N-CSR 1 a08-11961_8ncsr.htm N-CSR

 

 

 

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SECURITIES AND EXCHANGE COMMISSION

 

 

Washington, D.C. 20549

 

 

FORM N-CSR

 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES

 

Investment Company Act file number

  811-03826

 

AIM Sector Funds

(Exact name of registrant as specified in charter)

 

11 Greenway Plaza, Suite 100 Houston, Texas

 

77046

(Address of principal executive offices)

 

(Zip code)

 

Philip A. Taylor 11 Greenway Plaza, Suite 100 Houston, Texas 77046

(Name and address of agent for service)

 

Registrant’s telephone number, including area code:

(713) 626-1919

 

 

Date of fiscal year end:

3/31

 

 

Date of reporting period:

3/31/08

 

 



 

ITEM 1. REPORTS TO STOCKHOLDERS.

 



 

AIM Energy Fund

 

Annual Report to Shareholders · March 31, 2008

 

[Invesco Aim Logo]

- service mark -

 

[Mountain Graphic]

 

2

 

Letters to Shareholders

4

 

Performance Summary

4

 

Management Discussion

6

 

Long-Term Fund Performance

8

 

Supplemental Information

9

 

Schedule of Investments

11

 

Financial Statements

14

 

Notes to Financial Statements

20

 

Financial Highlights

24

 

Auditor’s Report

25

 

Fund Expenses

26

 

Approval of Sub-Advisory Agreement

27

 

Tax Information

28

 

Results of Proxy

30

 

Trustees and Officers

 



 

[Taylor
Photo]

 

Philip Taylor

 

Dear Shareholders:

 

I’m pleased to provide you with this report, which includes a discussion of how your Fund was managed during the period under review, and what factors affected its performance. The following pages contain important information that answers questions you may have about your investment.

 

As you’re no doubt aware, U.S. economic growth, while remaining positive overall, slowed considerably during the second half of the period covered by this report. Several factors contributed to this slowdown, including weakness in the housing market, rising energy prices, a credit “crunch” and slowing consumer spending. In response to these events, the U.S. Federal Reserve Board (the Fed) aggressively lowered short-term interest rates six times in an effort to stimulate growth, for a total reduction of 3.0% – from 5.25% to 2.25%.(1) The Fed also expanded its lending authority and increased liquidity in an effort to ensure the financial markets continued to function smoothly.

 

In other market news, we saw the U.S. stock market generally rise during the first half of the fiscal year ended March 31, 2008, followed by a general decline in the second half of the fiscal year. We also saw some increased stock market volatility in the fourth quarter of 2007 and the first quarter of 2008. Looking at the bond market, we watched the yield curve go from somewhat inverted at the beginning of the fiscal year (meaning short-term Treasury yields were higher than long-term yields), to a more normal shape (with long-term Treasury yields higher than short-term yields) by the close of the fiscal year. This change was due largely to the Fed’s decision to lower short-term interest rate targets. Historically, inverted yield curves have been reliable predictors of economic difficulty, while normal-shaped or positive yield curves have foretold a relatively healthy and expanding economy.

 

Market volatility is, of course, not new to anyone. What is new is our name, Invesco Aim, logo and look – in short, we have a new brand. If this is the first you’re hearing of the new brand, you’re probably asking “what does this mean?” It’s simple: This brand better reflects our primary objective – to put the interests of our investors first by offering diversified investment strategies that seek to help investors reach their financial goals. Invesco Aim represents the strength of global diversification you get through the combination of Invesco’s worldwide resources and AIM’s 30-year tradition of delivering quality investment products to the U.S. marketplace. As one of the world’s largest and most diversified global investment organizations, Invesco has more than 500 investment professionals operating in investment centers in 25 cities, a presence in 12 countries and $500 billion in assets under management globally at the end of 2007.

 

As for our new logo, it’s fashioned after Ama Dablam, one of the most imposing and impressive peaks in the Himalayas. It represents what we hope you will envision when you think of Invesco Aim: stability, endurance, strength and longevity – which are all, by the way, sound investment principles.

 

While our name, logo and look have changed, the names of your funds and their trading symbols remain the same – as do all of our telephone contact numbers. Most important, our commitment to serving you remains the same. All of us at Invesco Aim will continue to strive to provide you with solid investment performance, attractive product solutions and high-quality customer service. Regardless of market conditions, Invesco Aim will hold true to its mission: seeking to build financial security for investors.

 

To learn more, talk with your financial advisor and visit our new Web site: invescoaim.com.

 

And may I be the first to say: Welcome to Invesco Aim!

 

 

Sincerely,

 

 

/s/ Philip Taylor

 

 

Philip Taylor

CEO, Invesco Aim

Senior Managing Director, Invesco

 

May 19, 2008

 


(1) U.S. Federal Reserve Board

 

2



 

[Crockett
Photo]

 

Bruce Crockett

 

Dear Fellow AIM Fund Shareholders:

 

The lines of communication are open: More than 250 of you have responded to the invitation I extended in my previous letter to complete an online survey, and more than 50 shareholders have contacted me directly by e-mail. When I could respond quickly and easily to a shareholder’s specific concern I did, but the messages for the most part raised consistent issues that I respond to here.

 

I have received many suggestions, a few complaints, and one offer to buy a gold mine! In general, your letters expressed an appreciation for transparency, frankness and the opportunity to comment. Nevertheless, several shareholders found room for improvement in communications. Some would like more concise letters while others would prefer reports to be more customized for their particular information needs. With these reports going to tens of thousands of people, shareholder communications necessarily have to cover those issues common to a diverse population as well as the information required by law. The ability to change or further customize letters and reports is also affected by technology, timeliness and cost.

 

Online survey responders preferred electronic communications to paper at a ratio of 63% to 37%. Direct responders expressed more of a preference for paper, especially for long reports. Electronic communications are more cost-effective than paper communications that have to be printed and mailed, so I encourage those who have resisted electronic communications to give them a try.

 

The correspondence shows that improving fund performance and reducing shareholder costs remain the key shareholder concerns. Several letters noted individual funds where performance had changed for the better, while others remained dissatisfied with the returns from funds they hold. Although 75% of the online survey responders wanted to see more overall fund performance data in these letters, and 58% wanted more information on individual funds, Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) rules are very specific about the way fund performance can be discussed in print. Respect for those rules prevents me from commenting on individual funds or very recent results here, but I can assure you that your Board and all of its Investments subcommittees continue to work with Invesco Aim to make improved performance a top priority for all fund managers.

 

Expense levels came up as another dominant issue, and no respondent felt these were too low. Several shareholders questioned the need for 12b-1 fees, which cover the cost of distributing fund shares and thereby help the fund to attract new assets. Your Board reviews the funds’ 12b-1 fees annually with the shareholders’ best interests in mind. While your Board keeps its eye on containing or lowering these fees wherever possible, we also are mindful that 12b-1 fees may be necessary in order to maintain an effective distribution system for fund shares.

 

The value of communication between the Board and shareholders has been noted within and beyond the Invesco Aim community. In the online survey, 87% of the respondents felt it was either somewhat or very important to hear directly from the Board, with 55% saying it was very important. Morningstar™, the mutual fund tracking company, also commented favorably on this channel of communication in its fall 2007 update of fund stewardship grades, where Invesco Aim was one of fewer than 10 fund boards to get an A for board quality, according to BoardIQ (11/13/07).

 

In other news, Ruth Quigley retired from your Board at the end of 2007, and we thank her for her many years of dedicated service. Larry Soll has assumed Ruth’s place as a vice chair of the Investments Committee. The Valuation Committee, which Ruth used to chair, has been reorganized as the Valuation, Distribution and Proxy Oversight Committee under the chairmanship of Carl Frischling. The elevation of proxy oversight to standing committee status responds to suggestions from shareholders. In addition, Prema Mathai-Davis assumed my seat on the Governance Committee, and I moved to the Audit Committee.

 

Your Board looks forward to another year of diligent effort on your behalf, and we are even more strongly motivated by your feedback. The invitation remains open to e-mail me at bruce@brucecrockett.com. I look forward to hearing from you.

 

Sincerely,

 

 

/s/ Bruce L. Crockett

 

 

Bruce Crockett

Independent Chair

AIM Funds Board of Trustees

 

May 19, 2008

 

3



 

Management’s Discussion of Fund Performance

 

Performance summary

 

Energy stocks significantly outperformed the broad market during the fiscal year ended March 31, 2008. Accordingly, AIM Energy Fund outperformed its broad market index, the S&P 500 Index. The Fund also outperformed its style-specific index, the Dow Jones U.S. Oil & Gas Index, largely due to the Fund’s security selection and underweight position in integrated oil and gas stocks.

 

Your Fund’s long-term performance appears later in this report.

 

Fund vs. Indexes

 

Total returns, 3/31/07 to 3/31/08, at net asset value (NAV). Performance shown does not include applicable contingent deferred sales charges (CDSC) or front-end sales charges, which would have reduced performance.

 

Class A Shares

 

32.35

%

Class B Shares

 

31.35

 

Class C Shares

 

31.37

 

Investor Class Shares

 

32.34

 

S&P 500 Index (Broad Market Index)

 

-5.08

 

Dow Jones Oil & Gas Index (Style-Specific Index)

 

22.57

 

Lipper Natural Resources Funds Index (Peer Group Index)

 

26.91

 

 


Lipper Inc.

 

How we invest

 

Your Fund invests in companies involved in the exploration, production, transportation, refining and marketing of oil, natural gas and other forms of energy. We seek to own firms that have the potential to increase production through exploration or innovation. We believe companies with an increasing production profile that can control costs may earn a high rate of return, enabling them to grow earnings independent of oil and natural gas prices.

 

We combine bottom-up fundamental analysis with top-down macroeconomic industry analysis in our stock selection process. We focus on companies that have the following characteristics:

 

·        Free cash flow

·        Earnings growth potential

·        High returns on capital

·        Cost control

·        Low relative price-to-earnings (P/E) within their subsector with greater than expected growth opportunities

·        Increasing production profiles

 

Typically, we hold 30 to 40 stocks. The limited number of positions allows us to closely know our companies, their managements, their business structure and how their products and services fit into the energy value change – the process that moves oil and natural gas from the ground to the consumer.

 

We control risk by:

 

·        Diversifying across most industries and sub-industries within the energy sector

·        Avoiding concentration of assets in a small number of stocks

 

We may sell or reduce our position in a stock when:

 

·        In our opinion, its valuation becomes excessive in comparison to similar investment opportunities.

·        The company reports disappointing earnings or its fundamentals deteriorate.

·        We identify a more attractive investment opportunity.

 

Market conditions and your Fund

 

Many factors contributed to the negative performance of most major market indexes for the year ended March 31, 2008. The chief catalyst was undoubtedly the ongoing subprime loan crisis and its far reaching effects on overall credit availability. Additionally, record-high crude oil prices, falling home values and the declining U.S. dollar placed significant pressure on the purchasing power of the U.S. consumer. More recently, recessionary fears and a possible deterioration in corporate earnings drove an increase in market volatility.

 

In six separate actions beginning in September 2007, the U.S. Federal Reserve Board (the Fed) lowered the federal funds target rate from 5.25% to 2.25% in an effort to inject liquidity into the weakening credit markets.(1) Crude oil prices, as measured by West Texas Intermediate Crude, climbed over $35 higher during the fiscal year, ultimately ending March around $101 per barrel.(2) The record rise in oil prices was attributable to continued tightening supply/demand fundamentals for crude oil. Additionally, weakness in the U.S. dollar aggravated the situation.

 

Against this backdrop, energy, consumer staples and materials were the best performing sectors of the S&P 500 Index.(3) Conversely, financials, consumer discretionary and telecommunication services were the weakest performing sectors.(3) As for the Fund itself, no sub-industries detracted from performance. The Fund was most positively affected by holdings within our three largest sub-industries:

 

·        integrated oil and gas

·        oil and gas exploration and production

·        oil and gas equipment and services

 

The top contributor to Fund performance was National Oilwell Varco, a Houston-based oilfield equipment firm focused on producing land-based and ocean drilling rigs. National Oilwell Varco

 

Portfolio Composition

 

By industry

 

Oil & Gas Exploration & Production

 

30.4

%

Integrated Oil & Gas

 

28.8

 

Oil & Gas Equipment & Services

 

24.3

 

Oil & Gas Drilling

 

5.9

 

Oil & Gas Storage & Transportation

 

2.7

 

Coal & Consumable Fuels

 

2.6

 

Gas Utilities

 

2.4

 

Money Market Funds Plus Other Assets Less Liabilities

 

2.9

 

 

Top 10 Equity Holdings*

 

1. Occidental Petroleum Corp.

 

4.7

%

2. Apache Corp.

 

4.7

 

3. Murphy Oil Corp.

 

4.6

 

4. Devon Energy Corp.

 

4.4

 

5. Bill Barrett Corp.

 

3.8

 

6. Southwestern Energy Co.

 

3.7

 

7. Continental Resources, Inc.

 

3.3

 

8. Total S.A. - ADR

 

3.2

 

9. Hess Corp.

 

3.2

 

10. Weatherford International Ltd.

 

3.2

 

Total Net Assets

 

$

1.94 billion

 

Total Number of Holdings*

 

38

 

 

The Fund’s holdings are subject to change, and there is no assurance that the Fund will continue to hold any particular security.

 


* Excluding money market fund holdings.

 

4



 

benefited from the pending acquisition of Grant Prideco (also a Fund holding), which was announced during the reporting period. Once completed, the acquisition is expected to enhance National Oilwell Varco’s current product line.

 

Integrated oil and gas company Petroleo Brasileiro (Petrobras) also contributed to Fund performance. Aside from movement related to the increase in the price of crude, Petrobras benefited from a key discovery in the Tupi field, about 180 miles off the coast of Brazil. Tests indicate recoverable reserves of 5 billion to 8 billion barrels of oil equivalent, which would mean significant increases in the reserves of both Petrobras and Brazil once the field is developed.4 Petrobras holds significant additional prospective acreage in this emerging pre-salt field.

 

Helix Energy Solutions Group and Compagnie General de Geophysique-Veritas (Veritas) were two holdings we added during the reporting period that detracted from Fund performance. Both companies are focused on deep water services; Helix Energy provides subsea infrastructure services to energy producers and Veritas is the world’s second-largest seismic company. We believed the recent share price volatility to be short term and continued to hold the stocks.

 

During the year ended March 31, 2008, we added exposure to coal and consumable fuels stocks. Although we remained concerned regarding impending carbon dioxide legislation, we felt the market underestimated China’s demand for coal. Additionally, shipping disruptions further decreased available supplies of coal.

 

We also increased our weight in natural gas-leveraged companies as the outlook for natural gas had improved following the relatively cold winter domestically. Natural gas, the cleanest burning fossil fuel, produces approximately one-third the carbon dioxide emissions of coal and roughly half those of oil. Yet, domestic natural gas prices reflected a great disparity to crude oil prices during the fiscal year.

 

Although crude oil prices remain headline news, we continued to invest in companies with increasing production profiles and an ability to control costs. It is our belief these companies will be able grow earnings independent of oil and natural gas prices.

 

Energy stocks, and therefore the Fund, have experienced five calendar years of strong performance. It would be imprudent of us to suggest a similar level of performance going forward. As always, thank you for your continued investment in AIM Energy Fund.

 


(1) U.S. Federal Reserve Board

(2) Bloomberg L.P.

(3) Lipper Inc.

(4) Merrill Lynch & Co., Inc.

 

The views and opinions expressed in management’s discussion of Fund performance are those of Invesco Aim 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 Invesco Aim 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 later in this report.

 

Segner
[Photo]

 

John Segner

 

Senior portfolio manager, lead manager of AIM Energy Fund since February 1997. Mr. Segner has more than 20 years of experience in the energy and investment industries. Before joining the Fund’s advisor in 1997, he was a managing director and principal with an investment management company that focused exclusively on publicly traded energy stocks. Prior to that, he held positions with several energy companies. Mr. Segner earned a B.S. in civil engineering from the University of Alabama and an M.B.A. with a concentration in finance from The University of Texas at Austin.

 

Assisted by the Energy/Gold/Utilities Team

 

On May 1, 2008, after the close of the fiscal year, Andrew Lees was named a portfolio manager of AIM Energy Fund.

 

5



 

Your Fund’s Long-Term Performance

 

[MOUNTAIN CHART]

 

Results of a $10,000 Investment – Investor Class Shares (Oldest Share Class)

 

Fund data from 1/19/84, index data from 1/31/84

 

 

 

AIM Energy Fund-

 

 

 

 

 

 

 

 

 

Date

 

Investor Class Shares

 

S&P 500 Index(1)

 

 

 

 

 

 

 

1/19/84

 

$

10000

 

 

 

3/88

 

13942

 

18580

 

1/84

 

10000

 

$

10000

 

4/88

 

14266

 

18786

 

2/84

 

9975

 

9648

 

5/88

 

13928

 

18946

 

3/84

 

10013

 

9815

 

6/88

 

13618

 

19815

 

4/84

 

10125

 

9908

 

7/88

 

13854

 

19739

 

5/84

 

9737

 

9360

 

8/88

 

14105

 

19070

 

6/84

 

9324

 

9563

 

9/88

 

13737

 

19882

 

7/84

 

8337

 

9444

 

10/88

 

13884

 

20435

 

8/84

 

9412

 

10488

 

11/88

 

13614

 

20143

 

9/84

 

9686

 

10490

 

12/88

 

13927

 

20494

 

10/84

 

9449

 

10531

 

1/89

 

14720

 

21994

 

11/84

 

9551

 

10413

 

2/89

 

14885

 

21447

 

12/84

 

9487

 

10687

 

3/89

 

15617

 

21947

 

1/85

 

9767

 

11520

 

4/89

 

16274

 

23085

 

2/85

 

10162

 

11661

 

5/89

 

16872

 

24016

 

3/85

 

10429

 

11668

 

6/89

 

16946

 

23881

 

4/85

 

10429

 

11658

 

7/89

 

18022

 

26035

 

5/85

 

10289

 

12331

 

8/89

 

18516

 

26542

 

6/85

 

10175

 

12524

 

9/89

 

18410

 

26434

 

7/85

 

10633

 

12506

 

10/89

 

17821

 

25821

 

8/85

 

10658

 

12385

 

11/89

 

19072

 

26345

 

9/85

 

10264

 

12011

 

12/89

 

19988

 

26977

 

10/85

 

10741

 

12566

 

1/90

 

18736

 

25167

 

11/85

 

11117

 

13428

 

2/90

 

18905

 

25491

 

12/85

 

10780

 

14078

 

3/90

 

18950

 

26166

 

1/86

 

10145

 

14157

 

4/90

 

17730

 

25514

 

2/86

 

9977

 

15214

 

5/90

 

19668

 

27996

 

3/86

 

9912

 

16063

 

6/90

 

18814

 

27808

 

4/86

 

10029

 

15883

 

7/90

 

20385

 

27719

 

5/86

 

10638

 

16727

 

8/90

 

20018

 

25216

 

6/86

 

10573

 

17010

 

9/90

 

20203

 

23991

 

7/86

 

9808

 

16059

 

10/90

 

18570

 

23890

 

8/86

 

11221

 

17250

 

11/90

 

17924

 

25431

 

9/86

 

11091

 

15823

 

12/90

 

16693

 

26139

 

10/86

 

11186

 

16736

 

1/91

 

15891

 

27274

 

11/86

 

11186

 

17143

 

2/91

 

17523

 

29222

 

12/86

 

11549

 

16705

 

3/91

 

16768

 

29929

 

1/87

 

12851

 

18955

 

4/91

 

16584

 

30000

 

2/87

 

13026

 

19704

 

5/91

 

16552

 

31290

 

3/87

 

14731

 

20272

 

6/91

 

15490

 

29858

 

4/87

 

14624

 

20092

 

7/91

 

16721

 

31248

 

5/87

 

15523

 

20266

 

8/91

 

17507

 

31986

 

6/87

 

16369

 

21290

 

9/91

 

17183

 

31451

 

7/87

 

17376

 

22369

 

10/91

 

17537

 

31873

 

8/87

 

16879

 

23203

 

11/91

 

16153

 

30592

 

9/87

 

16033

 

22694

 

12/91

 

16106

 

34085

 

10/87

 

11898

 

17807

 

1/92

 

15328

 

33450

 

11/87

 

10971

 

16340

 

2/92

 

15157

 

33883

 

12/87

 

12117

 

17582

 

3/92

 

14317

 

33225

 

1/88

 

12985

 

18321

 

4/92

 

14349

 

34200

 

2/88

 

13383

 

19172

 

5/92

 

14940

 

34367

 

 


(1) Lipper Inc.

 

Past performance cannot guarantee comparable future results.

 

The performance data shown in the first chart above is that of the Fund’s Investor class shares. The performance of the Fund’s other share classes will differ primarily due to different sales charge structures and class expenses and may be greater than or less than the performance of the Fund’s Investor Class shares. The data shown in this chart includes reinvested distributions, Fund expenses and management fees. Index results include reinvested dividends.

 

The performance data shown in the second chart above is that of the Fund’s Class C shares. The performance of the Fund’s other share classes will differ primarily due to different sales charge structures and class expenses and may be greater than or less than the performance of the Fund’s Class C shares. The data shown in the second chart above includes reinvested distributions, Fund expenses and management fees. Index results include reinvested dividends, but they do not reflect sales charges.

 

Performance of an index of funds reflects fund expenses and management fees; performance of a market index does not. Performance shown in the charts and table does not reflect deduction of taxes a shareholder would pay on Fund distributions or sale of Fund shares.

 

Both charts above are logarithmic charts, which present the fluctuations in the value of the Fund’s share class and its indexes. We believe that a logarithmic chart is more effective than other types of charts in illustrating changes in value during the early years shown in the chart. The vertical axis, the one that indicates the dollar value of an investment, is constructed with each segment representing a percent change in the value of the investment.

 

6



 

6/92

 

13385

 

33856

 

8/00

 

47127

 

149420

 

7/92

 

14287

 

35238

 

9/00

 

48069

 

141534

 

8/92

 

14675

 

34518

 

10/00

 

43210

 

140933

 

9/92

 

14753

 

34924

 

11/00

 

38958

 

129831

 

10/92

 

14240

 

35043

 

12/00

 

48534

 

130468

 

11/92

 

14022

 

36233

 

1/01

 

46699

 

135094

 

12/92

 

13975

 

36678

 

2/01

 

46559

 

122783

 

1/93

 

14412

 

36984

 

3/01

 

45860

 

115009

 

2/93

 

15564

 

37488

 

4/01

 

50882

 

123940

 

3/93

 

16609

 

38279

 

5/01

 

50882

 

124771

 

4/93

 

17295

 

37353

 

6/01

 

43189

 

121735

 

5/93

 

18011

 

38350

 

7/01

 

42075

 

120537

 

6/93

 

18292

 

38462

 

8/01

 

40169

 

112998

 

7/93

 

17981

 

38307

 

9/01

 

35891

 

103874

 

8/93

 

19119

 

39757

 

10/01

 

38564

 

105856

 

9/93

 

18620

 

39453

 

11/01

 

37381

 

113974

 

10/93

 

18121

 

40268

 

12/01

 

40378

 

114973

 

11/93

 

16329

 

39884

 

1/02

 

38101

 

113296

 

12/93

 

16311

 

40366

 

2/02

 

39518

 

111111

 

1/94

 

16924

 

41738

 

3/02

 

44774

 

115290

 

2/94

 

16469

 

40605

 

4/02

 

46055

 

108303

 

3/94

 

15792

 

38838

 

5/02

 

45056

 

107508

 

4/94

 

16547

 

39336

 

6/02

 

41915

 

99853

 

5/94

 

16547

 

39979

 

7/02

 

37267

 

92071

 

6/94

 

16721

 

39001

 

8/02

 

37941

 

92674

 

7/94

 

16642

 

40280

 

9/02

 

35919

 

82612

 

8/94

 

16501

 

41928

 

10/02

 

36709

 

89876

 

9/94

 

16626

 

40904

 

11/02

 

37686

 

95160

 

10/94

 

17025

 

41821

 

12/02

 

38639

 

89573

 

11/94

 

15792

 

40300

 

1/03

 

37824

 

87231

 

12/94

 

15129

 

40897

 

2/03

 

39337

 

85920

 

1/95

 

14528

 

41957

 

3/03

 

39081

 

86752

 

2/95

 

14892

 

43590

 

4/03

 

38546

 

93894

 

3/95

 

15556

 

44874

 

5/03

 

43638

 

98837

 

4/95

 

16172

 

46195

 

6/03

 

42521

 

100099

 

5/95

 

16741

 

48038

 

7/03

 

39872

 

101865

 

6/95

 

16236

 

49152

 

8/03

 

42475

 

103848

 

7/95

 

16520

 

50781

 

9/03

 

41337

 

102748

 

8/95

 

16551

 

50908

 

10/03

 

41734

 

108558

 

9/95

 

16851

 

53055

 

11/03

 

42522

 

109512

 

10/95

 

16097

 

52866

 

12/03

 

47357

 

115251

 

11/95

 

16896

 

55184

 

1/04

 

47963

 

117366

 

12/95

 

18124

 

56247

 

2/04

 

50846

 

118997

 

1/96

 

17773

 

58159

 

3/04

 

51588

 

117202

 

2/96

 

18187

 

58700

 

4/04

 

52125

 

115364

 

3/96

 

19143

 

59265

 

5/04

 

51661

 

116944

 

4/96

 

20899

 

60138

 

6/04

 

56011

 

119217

 

5/96

 

20803

 

61686

 

7/04

 

57893

 

115272

 

6/96

 

21042

 

61922

 

8/04

 

56127

 

115734

 

7/96

 

20147

 

59187

 

9/04

 

62054

 

116988

 

8/96

 

21487

 

60438

 

10/04

 

62004

 

118775

 

9/96

 

22555

 

63836

 

11/04

 

66791

 

123579

 

10/96

 

24035

 

65596

 

12/04

 

64701

 

127783

 

11/96

 

25378

 

70550

 

1/05

 

67580

 

124669

 

12/96

 

25160

 

69153

 

2/05

 

77318

 

127291

 

1/97

 

25925

 

73471

 

3/05

 

76205

 

125039

 

2/97

 

23262

 

74047

 

4/05

 

70878

 

122669

 

3/97

 

24447

 

71011

 

5/05

 

74386

 

126568

 

4/97

 

24185

 

75246

 

6/05

 

80732

 

126750

 

5/97

 

26935

 

79847

 

7/05

 

88772

 

131461

 

6/97

 

27110

 

83396

 

8/05

 

96140

 

130263

 

7/97

 

30032

 

90030

 

9/05

 

100438

 

131317

 

8/97

 

32225

 

84990

 

10/05

 

92795

 

129127

 

9/97

 

34764

 

89642

 

11/05

 

96098

 

134006

 

10/97

 

33805

 

86652

 

12/05

 

99606

 

134054

 

11/97

 

30492

 

90660

 

1/06

 

113939

 

137603

 

12/97

 

29964

 

92216

 

2/06

 

101577

 

137976

 

1/98

 

26842

 

93235

 

3/06

 

105873

 

139693

 

2/98

 

28018

 

99955

 

4/06

 

112416

 

141567

 

3/98

 

30113

 

105070

 

5/06

 

109932

 

137498

 

4/98

 

31161

 

106146

 

6/06

 

111801

 

137680

 

5/98

 

29195

 

104324

 

7/06

 

113030

 

138529

 

6/98

 

28681

 

108558

 

8/06

 

108114

 

141820

 

7/98

 

24425

 

107411

 

9/06

 

101940

 

145472

 

8/98

 

19655

 

91893

 

10/06

 

105090

 

150210

 

9/98

 

23419

 

97784

 

11/06

 

114359

 

153062

 

10/98

 

24168

 

105726

 

12/06

 

109225

 

155209

 

11/98

 

22114

 

112131

 

1/07

 

109596

 

157554

 

12/98

 

21625

 

118588

 

2/07

 

109738

 

154482

 

1/99

 

20040

 

123546

 

3/07

 

116970

 

156206

 

2/99

 

19162

 

119706

 

4/07

 

124000

 

163123

 

3/99

 

24322

 

124495

 

5/07

 

132630

 

168810

 

4/99

 

28326

 

129316

 

6/07

 

134315

 

166007

 

5/99

 

28326

 

126265

 

7/07

 

134033

 

160867

 

6/99

 

29847

 

133254

 

8/07

 

132197

 

163274

 

7/99

 

30617

 

129111

 

9/07

 

144742

 

169374

 

8/99

 

32264

 

128472

 

10/07

 

153152

 

172068

 

9/99

 

31109

 

124954

 

11/07

 

145724

 

164872

 

10/99

 

29289

 

132858

 

12/07

 

158518

 

163730

 

11/99

 

29096

 

135558

 

1/08

 

143300

 

153910

 

12/99

 

30682

 

143531

 

2/08

 

155624

 

148915

 

1/00

 

30768

 

136321

 

3/08

 

154802

 

148271

 

2/00

 

31152

 

133743

 

 

 

 

 

 

 

3/00

 

37255

 

146819

 

 

 

 

 

 

 

4/00

 

37449

 

142403

 

 

 

 

 

 

 

5/00

 

42718

 

139484

 

 

 

 

 

 

 

6/00

 

41774

 

142919

 

 

 

 

 

 

 

7/00

 

40445

 

140687

 

 

 

 

 

 

 

 



 

[MOUNTAIN CHART]

 

Results of a $10,000 Investment – Class C Shares (Oldest Share Class with Sales Charges)

 

Index data from 1/31/00, Fund data from 2/14/00

 

 

 

 

 

 

 

 

 

Lipper Natural

 

 

 

AIM Energy Fund-

 

 

 

Dow Jones U.S. Oil &

 

Resource Funds

 

Date

 

Class C Shares

 

S&P 500 Index(1)

 

Gas Index(1)

 

Index(1)

 

1/31/00

 

 

 

$

10000

 

$

10000

 

$

10000

 

2/00

 

$

10146

 

9811

 

9694

 

10147

 

3/00

 

12111

 

10770

 

10877

 

11679

 

4/00

 

12174

 

10446

 

10776

 

11564

 

5/00

 

13875

 

10232

 

11850

 

12682

 

6/00

 

13568

 

10484

 

11212

 

12126

 

7/00

 

13129

 

10320

 

10937

 

11676

 

8/00

 

15296

 

10961

 

12023

 

13012

 

9/00

 

15582

 

10382

 

12430

 

12994

 

10/00

 

14001

 

10338

 

12012

 

12315

 

11/00

 

12616

 

9524

 

11471

 

11647

 

12/00

 

15704

 

9571

 

12600

 

13498

 

1/01

 

15106

 

9910

 

12145

 

13193

 

2/01

 

15053

 

9007

 

12107

 

13255

 

3/01

 

14818

 

8437

 

11931

 

12832

 

4/01

 

16431

 

9092

 

13167

 

14136

 

5/01

 

16422

 

9153

 

13057

 

13990

 

6/01

 

13933

 

8930

 

11865

 

12453

 

7/01

 

13562

 

8842

 

11593

 

12229

 

8/01

 

12934

 

8289

 

11105

 

11727

 

9/01

 

11557

 

7620

 

10292

 

10522

 

10/01

 

12412

 

7765

 

10897

 

11268

 

11/01

 

12019

 

8361

 

10455

 

11053

 

12/01

 

12980

 

8434

 

11131

 

11800

 

1/02

 

12239

 

8311

 

10702

 

11438

 

2/02

 

12686

 

8151

 

11183

 

11956

 

3/02

 

14366

 

8457

 

12109

 

12980

 

4/02

 

14767

 

7945

 

11562

 

13002

 

5/02

 

14435

 

7886

 

11296

 

12916

 

6/02

 

13420

 

7325

 

11017

 

12184

 

7/02

 

11929

 

6754

 

9696

 

10756

 

8/02

 

12119

 

6798

 

9754

 

10988

 

9/02

 

11483

 

6060

 

8940

 

10178

 

10/02

 

11733

 

6593

 

9246

 

10437

 

11/02

 

12036

 

6981

 

9587

 

10793

 

12/02

 

12331

 

6571

 

9626

 

10947

 

1/03

 

12065

 

6399

 

9357

 

10619

 

2/03

 

12542

 

6303

 

9605

 

10962

 

3/03

 

12452

 

6364

 

9677

 

10816

 

4/03

 

12277

 

6888

 

9677

 

10860

 

5/03

 

13889

 

7250

 

10603

 

12125

 

6/03

 

13534

 

7343

 

10447

 

11886

 

7/03

 

12679

 

7472

 

10110

 

11391

 

8/03

 

13504

 

7618

 

10775

 

12162

 

9/03

 

13141

 

7537

 

10508

 

11871

 

10/03

 

13262

 

7963

 

10616

 

12173

 

11/03

 

13504

 

8033

 

10658

 

12368

 

12/03

 

15041

 

8454

 

12104

 

13820

 

1/04

 

15223

 

8610

 

12274

 

13920

 

2/04

 

16132

 

8729

 

12846

 

14701

 

3/04

 

16351

 

8597

 

12776

 

14755

 

4/04

 

16510

 

8463

 

13012

 

14566

 

5/04

 

16358

 

8579

 

13022

 

14475

 

6/04

 

17712

 

8745

 

13799

 

15503

 

7/04

 

18295

 

8456

 

14257

 

15900

 

8/04

 

17728

 

8490

 

14066

 

15697

 

9/04

 

19598

 

8582

 

15300

 

17361

 

10/04

 

19569

 

8713

 

15343

 

17427

 

11/04

 

21068

 

9065

 

16364

 

18967

 

12/04

 

20394

 

9374

 

16030

 

18691

 

1/05

 

21287

 

9145

 

16501

 

19018

 

2/05

 

24337

 

9338

 

19497

 

21683

 

3/05

 

23982

 

9172

 

18847

 

21266

 

4/05

 

22286

 

8999

 

17804

 

19900

 

5/05

 

23376

 

9285

 

18194

 

20632

 

6/05

 

25352

 

9298

 

19327

 

22234

 

7/05

 

27864

 

9644

 

20537

 

24167

 

8/05

 

30157

 

9556

 

21679

 

25896

 

9/05

 

31481

 

9633

 

23052

 

27593

 

10/05

 

29066

 

9472

 

20934

 

25575

 

11/05

 

30081

 

9830

 

21290

 

26429

 

12/05

 

31161

 

9834

 

21494

 

27365

 

1/06

 

35623

 

10094

 

24533

 

31567

 

2/06

 

31747

 

10121

 

22421

 

28573

 

3/06

 

33071

 

10247

 

23404

 

30176

 

4/06

 

35085

 

10385

 

24599

 

32152

 

5/06

 

34292

 

10086

 

23864

 

30793

 

6/06

 

34854

 

10100

 

24414

 

31054

 

7/06

 

35206

 

10162

 

25513

 

30996

 

8/06

 

33657

 

10403

 

24524

 

30014

 

9/06

 

31725

 

10671

 

23734

 

28343

 

10/06

 

32680

 

11019

 

24844

 

29930

 

11/06

 

35537

 

11228

 

26990

 

32243

 

12/06

 

33923

 

11386

 

26389

 

31480

 

1/07

 

34018

 

11558

 

26038

 

31594

 

2/07

 

34039

 

11332

 

25615

 

31690

 

3/07

 

36258

 

11459

 

27222

 

33446

 

4/07

 

38423

 

11966

 

28659

 

35319

 

5/07

 

41066

 

12383

 

30717

 

38016

 

6/07

 

41567

 

12178

 

31216

 

38399

 

7/07

 

41447

 

11801

 

31364

 

38167

 

8/07

 

40862

 

11977

 

31554

 

37666

 

9/07

 

44720

 

12425

 

34096

 

41318

 

10/07

 

47269

 

12622

 

34591

 

43864

 

11/07

 

44952

 

12094

 

33155

 

41484

 

12/07

 

48868

 

12011

 

35583

 

43959

 

1/08

 

44147

 

11290

 

31765

 

40008

 

2/08

 

47917

 

10924

 

34138

 

43573

 

3/08

 

47616

 

10877

 

33367

 

42448

 

 


(1) Lipper Inc.

 



 

Average Annual Total Returns

 

As of 3/31/08, including maximum applicable sales charges

 

Class A Shares

 

 

 

Inception (3/28/02)

 

21.83

%

5 Years

 

30.21

 

1 Year

 

25.06

 

 

 

 

 

Class B Shares

 

 

 

Inception (3/28/02)

 

22.09

%

5Years

 

30.63

 

1 Year

 

26.35

 

 

 

 

 

Class C Shares

 

 

 

Inception (2/14/00)

 

21.17

%

5 Years

 

30.77

 

1 Year

 

30.37

 

 

 

 

 

Investor Class Shares

 

 

 

Inception (1/19/84)

 

11.99

%

10 Years

 

17.79

 

5 Years

 

31.69

 

1 Year

 

32.34

 

 

The performance data quoted represent past performance and cannot guarantee comparable future results; current performance may be lower or higher. Please visit invescoaim.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.

 

The total annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this report for Class A, Class B, Class C and Investor Class shares was 1.17%, 1.92%, 1.92% and 1.17%, respectively. The expense ratios presented above may vary from the expense ratios presented in other sections of this report that are based on expenses incurred during the period covered by this report.

 

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 primarily due to different sales charge structures and class expenses.

 

Had the advisor not waived fees and/or reimbursed expenses on Class B and Class C shares in the past, performance would have been lower.

 

7



 

AIM Energy Fund’s investment objective is capital growth.

 

·

Unless otherwise stated, information presented in this report is as of March 31, 2008, and is based on total net assets.

 

 

·

Unless otherwise noted, all data provided by Invesco Aim.

 

About share classes

 

·

Class B shares are not available as an investment for retirement plans maintained pursuant to Section 401 of the Internal Revenue Code, including 401(k) plans, money purchase pension plans and profit sharing plans. Plans that had existing accounts invested in Class B shares prior to September 30, 2003, will continue to be allowed to make additional purchases.

 

 

·

Investor Class shares are closed to most investors. For more information on who may continue to invest in Investor Class shares, please see the prospectus.

 

 

Principal risks of investing in the Fund

 

 

·

Since a large percentage of the Fund’s assets may be invested in securities of a limited number of companies, each investment has a greater effect on the Fund’s overall performance, and any change in the value of those securities could significantly affect the value of your investment in the Fund.

 

 

·

The businesses in which the Fund invests may be adversely affected by foreign government, federal or state regulations on energy production, distribution and sale. Short-term fluctuations in commodity prices may influence Fund returns and increase price fluctuations of the Fund’s shares.

 

 

·

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.

 

 

·

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

 

 

·

There is no guarantee that the investment techniques and risk analyses used by the Fund’s portfolio managers will produce the desired results.

 

 

·

The prices of securities held by the Fund may decline in response to market risks.

 

 

·

The Fund’s investments are concentrated in a comparatively narrow segment of the economy. Consequently, the Fund may tend to be more volatile than other mutual funds, and the value of the Fund’s investments may tend to rise and fall more rapidly.

 

 

About indexes used in this report

 

 

·

The Dow Jones U.S. Oil & Gas Index measures the performance of energy companies within the United States. The index maintains an approximate weighting of 95% in U.S. coal, oil and drilling, and pipeline companies.

 

 

·

The Lipper Natural Resource Funds Index is an equally weighted representation of the largest funds in the Lipper Natural Resource Funds category. These funds invest primarily in the equity securities of domestic and foreign companies engaged in natural resources.

 

 

·

The S&P 500—registered trademark— Index is a market capitalization-weighted index covering all major areas of the U.S. economy. It is not the 500 largest companies, but rather the most widely held 500 companies chosen with respect to market size, liquidity, and their industry.

 

 

·

The Fund is not managed to track the performance of any particular index, including the indexes defined here, and consequently, the performance of the Fund may deviate significantly from the performance of the indexes.

 

 

·

A direct investment cannot be made in an index. Unless otherwise indicated, index results include reinvested dividends, and they do not reflect sales charges. Performance of an index of funds reflects fund expenses; performance of a market index does not.

 

 

Other information

 

 

·

The returns shown in the management’s discussion of Fund performance are based on net asset values calculated for shareholder transactions. Generally accepted accounting principles require adjustments to be made to the net assets of the Fund at period end for financial reporting purposes, and as such, the net asset values for shareholder transactions and the returns based on those net asset values may differ from the net asset values and returns reported in the Financial Highlights.

 

 

·

Industry classifications used in this report are generally according to the Global Industry Classification Standard, which was developed by and is the exclusive property and a service mark of MSCI Inc. and Standard & Poor’s.

 

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

 

Fund Nasdaq Symbols

 

Class A Shares,

 

IENAX

 

Class B Shares

 

IENBX

 

Class C Shares

 

IEFCX

 

Investor Class Shares

 

FSTEX

 

 

8



 

Supplement to Annual Report dated 3/31/08

 

AIM Energy Fund

 

Institutional Class Shares

 

The following information has been prepared to provide Institutional Class shareholders with a performance overview specific to their holdings. Institutional Class shares are offered exclusively to institutional investors, including defined contribution plans that meet certain criteria.

 

Average annual total returns

 

For periods ended 3/31/08

 

Inception (1/31/06)

 

15.72%

1 Year

 

32.90

 

Institutional Class shares have no sales charge; therefore, performance is at net asset value (NAV). Performance of Institutional Class shares will differ from performance of other share classes primarily due to differing sales charges and class expenses.

 

The total annual Fund operating expense ratio set forth in the most recent Fund prospectus as of the date of this supplement for Institutional Class shares was 0.72%. The expense ratios presented above may vary from the expense ratios presented in other sections of the actual report that are based on expenses incurred during the period covered by the report.

 

Please note that past performance is not indicative of future results. More recent returns may be more or less than those shown. All returns assume reinvestment of distributions at NAV. Investment return and principal value will fluctuate so your shares, when redeemed, may be worth more or less than their original cost. See full report for information on comparative benchmarks. Please consult your Fund prospectus for more information. For the most current month-end performance, please call 800 451 4246 or visit invescoaim.com.

 

Nasdaq Symbol

 

IENIX

 

Over for information on your Fund’s expenses.

 

This supplement must be accompanied or preceded by a currently effective Fund prospectus, which contains more complete information, including sales charges and expenses. Investors should read it carefully before investing.

 

FOR INSTITUTIONAL INVESTOR USE ONLY

 

This material is for institutional investor use only and may not be quoted, reproduced or shown to the public, nor used in written form as sales literature for public use.

 

 

[Invesco

 

Aim

 

Logo]

 

– service mark –

 

invescoaim.com

 

I-ENE-INS-1

 

Invesco Aim Distributors, Inc.

 



Schedule of Investments(a)

March 31, 2008

   
Shares
  Value  
Domestic Common Stocks–79.92%  
Coal & Consumable Fuels–1.05%  
Peabody Energy Corp.     400,000     $ 20,400,000    
Gas Utilities–2.45%  
Questar Corp.     840,000       47,510,400    
Integrated Oil & Gas–18.34%  
ConocoPhillips     562,000       42,830,020    
Exxon Mobil Corp.     467,000       39,498,860    
Hess Corp.     710,000       62,607,800    
Marathon Oil Corp.     660,000       30,096,000    
Murphy Oil Corp.     1,089,000       89,450,460    
Occidental Petroleum Corp.     1,245,000       91,096,650    
              355,579,790    
Oil & Gas Drilling–5.88%  
Diamond Offshore Drilling, Inc.     344,000       40,041,600    
Hercules Offshore, Inc.(b)     1,515,000       38,056,800    
Nabors Industries Ltd.(b)     1,060,000       35,796,200    
              113,894,600    
Oil & Gas Equipment & Services–21.68%  
BJ Services Co.     1,488,000       42,422,880    
Cameron International Corp.(b)     1,150,000       47,886,000    
Grant Prideco, Inc.(b)     850,000       41,837,000    
Halliburton Co.     1,275,000       50,145,750    
Helix Energy Solutions Group Inc.(b)     1,400,000       44,100,000    
National-Oilwell Varco Inc.(b)     525,000       30,649,500    
Oceaneering International, Inc.(b)     730,000       45,990,000    
Schlumberger Ltd.     640,000       55,680,000    
Weatherford International Ltd.(b)     850,000       61,599,500    
              420,310,630    
Oil & Gas Exploration & Production–27.81%  
Anadarko Petroleum Corp.     685,000       43,175,550    
Apache Corp.     750,000       90,615,000    
Bill Barrett Corp.(b)     1,570,000       74,182,500    
Continental Resources, Inc.(b)     2,015,000       64,258,350    
Devon Energy Corp.     825,000       86,072,250    
Noble Energy, Inc.     570,000       41,496,000    
Plains Exploration & Production Co.(b)     345,000       18,333,300    
Southwestern Energy Co.(b)     2,140,000       72,096,600    

 

   
Shares
  Value  
Oil & Gas Exploration & Production–(continued)  
XTO Energy, Inc.     788,000     $ 48,745,680    
              538,975,230    
Oil & Gas Storage & Transportation–2.71%  
El Paso Corp.     2,625,000       43,680,000    
Williams Cos., Inc. (The)     270,000       8,904,600    
              52,584,600    
Total Domestic Common Stocks
(Cost $1,154,199,883)
            1,549,255,250    
Foreign Common Stocks & Other Equity Interests–17.20%  
Brazil–2.42%  
Petroleo Brasileiro S.A.–ADR (Integrated Oil & Gas)     460,000       46,970,600    
Canada–6.52%  
Cameco Corp. (Coal & Consumable Fuels)     900,000       29,646,000    
Suncor Energy, Inc. (Integrated Oil & Gas)     480,000       46,248,000    
Talisman Energy Inc. (Oil & Gas Exploration &
Production)
    2,850,000       50,445,000    
              126,339,000    
France–5.88%  
Compagnie Generale de Geophysique-Veritas–ADR
(Oil & Gas Equipment & Services)(b)
    1,032,000       51,094,320    
Total S.A.–ADR (Integrated Oil & Gas)     850,000       62,908,500    
              114,002,820    
United Kingdom–2.38%  
BP PLC–ADR (Integrated Oil & Gas)     760,000       46,094,000    
Total Foreign Common Stocks & Other Equity Interests
(Cost $305,355,180)
            333,406,420    
Money Market Funds–3.28%  
Liquid Assets Portfolio–Institutional Class(c)     31,763,841       31,763,841    
Premier Portfolio–Institutional Class(c)     31,763,842       31,763,842    
Total Money Market Funds
(Cost $63,527,683)
            63,527,683    
TOTAL INVESTMENTS–100.40%
(Cost $1,523,082,746)
            1,946,189,353    
OTHER ASSETS LESS LIABILITIES–(0.40)%             (7,674,541 )  
NET ASSETS–100.00%           $ 1,938,514,812    

 

Investment Abbreviations:

ADR         American Depositary Receipt  

 

See accompanying Notes to Financial Statements which are an integral part of the financial statements.

AIM Energy Fund
9



Notes to Schedule of Investments:

(a)  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 MSCI Inc. and Standard & Poor's.

(b)  Non-income producing security.

(c)  The money market fund and the Fund are affiliated by having the same investment advisor.

See accompanying Notes to Financial Statements which are an integral part of the financial statements.

AIM Energy Fund
10




Statement of Assets and Liabilities

March 31, 2008

Assets:  
Investments, at value (cost $1,459,555,063)   $ 1,882,661,670    
Investments in affiliated money market funds (cost $63,527,683)     63,527,683    
Total investments (cost $1,523,082,746)     1,946,189,353    
Cash     9,461    
Receivables for:  
Investments sold     2,449,897    
Fund shares sold     5,642,294    
Dividends     1,609,957    
Investment for trustee deferred compensation and retirement plans     56,670    
Other assets     69,365    
Total assets     1,956,026,997    
Liabilities:  
Payables for:  
Investments purchased     7,628,760    
Fund shares reacquired     8,104,062    
Trustee deferred compensation and retirement plans     121,206    
Accrued distribution fees     660,706    
Accrued trustees' and officer's fees and benefits     7,902    
Accrued transfer agent fees     620,877    
Accrued operating expenses     368,672    
Total liabilities     17,512,185    
Net assets applicable to shares outstanding   $ 1,938,514,812    
Net assets consist of:  
Shares of beneficial interest   $ 1,501,304,541    
Undistributed net investment income (loss)     (101,639 )  
Undistributed net realized gain     14,205,302    
Unrealized appreciation     423,106,608    
    $ 1,938,514,812    

 

Net Assets:  
Class A   $ 851,105,230    
Class B   $ 172,189,901    
Class C   $ 231,832,480    
Investor Class   $ 681,147,226    
Institutional Class   $ 2,239,975    
Shares outstanding, $0.01 par value per share, unlimited number of shares authorized:  
Class A     19,472,450    
Class B     4,195,753    
Class C     5,787,766    
Investor Class     15,637,603    
Institutional Class     50,641    
Class A:  
Net asset value per share   $ 43.71    
Maximum offering price per share
(Net asset value of $43.71 ÷ 94.50%)
  $ 46.25    
Class B:  
Net asset value and offering price per share   $ 41.04    
Class C:  
Net asset value and offering price per share   $ 40.06    
Investor Class:  
Net asset value and offering price per share   $ 43.56    
Institutional Class:  
Net asset value and offering price per share   $ 44.23    

 

See accompanying Notes to Financial Statements which are an integral part of the financial statements.

AIM Energy Fund
11



Statement of Operations

For the year ended March 31, 2008

Investment income:  
Dividends (net of foreign withholding taxes of $535,442)   $ 14,506,985    
Dividends from affiliated money market funds (includes securities lending income of $686,445)     4,756,043    
Total investment income     19,263,028    
Expenses:  
Advisory fees     10,564,545    
Administrative services fees     414,889    
Custodian fees     69,262    
Distribution fees:  
Class A     1,836,376    
Class B     1,624,507    
Class C     2,053,081    
Investor Class     1,566,228    
Transfer agent fees — A, B, C and Investor     3,135,080    
Transfer agent fees — Institutional     90    
Trustees' and officer's fees and benefits     59,757    
Other     640,471    
Total expenses     21,964,286    
Less: Fees waived, expenses reimbursed and expense offset arrangement(s)     (188,466 )  
Net expenses     21,775,820    
Net investment income (loss)     (2,512,792 )  
Realized and unrealized gain (loss) from:  
Net realized gain from:  
Investment securities (includes net gains from securities sold to affiliates of $1,068,286)     356,132,798    
Foreign currencies     44    
      356,132,842    
Change in net unrealized appreciation (depreciation) of:  
Investment securities     93,475,462    
Foreign currencies     (34 )  
      93,475,428    
Net realized and unrealized gain     449,608,270    
Net increase in net assets resulting from operations   $ 447,095,478    

 

See accompanying Notes to Financial Statements which are an integral part of the financial statements.

AIM Energy Fund
12



Statement of Changes in Net Assets

For the years ended March 31, 2008 and 2007

    2008   2007  
Operations:  
Net investment income (loss)   $ (2,512,792 )   $ (3,438,110 )  
Net realized gain     356,132,842       107,052,420    
Change in net unrealized appreciation     93,475,428       9,961,898    
Net increase in net assets resulting from operations     447,095,478       113,576,208    
Distributions to shareholders from net realized gains:  
Class A     (158,355,876 )     (77,496,244 )  
Class B     (36,010,926 )     (21,033,488 )  
Class C     (47,398,822 )     (25,182,648 )  
Investor Class     (132,884,871 )     (72,566,655 )  
Institutional Class     (366,456 )     (15,064 )  
Decrease in net assets resulting from distributions     (375,016,951 )     (196,294,099 )  
Share transactions—net:  
Class A     281,663,485       42,778,823    
Class B     29,756,451       (1,078,947 )  
Class C     71,768,967       (2,239,340 )  
Investor Class     158,109,710       (46,915,816 )  
Institutional Class     2,236,260       39,458    
Net increase (decrease) in net assets resulting from share transactions     543,534,873       (7,415,822 )  
Net increase (decrease) in net assets     615,613,400       (90,133,713 )  
Net assets:  
Beginning of year     1,322,901,412       1,413,035,125    
End of year (including undistributed net investment income (loss) of $(101,639) and $(76,621), respectively)   $ 1,938,514,812     $ 1,322,901,412    

 

See accompanying Notes to Financial Statements which are an integral part of the financial statements.

AIM Energy Fund
13




Notes to Financial Statements

March 31, 2008

NOTE 1—Significant Accounting Policies

AIM Energy Fund (the "Fund") is a series portfolio of AIM Sector Funds (the "Trust"). The Trust is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of six separate portfolios, each authorized to issue an unlimited number of shares of beneficial interest. The Fund currently consists of multiple classes of shares. Matters affecting each portfolio or class will be voted on exclusively by the shareholders of such portfolio or class. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund.

The Fund's investment objective is capital growth.

The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements.

A.  Security Valuations — Securities, including restricted securities, are valued according to the following policy.

A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded, or lacking any sales or official closing price on a particular day, the security may be valued at the closing bid price on that day. Securities traded in the over-the-counter market are valued based on prices furnished by independent pricing services or market makers. When such securities are valued by an independent pricing service they may be considered fair valued. Futures contracts are valued at the final settlement price set by an exchange on which they are principally traded. Listed options are valued at the mean between the last bid and the ask prices from the exchange on which they are principally traded. Options not listed on an exchange are valued by an independent source at the mean between the last bid and ask prices. For purposes of determining net asset value per share, futures and option contracts generally are valued 15 minutes after the close of the customary trading session of the New York Stock Exchange ("NYSE").

Investments in open-end and closed-end registered investment companies that do not trade on an exchange are valued at the end of day net asset value per share. Investments in open-end and closed-end registered investment companies that trade on an exchange are valued at the last sales price or official closing price as of the close of the customary trading session on the exchange where the security is principally traded.

Debt obligations (including convertible bonds) and unlisted equities are fair valued using an evaluated quote provided by an independent pricing service. Evaluated quotes provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to specific securities, dividend rate, yield, quality, type of issue, coupon rate, maturity, individual trading characteristics and other market data. Short-term obligations, including commercial paper, having 60 days or less to maturity are recorded at amortized cost which approximates value. Debt securities are subject to interest rate and credit risks. In addition, all debt securities involve some risk of default with respect to interest and/or principal payments.

Foreign securities (including foreign exchange contracts) are converted into U.S. dollar amounts using the applicable exchange rates as of the close of the NYSE. If market quotations are available and reliable for foreign exchange traded equity securities, the securities will be valued at the market quotations. Because trading hours for certain foreign securities end before the close of the NYSE, closing market quotations may become unreliable. If between the time trading ends on a particular security and the close of the customary trading session on the NYSE, events occur that are significant and may make the closing price unreliable, the Fund may fair value the security. If the event is likely to have affected the closing price of the security, the security will be valued at fair value in good faith using procedures approved by the Board of Trustees. Adjustments to closing prices to reflect fair value may also be based on a screening process of an independent pricing service to indicate the degree of certainty, based on historical data, that the closing price in the principal market where a foreign security trades is not the current value as of the close of the NYSE. Foreign securities meeting the approved degree of certainty that the price is not reflective of current value will be priced at the indication of fair value from the independent pricing service. Multiple factors may be considered by the independent pricing service in determining adjustments to reflect fair value and may include information relating to sector indices, ADRs and domestic and foreign index futures. Foreign securities may have additional risks including exchange rate changes, potential for sharply devalued currencies and high inflation, political and economical upheaval, the relative lack of issuer information, relatively low market liquidity and the potential lack of strict financial and accounting controls and standards.

Securities for which market prices are not provided by any of the above methods may be valued based upon quotes furnished by independent sources and are valued at the last bid price in the case of equity securities and in the case of debt obligations, the mean between the last bid and asked prices.

Securities for which market quotations are not readily available or are unreliable are valued at fair value as determined in good faith by or under the supervision of the Trust's officers following procedures approved by the Board of Trustees. Issuer specific events, market trends, bid/ask quotes of brokers and information providers and other market data may be reviewed in the course of making a good faith determination of a security's fair value.

Valuations change in response to many factors including the historical and prospective earnings of the issuer, the value of the issuer's assets, general economic conditions, interest rates, investor perceptions and market liquidity.

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.

AIM Energy Fund
14



The Fund may periodically participate in litigation related to Fund investments. As such, the Fund may receive proceeds from litigation settlements. Any proceeds as received are included in the Statement of Operations as realized gain/loss for investments no longer held and as unrealized gain/loss for investments still held.

Brokerage commissions and mark ups are considered transaction costs and are recorded as an increase to the cost basis of securities purchased and/or a reduction of proceeds on a sale of securities. Such transaction costs are included in the determination of realized and unrealized gain (loss) from investment securities reported in the Statement of Operations and the Statement of Changes in Net Assets and the realized and unrealized net gains (losses) on securities per share in the Financial Highlights. Transaction costs are included in the calculation of the Fund's net asset value and, accordingly, they reduce the Fund's total returns. These transaction costs are not considered operating expenses and are not reflected in net investment income reported in the Statement of Operations and Statement of Changes in Net Assets, or the net investment income per share and ratios of expenses and net investment income reported in the Financial Highlights, nor are they limited by any expense limitation arrangements between the Fund and the advisor.

The Fund allocates income and realized and unrealized capital gains and losses to a class based on the relative net assets of each class.

C.  Country Determination — For the purposes of making investment selection decisions and presentation in the Schedule of Investments, Invesco Aim may determine the country in which an issuer is located and/or credit risk exposure based on various factors. These factors include the laws of the country under which the issuer is organized, where the issuer maintains a principal office, the country in which the issuer derives 50% or more of its total revenues and the country that has the primary market for the issuer's securities, as well as other criteria. Among the other criteria that may be evaluated for making this determination are the country in which the issuer maintains 50% or more of its assets, the type of security, financial guarantees and enhancements, the nature of the collateral and the sponsor organization. Country of issuer and/or credit risk exposure has been determined to be the United States of America unless otherwise noted.

D.  Distributions — Distributions from income and net realized capital gain, if any, are generally paid annually and recorded on ex-dividend date. The Fund may elect to treat a portion of the proceeds from redemptions as distributions for federal income tax purposes.

E.  Federal Income Taxes — The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code necessary to qualify as a regulated investment company and to distribute substantially all of the Fund's taxable earnings to shareholders. As such, the Fund will not be subject to federal income taxes on otherwise taxable income (including net realized capital gain) that is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements.

The Fund files tax returns in the U.S. federal jurisdiction and certain other jurisdictions. Generally the Fund is subject to examinations by such taxing authorities for up to three years after the tax period.

F.  Expenses — Fees provided for under the Rule 12b-1 plan of a particular class of the Fund are charged to the operations of such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses attributable to the Institutional Class are charged to such class. Transfer agency fees and expenses and other shareholder recordkeeping fees and expenses relating to all other classes are allocated among those classes based on relative net assets. All other expenses are allocated among the classes based on relative net assets.

G.  Accounting Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including estimates and assumptions related to taxation. Actual results could differ from those estimates.

H.  Indemnifications — Under the Trust's organizational documents, each Trustee, officer, employee or other agent of the Trust (including the Trust's investment manager) is indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss as a result of such indemnification claims is considered remote.

I.  Other Risks — The Fund's investments are concentrated in a comparatively narrow segment of the economy. Consequently, the Fund may tend to be more volatile than other mutual funds, and the value of the Fund's investments may tend to rise and fall more rapidly.

The businesses in which the Fund invests may be adversely affected by foreign government, federal or state regulations on energy production, distribution and sale. Short-term fluctuations in commodity prices may influence Fund returns and increase price fluctuations of the Fund's shares.

J.  Securities Lending — The Fund may lend portfolio securities having a market value up to one-third of the Fund's total assets. Such loans are secured by collateral equal to no less than the market value of the loaned securities determined daily by the securities lending provider. Such collateral will be cash or debt securities issued or guaranteed by the U.S. Government or any of its sponsored agencies. Cash collateral received in connection with these loans is invested in short-term money market instruments or affiliated money market funds and is shown as such on the Schedule of Investments. It is the Fund's policy to obtain additional collateral from or return excess collateral to the borrower by the end of the next business day, following the valuation date of the securities loaned. Therefore, the value of the collateral held may be temporarily less than the value of the securities on loan. Lending securities entails a risk of loss to the Fund if and to the extent that the market value of the securities loaned were to increase and the borrower did not increase the collateral accordingly, and the borrower fails to return the securities. 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 any loss on the collateral invested. Dividends received on cash collateral investments for securities lending transactions, which are net of compensation to counterparties, is included in Dividends from affiliates on the Statement of Operations. The aggregate value of securities out on loan is shown as a footnote on the Statement of Assets and Liabilities.

AIM Energy Fund
15



K.  Foreign Currency Translations — Foreign currency is valued at the close of the NYSE based on quotations posted by banks and major currency dealers. Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities (net of foreign taxes withheld on disposition) and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for the portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. The combined results of changes in foreign exchange rates and the fluctuation of market prices on investments (net of estimated foreign tax withholding) are included with the net realized and unrealized gain or loss from investments in the Statement of Operations. Reported net realized foreign currency gains or losses arise from (i) sales of foreign currencies, (ii) currency gains or losses realized between the trade and settlement dates on securities transactions, and (iii) the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates.

The Fund may invest in foreign securities which may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. Taxes are accrued based on the Fund's current interpretation of tax regulations and rates that exist in the foreign markets in which the Fund invests.

L.  Foreign Currency Contracts — A foreign currency contract is an obligation to purchase or sell a specific currency for an agreed-upon price at a future date. The Fund may enter into a foreign currency contract to attempt to minimize the risk to the Fund from adverse changes in the relationship between currencies. The Fund may also enter into a foreign currency contract for the purchase or sale of a security denominated in a foreign currency in order to "lock in" the U.S. dollar price of that security. Fluctuations in the value of these contracts are recorded as unrealized appreciation (depreciation) until the contracts are closed. When these contracts are closed, realized gains (losses) are recorded. Realized and unrealized gains and losses on these contracts are included in the Statement of Operations. The Fund could be exposed to risk, which may be in excess of the amount reflected in the Statement of Assets and Liabilities, if counterparties to the contracts are unable to meet the terms of their contracts or if the value of the foreign currency changes unfavorably.

NOTE 2—Advisory Fees and Other Fees Paid to Affiliates

The Trust has entered into a master investment advisory agreement with Invesco Aim Advisors, Inc. (the "Advisor" or "Invesco Aim"). Under the terms of the investment advisory agreement, the Fund pays an advisory fee to the Advisor based on the annual rate of the Fund's average daily net assets as follows:

Average Net Assets   Rate  
First $350 million     0.75 %  
Next $350 million     0.65 %  
Next $1.3 billion     0.55 %  
Next $2 billion     0.45 %  
Next $2 billion     0.40 %  
Next $2 billion     0.375 %  
Over $8 billion     0.35 %  

 

Under the terms of a master sub-advisory agreement approved by shareholders of the Fund on March 28, 2008, to be effective as of May 1, 2008, between the Advisor and each of Invesco Asset Management Deutschland GmbH, Invesco Asset Management Limited, Invesco Asset Management (Japan) Limited, Invesco Australia Limited, Invesco Global Asset Management (N.A.), Inc., Invesco Hong Kong Limited, Invesco Institutional (N.A.), Inc., Invesco Senior Secured Management, Inc. and AIM Funds Management Inc. (collectively, the "Affiliated Sub-Advisors") the Advisor, not the Fund, may pay 40% of the fees paid to the Advisor to any such Affiliated Sub-Advisor(s) that provide discretionary investment management services to the Fund based on the percentage of assets allocated to such Sub-Advisor(s).

The Advisor has contractually agreed, through at least June 30, 2008, to waive advisory fees in an amount equal to 100% of the advisory fee the Advisor 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).

For the year ended March 31, 2008, the Advisor waived advisory fees of $91,690.

At the request of the Trustees of the Trust, Invesco Ltd. ("Invesco") agreed to reimburse expenses incurred by the Fund in connection with market timing matters in the AIM Funds, which may include legal, audit, shareholder reporting, communications and trustee expenses. These expenses along with the related expense reimbursement are included in the Statement of Operations. For the year ended March 31, 2008, Invesco reimbursed expenses of the Fund in the amount of $9,952.

The Trust has entered into a master administrative services agreement with Invesco Aim pursuant to which the Fund has agreed to pay Invesco Aim for certain administrative costs incurred in providing accounting services, to the Fund. For the year ended March 31, 2008, expenses incurred under the agreement are shown in the Statement of Operations as administrative services fees.

AIM Energy Fund
16



The Trust has entered into a transfer agency and service agreement with Invesco Aim Investment Services, Inc. ("IAIS") pursuant to which the Fund has agreed to pay IAIS a fee for providing transfer agency and shareholder services to the Fund and reimburse IAIS for certain expenses incurred by IAIS in the course of providing such services. IAIS may make payments to intermediaries that provide omnibus account services, sub-accounting services and/or networking services. All fees payable by IAIS to intermediaries that provide omnibus account services or sub-accounting are charged back to the Fund, subject to certain limitations approved by the Trust's Board of Trustees. For the year ended March 31, 2008, expenses incurred under the agreement are shown in the Statement of Operations as transfer agent fees.

The Trust has entered into master distribution agreements with Invesco Aim Distributors, Inc. ("IADI") to serve as the distributor for the Class A, Class B, Class C, 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 Plans, pays IADI compensation at the annual rate of 0.25% of the Fund's average daily net assets of Class A shares, 1.00% of the average daily net assets of Class B and Class C shares and 0.25% of the average daily net assets of Investor Class shares. Of the Plan payments, up to 0.25% of the average daily net assets of each class of shares may be paid to furnish continuing personal shareholder services to customers who purchase and own shares of such classes. Any amounts not paid as a service fee under the Plans would constitute an asset-based sales charge. Rules of the Financial Industry Regulatory Authority ("FINRA") impose a cap on the total sales charges, including asset-based sales charges that may be paid by any class of shares of the Fund. For the year ended March 31, 2008, expenses incurred under the Plan are shown in the Statement of Operations as distribution fees.

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 March 31, 2008, IADI advised the Fund that IADI retained $510,178 in front-end sales commissions from the sale of Class A shares and $54,456, $241,759 and $51,307 from Class A, Class B and Class C shares, respectively, for CDSC imposed on redemptions by shareholders.

Certain officers and trustees of the Trust are officers and directors of Invesco Aim, IAIS and/or IADI.

NOTE 3—Security Transactions with Affiliated Funds

The Fund is permitted to purchase or sell securities from or to certain other AIM Funds under specified conditions outlined in procedures adopted by the Board of Trustees of the Trust. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund or portfolio that is or could be considered an affiliate by virtue of having a common investment advisor (or affiliated investment advisors), common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under the procedures, each transaction is effected at the current market price. Pursuant to these procedures, for the year ended March 31, 2008, the Fund engaged in securities sales of $5,929,030, which resulted in net realized gains of $1,068,286, and securities purchases of $12,992,160.

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 March 31, 2008, the Fund received credits from these arrangements, which resulted in the reduction of the Fund's total expenses of $86,824.

NOTE 5—Trustees' and Officer's Fees and Benefits

"Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to pay remuneration to certain Trustees and Officers of the Fund. Trustees have the option to defer compensation payable by the Fund, and "Trustees' and Officer's Fees and Benefits" also include amounts accrued by the Fund to fund such deferred compensation amounts. Those Trustees who defer compensation have the option to select various AIM Funds in which their deferral accounts shall be deemed to be invested. Finally, certain current Trustees are eligible to participate in a retirement plan that provides for benefits to be paid upon retirement to Trustees over a period of time based on the number of years of service. The Fund may have certain former Trustees who also participate in a retirement plan and receive benefits under such plan. "Trustees' and Officer's Fees and Benefits" include amounts accrued by the Fund to fund such retirement benefits. Obligations under the deferred compensation and retirement plans represent unsecured claims against the general assets of the Fund.

During the year ended March 31, 2008, the Fund paid legal fees of $5,914 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

The Fund is permitted to temporarily carry a negative or overdrawn balance in its account with The State Street Bank and Trust Company ("SSB"), the custodian bank. To compensate the custodian bank for such overdrafts, the overdrawn Fund may either (i) leave funds as a compensating balance in the account so the custodian bank can be compensated by earning the additional interest; or (ii) compensate by paying the custodian bank at a rate agreed upon by the custodian bank and Invesco Aim, not to exceed the contractually agreed upon rate.

AIM Energy Fund
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Additionally, the Fund participates in an uncommitted unsecured revolving credit facility with 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 Invesco 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 March 31, 2008, the Fund did not borrow under the uncommitted unsecured revolving credit facility.

NOTE 7—Distributions to Shareholders and Tax Components of Net Assets

Distributions to Shareholders:

The tax character of distributions paid during the years ended March 31, 2008 and 2007 was as follows:

    2008   2007  
Ordinary income   $     $ 46,291,276    
Long-term capital gain     375,016,951       150,002,823    
Total distributions   $ 375,016,951     $ 196,294,099    

 

Tax Components of Net Assets:

As of March 31, 2008, the components of net assets on a tax basis were as follows:

    2008  
Undistributed long-term gain   $ 16,385,072    
Net unrealized appreciation–investmen