 4.75%, 11/15/08                                             (h)         5,951,561            -   2,200,401      8,151,962
 5.00%, 02/15/11                                             (h)         4,816,274            -      53,219      4,869,493
                                                                        62,450,010    5,454,020   7,351,052     75,255,082

U.S. TREASURY BONDS - 1.03%                                                                                               
 7.25%, 05/15/16 to 08/15/22                                 (h)        14,588,714            -   1,265,722     15,854,436
 7.50%, 11/15/16                                             (h)            76,697            -     204,525        281,222
 8.13%, 08/15/19                                             (h)                 -    4,670,967           -      4,670,967
 6.00%, 02/15/26                                             (h)                 -    3,933,250           -      3,933,250
 5.38%, 02/15/31                                             (h)         2,264,569            -     643,159      2,907,728
                                                                        16,929,980    8,604,217   2,113,406     27,647,603

U.S. TREASURY STRIPS - 0.05%                                                                                              
 3.03%, 02/15/07                                             (h)(p)      1,103,219            -     187,782      1,291,001

Total U.S. Treasury Securities (Cost $102,406,964)                      80,483,209   14,058,237   9,652,240    104,193,686

EX-99.77M MERGERS
609th “Page” of 620
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 PRO FORMA COMBINING SCHEDULE OF INVESTMENTS *
OF AIM BALANCED FUND AND AIM TOTAL RETURN FUND
INTO AIM BASIC BALANCED FUND
 DECEMBER 31, 2004
 (UNAUDITED)

                                                        [Enlarge/Download Table]

             PRINCIPAL AMOUNT & SHARES                                                                                              
----------------------------------------------------                                                                                
                                             AIM                                                                                    
                                            BASIC                                                                                   
                   AIM         AIM         BALANCED                                                                                 
     AIM          TOTAL       BASIC          FUND                                                                                   
  BALANCED       RETURN      BALANCED     PRO FORMA                                                                                 
    FUND          FUND         FUND       COMBINING                                                                                 
----------------------------------------------------                                                                                
                                                                                                                                    
                                                      ASSET-BACKED SECURITIES - 3.21%                                               
                                                      COLLATERALIZED MORTGAGE OBLIGATIONS - 2.20%                                   

                                                      ABN AMRO Mortgage Corp.-Series 2003-10, Class A1, Pass Through Ctfs.,         
   $       -  $  2,890,704   $       -  $  2,890,704  4.50%, 09/25/18                                                         (h)   
                                                      Accredited Mortgage Loan Trust-Series 2003-3, Class A3, Floating Rate         
           -     2,559,644           -     2,559,644  Pass Through Ctfs., 2.80%, 01/25/34                                     (h)(q)
                                                      Capital One Multi-Asset Execution Trust-Series 2003-B4, Floating Rate         
           -     2,195,000           -     2,195,000  Pass Through Ctfs., 3.20%, 07/15/11                                     (h)(q)
                                                      Chase Funding Mortgage Loan-Series 2003-6, Class 2A2, Floating Rate           
           -     4,000,000           -     4,000,000  Pass Through Ctfs., 2.71%, 09/25/33                                     (h)(q)
                                                      Countrywide Asset-Backed Ctfs.-Series 2004-6, Class 2A5, Floating Rate        
           -     2,742,523           -     2,742,523  Pass Through Ctfs., 2.81%, 11/25/34                                     (h)(q)
                                                      Countrywide Home Loans,-Series 2004-HYB7, Class 1A2, Pass Through             
           -     2,496,224           -     2,496,224  Ctfs., 4.83%, 10/20/34                                                        
                                                      Credit Suisse First Boston Mortgage Securities Corp.-Series 2004-AR3,         
           -     2,521,055           -     2,521,055  Class 5A1, Pass Through Ctfs., 4.82%, 04/25/34                          (h)   
                                                      Credit Suisse First Boston Mortgage Securities Corp.-Series 2004-AR7,         
           -     2,568,426           -     2,568,426  Class 2A1, Pass Through Ctfs., 4.89%, 11/25/34                          (h)   
                                                      Credit Suisse First Boston Mortgage Securities Corp.-Series 2004-C4,          
           -     2,800,000           -     2,800,000  Class A6, Pass Through Ctfs., 4.69%, 10/15/39                           (h)   
                                                      Fannie Mae Grantor Trust-Series 2004-T1, Class 2A, Floating Rate Pass         
           -     1,888,416           -     1,888,416  Through Ctfs., 3.68%, 08/25/43                                          (h)(q)
                                                      Fannie Mae Whole Loan-Series 2003-W19, Class 1A3, Pass Through Ctfs.,         
           -     1,290,000           -     1,290,000  4.78%, 12/25/06                                                         (h)   
                                                      Fannie Mae Whole Loan-Series 2004-W2, Class 4A, Floating Rate Pass            
           -     1,938,082           -     1,938,082  Through Ctfs., 4.26%, 02/25/44                                          (h)(q)
                                                      Impac CMB Trust-Series 2003-12, Class A1, Floating Rate Pass Through          
           -       718,126           -       718,126  Ctfs., 2.80%,12/25/33                                                   (h)(q)
                                                      Impac CMB Trust-Series 2004-1, Class A1, Floating Rate, Pass Through          
           -     2,258,811           -     2,258,811  Ctfs., 2.75%, 03/25/34                                                  (h)(q)
                                                      Long Beach Mortgage Loan Trust-Series 2004-1, Class A3, Floating Rate         
           -     1,806,096           -     1,806,096  Pass Through Ctfs., 2.72%, 02/25/34                                     (h)(q)
                                                      Master Asset Securitization Trust-Series 2003-8, Class 1A1, Pass              
           -     3,809,263           -     3,809,263  Through Ctfs., 5.50%, 09/25/33                                          (h)   
                                                      MLCC Mortgage Investors, Inc.-Series 2003-G, Class A1, Floating Rate          
           -     3,380,641           -     3,380,641  Pass Through Ctfs., 2.74%, 01/25/29                                     (h)(q)
                                                      Morgan Stanley Mortgage Loan Trust-Series 2004-6AR, Class 2A2, Pass           
           -     2,643,163           -     2,643,163  Through Ctfs., 4.18%, 08/25/34                                          (h)   
                                                      Residential Asset Mortgage Products, Inc.-Series 2003-RS2, Class AII,         
           -     1,802,137           -     1,802,137  Floating Rate Pass Through Ctfs., 2.76%, 03/25/33                       (h)(q)
                                                      Specialty Underwriting & Residential Finance Trust-Series 2003-BC3,           
           -     1,456,239           -     1,456,239  Class A, Floating Rate Pass Through Ctfs., 2.77%, 08/25/34              (h)(q)
                                                      Structured Adjustable Rate Mortgage Loan-Series 2004-3AC, Class A1,           
           -     2,401,366           -     2,401,366  Pass Through Ctfs., 4.94%, 01/25/34                                     (h)   
                                                      Structured Asset Securities Corp.-Series 2003-37A, Class 7A, Pass             
           -     2,769,913           -     2,769,913  Through Ctfs., 4.88%, 12/25/33                                          (h)   
                                                      Structured Asset Securities Corp.-Series 2003-S2, Class A1, Floating          
           -       230,289           -       230,289  Rate, Pass Through Ctfs., 2.67%, 12/25/33                               (h)(q)
                                                      Structured Asset Securities Corp.-Series 2004-2AC, Class A1, Pass             
           -     4,458,102           -     4,458,102  Through Ctfs., 5.05%, 01/25/34                                          (h)   

                                                        [Enlarge/Download Table]

                                                                                                    MARKET VALUE                    
                                                                                ----------------------------------------------------
                                                                                                                           AIM      
                                                                                                  AIM         AIM     BASIC BALANCED
                                                                                    AIM          TOTAL       BASIC        FUND      
                                                                                  BALANCED      RETURN     BALANCED     PRO FORMA   
                                                                                    FUND         FUND        FUND       COMBINING   
                                                                                ----------------------------------------------------
                                                                                                                                    
ASSET-BACKED SECURITIES - 3.21%                                                                                                     
COLLATERALIZED MORTGAGE OBLIGATIONS - 2.20%                                                                                         

ABN AMRO Mortgage Corp.-Series 2003-10, Class A1, Pass Through Ctfs.,                                                               
4.50%, 09/25/18                                                         (h)     $         -    $2,864,508  $      -     $2,864,508  
Accredited Mortgage Loan Trust-Series 2003-3, Class A3, Floating Rate                                                               
Pass Through Ctfs., 2.80%, 01/25/34                                     (h)(q)            -     2,562,994         -      2,562,994  
Capital One Multi-Asset Execution Trust-Series 2003-B4, Floating Rate                                                               
Pass Through Ctfs., 3.20%, 07/15/11                                     (h)(q)            -     2,236,369         -      2,236,369  
Chase Funding Mortgage Loan-Series 2003-6, Class 2A2, Floating Rate                                                                 
Pass Through Ctfs., 2.71%, 09/25/33                                     (h)(q)            -     4,002,572         -      4,002,572  
Countrywide Asset-Backed Ctfs.-Series 2004-6, Class 2A5, Floating Rate                                                              
Pass Through Ctfs., 2.81%, 11/25/34                                     (h)(q)            -     2,744,285         -      2,744,285  
Countrywide Home Loans,-Series 2004-HYB7, Class 1A2, Pass Through                                                                   
Ctfs., 4.83%, 10/20/34                                                                    -     2,521,253         -      2,521,253  
Credit Suisse First Boston Mortgage Securities Corp.-Series 2004-AR3,                                                               
Class 5A1, Pass Through Ctfs., 4.82%, 04/25/34                          (h)               -     2,519,961         -      2,519,961  
Credit Suisse First Boston Mortgage Securities Corp.-Series 2004-AR7,                                                               
Class 2A1, Pass Through Ctfs., 4.89%, 11/25/34                          (h)               -     2,580,900         -      2,580,900  
Credit Suisse First Boston Mortgage Securities Corp.-Series 2004-C4,                                                                
Class A6, Pass Through Ctfs., 4.69%, 10/15/39                           (h)               -     2,772,531         -      2,772,531  
Fannie Mae Grantor Trust-Series 2004-T1, Class 2A, Floating Rate Pass                                                               
Through Ctfs., 3.68%, 08/25/43                                          (h)(q)            -     1,898,470         -      1,898,470  
Fannie Mae Whole Loan-Series 2003-W19, Class 1A3, Pass Through Ctfs.,                                                               
4.78%, 12/25/06                                                         (h)               -     1,298,452         -      1,298,452  
Fannie Mae Whole Loan-Series 2004-W2, Class 4A, Floating Rate Pass                                                                  
Through Ctfs., 4.26%, 02/25/44                                          (h)(q)            -     1,997,165         -      1,997,165  
Impac CMB Trust-Series 2003-12, Class A1, Floating Rate Pass Through                                                                
Ctfs., 2.80%,12/25/33                                                   (h)(q)            -       718,433         -        718,433  
Impac CMB Trust-Series 2004-1, Class A1, Floating Rate, Pass Through                                                                
Ctfs., 2.75%, 03/25/34                                                  (h)(q)            -     2,267,434         -      2,267,434  
Long Beach Mortgage Loan Trust-Series 2004-1, Class A3, Floating Rate                                                               
Pass Through Ctfs., 2.72%, 02/25/34                                     (h)(q)            -     1,807,497         -      1,807,497  
Master Asset Securitization Trust-Series 2003-8, Class 1A1, Pass                                                                    
Through Ctfs., 5.50%, 09/25/33                                          (h)               -     3,828,766         -      3,828,766  
MLCC Mortgage Investors, Inc.-Series 2003-G, Class A1, Floating Rate                                                                
Pass Through Ctfs., 2.74%, 01/25/29                                     (h)(q)            -     3,381,595         -      3,381,595  
Morgan Stanley Mortgage Loan Trust-Series 2004-6AR, Class 2A2, Pass                                                                 
Through Ctfs., 4.18%, 08/25/34                                          (h)               -     2,650,608          -     2,650,608  
Residential Asset Mortgage Products, Inc.-Series 2003-RS2, Class AII,                                                               
Floating Rate Pass Through Ctfs., 2.76%, 03/25/33                       (h)(q)            -     1,805,054         -      1,805,054  
Specialty Underwriting & Residential Finance Trust-Series 2003-BC3,                                                                 
Class A, Floating Rate Pass Through Ctfs., 2.77%, 08/25/34              (h)(q)            -     1,458,991         -      1,458,991  
Structured Adjustable Rate Mortgage Loan-Series 2004-3AC, Class A1,                                                                 
Pass Through Ctfs., 4.94%, 01/25/34                                     (h)               -     2,402,568         -      2,402,568  
Structured Asset Securities Corp.-Series 2003-37A, Class 7A, Pass                                                                   
Through Ctfs., 4.88%, 12/25/33                                          (h)               -     2,800,606         -      2,800,606  
Structured Asset Securities Corp.-Series 2003-S2, Class A1, Floating                                                                
Rate, Pass Through Ctfs., 2.67%, 12/25/33                               (h)(q)            -       230,487         -        230,487  
Structured Asset Securities Corp.-Series 2004-2AC, Class A1, Pass                                                                   
Through Ctfs., 5.05%, 01/25/34                                          (h)               -     4,521,666         -      4,521,666  

EX-99.77M MERGERS
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 PRO FORMA COMBINING SCHEDULE OF INVESTMENTS *
OF AIM BALANCED FUND AND AIM TOTAL RETURN FUND
INTO AIM BASIC BALANCED FUND
 DECEMBER 31, 2004
 (UNAUDITED)

                                                        [Enlarge/Download Table]

             PRINCIPAL AMOUNT & SHARES                                                                                              
---------------------------------------------------                                                                                 
                                           AIM                                                                                      
                                          BASIC                                                                                     
                  AIM        AIM         BALANCED                                                                                   
     AIM         TOTAL      BASIC          FUND                                                                                     
  BALANCED      RETURN     BALANCED     PRO FORMA                                                                                   
    FUND         FUND        FUND       COMBINING                                                                                   
--------------------------------------------------                                                                                  
                                                                                                                                    
                                                   Vanderbuilt Mortgage & Finance, Inc.-Series 2002-B, Class A4,                    
   $       - $  1,160,000  $       -  $  1,160,000 Pass Through Ctfs., 5.84%, 02/07/26                               (h)            

                                                   OTHER DIVERSIFIED FINANCIAL SERVICES - 0.83%                                     
                                                   Citicorp Lease-Series 1999-1, Pass Through Ctfs.,                                

                                                   Class A1, 7.22%, 06/15/05 (Acquired 05/08/02-02/25/04; Cost                      
   5,400,171            -    450,014     5,850,185 $6,214,954)                                                       (d)(h)         

   3,950,000            -                3,950,000 Class A2, 8.04%, 12/15/19 (Acquired 06/01/00; Cost $3,901,297)    (d)(h)         

           -            -    150,000       150,000 Class A2, 8.04%, 12/15/19 (Acquired 08/20/02; Cost $166,614)      (d)(h)         
                                                   Patrons' Legacy                                                                  
                                                   Series 2003-III, Ctfs., 5.65%, 01/17/17 (Acquired 11/04/04;  Cost                
   2,500,000            -    500,000     3,000,000 $3,076,230)                                                       (d)(f)         
                                                   Series 2004-I, Ctfs., 6.67%, 02/04/17 (Acquired 04/30/04; Cost                   
   5,000,000            -    500,000     5,500,000 $5,500,000)                                                       (d)(f)         
                                                   PLC Trust 2003-1, Sec. Notes, 2.71%, 03/31/06 (Acquired 03/23/04;                
           -            -    111,655       111,655 Cost $116,625)                                                    (d)(f)(h)      
                                                   Twin Reefs Pass-Through Trust, Floating Rate Pass Through Ctfs.,                 
   1,900,000            -    200,000     2,100,000 3.37% (Acquired 12/07/04; Cost $2,100,000)                        (d)(f)(h)(j)(q)
                                                   Yorkshire Power Pass-Through Asset Trust (Cayman Islands)-Series                 
                                                   2000-1, Pass Through Ctfs., 8.25%, 02/15/05 (Acquired 11/12/03;                  
     600,000            -     50,000       650,000 Cost $694,200)                                                    (d)(f)(h)      

                                                   PROPERTY & CASUALTY INSURANCE - 0.09%                                            

                                                   North Front Pass-Through Trust, Bonds, 5.81%, 12/15/24 (Acquired                 
   2,125,000            -    225,000     2,350,000 12/08/04; Cost $2,369,940)                                        (d)(f)(h)      

                                                   THRIFTS & MORTGAGE FINANCE - 0.08%                                               

                                                   Sovereign Bank-Class A-1, Pass Through Ctfs., 10.20%, 06/30/05                   
   2,020,308            -    195,064     2,215,372 (Acquired 09/22/04; Cost $2,579,172)                              (d)(f)(h)      

                                                   Total Asset-Backed Securities (Cost $85,654,087)                                 

    SHARES       SHARES     SHARES        SHARES                                                                                    
                                                   MONEY MARKET FUNDS - 0.23%                                                       

           -    6,277,982          -     6,277,982 Premier Portfolio   (Cost $6,277,982)                             (r)            

                                                   TOTAL INVESTMENTS--102.67% (excluding investments purchased with                 
                                                   cash collateral from securities loaned) (Cost $2,518,763,566)                    

                                                        [Enlarge/Download Table]

                                                                                                MARKET VALUE                        
                                                                               -----------------------------------------------------
                                                                                                                           AIM      
                                                                                                AIM           AIM     BASIC BALANCED
                                                                                   AIM         TOTAL         BASIC         FUND     
                                                                                 BALANCED     RETURN       BALANCED     PRO FORMA   
                                                                                   FUND        FUND          FUND       COMBINING   
                                                                               -----------------------------------------------------
                                                                                                                                    
Vanderbuilt Mortgage & Finance, Inc.-Series 2002-B, Class A4,                                                                       
Pass Through Ctfs., 5.84%, 02/07/26                              (h)           $           - $ 1,189,477 $          - $    1,189,477
                                                                                           -  59,062,642            -     59,062,642

OTHER DIVERSIFIED FINANCIAL SERVICES - 0.83%                                                                                        
Citicorp Lease-Series 1999-1, Pass Through Ctfs.,                                                                                   

Class A1, 7.22%, 06/15/05 (Acquired 05/08/02-02/25/04; Cost                                                                         
$6,214,954)                                                      (d)(h)            5,498,724           -      458,227      5,956,951

Class A2, 8.04%, 12/15/19 (Acquired 06/01/00; Cost $3,901,297)   (d)(h)            4,707,626           -            -      4,707,626

Class A2, 8.04%, 12/15/19 (Acquired 08/20/02; Cost $166,614)     (d)(h)                    -           -      178,771        178,771
Patrons' Legacy                                                                                                                     
Series 2003-III, Ctfs., 5.65%, 01/17/17 (Acquired 11/04/04;  Cost                                                                   
$3,076,230)                                                      (d)(f)            2,543,406           -      508,681      3,052,087
Series 2004-I, Ctfs., 6.67%, 02/04/17 (Acquired 04/30/04; Cost                                                                      
$5,500,000)                                                      (d)(f)            5,097,013           -      509,701      5,606,714
PLC Trust 2003-1, Sec. Notes, 2.71%, 03/31/06 (Acquired 03/23/04;                                                                   
Cost $116,625)                                                   (d)(f)(h)                 -           -      111,218        111,218
Twin Reefs Pass-Through Trust, Floating Rate Pass Through Ctfs.,                                                                    
3.37% (Acquired 12/07/04; Cost $2,100,000)                       (d)(f)(h)(j)(q)   1,910,811           -      201,138      2,111,949
Yorkshire Power Pass-Through Asset Trust (Cayman Islands)-Series                                                                    
2000-1, Pass Through Ctfs., 8.25%, 02/15/05 (Acquired 11/12/03;                                                                     
Cost $694,200)                                                   (d)(f)(h)           603,294           -       50,274        653,568

                                                                                  20,360,874           -    2,018,010     22,378,884

PROPERTY & CASUALTY INSURANCE - 0.09%                                                                                               

North Front Pass-Through Trust, Bonds, 5.81%, 12/15/24 (Acquired                                                                    
12/08/04; Cost $2,369,940)                                       (d)(f)(h)         2,167,351           -      229,484      2,396,835

THRIFTS & MORTGAGE FINANCE - 0.08%                                                                                                  

Sovereign Bank-Class A-1, Pass Through Ctfs., 10.20%, 06/30/05                                                                      
(Acquired 09/22/04; Cost $2,579,172)                             (d)(f)(h)         2,080,331           -      200,860      2,281,191

Total Asset-Backed Securities (Cost $85,654,087)                                  24,608,556  59,062,642    2,448,354     86,119,552

MONEY MARKET FUNDS - 0.23%                                                                                                          

Premier Portfolio   (Cost $6,277,982)                            (r)                       -   6,277,982            -      6,277,982

TOTAL INVESTMENTS--102.67% (excluding investments purchased with                                                                    
cash collateral from securities loaned) (Cost $2,518,763,566)                  1,938,266,426 637,137,742  180,794,340  2,756,198,508

EX-99.77M MERGERS
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 PRO FORMA COMBINING SCHEDULE OF INVESTMENTS *
OF AIM BALANCED FUND AND AIM TOTAL RETURN FUND
INTO AIM BASIC BALANCED FUND
 DECEMBER 31, 2004
 (UNAUDITED)

                                                        [Enlarge/Download Table]

             PRINCIPAL AMOUNT & SHARES                                                                                           
----------------------------------------------------                                                                             
                                             AIM                                                                                 
                                            BASIC                                                                                
                   AIM         AIM         BALANCED                                                                              
     AIM          TOTAL       BASIC          FUND                                                                                
  BALANCED       RETURN      BALANCED     PRO FORMA                                                                              
    FUND          FUND         FUND       COMBINING                                                                              
----------------------------------------------------                                                                             
                                                                                                                                 
                                                      INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED -        
                                                      9.02%                                                                      

                                                      MONEY MARKET FUNDS - 9.02%                                                 

$121,085,396  $          -  $        -  $121,085,396  Liquid Assets Portfolio-Institutional Class                          (r)(s)

 121,085,396             -           -   121,085,396  STIC Prime Portfolio-Institutional Class                             (r)(s)
                                                      Total Money Market Funds (purchased with cash collateral from              
                                                      securities loaned) (Cost $242,170,792)                                     

                                                      TOTAL INVESTMENTS--111.69%  (Cost $2,760,934,358)                          

                                                      OTHER ASSETS LESS LIABILITIES--(11.69%)                                    
                                                      NET ASSETS--100.00%                                                        

                                                        [Enlarge/Download Table]

                                                                                             MARKET VALUE                           
                                                                         -----------------------------------------------------------
                                                                                                                           AIM      
                                                                                             AIM            AIM      BASIC BALANCED 
                                                                               AIM            TOTAL        BASIC          FUND      
                                                                             BALANCED        RETURN      BALANCED       PRO FORMA   
                                                                               FUND           FUND         FUND         COMBINING   
                                                                         -----------------------------------------------------------
                                                                                                                                    
INVESTMENTS PURCHASED WITH CASH COLLATERAL FROM SECURITIES LOANED                                                                   
- 9.02%                                                                                                                             

MONEY MARKET FUNDS - 9.02%                                                                                                          

Liquid Assets Portfolio-Institutional Class                       (r)(s)  $ 121,085,396  $          -            -  $   121,085,396 

STIC Prime Portfolio-Institutional Class                          (r)(s)    121,085,396             -            -      121,085,396 
Total Money Market Funds (purchased with cash collateral from                                                                       
securities loaned) (Cost $242,170,792)                                      242,170,792             -            -      242,170,792 

TOTAL INVESTMENTS--111.69%  (Cost $2,760,934,358)                         2,180,437,218   637,137,742  180,794,340    2,998,369,300 

OTHER ASSETS LESS LIABILITIES--(11.69%)                                    (309,714,704)    1,119,805   (4,116,913)    (312,711,812)
NET ASSETS--100.00%                                                      $1,870,722,514  $638,257,547 $176,677,427   $2,685,657,488 

Investment Abbreviations:                                                       

                                                                [Download Table]
                                                                         
ADR          American Depositary Receipt                                 
Ctfs.        Certificates                                                
Deb.         Debentures                                                  
Disc.        Discounted                                                  
Gtd.         Guaranteed                                                  
Jr.          Junior                                                      
Pfd.         Preferred                                                   
RB           Revenue Bonds                                               
REGS         Regulation S                                                
Sec.         Secured                                                     
Sr.          Senior                                                      
STRIPS       Separately Traded Registered Interest and Principal Security
Sub.         Subordinated                                                
TBA          To Be Announced                                             
Unsec.       Unsecured                                                   
Unsub.       Unsubordinated                                              
Wts.         Warrants                                                    

Notes to ProForma Combining Schedule of Investments:                            

*     As of December 31, 2004 all of the securities held by AIM Balanced Fund   
 and AIM Total Return Fund would comply with the compliance guidelines
and/or investment restrictions of AIM Basic Balanced Fund.          

(a)   Non-income producing security.                                            

(b)   All or a portion of this security has been pledged as collateral for      
security lending transactions at December 31, 2004.                 

(c)   Interest rate is redetermined quarterly. Rate shown is the rate in effect 
on December 31, 2004.                                               

(d)   Security not registered under the Securities Act of 1933, as amended      
(e.g., the security was purchased in a Rule 144A transaction or a   
     Regulation D transaction). The security may be resold only pursuant to an
  exemption from registration under the 1933 Act, typically to qualified
 institutional buyers. AIM Basic Balanced Fund has no rights to demand
 registration of these securities. The aggregate market value of these
 securities for AIM Balanced Fund at December 31, 2004 was 75,643,050,
    which represented 4.04% of AIM Balanced Fund's Net Assets. The aggregate
      market value of these securities for AIM Total Return Fund at December 31,
      2004 was 1,612,835, which represented 0.25% of AIM Total Return Fund's Net
Assets.The aggregate market value of these securities for AIM Basic 
     Balanced Fund at December 31, 2004 was 6,984,710, which represented 3.95%
     of AIM Basic Balanced Fund's Net Assets.The aggregate market value of all
unregistered securities at December 31, 2004 was $84,240,594, which 
represented 3.14% of the pro forma combining Net Assets of AIM Basic
Balanced Fund. Unless otherwise indicated, these securities are not 
considered illiquid.                                                

(e)   Interest rate is redetermined annually. Rate shown is the rate in effect  
on December 31, 2004.                                               

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(f)   Security considered to be illiquid. The aggregate market value of these   
      securities considered illiquid at December 31, 2004 was $46,657,917, which
   represented 2.49% of the Net Assets of AIM Balanced Fund. The aggregate
     market value of these securities considered illiquid at December 31, 2004
  was $4,729,108, which represented 2.68% of the Net Assets of AIM Basic
    Balanced Fund. The aggregate market value of these securities considered
     illiquid at December 31, 2004 was $53,254,502, which represented 1.98% of
the pro forma combining Net Assets of AIM Basic Balanced Fund.      

(g)   In accordance with the procedures established by the Board of Trustees,   
     the foreign security is fair valued using adjusted closing market prices.
    The market value of this security at December 31, 2004 represented 1.94%
 and 2.17% of the Total Investments of AIM Balanced Fund and AIM Basic
      Balanced Fund, respectively. The market value of this security at December
      31, 2004 represented 1.54% of the pro forma combining Total Investments of
AIM Basic Balanced Fund.                                            

(h)   In accordance with the procedures established by the Board of Trustees,   
security fair valued based on an evaluated quote provided by an     
independent pricing service. The aggregate market value of these    
   securities for AIM Balanced Fund at December 31, 2004 was $497,865,734,
   which represented 22.83% of the Total Investments of AIM Balanced Fund.
    The aggregate market value of these securities for AIM Total Return Fund
  at December 31, 2004 was $219,139,824, which represented 34.39% of the
     Total Investments of AIM Total Return Fund. The aggregate market value of
 these securities for AIM Basic Balanced Fund at December 31, 2004 was
 $49,306,517, which represented 27.27% of the Total Investments of AIM
  Basic Balanced Fund. The aggregate market value of these securities at
   December 31, 2004 was $766,312,076, which represented 25.56% of the pro
forma combining Total Investments of AIM Basic Balanced Fund.       

(i)   A portion of the principal balance was pledged as collateral to cover     
margin requirements for open futures contracts.                     

(j)   Perpetual bond with no specified maturity date.                           

(k)   Interest rate is redetermined semi-annually. Rate shown is the rate in    
effect on December 31, 2004.                                        

(l)   Principal and/or interest payments are secured by bond insurance provided 
by one of the following companies: Ambac Assurance Corp., Financial 
Guaranty Insurance Co., Financial Security Assurance Inc., or MBIA  
Insurance Corp.                                                     

(m)   Bond issued at a discount with a zero coupon. The rate shown represents   
      the yield at issue to the remarketing date. The Bond will be remarketed or
convert to a fixed coupon rate at a specified future date.          

(n)   Step coupon bond at issue. The interest rate represents the coupon rate at
which the bond will accrue at a specified future date.              

(o)   Security purchased on forward commitment basis. This security is subject  
to dollar roll transactions.                                        

(p)   Security is traded on a discount basis. The interest rate shown represents
the discount rate at the time of purchase by the Fund.              

(q)   Interest rate is redetermined monthly. Rate shown is the rate in effect on
December 31, 2004.                                                  

(r)   Liquid Assets Portfolio, STIC Prime Portfolio and Premier portfolio are   
     affiliated with AIM Balanced Fund and AIM Total Return Fund by having the
same investment advisor.                                            

(s)   The security has been segregated to satisfy the forward commitment to     
  return the cash collateral received in securities lending transactions
upon the borrower's return of the securities loaned.                

See Accompanying Notes to Proforma Combining Financial Statements.  

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 PRO FORMA COMBINING STATEMENT OF ASSETS & LIABILITIES
OF AIM BALANCED FUND AND
AIM TOTAL RETURN FUND INTO
 AIM BASIC BALANCED FUND
 DECEMBER 31, 2004
 (UNAUDITED)

                                                        [Enlarge/Download Table]


                                                                                 AIM              AIM        AIM BASIC    
                                                                               BALANCED       TOTAL RETURN    BALANCED    
                                                                                 FUND             FUND          FUND      
                                                                            ---------------   ------------  ------------- 
                                                                                                                          
Assets:                                                                                                                   
Investments at market value                                                 $ 1,938,266,426   $630,859,760  $ 180,794,340 
(cost $1,760,597,128 - AIM Balanced Fund)                                                                                 
(cost $599,640,425  - AIM Total Return Fund)                                                                              
(cost $158,526,013  - AIM Basic Balanced Fund)                                                                            
(cost $2,518,763,566 - Pro Forma combining)                                                                               
                                                                            ---------------   ------------  ------------- 
Investments in affiliates                                                       242,170,792      6,277,982             -- 
(cost $242,170,792 - AIM Balanced Fund)                                                                                   
(cost $6,277,982 - AIM Total Return Fund)                                                                                 
(cost $0 - AIM Basic Balanced Fund)                                                                                       
(cost $248,448,774 - Pro Forma combining)                                                                                 
                                                                            ---------------   ------------  ------------- 
Foreign currencies, at market value                                                      74             --             -- 
(cost $61 - AIM Balanced Fund)                                                                                            
(cost $0 - AIM Total Return Fund)                                                                                         
(cost $0 - AIM Basic Balanced Fund)                                                                                       
(cost $61 - Pro Forma combining)                                                                                          
                                                                            ---------------   ------------  ------------- 
Cash                                                                                 48,740             --          5,044 
                                                                            ---------------   ------------  ------------- 
Receivables for:                                                                                                          
   Investments sold                                                              34,642,388             --      1,292,519 
                                                                            ---------------   ------------  ------------- 
   Variation margin                                                                 231,360             --         16,828 
                                                                            ---------------   ------------  ------------- 
   Fund shares sold                                                                 896,040          9,791        126,374 
                                                                            ---------------   ------------  ------------- 
   Dividends and interest                                                         7,924,723      2,162,058        764,644 
                                                                            ---------------   ------------  ------------- 
   Investments matured                                                            1,535,737             --             -- 
                                                                            ---------------   ------------  ------------- 
    Principal paydowns                                                              211,796         78,331         20,449 
                                                                            ---------------   ------------  ------------- 
   Investment for trustee deferred compensation and retirement plans                198,595        222,769         14,393 
                                                                            ---------------   ------------  ------------- 
Other assets                                                                         42,274             --         22,312 
                                                                            ===============   ============  ============= 
          Total assets                                                        2,226,168,945    639,610,691    183,056,903 
                                                                            ===============   ============  ============= 
LIABILITIES:                                                                                                              
Payables for:                                                                                                             
   Investments purchased                                                         98,246,293             --      5,844,826 
                                                                            ---------------   ------------  ------------- 
   Fund shares reacquired                                                        13,131,602        545,093        277,086 
                                                                            ---------------   ------------  ------------- 
   Trustee deferred compensation and retirement plans                               306,986        297,666         18,052 
                                                                            ---------------   ------------  ------------- 
   Collateral upon return of securities loaned                                  242,170,792             --             -- 
                                                                            ---------------   ------------  ------------- 
   Amount due to custodian                                                               --        167,828             -- 
                                                                            ---------------   ------------  ------------- 
Accrued distribution fees                                                           750,548         69,540        107,326 
                                                                            ---------------   ------------  ------------- 
Accrued transfer agent fees                                                         580,773        263,210         85,508 
                                                                            ---------------   ------------  ------------- 
Accrued operating expenses                                                          259,437          9,807         46,678 
                                                                            ---------------   ------------  ------------- 
          Total liabilities                                                     355,446,431      1,353,144      6,379,476 
                                                                            ===============   ============  ============= 

Net assets applicable to shares outstanding                                 $ 1,870,722,514   $638,257,547  $ 176,677,427 
                                                                            ===============   ============  ============= 
NET ASSETS CONSIST OF:                                                                                                    
Shares of beneficial interest                                                 2,360,571,857    553,963,254    154,792,290 
                                                                            ---------------   ------------  ------------- 
Undistributed net investment income  (loss)                                      (5,141,012)       862,957         38,788 
                                                                            ---------------   ------------  ------------- 
Undistributed net realized gain (loss) from investment securities, foreign                                                
  currencies and futures contracts                                             (663,161,487)    45,934,019       (471,776)
                                                                            ---------------   ------------  ------------- 
Unrealized appreciation of investment securities, foreign currencies                                                      
  and futures contracts                                                         178,453,156     37,497,317     22,318,125 
                                                                            ---------------   ------------  ------------- 
                                                                            $ 1,870,722,514   $638,257,547  $ 176,677,427 
                                                                            ===============   ============  ============= 

NET ASSETS:                                                                                                               
Class A                                                                     $ 1,049,415,157   $  4,704,630  $  68,951,179 
                                                                            ===============   ============  ============= 
Class B                                                                     $   604,378,457   $  2,151,013  $  79,967,801 
                                                                            ===============   ============  ============= 
Class C                                                                     $   211,297,376   $  2,503,406  $  27,728,863 
                                                                            ===============   ============  ============= 
Class R                                                                     $     5,620,985   $         --  $      18,972 
                                                                            ===============   ============  ============= 
Investor Class                                                              $            --   $628,887,330  $          -- 
                                                                            ===============   ============  ============= 
Instituitional Class                                                        $        10,539   $     11,168  $      10,612 
                                                                            ===============   ============  ============= 

                                                        [Enlarge/Download Table]

                                                                                               AIM BASIC    
                                                                                             BALANCED FUND  
                                                                                               PROFORMA     
                                                                             ADJUSTMENTS       COMBINING    
                                                                            --------------  --------------- 
                                                                                                            
Assets:                                                                                                     
Investments at market value                                                 $           --    2,749,920,526 
(cost $1,760,597,128 - AIM Balanced Fund)                                                                   
(cost $599,640,425  - AIM Total Return Fund)                                                                
(cost $158,526,013  - AIM Basic Balanced Fund)                                                              
(cost $2,518,763,566 - Pro Forma combining)                                                                 
                                                                            --------------  --------------- 
Investments in affiliates                                                               --      248,448,774 
(cost $242,170,792 - AIM Balanced Fund)                                                                     
(cost $6,277,982 - AIM Total Return Fund)                                                                   
(cost $0 - AIM Basic Balanced Fund)                                                                         
(cost $248,448,774 - Pro Forma combining)                                                                   
                                                                            --------------  --------------- 
Foreign currencies, at market value                                                     --               74 
(cost $61 - AIM Balanced Fund)                                                                              
(cost $0 - AIM Total Return Fund)                                                                           
(cost $0 - AIM Basic Balanced Fund)                                                                         
(cost $61 - Pro Forma combining)                                                                            
                                                                            --------------  --------------- 
Cash                                                                                    --           53,784 
                                                                            --------------  --------------- 
Receivables for:                                                                                            
   Investments sold                                                                     --       35,934,907 
                                                                            --------------  --------------- 
   Variation margin                                                                     --          248,188 
                                                                            --------------  --------------- 
   Fund shares sold                                                                     --        1,032,205 
                                                                            --------------  --------------- 
   Dividends and interest                                                               --       10,851,425 
                                                                            --------------  --------------- 
   Investments matured                                                                  --        1,535,737 
                                                                            --------------  --------------- 
    Principal paydowns                                                                  --          310,576 
                                                                            --------------  --------------- 
   Investment for trustee deferred compensation and retirement plans                    --          435,757 
                                                                            --------------  --------------- 
Other assets                                                                            --           64,586 
                                                                            ==============  =============== 
          Total assets                                                                  --    3,048,836,539 
                                                                            ==============  =============== 
LIABILITIES:                                                                                                
Payables for:                                                                                               
   Investments purchased                                                                --      104,091,119 
                                                                            --------------  --------------- 
   Fund shares reacquired                                                               --       13,953,781 
                                                                            --------------  --------------- 
   Trustee deferred compensation and retirement plans                                   --          622,704 
                                                                            --------------  --------------- 
   Collateral upon return of securities loaned                                          --      242,170,792 
                                                                            --------------  --------------- 
   Amount due to custodian                                                              --          167,828 
                                                                            --------------  --------------- 
Accrued distribution fees                                                               --          927,414 
                                                                            --------------  --------------- 
Accrued transfer agent fees                                                             --          929,491 
                                                                            --------------  --------------- 
Accrued operating expenses                                                              --          315,922 
                                                                            --------------  --------------- 
          Total liabilities                                                             --      363,179,051 
                                                                            ==============  =============== 

Net assets applicable to shares outstanding                                 $           --  $ 2,685,657,488 
                                                                            ==============  =============== 
NET ASSETS CONSIST OF:                                                                                      
Shares of beneficial interest                                                           --    3,069,327,401 
                                                                            --------------  --------------- 
Undistributed net investment income  (loss)                                             --       (4,239,267)
                                                                            --------------  --------------- 
Undistributed net realized gain (loss) from investment securities, foreign                                  
  currencies and futures contracts                                                      --     (617,699,244)
                                                                            --------------  --------------- 
Unrealized appreciation of investment securities, foreign currencies                                        
  and futures contracts                                                                 --      238,268,598 
                                                                            --------------  --------------- 
                                                                            $           --  $ 2,685,657,488 
                                                                            ==============  =============== 

NET ASSETS:                                                                                                 
Class A                                                                     $           --  $ 1,123,070,966 
                                                                            ==============  =============== 
Class B                                                                     $           --  $   686,497,271 
                                                                            ==============  =============== 
Class C                                                                     $           --  $   241,529,645 
                                                                            ==============  =============== 
Class R                                                                     $           --  $     5,639,957 
                                                                            ==============  =============== 
Investor Class                                                              $           --  $   628,887,330 
                                                                            ==============  =============== 
Instituitional Class                                                        $           --  $        32,319 
                                                                            ==============  =============== 

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                                                        [Enlarge/Download Table]


                                                                               AIM             AIM        AIM BASIC   
                                                                             BALANCED      TOTAL RETURN    BALANCED   
                                                                               FUND            FUND          FUND     
                                                                          ---------------  ------------  -------------
                                                                                                                      
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE (AIM BALANCED FUND):                                                    
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE (AIM TOTAL RETURN FUND)                                                 
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE (AIM BASIC BALANCED FUND):                                              

Class A                                                                        41,473,872       196,602      5,815,514
                                                                          ===============  ============  =============
Class B                                                                        23,938,724        90,458      6,754,534
                                                                          ===============  ============  =============
Class C                                                                         8,356,529       104,455      2,340,704
                                                                          ===============  ============  =============
Class R                                                                           221,893            --          1,598
                                                                          ===============  ============  =============
Investor Class                                                                         --    25,673,810             --
                                                                          ===============  ============  =============
Instituitional Class                                                                416.3           466            895
                                                                          ===============  ============  =============
Class A:                                                                                                              
   Net asset value per share                                              $         25.30  $      23.93  $       11.86
                                                                          ---------------  ------------  -------------
   Offering price per share:                                                                                          
      (Net asset value of $25.30 /95.25% - AIM Balanced Fund)                                                         
      (Net asset value of $23.93 / 94.50% - AIM Total Return Fund)                                                    
      (Net asset value of $11.86 / 95.25% - AIM Basic Balanced Fund)                                     $       12.45
Class B:                                                                                                              
   Net asset value and offering price per share                           $         25.25  $      23.78  $       11.84
                                                                          ===============  ============  =============
Class C:                                                                                                              
   Net asset value and offering price per share                           $         25.29  $      23.97  $       11.85
                                                                          ===============  ============  =============
Class R:                                                                                                              
   Net asset value and offering price per share                           $         25.33  $         --  $       11.87
                                                                          ===============  ============  =============
Investor Class shares:                                                                                                
   Net asset value and offering price per share                           $            --  $      24.50  $          --
                                                                          ===============  ============  =============
Institutional Class:                                                                                                  
   Net asset value and offering price per share                           $         25.32  $      23.95          11.86
                                                                          ===============  ============  =============

                                                        [Enlarge/Download Table]

                                                                                             AIM BASIC   
                                                                                           BALANCED FUND 
                                                                                             PROFORMA    
                                                                           ADJUSTMENTS       COMBINING   
                                                                          --------------  ---------------
                                                                                                         
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE (AIM BALANCED FUND):                                       
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE (AIM TOTAL RETURN FUND)                                    
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE (AIM BASIC BALANCED FUND):                                 

Class A                                                                       88,869,616       94,685,130
                                                                          ==============  ===============
Class B                                                                       51,233,435       57,987,969
                                                                          ==============  ===============
Class C                                                                       18,045,604       20,386,308
                                                                          ==============  ===============
Class R                                                                          473,509          475,107
                                                                          ==============  ===============
Investor Class                                                                53,036,117       53,036,117
                                                                          ==============  ===============
Instituitional Class                                                               1,831            2,726
                                                                          ==============  ===============
Class A:                                                                                                 
   Net asset value per share                                              $           --  $         11.86
                                                                          --------------  ---------------
   Offering price per share:                                                                             
      (Net asset value of $25.30 /95.25% - AIM Balanced Fund)                             $         26.56
      (Net asset value of $23.93 / 94.50% - AIM Total Return Fund)                        $         25.32
      (Net asset value of $11.86 / 95.25% - AIM Basic Balanced Fund)      $           --  $         12.45
Class B:                                                                                                 
   Net asset value and offering price per share                           $           --  $         11.84
                                                                          ==============  ===============
Class C:                                                                                                 
   Net asset value and offering price per share                           $           --  $         11.85
                                                                          ==============  ===============
Class R:                                                                                                 
   Net asset value and offering price per share                           $           --  $         11.87
                                                                          ==============  ===============
Investor Class shares:                                                                                   
   Net asset value and offering price per share                           $           --  $         24.50
                                                                          ==============  ===============
Institutional Class:                                                                                     
   Net asset value and offering price per share                           $           --  $         11.86
                                                                          ==============  ===============

SEE ACCOMPANYING NOTES TO PRO FORMA COMBINING FINANCIAL STATEMENTS              

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 PRO FORMA COMBINING STATEMENT OF OPERATIONS
OF AIM BALANCED FUND AND
AIM TOTAL RETURN FUND INTO
 AIM BASIC BALANCED FUND
 FOR THE YEAR ENDING DECEMBER 31, 2004
 (UNAUDITED)

                                                        [Enlarge/Download Table]


                                                                                                AIM TOTAL      AIM BASIC   
                                                                               AIM BALANCED       RETURN        BALANCED   
                                                                                   FUND            FUND           FUND     
                                                                               -------------   ------------   ------------ 
                                                                                                                           
Investment income:                                                                                                         
                                                                               -------------   ------------   ------------ 
Interest                                                                       $  30,801,224   $ 13,987,422   $  2,180,680 
                                                                               -------------   ------------   ------------ 
Dividends                                                                         19,345,706      8,132,219      1,533,906 
     (net of foreign withholding tax of $285,253 - AIM Balanced Fund) (net of                                              
     foreign withholding tax of $0 - AIM Total Return Fund) (net of foreign                                                
     withholding tax of $19,571 - AIM Basic Balanced Fund) (net of foreign                                                 
     withholding tax of $304,824 - Pro forma combination)                                                                  
                                                                               -------------   ------------   ------------ 
Dividends from affiliated money market funds                                         323,468        171,440             -- 
     (including security lending income of $323,468 - AIM Balanced Fund)                                                   
     (including security lending income of $1,087 - AIM Total Return Fund)                                                 
     (including security lending income of $0 - AIM Basic Balanced Fund)                                                   
     (including security lending income of $324,555 - Pro forma combination)                                               
                                                                               =============   ============   ============ 
     Total investment income                                                      50,470,398     22,291,081      3,714,586 
                                                                               =============   ============   ============ 
EXPENSES:                                                                                                                  
Advisory fees                                                                     10,703,307      5,636,595      1,094,829 
                                                                               -------------   ------------   ------------ 
Administrative services fees                                                         458,536        305,813         50,000 
                                                                               -------------   ------------   ------------ 
Custodian fees                                                                       302,990         92,914         32,443 
                                                                               -------------   ------------   ------------ 
Distribution fees:                                                                                                         
                                                                               -------------   ------------   ------------ 
   Class A                                                                         2,887,535         19,837        217,699 
                                                                               -------------   ------------   ------------ 
   Class B                                                                         6,710,792         15,880        796,944 
                                                                               -------------   ------------   ------------ 
   Class C                                                                         2,349,482         26,242        265,274 
                                                                               -------------   ------------   ------------ 
   Class R                                                                            23,049             --             35 
                                                                               -------------   ------------   ------------ 
   Investor Class                                                                         --      1,950,887             -- 
                                                                               -------------   ------------   ------------ 
Transfer agent fees-Class A, B, C and R                                            4,790,611      2,891,150        493,477 
                                                                               -------------   ------------   ------------ 
Transfer agent fees-Instiutional Class                                                    23             11              7 
                                                                               -------------   ------------   ------------ 
Trustees' fees and retirement benefits                                                68,735         20,600         17,423 
                                                                               -------------   ------------   ------------ 
Other                                                                                742,795        211,480        240,236 
                                                                               =============   ============   ============ 
     Total expenses                                                               29,037,855     11,171,409      3,208,367 
                                                                               =============   ============   ============ 
Less: Fees waived, expenses reimbursed and expense offset arrangements              (258,923)    (1,343,399)       (37,052)
                                                                               =============   ============   ============ 
     Net expenses                                                                 28,778,932      9,828,010      3,171,315 
                                                                               =============   ============   ============ 
Net investment income (loss)                                                      21,691,466     12,463,071        543,271 
                                                                               =============   ============   ============ 
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES,                                                              
   FOREIGN CURRENCIES AND FUTURES CONTRACTS                                                                                
Net realized gain from:                                                                                                    
     Investment securities                                                        90,280,637     61,693,020      8,095,387 
                                                                               -------------   ------------   ------------ 
     Foreign currencies                                                                7,933             --          3,430 
                                                                               -------------   ------------   ------------ 
     Futures contracts                                                             1,430,062        263,457        165,646 
                                                                               =============   ============   ============ 
                                                                                  91,718,632     61,956,477      8,264,463 
                                                                               =============   ============   ============ 
Net unrealized appreciation of:                                                                                            
     Investment securities                                                        25,925,592         36,609      1,548,687 
                                                                               -------------   ------------   ------------ 
     Foreign currencies                                                               44,599             --             -- 
                                                                               -------------   ------------   ------------ 
     Futures contracts                                                               783,890        271,041         49,798 
                                                                               =============   ============   ============ 
                                                                                  26,754,081        307,650      1,598,485 
                                                                               =============   ============   ============ 
Undistributed net realized gain (loss) from investment securities, foreign                                                 
  currencies and futures contracts                                               118,472,713     62,264,127      9,862,948 
                                                                               =============   ============   ============ 
Unrealized appreciation of investment securities, foreign currencies                                                       
  and futures contracts                                                        $ 140,164,179   $ 74,727,198   $ 10,406,219 
                                                                               =============   ============   ============ 

                                                        [Enlarge/Download Table]

                                                                                             AIM BASIC    
                                                                                            BALANCED FUND 
                                                                                              PROFORMA    
                                                                               ADJUSTMENTS    COMBINING   
                                                                               -----------  ------------- 
                                                                                                          
Investment income:                                                                                        
                                                                               -----------  ------------- 
Interest                                                                       $        --  $  46,969,326 
                                                                               -----------  ------------- 
Dividends                                                                               --     29,011,831 
     (net of foreign withholding tax of $285,253 - AIM Balanced Fund) (net of                             
     foreign withholding tax of $0 - AIM Total Return Fund) (net of foreign                               
     withholding tax of $19,571 - AIM Basic Balanced Fund) (net of foreign                                
     withholding tax of $304,824 - Pro forma combination)                                                 
                                                                               -----------  ------------- 
Dividends from affiliated money market funds                                            --        494,908 
     (including security lending income of $323,468 - AIM Balanced Fund)                                  
     (including security lending income of $1,087 - AIM Total Return Fund)                                
     (including security lending income of $0 - AIM Basic Balanced Fund)                                  
     (including security lending income of $324,555 - Pro forma combination)                              
                                                                               ===========  ============= 
     Total investment income                                                            --     76,476,065 
                                                                               ===========  ============= 
EXPENSES:                                                                                                 
Advisory fees                                                                   (2,600,192)    14,834,539 
                                                                               -----------  ------------- 
Administrative services fees                                                      (223,619)       590,730 
                                                                               -----------  ------------- 
Custodian fees                                                                          --        428,347 
                                                                               -----------  ------------- 
Distribution fees:                                                                                        
                                                                               -----------  ------------- 
   Class A                                                                         (67,868)     3,057,203 
                                                                               -----------  ------------- 
   Class B                                                                              --      7,523,616 
                                                                               -----------  ------------- 
   Class C                                                                              --      2,640,998 
                                                                               -----------  ------------- 
   Class R                                                                              --         23,084 
                                                                               -----------  ------------- 
   Investor Class                                                                       --      1,950,887 
                                                                               -----------  ------------- 
Transfer agent fees-Class A, B, C and R                                                 --      8,175,238 
                                                                               -----------  ------------- 
Transfer agent fees-Instiutional Class                                                  --             41 
                                                                               -----------  ------------- 
Trustees' fees and retirement benefits                                                  --        106,758 
                                                                               -----------  ------------- 
Other                                                                              (75,107)     1,119,404 
                                                                               ===========  ============= 
     Total expenses                                                             (2,966,786)    40,450,845 
                                                                               ===========  ============= 
Less: Fees waived, expenses reimbursed and expense offset arrangements           1,343,399       (295,975)
                                                                               ===========  ============= 
     Net expenses                                                               (1,623,387)    40,154,870 
                                                                               ===========  ============= 
Net investment income (loss)                                                     1,623,387     36,321,195 
                                                                               ===========  ============= 
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES,                                             
   FOREIGN CURRENCIES AND FUTURES CONTRACTS                                                               
Net realized gain from:                                                                                   
     Investment securities                                                              --    160,069,044 
                                                                               -----------  ------------- 
     Foreign currencies                                                                 --         11,363 
                                                                               -----------  ------------- 
     Futures contracts                                                                  --      1,859,165 
                                                                               ===========  ============= 
                                                                                        --    161,939,572 
                                                                               ===========  ============= 
Net unrealized appreciation of:                                                                           
     Investment securities                                                              --     27,510,888 
                                                                               -----------  ------------- 
     Foreign currencies                                                                 --         44,599 
                                                                               -----------  ------------- 
     Futures contracts                                                                  --      1,104,729 
                                                                               ===========  ============= 
                                                                                        --     28,660,216 
                                                                               ===========  ============= 
Undistributed net realized gain (loss) from investment securities, foreign                                
  currencies and futures contracts                                                      --    190,599,788 
                                                                               ===========  ============= 
Unrealized appreciation of investment securities, foreign currencies                                      
  and futures contracts                                                        $ 1,623,387  $ 226,920,983 
                                                                               ===========  ============= 

SEE ACCOMPANYING NOTES TO PRO FORMA COMBINING FINANCIAL STATEMENTS.             

EX-99.77M MERGERS
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 PRO FORMA COMBINING NOTES TO FINANCIAL STATEMENTS
OF AIM BALANCED FUND AND
AIM TOTAL RETURN FUND INTO
 AIM BASIC BALANCED FUND
 DECEMBER 31, 2004
 (UNAUDITED)

NOTE 1 - BASIS OF PRO FORMA PRESENTATION                                        

The pro forma financial statements and the accompanying pro forma schedule of   
investments give effect to the proposed Plan of Reorganization between AIM      
Balanced Fund and AIM Basic Balanced Fund and the Agreement and Plan of         
Reorganization between AIM Total Return Fund and AIM Basic Balanced Fund        
(collectively, the "Plans") and the consummation of transactions contemplated   
therein to be accounted for as a tax-free reorganization of investment          
companies. The Plans would be accomplished by an exchange of shares of AIM Basic
Balanced Fund for the net assets of AIM Balanced Fund and AIM Total Return Fund 
and the distribution of AIM Basic Balanced shares to AIM Balanced Fund and AIM  
Total Return Fund shareholders. If the Plans were to have taken place at        
December 31, 2004, AIM Balanced Fund - Class A shareholders would have received 
88,472,931 shares of AIM Basic Balanced Fund - Class A shares; AIM Balanced Fund
- Class B shareholders would have received 51,051,755 shares of AIM Basic       
Balanced Fund - Class B shares; AIM Balanced Fund - Class C shareholders would  
have received 17,834,314 shares of AIM Basic Balanced Fund - Class C shares; AIM
Balanced Fund - Class R shareholders would have received 473,509 shares of AIM  
Basic Balanced Fund - Class R shares and AIM Balanced Fund - Institutional Class
shareholders would have received 889 shares of AIM Basic Balanced Fund -        
Institutional Class shares. AIM Total Return Fund - Class A shareholders would  
have received 396,685 shares of AIM Basic Balanced Fund - Class A shares; AIM   
Total Return Fund - Class B shareholders would have received 181,680 shares of  
AIM Basic Balanced Fund - Class B shares; AIM Total Return Fund- Class C        
shareholders would have received 211,290 shares of AIM Basic Balanced Fund -    
Class C shares; AIM Total Return Fund - Investor Class shareholders would have  
received 53,036,117 of AIM Basic Balanced Fund - Investor Class shares and AIM  
Total Return Fund Institutional Class shareholders would have received 942      
shares of AIM Basic Balanced Fund - Institutional Class shares.                 

    The preparation of pro forma combined 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 pro forma combined         
financial statements and the reported amounts of revenues and expenses during   
the reporting period. Actual results could differ from those estimates.         

NOTE 2 - PRO FORMA ADJUSTMENTS                                                  

(a) Under the terms of the investment advisory agreement of AIM Basic Balanced  
Fund, the advisory fees based on pro forma combined assets for the year ended   
December 31, 2004 were $14,834,539. The advisory fees were adjusted to reflect  
the advisory fee rates in effect for AIM Basic Balanced Fund.                   

Upon the closing date of the merger transaction of both AIM Balanced Fund and   
AIM Total Return Fund, the advisory fee payable by AIM Basic Balanced Fund will 
be permanently reduced to 0.65% of the first $150 million, plus 0.50% of the    
next $1.85 billion, plus 0.45% of the next $2 billion, plus 0.40% of the next $2
billion, plus 0.375% of the next $2 billion, plus 0.35% of the Fund's average   
daily net assets in excess of $8 billion.                                       

Upon the closing date of the merger transaction of AIM Balanced Fund only, the  
advisory fee payable by AIM Basic Balanced Fund will be permanently reduced to  
0.65% of the first $150 million, plus 0.50% of the next $4.85 billion, plus     
0.475% of the next $5 billion, plus 0.45% of the Fund's average daily net assets
in excess of $10 billion.                                                       

Upon the closing date of the merger transaction of AIM Total Return Fund only,  
the advisory fee payable by AIM Basic Balanced Fund will be permanently reduced 
to 0.65% of the first $1 billion, plus 0.50% of the next $1 billion, plus 0.45% 
of the next $2 billion, plus 0.40% of the next $2 billion, plus 0.375% of the   
next $2 billion, plus 0.35% of the Fund's average daily net assets in excess of 
$8 billion.                                                                     

(b) Pursuant to the master administrative services agreement for AIM Basic      
Balanced Fund, fees paid on pro forma combined assets for the year ended        
December 31, 2004 were $590,730. The administrative services fees were adjusted 
to reflect the fees in effect under the administrative services agreement for   
the AIM Basic Balanced Fund.                                                    

(c) Upon the closing date of the merger transaction, the distribution fee for   
Class A shares of the AIM Basic Balanced Fund will be permanently reduced from  
0.35% to 0.25% of average daily net assets. The Class A distribution fees on the
pro forma combined assets for the year ended December 31, 2004 were $3,057,203  
adjusted for the reduction in Class A distribution fees.                        

(d) Other expenses were reduced by $75,107 to eliminate the effects of          
duplicative fixed costs of professional services fees.                          

NOTE 3 - REORGANIZATION COSTS                                                   

Merger costs related to the Plans are estimated at approximately $1,240,000 and 
because these are non recurring costs they have not been included in the        
unaudited pro forma statement of operations. These costs represent the estimated
expense of AIM Balanced Fund and AIM Total Return Fund carrying out their       
obligations under the Plans and consist of management's estimate of professional
services fees, printing costs and mailing charges related to the proposed       
reorganizations. The reorganization costs related to AIM Balanced Fund are      
estimated to be $899,000 and AIM has agreed to pay 100% of these costs. The     
reorganization costs related to AIM Total Return Fund are estimated to be       
$341,000 and AIM has agreed to pay 100% of these costs.                         

EX-99.77M MERGERS
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[AIM INVESTMENTS LOGO APPEARS HERE]  P.O. BOX 9132                              
- --Registered Trademark--             HINGHAM, MA 02043-9132                   

 EACH SHAREHOLDER'S VOTE IS IMPORTANT! PLEASE VOTE YOUR PROXY TODAY!

 FOUR EASY WAYS TO VOTE YOUR PROXY

  INTERNET: Go to www.aiminvestments.com/proxy and follow the online directions.

TELEPHONE: Call 1-800-690-6903 and follow the simple instructions.            

MAIL: Vote, sign, date and return your proxy by mail.               

IN PERSON: Vote at the Special Meeting of Shareholders.                       

                                                        [Enlarge/Download Table]
                                                                                                                                    
AIM BALANCED FUND (THE "FUND")                                                PROXY SOLICITED BY THE BOARD OF TRUSTEES (THE "BOARD")
AN INVESTMENT PORTFOLIO OF AIM FUNDS GROUP                                           PROXY FOR SPECIAL MEETING OF SHAREHOLDERS TO BE
                                                                                                                  HELD JUNE 28, 2005

The undersigned hereby appoints Mark H. Williamson, Robert H. Graham, Kevin M. Carome, Sidney M. Dilgren and Ofelia M. Mayo, and any
one of them separately, proxies with full power of substitution in each, and hereby authorizes them to represent and to vote, as    
designated on the reverse of this proxy card, at the Special Meeting of Shareholders on June 28, 2005, at 11:00 a.m., Central Time, 
and at any adjournment or postponement thereof, all of the shares of the FUND which the undersigned would be entitled to vote if    
personally present. IF THIS PROXY IS SIGNED AND RETURNED WITH NO CHOICE INDICATED, THE SHARES WILL BE VOTED "FOR" THE APPROVAL OF   
THE PROPOSAL.                                                                                                                       

                                                                               NOTE: IF YOU VOTE BY TELEPHONE OR ON THE INTERNET,   
                                                                                     PLEASE DO NOT RETURN YOUR PROXY CARD.          

                                                                                     PROXY MUST BE SIGNED AND DATED BELOW.          

                                                                               Dated                         2005                   
                                                                                     -----------------------                        

                                                                               -----------------------------------------------------
                                                                               Signature(s) (if held jointly)      (SIGN IN THE BOX)

                                                                               NOTE: PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ON    
                                                                               THIS PROXY CARD. All joint owners should sign. When  
                                                                               signing as executor, administrator, attorney, trustee
                                                                               or guardian or as custodian for a minor, please give 
                                                                               full title as such. If a corporation, limited        
                                                                               liability company, or partnership, please sign in    
                                                                               full entity name and indicate the signer's position  
                                                                               with the entity.                                     

                                                                                                                        Aim 2 - DH  

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                                                        [Enlarge/Download Table]
                                                                                                                                    
                                                       PLEASE FILL IN BOX AS SHOWN USING BLACK OR BLUE INK OR NUMBER 2 PENCIL.   (X)
                                                       PLEASE DO NOT USE FINE POINT PENS.                                           

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD. THE BOARD RECOMMENDS VOTING "FOR" THE PROPOSAL.                                     

                                                                                               FOR     AGAINST    ABSTAIN           

1.   Approve a Plan of Reorganization (the "Plan") under which all of the assets               ( )       ( )        ( )             
     of AIM Balanced Fund (the "Fund"), an investment portfolio of AIM Funds                                                        
     Group ("AFG"), will be transferred to AIM Basic Balanced Fund ("Buying Fund"),                                                 
     which is also an investment portfolio of AFG. Buying Fund will assume the                                                      
     liabilities of the Fund and AFG will issue shares of each class of Buying                                                      
     Fund to shareholders of the corresponding class of shares of the Fund.                                                         

PROXIES ARE AUTHORIZED TO VOTE, IN THEIR DISCRETION, UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY        
ADJOURNMENT OR POSTPONEMENT THEREOF.                                                                                                

                         PLEASE VOTE, SIGN AND DATE THIS PROXY CARD AND RETURN IT IN THE ENCLOSED ENVELOPE.                         

                                                                                                                    Aim Bal - DH    

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[AIM INVESTMENTS LOGO APPEARS HERE]  P.O. BOX 9132                              
- --Registered Trademark--             HINGHAM, MA 02043-9132                   

 EACH SHAREHOLDER'S VOTE IS IMPORTANT! PLEASE VOTE YOUR PROXY TODAY!

 FOUR EASY WAYS TO VOTE YOUR PROXY

  INTERNET: Go to www.aiminvestments.com/proxy and follow the online directions.

TELEPHONE: Call 1-800-690-6903 and follow the simple instructions.            

MAIL: Vote, sign, date and return your proxy by mail.               

IN PERSON: Vote at the Special Meeting of Shareholders.                       

                                                        [Enlarge/Download Table]
                                                                                                                                    
AIM TOTAL RETURN FUND (THE "FUND")                                            PROXY SOLICITED BY THE BOARD OF TRUSTEES (THE "BOARD")
AN INVESTMENT PORTFOLIO OF AIM COMBINATION STOCK & BOND FUNDS                        PROXY FOR SPECIAL MEETING OF SHAREHOLDERS TO BE
                                                                                                                  HELD JUNE 28, 2005

The undersigned hereby appoints Mark H. Williamson, Robert H. Graham, Kevin M. Carome, Sidney M. Dilgren and Ofelia M. Mayo, and any
one of them separately, proxies with full power of substitution in each, and hereby authorizes them to represent and to vote, as    
designated on the reverse of this proxy card, at the Special Meeting of Shareholders on June 28, 2005, at 11:00 a.m., Central Time, 
and at any adjournment or postponement thereof, all of the shares of the FUND which the undersigned would be entitled to vote if    
personally present. IF THIS PROXY IS SIGNED AND RETURNED WITH NO CHOICE INDICATED, THE SHARES WILL BE VOTED "FOR" THE APPROVAL OF   
THE PROPOSAL.                                                                                                                       

                                                                               NOTE: IF YOU VOTE BY TELEPHONE OR ON THE INTERNET,   
                                                                                     PLEASE DO NOT RETURN YOUR PROXY CARD.          

                                                                                     PROXY MUST BE SIGNED AND DATED BELOW.          

                                                                               Dated                         2005                   
                                                                                     -----------------------                        

                                                                               -----------------------------------------------------
                                                                               Signature(s) (if held jointly)      (SIGN IN THE BOX)

                                                                               NOTE: PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ON    
                                                                               THIS PROXY CARD. All joint owners should sign. When  
                                                                               signing as executor, administrator, attorney, trustee
                                                                               or guardian or as custodian for a minor, please give 
                                                                               full title as such. If a corporation, limited        
                                                                               liability company, or partnership, please sign in    
                                                                               full entity name and indicate the signer's position  
                                                                               with the entity.                                     

                                                                                                                         Aim 2 - DH 

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                                                        [Enlarge/Download Table]
                                                                                                                                    
                                                       PLEASE FILL IN BOX AS SHOWN USING BLACK OR BLUE INK OR NUMBER 2 PENCIL.   (X)
                                                       PLEASE DO NOT USE FINE POINT PENS.                                           

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD. THE BOARD RECOMMENDS VOTING "FOR" THE PROPOSAL.                                     

                                                                                             FOR     AGAINST    ABSTAIN             

1.    Approve an Agreement and Plan of Reorganization (the "Plan") under which               ( )       ( )        ( )               
      all of the assets of AIM Total Return Fund (the "Fund"), an investment                                                        
      portfolio of AIM Combination Stock & Bond Funds, will be transferred to                                                       
      AIM Basic Balanced Fund ("Buying Fund"), an investment portfolio of AIM                                                       
      Funds Group ("AFG"). Buying Fund will assume the liabilities of the Fund                                                      
      and AFG will issue shares of each class of Buying Fund to shareholders of                                                     
      the corresponding class of shares of the Fund.                                                                                

PROXIES ARE AUTHORIZED TO VOTE, IN THEIR DISCRETION, UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY        
ADJOURNMENT OR POSTPONEMENT THEREOF.                                                                                                

                         PLEASE VOTE, SIGN AND DATE THIS PROXY CARD AND RETURN IT IN THE ENCLOSED ENVELOPE.                         

                                                                                                                  Aim Tot Ret - DH