<PAGE> 1
[AIM LOGO APPEARS HERE]
[PHOTO APPEARS HERE]
AIM INTERMEDIATE GOVERNMENT FUND
ANNUAL REPORT
DECEMBER 31, 1995
<PAGE> 2
AIM INTERMEDIATE GOVERNMENT FUND
For shareholders who seek a high level of current income and relative
price stability. The Fund invests in a portfolio of U.S. government
securities.
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o AIM Intermediate Government Fund's performance figures are historical and
reflect reinvestment of all distributions and changes in net asset value.
Unless otherwise indicated, the Fund's performance is computed without a
sales charge.
o When sales charges are included in performance figures, Class A share
performance reflects the maximum 4.75% sales charge, and Class B share
performance reflects the applicable contingent deferred sales charge (CDSC)
for the period involved. The CDSC on Class B shares declines from 5% to 0%
at the beginning of the seventh year. The performance of the Fund's Class B
shares will differ from that of Class A shares.
o In 1995, the Fund paid distributions for Class A and Class B shares of
$0.705 and $0.627 per share, respectively.
o The Fund's investment return and principal value will fluctuate so
that an investor's shares, when redeemed, may be worth more or less than
their original cost.
o The Fund's portfolio composition is subject to change and there is no
assurance the Fund will continue to hold any one particular security.
o Government securities, such as U.S. Treasury bills and bonds, offer
a high degree of safety and are guaranteed as to the timely payment of
principal and interest. Fund shares are not insured and their value and
yield will vary with market conditions.
o Past performance cannot guarantee comparable future results.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o Lipper Analytical Services, Inc., is an independent mutual fund
performance monitor. The unmanaged Lipper U.S. Intermediate Government Funds
Index represents an average of the performance of the 30 largest
intermediate government funds. The unmanaged Lipper U.S. Mortgage Funds
Index represents an average of the performance of the 10 largest mortgage
funds. The unmanaged Lipper General Bond Funds Index represents an average
of the performance of the 10 largest general bond funds. The unmanaged
Lipper Fixed-Income Funds Average represents an average of the performance
of all fixed-income funds Lipper tracks. The unmanaged Lipper General Equity
Funds Average represents an average of the performance of all general equity
funds Lipper tracks.
o The Lehman Intermediate Government Bond Index is an unmanaged composite
generally considered representative of intermediate U.S. Treasury and U.S.
government agency securities.
o The Standard & Poor's 500 (S&P 500) is a group of unmanaged securities
widely regarded by investors to be representative of the stock market in
general.
o An investment cannot be made in any indexes listed. Unless otherwise
indicated, index results include reinvested dividends and do not reflect
sales charges.
This report may be distributed only to current shareholders or to
persons who have received a current prospectus of the Fund.
<PAGE> 3
A Message from
the Chairman
Dear Fellow Shareholder:
In one of the best years for bonds on record, AIM
Intermediate Government Fund delivered the strongest
performance in its eight-year history. The Fund logged total
returns for Class A and Class B shares of 16.28% and 15.22%,
[PHOTO OF respectively, for the 12 months ended December 31, 1995. Such
Charles T. performance was enough to outperform the 14.62% return logged
Bauer, for the average intermediate government fund, as measured
Chairman of by the Lipper U.S. Intermediate Government Funds Index.
the Board of The Fund managed its strong showing in a record-breaking
the Fund, market that, for much of 1995, was favored by ideal
APPEARS HERE] conditions for bonds: declining interest rates, moderating
economic growth, and mild inflation. Key to the Fund's
performance was a balanced approach across all government
sectors. A complete discussion of market conditions during the
reporting period and the Fund's investment strategy appears on
page 2 of this report.
The Fund's attractive 30-day yield was 5.05% for Class A shares and
4.92% for Class B shares, based on maximum offering price as of December 31,
1995. The yield calculation reflects the yield to maturity of the securities in
the portfolio, and includes both interest and amortization of any discount or
premium to the face value of the securities.
Effective in September, the trustees changed the Fund's name from AIM
Government Securities Fund to AIM Intermediate Government Fund. There was no
change in the Fund's overall investment strategy, although now the portfolio
will maintain a dollar-weighted average maturity of between three and 10 years.
AIM believes the new name more accurately characterizes the Fund's investment
discipline within the U.S. government bond fund universe.
Net assets in the Fund increased during the year to $237.6 million as of
December 31, 1995. While the Fund's favorable market performance was largely
responsible, significant credit for this increase goes to our shareholders who
paid AIM the highest compliment with their continued support.
Although it has been a good year for AIM Intermediate Government Fund, it is
but one year. From a historic perspective, a repeat of the year's impressive
performance by bond markets is unlikely. Therefore, even as we relish the
success of a good year, we are already looking ahead.
On a personal level,1996 has important investment implications for all of us.
Clouds on the horizon in the form of the budget debate over retirement
benefits such as Medicare and Social Security programs accentuate the need to
build your own retirement nest egg, independent of any benefits which may--or
may not--be available to you when the time comes. For many in the baby boomer
generation, that's just 10 years away.
Thank you for continuing to rely on AIM Intermediate Government Fund to
help build your financial future. We are ready to respond to any questions or
comments you may have about this report. Please call Client Services at
800-959-4246 during normal business hours. For automated account information 24
hours a day, call the AIM Investor Line toll-free at 800-246-5463.
Respectfully submitted,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
AIM INTERMEDIATE
GOVERNMENT FUND
OUTPERFORMED THE
AVERAGE
INTERMEDIATE GOVERNMENT
FUND IN 1995
AIM INTERMEDIATE
GOVERNMENT FUND
CLASS A SHARES
16.28%
AIM INTERMEDIATE
GOVERNMENT FUND
CLASS B SHARES
15.22%
LIPPER U.S.
INTERMEDIATE
GOVERNMENT FUNDS
INDEX 14.62%
Fund total return performance is
compared to the performance of the
30 largest intermediate government
funds tracked by Lipper, excluding
all sales charges, and including fees
and expenses.
<PAGE> 4
Management's
Discussion & Analysis
- ----------------
Declining
interest rates
were the most
visible catalyst
driving bond
markets during
the year
- ----------------
BONDS STAGE A DRAMATIC RECOVERY IN 1995
Sharply declining interest rates and mild inflation mixed the powerful
recipe that launched one of the strongest rallies in bonds on record. The
strength of the rally surprised many investors, coming on the heels of the
disappointing performance of bonds in 1994.
During 1995, general bond funds averaged total returns of 16.56%, as measured
by the Lipper General Bond Funds Index. Such performance would be a strong
showing for equity funds in a more typical year. Moreover, 1995 bond fund
returns outdistanced those achieved in 1993, a vintage year for bond investors
when interest rates fell to their lowest levels in a quarter-century.
Falling interest rates were the most visible catalyst driving bond markets
during the year. After boosting interest rates at a record clip in 1994, the
Federal Reserve Board reversed its policy and eased interest rates twice in
1995. It was the first time the central bank had lowered rates since 1992.
Bonds also attracted increased demand from foreign central banks during the
year. The Federal Reserve Board reported that foreign bank custody holdings
of U.S. Treasury securities rose 21% to more than $500 billion by the end of
December.
The bond market's rally was paced by a sharp drop in long-term yields, which
saw the benchmark 30-year U.S. Treasury fall to 5.95% by year-end, from 7.88%
at the close of 1994. According to Lipper Analytical Services, Inc., general
U.S. government bond funds gained 16.79% for the year, closely followed by U.S.
mortgage funds which rose 15.44%.
Mortgage-backed securities were a step behind U.S. Treasuries during the year
amid investor concerns that low interest rates would prompt homeowners to
refinance their mortgages. Early repayment shortens the life of a mortgage
security and reduces its overall return.
In the final three months of the year, fixed-income funds actually
outperformed equity funds. The Lipper Fixed-Income Funds Average gained 3.53%
in the last quarter of 1995, compared to 3.05% for the Lipper General Equity
Funds Average. The Lipper U.S. Intermediate Government Funds Index gained 3.72%
for the quarter.
As the year drew to a close, bond markets were anticipating yet another
interest rate cut by the central bank and a credible budget compromise in
Congress. In December, the 30-year U.S. Treasury bond yield was pushed below 6%
for the first time since late 1993.
At year-end, economic conditions continued to favor bonds. Growth
in the economy was predicted at a 2.5% annual rate for the fourth quarter, with
inflation estimated at only 2.4%. Such modest growth helps lessen demand for
borrowed funds and keeps interest rates down. It seemed a fitting finale for
1995, which ended triumphantly for investors with stocks at historic highs,
bond yields the lowest since 1993, and the U.S. dollar on solid ground.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
MARKETS AT A GLANCE--YEAR-END YIELD COMPARISONS
- ------------------------------------------------------------------------------------------------------------
MORTGAGE MARKETS U.S. TREASURY MARKETS
<S> <C> <C> <C> <C> <C>
12/95 12/94 12/95 12/94
FREDDIE MAC HOME LOANS
30-Year Fixed 7.25% 9.39% 1-Year Treasury Bills 5.132% 7.162%
1-Year Adjustable 5.375 6.375 2-Year Treasury Notes 5.150 7.690
3-Year Treasury Notes 5.208 7.778
FANNIE MAE HOME LOAN 5-Year Treasury Notes 5.374 7.827
30-Year Fixed 7.22% 9.28% 10-Year Treasury Notes 5.570 7.827
1-Year Adjustable 6.15 8.40 30-Year Treasury Bonds 5.949 7.876
- ------------------------------------------------------------------------------------------------------------
</TABLE>
Source: Barron's
See important Fund disclosure on inside front cover.
2
<PAGE> 5
Management's
Discussion & Analysis
YOUR INVESTMENT PORTFOLIO AIM
AIM Intermediate Government Fund delivered its strongest year since its
inception in 1987, thanks to a disciplined investment strategy which took full
advantage of the dramatic rise in prices for government securities in 1995.
Remember to keep in mind, the Fund's portfolio composition is subject to change
and there is no guarantee the Fund will continue to hold any particular security
mentioned in this report.
The yield curve steepened during the reporting year, as shown by the
spread between two-year and 30-year U.S. Treasury securities which increased
from less than 20 basis points to almost 80 basis points. (A basis point is
1/100 of a percentage point.) The yield on the 10-year U.S. Treasury note
declined from 7.827% to 5.570%, and that decline of more than 200 basis points
led to a significant increase in mortgage prepayments and a widening of
pass-through spreads. Mortgage refinancing, which started the year at only 15%
of total volume, comprised 44% by year-end.
The Fund maintained its balanced approach to the government markets, but
with increasing expectations of a slowing economy and an outlook for lower
interest rates, moved to overweight treasury securities versus mortgage
securities. Average weighted maturity was extended to just under eight years,
and duration to almost four years.
Positions in U.S. Treasury securities were increased, particularly in the
one- to three-year maturity range. With the sharp decline in yields,
intermediate-term U.S. Treasury notes were among the best performing
sectors among government securities during the year. Investments in
mortgage-backed securities were reduced during the year as prepayment concerns
contributed to price pressures for those securities.
For mortgage loan resalers and repackagers, the decline in interest rates
fueled the supply in low-cost mortgages. Federal National Mortgage Association
(Fannie Mae), a principal mortgage-loan resaler, reported a 15% increase in
fourth quarter earnings, thanks to lower borrowing costs for the agency and
increased investor demand for mortgages. Federal Home Loan Mortgage Corp.
(Freddie Mac), a major mortgage loan repackager, reported its ninth consecutive
year of record earnings, largely due to strong growth in its mortgage
portfolio.
At year-end, the Fund had approximately 47% of its assets in mortgage-backed
securities, 31% in U.S. Treasury securities, and 16% in U.S. agency securities.
The remaining assets were invested in cash and cash-equivalent securities.
Standard & Poor's Corporation, a widely known credit rating agency, assigned
the Fund its highest possible rating of AAAf for credit quality. These ratings
are historical and are based on an annual analysis of the Fund's credit quality,
composition, and management.
OUTLOOK FOR THE FUTURE
Most analysts and market watchers agree: 1995 will be a hard act to follow.
To trigger similar returns in 1996, the yield on the bellwether 30-year
U.S. Treasury bond would have to decline to just over 4%, a level not seen in 30
years. However, a decline to 5.75% for that same bond would generate a solid
total return of about 12%.
At this writing, the bond market appears to be extending its rally into the
new year. Slow-to-moderate economic growth and receding inflation have fueled
speculation that interest rates could decline even further. The central bank
recently lowered short-term interest rates by 0.25%, a move apparently
anticipated by investors given the current slope of the U.S. Treasury yield
curve.
Rather than try to determine the future direction of interest rates and
financial markets, AIM Intermediate Government Fund continues its focus on
generating optimal current income with reasonable risk. We believe our
commitment to this time-tested strategy will best serve our shareholders over
the long term.
PORTFOLIO COMPOSITION
(As of 12/31/95)
MORTGAGE OBLIGATIONS
FEDERAL NATIONAL
MORTGAGE ASSN. 51%
FEDERAL HOME LOAN
MORTGAGE CORP. 28%
GOVERNMENT NATIONAL
MORTGAGE ASSN. 21%
See important Fund disclosure on inside front cover.
3
<PAGE> 6
Long-term
Performance
GROWTH OF A $10,000 INVESTMENT
- --------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
For periods ended December 31, 1995
<TABLE>
<CAPTION>
Without With
Sales Charge Sales Charge
------------ ------------
<S> <C> <C>
CLASS A SHARES
1 Year 16.28% 10.74%
5 Years 7.61 6.56
Inception (4/28/87) 7.99 7.39
CLASS B SHARES
1 Year 15.22% 10.22%
Inception (9/7/93) 4.34 3.20
</TABLE>
- --------------------------------------------------
<TABLE>
<CAPTION>
AIM INTERMEDIATE GOVERNMENT AIM INTERMEDIATE GOVERNMENT LEHMAN BROS. INTERMEDIATE
FUND CLASS A SHARES (W/O SALES CHARGE) FUND CLASS A SHARES (W/SALES CHARGE) GOVT. BOND INDEX
<S> <C> <C> <C>
4/87 $10,000 $9,524 $10,000
12/87 10,418 9,922 10,424
12/88 11,088 10,560 11,091
12/89 12,339 11,752 12,498
12/90 13,498 12,855 13,690
12/91 15,250 14,524 15,620
12/92 16,204 15,432 16,704
12/93 17,350 16,524 18,068
12/94 16,753 15,955 17,751
12/95 19,480 18,552 20,314
</TABLE>
Past performance cannot guarantee comparable future results.
Source: Towers Data Systems HYPO(R)
An investment cannot be made in any indexes listed. Unless otherwise indicated,
index results include reinvested dividends and do not reflect sales charges
The performance of Class B shares will differ from that of Class A shares due
to differing fees and expenses. For Fund performance calculations and
descriptions of indexes cited on this page, please refer to the inside front
cover of this report.
4
<PAGE> 7
- ---------------------
Your financial
consultant can assist
you in developing an
asset allocation
strategy and select
the appropriate
investments to help
you meet your
long-term
investment goals.
- ---------------------
ASSET ALLOCATION HELPS YOU MANAGE
YOUR INVESTMENTS IN CHANGING MARKETS
Every mutual fund investor would like to invest in a market that only
goes up--a tide that floats all ships. The truth is, markets also decline. But
market changes do not affect all investments the same way--some investments may
benefit from a market trend when others do not.
And market changes are not the only factors an investor must manage. As you
can see in the box below, Investment Risk Takes Many Forms, there are a number
of important considerations with every investment.
To manage these changing conditions, investors have learned to diversify
their assets across a wide variety of investments. For most investors, mutual
funds offer convenient and affordable methods to diversify their assets. For as
little as $500, an investor has access to a portfolio of hundreds of
professionally selected securities.
When you invest in more than one fund, you increase the level of
diversification. You also gain another important benefit. Since mutual funds are
managed according to specific investment objectives, such as growth or income,
you can invest in mutual funds with different investment objectives to create a
personalized investment plan which suits your unique financial objectives. This
investment strategy is called asset allocation.
Mutual fund investors tend to seek growth, or current income, or some
combination of both. Generally, investors who choose to assume more investment
risk get the potential for a higher return. With asset allocation, you can
fine-tune your investment plan to be more conservative, or more aggressive,
depending on your personal financial goals and risk tolerances.
- -------------------------------------------------------------------------------
INVESTMENT RISK TAKES MANY FORMS:
MARKET RISK. The prices of some investments will fluctuate according to
changes in the market.
INTEREST RATE RISK. The value of some investments, such as fixed-income
securities, will rise and fall as interest rates change.
REINVESTMENT RISK. When interest rates fall, investors face the possibility
that investment income can not be reinvested at higher rates previously
available.
INFLATION RISK. Inflation can cause the value of some investments to
erode as the cost of living increases.
CURRENCY EXCHANGE RISK. Investments valued in U.S. dollars will rise
and fall according to the dollar's value against other world currencies.
5
<PAGE> 8
CHANGING JOBS OR
RETIRING SOON?
If you receive a lump-sum distribution, you can keep your money working
tax deferred and avoid a mandatory 20% withholding tax by transferring your
assets directly into an AIM IRA. You need simply to complete AIM's IRA
transfer form.
WANT TO START AN AIM IRA?
Contact your financial consultant or AIM for the AIM IRA kit. It
includes the information and forms you need to get started.
WANT TO ADD TO YOUR EXISTING AIM IRA?
Simply mail your check payable to the AIM fund in which you
have your IRA and include your account number on the check. Mail it to A I M
Fund Services, Inc., Box 4739, Houston, TX 77210-4739.
LONG-TERM INCOME TAX DEFERRAL:
A BIG BOOST TO RETURNS ON AN IRA
Although the rules regarding deductibility of Individual Retirement Account
(IRA) contributions have been tightened, the important thing about an IRA is
not the tax deduction but the tax-deferred compounding of the earnings
on your investment. Over time, tax-deferred compounding can be a very powerful
investment tool.
In the example shown in the table, an investor puts $2,000 per year into two
accounts, each averaging 7.5% total return per year. In one, the earnings are
taxed; in the other, an IRA, the earnings are untaxed. At the end of year one,
the difference between the two accounts is only $42. But after 20 years, the
difference is $20,381.
Of course, eventually you will be taxed on the money you withdraw from your
retirement account. But if you leave your IRA investments alone until you retire
and then withdraw only the amount of income you need, the paid-out amount will
be subject to the applicable ordinary income tax while the balance of your
retirement account remains tax deferred. Also, if you wait until retirement to
begin making withdrawals, by then you may qualify for a lower tax bracket.
Money withdrawn early from an IRA (before age 59-1/2) is usually subject to a
10% tax penalty.
At age 70-1/2 you are required to begin making withdrawals from your IRA.
Failure to do so has significant tax penalties. The IRS has established minimum
required withdrawals.
- --------------------------------------------------------------------------------
THE IMPACT OF TAX DEFERRAL ON AN INVESTMENT PLAN
- --------------------------------------------------------------------------------
$2,000 per year at 7.5% annual total return, all earnings reinvested
TOTAL VALUE OF INVESTMENT
<TABLE>
<CAPTION>
AT END OF: TAXED AT 28% TAX-DEFERRED
---------- ------------ ------------
<S> <C> <C>
1 Year $ 2,108 $ 2,150
3 Years $ 6,672 $ 6,946
5 Years $11,742 $12,488
10 Years $27,015 $30,416
15 Years $46,881 $56,155
20 Years $72,724 $93,105
</TABLE>
The 7.5% rate of return is a conservative assumption. During the 20 years ended
12/31/95, for example, the unmanaged Standard & Poor's Composite Index of 500
Stocks (S&P 500) delivered total average annual return of 14.55%. The 28% tax
bracket is a standard tax bracket per the IRS, 1995. This example is
hypothetical and is not intended to represent the performance of any AIM fund.
- --------------------------------------------------------------------------------
The information presented here does not constitute tax advice.
6
<PAGE> 9
Financials
SCHEDULE OF INVESTMENTS
December 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MARKET VALUE
<S> <C> <C>
U.S. GOVERNMENT AGENCIES-70.46%
FEDERAL FARM CREDIT BANK-2.81%
$ 6,000,000 11.90%, 10/20/97 $ 6,673,800
- ---------------------------------------------------------------------------------------------
FEDERAL HOME LOAN BANK-4.27%
Medium term notes
4,000,000 7.31%, 07/06/01 4,304,200
- ---------------------------------------------------------------------------------------------
2,500,000 7.78%, 10/19/01 2,765,850
- ---------------------------------------------------------------------------------------------
2,800,000 7.36%, 07/01/04 3,074,092
- ---------------------------------------------------------------------------------------------
10,144,142
- ---------------------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORPORATION-15.00%
Pass through certificates
9,675,526 9.00%, 12/01/05 to 09/01/20 10,167,149
- ---------------------------------------------------------------------------------------------
46,522 8.00%, 07/01/06 to 12/01/06 48,281
- ---------------------------------------------------------------------------------------------
3,132,104 8.50%, 07/01/07 to 04/01/25 3,269,961
- ---------------------------------------------------------------------------------------------
4,732,089 10.50%, 09/01/09 to 01/01/21 5,186,750
- ---------------------------------------------------------------------------------------------
71,263 10.00%, 11/01/11 to 02/01/16 77,586
- ---------------------------------------------------------------------------------------------
39,457 12.00%, 02/01/13 44,055
- ---------------------------------------------------------------------------------------------
3,000,097 7.00%, 06/01/24 3,029,108
- ---------------------------------------------------------------------------------------------
12,974,513 9.50%, 04/01/25 13,809,552
- ---------------------------------------------------------------------------------------------
35,632,442
- ---------------------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION-37.27%
Debentures
3,000,000 9.35%, 02/12/96 3,014,430
- ---------------------------------------------------------------------------------------------
5,000,000 9.55%, 11/10/97 5,371,650
- ---------------------------------------------------------------------------------------------
4,000,000 8.20%, 03/10/98 4,236,920
- ---------------------------------------------------------------------------------------------
3,500,000 8.625%, 11/10/04 3,827,390
- ---------------------------------------------------------------------------------------------
4,500,000 8.50%, 02/01/05 4,926,780
- ---------------------------------------------------------------------------------------------
3,000,000 7.875%, 02/24/05 3,422,130
- ---------------------------------------------------------------------------------------------
Pass through certificates
55,403 8.50%, 01/01/07 to 03/01/07 57,844
- ---------------------------------------------------------------------------------------------
2,935,647 7.00%, 09/01/25 2,961,276
- ---------------------------------------------------------------------------------------------
2,939,425 7.50%, 06/01/25 3,013,793
- ---------------------------------------------------------------------------------------------
4,018,870 9.00%, 04/01/25 to 05/01/25 4,234,804
- ---------------------------------------------------------------------------------------------
12,652,613 10.00%, 07/01/20 to 08/01/20 13,897,883
- ---------------------------------------------------------------------------------------------
2,115,052 10.50%, 03/01/14 to 07/01/19 2,336,434
- ---------------------------------------------------------------------------------------------
4,746,563 9.50%, 07/01/16 to 08/01/22 5,086,179
- ---------------------------------------------------------------------------------------------
934,115 8.00%, 03/01/25 967,667
- ---------------------------------------------------------------------------------------------
15,000,000 8.00%, 01/16/26 TBA(a) 15,548,438
- ---------------------------------------------------------------------------------------------
15,000,000 8.50%, 01/18/26 TBA(a) 15,665,625
- ---------------------------------------------------------------------------------------------
88,569,243
- ---------------------------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION-11.11%
Pass through certificates
4,292,410 9.00%, 10/15/08 to 11/15/21 4,573,885
- ---------------------------------------------------------------------------------------------
3,169,596 9.50%, 06/15/09 to 12/15/20 3,430,149
- ---------------------------------------------------------------------------------------------
9,233,277 10.00%, 11/15/09 to 07/15/24 10,176,302
- ---------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 10
Financials
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MARKET VALUE
<S> <C> <C>
Pass through certificates (continued)
$ 345,649 11.00%, 12/15/09 to 12/15/15 $ 388,095
- --------------------------------------------------------------------------------------------
585,603 13.50%, 07/15/10 to 04/15/15 681,671
- --------------------------------------------------------------------------------------------
305,460 12.50%, 11/15/10 351,654
- --------------------------------------------------------------------------------------------
637,065 13.00%, 01/15/11 to 05/15/15 738,185
- --------------------------------------------------------------------------------------------
1,074,738 12.00%, 01/15/13 to 07/15/15 1,226,523
- --------------------------------------------------------------------------------------------
2,679,547 10.50%, 07/15/13 to 10/15/21 2,977,251
- --------------------------------------------------------------------------------------------
1,784,715 8.00%, 03/15/23 1,863,885
- --------------------------------------------------------------------------------------------
26,407,600
- --------------------------------------------------------------------------------------------
Total U.S. Government Agencies 167,427,227
- --------------------------------------------------------------------------------------------
U.S. TREASURY SECURITIES-34.77%
U.S. TREASURY NOTES & BONDS-33.97%
5,000,000 9.375%, 04/15/96 5,057,600
- --------------------------------------------------------------------------------------------
1,000,000 8.625%, 08/15/97 1,052,970
- --------------------------------------------------------------------------------------------
7,000,000 8.875%, 11/15/97 7,451,080
- --------------------------------------------------------------------------------------------
6,000,000 9.25%, 08/15/98 6,581,580
- --------------------------------------------------------------------------------------------
3,000,000 7.75%, 11/30/99 3,251,580
- --------------------------------------------------------------------------------------------
10,000,000 6.50%, 05/15/05 10,653,900
- --------------------------------------------------------------------------------------------
13,500,000 7.25, 05/15/16 to 08/15/22 15,536,155
- --------------------------------------------------------------------------------------------
16,000,000 7.50%, 11/15/16 to 11/15/24 18,951,560
- --------------------------------------------------------------------------------------------
4,000,000 8.125%, 08/15/19 5,035,720
- --------------------------------------------------------------------------------------------
4,000,000 7.625%, 02/15/25 4,889,200
- --------------------------------------------------------------------------------------------
2,000,000 6.875%, 08/15/25 2,257,620
- --------------------------------------------------------------------------------------------
80,718,965
- --------------------------------------------------------------------------------------------
U.S. TREASURY STRIPS-0.80%(b)
1,000,000 6.80%, 11/15/18 241,000
- --------------------------------------------------------------------------------------------
7,000,000 6.71%, 02/15/19 1,660,400
- --------------------------------------------------------------------------------------------
1,901,400
- --------------------------------------------------------------------------------------------
Total U. S. Treasury Securities 82,620,365
- --------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT-6.35%(c)
Daiwa Securities America Inc.
15,076,782 5.92%, 01/02/96(d) 15,076,782
- --------------------------------------------------------------------------------------------
TOTAL INVESTMENTS-111.58% 265,124,374
- --------------------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-(11.58%) (27,506,669)
- --------------------------------------------------------------------------------------------
NET ASSETS-100.00% $237,617,705
============================================================================================
</TABLE>
Notes to Schedule of Investments:
(a) At 12/31/95, cost of securities purchased on a when-issued basis totalled
$31,117,969. These securities are also subject to dollar roll transactions.
See Note 1, Section C of Notes to Financial Statements.
(b) U.S. Treasury STRIPS are traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at the
time of purchase by the Fund.
(c) 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. The collateral is marked to market
daily to ensure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds managed by
the investment advisor.
(d) Joint repurchase agreement entered into 12/29/95 with a maturing value of
$646,679,181. Collateralized by $537,995,000 U.S. Treasury obligations,
7.875% to 11.25% due 11/15/07 to 02/15/15.
Abbreviations:
TBA-To Be Announced
See Notes to Financial Statements.
8
<PAGE> 11
Financials
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $254,158,535) $265,124,374
- -----------------------------------------------------------------------------------------
Receivables for:
Fund shares sold 1,506,965
- -----------------------------------------------------------------------------------------
Interest 3,050,406
- -----------------------------------------------------------------------------------------
Investment for deferred compensation plan 16,279
- -----------------------------------------------------------------------------------------
Other assets 117,790
- -----------------------------------------------------------------------------------------
Total assets 269,815,814
- -----------------------------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 31,117,969
- -----------------------------------------------------------------------------------------
Fund shares redeemed 352,050
- -----------------------------------------------------------------------------------------
Dividends 344,882
- -----------------------------------------------------------------------------------------
Deferred compensation plan 16,279
- -----------------------------------------------------------------------------------------
Accrued advisory fees 98,006
- -----------------------------------------------------------------------------------------
Accrued administrative service fees 4,767
- -----------------------------------------------------------------------------------------
Accrued distribution fees 164,601
- -----------------------------------------------------------------------------------------
Accrued transfer agent fees 38,089
- -----------------------------------------------------------------------------------------
Accrued operating expenses 61,466
- -----------------------------------------------------------------------------------------
Total liabilities 32,198,109
- -----------------------------------------------------------------------------------------
Net assets applicable to shares outstanding $237,617,705
=========================================================================================
NET ASSETS:
Class A $176,318,099
=========================================================================================
Class B $ 61,299,606
=========================================================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE:
Class A 18,174,801
=========================================================================================
Class B 6,324,677
=========================================================================================
Class A:
Net asset value and redemption price per share $ 9.70
=========================================================================================
Offering price per share:
(Net asset value of $9.70 divided by 95.25%) $ 10.18
=========================================================================================
Class B:
Net asset value and offering price per share $ 9.69
=========================================================================================
See Notes to Financial Statements.
9
</TABLE>
<PAGE> 12
Financials
STATEMENT OF OPERATIONS
For the year ended December 31, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $17,039,564
- ----------------------------------------------------------------------------------------
EXPENSES:
Advisory fees 996,681
- ----------------------------------------------------------------------------------------
Custodian fees 62,116
- ----------------------------------------------------------------------------------------
Distribution fees -- Class A 403,858
- ----------------------------------------------------------------------------------------
Distribution fees -- Class B 377,931
- ----------------------------------------------------------------------------------------
Administrative service fees 71,765
- ----------------------------------------------------------------------------------------
Interest 215,956
- ----------------------------------------------------------------------------------------
Professional fees 98,885
- ----------------------------------------------------------------------------------------
Transfer agent fees -- Class A 251,364
- ----------------------------------------------------------------------------------------
Transfer agent fees -- Class B 66,583
- ----------------------------------------------------------------------------------------
Trustees' fees 7,461
- ----------------------------------------------------------------------------------------
Other 118,064
- ----------------------------------------------------------------------------------------
Total expenses 2,670,664
- ----------------------------------------------------------------------------------------
Net investment income 14,368,900
- ----------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES:
Net realized gain (loss) on sales of investment securities (1,382,949)
- ----------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 16,712,997
- ----------------------------------------------------------------------------------------
Net gain on investment securities 15,330,048
- ----------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $29,698,948
=========================================================================================
</TABLE>
See Notes to Financial Statements.
10
<PAGE> 13
Financials
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
OPERATIONS:
Net investment income $ 14,368,900 $10,649,346
- -------------------------------------------------------------------------------------------
Net realized gain (loss) on sales of investment
securities (1,382,949) (10,486,627)
- -------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities 16,712,997 (5,639,126)
- -------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 29,698,948 (5,476,407)
- -------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (11,460,957) (7,962,122)
- -------------------------------------------------------------------------------------------
Class B (2,319,847) (834,681)
- -------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on
investment securities:
Class A -- (652,519)
- -------------------------------------------------------------------------------------------
Class B -- (80,521)
- -------------------------------------------------------------------------------------------
Return of capital:
Class A (693,899) (1,369,875)
- -------------------------------------------------------------------------------------------
Class B (162,343) (165,673)
- -------------------------------------------------------------------------------------------
Share transactions-net:
Class A 5,708,304 33,619,200
- -------------------------------------------------------------------------------------------
Class B 35,091,651 18,932,857
- -------------------------------------------------------------------------------------------
Net increase in net assets 55,861,857 36,010,259
- -------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 181,755,848 145,745,589
- -------------------------------------------------------------------------------------------
End of period $237,617,705 $181,755,848
===========================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $239,433,094 $196,716,205
- -------------------------------------------------------------------------------------------
Undistributed net investment income (12,778) 159,155
- -------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) on sales of
investment securities (12,768,450) (9,372,354)
- -------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities 10,965,839 (5,747,158)
- -------------------------------------------------------------------------------------------
$237,617,705 $181,755,848
===========================================================================================
</TABLE>
See Notes to Financial Statements.
11
<PAGE> 14
Financials
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Intermediate Government Fund (the "Fund") (formerly AIM Government
Securities Fund) is a series portfolio of AIM Funds Group (the "Trust"). The
Trust is a Delaware business 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 series portfolios, each having an
unlimited number of shares of beneficial interest. The Fund currently offers two
different classes of shares: the Class A shares and the Class B shares. Class A
shares are sold with a front-end sales charge. Class B shares are sold with a
contingent deferred sales charge. 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. The Fund's investment objective is to seek to achieve a high level
of current income consistent with reasonable concern for safety of principal by
investing in debt securities issued, guaranteed or otherwise backed by the
United States Government. Information presented in these financial statements
pertains only to the Fund.
The preparation of financial statements in conformity with generally accepted
accounting principles 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 significant accounting policies followed by the Fund
in the preparation of its financial statements.
A. Security Valuations - Debt obligations that are issued or guaranteed by the
U.S. Government, its agencies, authorities, and instrumentalities 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 yield, type of
issue, coupon rate, maturity and seasoning differential. Securities for which
market prices are not provided by the pricing service are valued at the mean
between the last bid and asked prices based upon quotes furnished by
independent sources. Securities for which market quotations are either 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. Short-term obligations
having 60 days or less to maturity are valued at amortized cost which
approximates market value.
B. Securities Transactions, Investment Income and Distributions - 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 as earned from settlement date
and is recorded on the accrual basis. Dividends to shareholders are declared
daily and are paid monthly.
On December 31, 1995, $760,029 was reclassified from undistributed net
realized gain to undistributed net investment income as a result of permanent
book/tax differences due to the differing book/tax treatment for principal
paydown losses on mortgage-backed securities. In addition, $856,242 was
reclassified from undistributed net investment income to paid-in capital,
consisting of $760,029 mentioned above and $96,213 of distributions in excess
of net investment income. On December 31, 1995, undistributed net realized
loss was increased and shares of beneficial interest increased by $2,773,176
in order to comply with the requirements of the American Institute of
Certified Public Accountants Statement of Position 93-2. Net assets of the
Fund were unaffected by the reclassifications discussed above.
C. Reverse Repurchase Agreements and Dollar Roll Transactions - A reverse
repurchase agreement involves the sale of securities held by the Fund, with
an agreement that the Fund will repurchase such securities at an agreed-upon
price and date. Proceeds from reverse repurchase agreements are treated as
borrowings. The agreements are collateralized by the underlying securities
and are carried at the amount at which the securities will subsequently be
repurchased as specified in the agreements.
The Fund may also engage in dollar roll transactions with respect to
mortgage securities issued by GNMA, FNMA and FHLMC. In a dollar roll
transaction, the Fund sells a mortgage security held in the portfolio to a
financial institution such as a bank or broker-dealer, and simultaneously
agrees to repurchase a substantially similar security (same type, coupon and
maturity) from the institution at a later date at an agreed upon price. The
mortgage securities that are repurchased will bear the same interest rate as
those sold, but generally will be
12
<PAGE> 15
Financials
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (continued)
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 the Fund exceeding the yield
on the security sold.
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 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 repurchase the securities. The Fund will limit its borrowings from banks,
reverse repurchase agreements and dollar roll transactions to an aggregate of
33-1/3% of its total assets at the time of investment. The Fund will not
purchase additional securities when any borrowings from banks exceed 5% of
the Fund's total assets.
D. Federal Income Taxes - The Fund intends to comply with the requirements 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 gains) which is
distributed to shareholders. Therefore, no provision for federal income taxes
is recorded in the financial statements. The Fund has a capital loss
carryforward of $12,521,212 (which may be carried forward to offset future
taxable capital gains, if any) which expires, if not previously utilized,
through the year 2003. The Fund cannot distribute capital gains to
shareholders until the tax loss carryforwards have been utilized.
E. Expenses - Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to both
classes, e.g. advisory fees, are allocated between them.
NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays AIM an advisory fee at an annual rate of 0.50% of the
first $200 million of the Fund's average daily net assets, plus 0.40% of the
Fund's average daily net assets in excess of $200 million to and including $500
million, plus 0.35% of the Fund's average daily net assets in excess of $500
million to and including $1 billion, plus 0.30% of the Fund's average daily net
assets in excess of $1 billion. This agreement requires AIM to reduce its fees
or, if necessary, make payments to the Fund to the extent required to satisfy
any expense limitations imposed by the securities laws or regulations thereunder
of any state in which the Fund's shares are qualified for sale.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to reimburse AIM for certain administrative costs incurred in
providing accounting services to the Fund. During the year ended December 31,
1995, AIM was reimbursed $71,765 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. During the year ended December 31, 1995, the
Fund paid AFS $185,603 for such 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 shares and Class B 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
shares (the "Class A Plan") and with respect to the Fund's Class B shares (the
"Class B Plan")(collectively, the "Plans"). The Fund, pursuant to the Class A
Plan, pays AIM Distributors compensation at an annual rate of 0.25% of the
average daily net assets attributable to the Class A shares. The Class A Plan is
designed to compensate AIM Distributors for certain promotional and other sales
related costs and provides periodic payments to selected dealers and financial
institutions who furnish continuing personal shareholder services to their
customers who purchase and own Class A shares of the Fund. The Fund, pursuant to
the Class B Plan, pays AIM Distributors compensation at an annual rate of 1.00%
of the average daily net assets attributable to the Class B shares. Of this
amount, the Fund may pay a service fee of 0.25% of the average daily net assets
of the Class B shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
Class B shares of the Fund. Any amounts not paid as a service fee under such
Plans would constitute an asset-based sales charge. The Plans also impose a cap
on the total sales charges, including asset-based sales charges, that may be
paid by the
13
<PAGE> 16
Financials
NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES (continued)
respective classes. AIM Distributors may, from time to time, assign, transfer or
pledge to one or more designees, its rights to all or a designated portion of
(a) compensation received by AIM Distributors from the Fund pursuant to the
Class B Plan (but not AIM Distributors' duties and obligations pursuant to the
Class B Plan) and (b) any contingent deferred sales charges received by AIM
Distributors related to the Class B shares. During the year ended December 31,
1995, the Class A shares and the Class B shares paid AIM Distributors $403,858
and $377,931, respectively, as compensation under the Plans.
AIM Distributors received commissions of $144,669 from sales of the Class A
shares of the Fund during the year ended December 31, 1995. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended December 31, 1995,
AIM Distributors received $101,233 in contingent deferred sales charges imposed
on redemptions of Fund shares. Certain officers and trustees of the Trust are
officers and directors of AIM, AIM Distributors and AFS.
During the year ended December 31, 1995, the Fund paid legal fees of $3,146
for services rendered by Kramer, Levin, Naftalis, Nessen, Kamin & Frankel as
counsel to the Board of Trustees. A member of that firm is a trustee of the
Trust.
NOTE 3 - TRUSTEES' FEES
Trustees' fees represent remuneration paid or accrued to each trustee who is not
an "interested person" of AIM. The Trust may invest trustees' fees, if so
elected by a trustee, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4 - BANK BORROWINGS
The Fund has a $3,200,000 committed line of credit with a financial institution
syndicate with Chemical Bank of New York as the administrative agent. Interest
on borrowings under the line of credit is payable on maturity or prepayment
date. During the period July 20, 1995 (effective date of line of credit
agreement) through December 31, 1995, the Fund did not borrow under the line of
credit agreement. The Fund is charged a commitment fee, payable quarterly, at
the rate of 1/10 of 1% per annum on the unused balance of the Fund's commitment
line.
NOTE 5 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended December 31, 1995 was
$322,679,539 and $263,743,534, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
on a tax basis as of December 31, 1995 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $10,864,062
- -----------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (80,427)
- -----------------------------------------------------------------------------------
Net unrealized appreciation of investment securities $10,783,635
===================================================================================
</TABLE>
Cost of investments for tax purposes is $254,340,739.
NOTE 6 - SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 1995 and 1994
were as follows:
<TABLE>
<CAPTION>
1995 1994
---------------------- ----------------------
SHARES VALUE SHARES VALUE
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Sold:
Class A 5,766,866 $54,292,965 9,095,532 $84,555,557
- ---------------------------------- ------------------------------------------------
Class B 4,740,977 44,702,493 2,442,865 23,125,558
- ---------------------------------- ------------------------------------------------
Issued as reinvestment of
dividends:
Class A 993,993 9,337,931 815,446 7,649,630
- ---------------------------------- ------------------------------------------------
Class B 172,523 1,627,255 72,145 670,468
- ---------------------------------- ------------------------------------------------
Reacquired:
Class A (6,189,567) (57,922,592) (6,202,526) (58,585,987)
- ---------------------------------- ------------------------------------------------
Class B (1,194,246) (11,238,097) (523,327) (4,863,169)
- ---------------------------------- ------------------------------------------------
4,290,546 $40,799,955 5,700,135 $52,552,057
================================== ================================================
</TABLE>
14
<PAGE> 17
NOTE 7 - FINANCIAL HIGHLIGHTS
Shown below are the condensed financial highlights for a Class A share
outstanding during the eight-year period ended December 31, 1995 and the period
April 28, 1987 (date operations commenced) through December 31, 1987 and for a
Class B share outstanding during the two-year period ended December 31, 1995 and
the period September 7, 1993 (date sales commenced) through December 31, 1993.
<TABLE>
<CAPTION>
CLASS A: 1995 1994 1993 1992(a) 1991 1990
-------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.99 $ 10.05 $ 10.19 $ 10.34 $ 9.95 $ 9.91
- ---------------------------------------------- -------- -------- -------- -------- -------- -------
Income from investment operations:
Net investment income 0.69 0.68 0.74 0.77 0.82 0.87
- ---------------------------------------------- -------- -------- -------- -------- -------- -------
Net gains (losses) on securities (both
realized and unrealized) 0.73 (1.02) (0.04) (0.15) 0.41 0.01
- ---------------------------------------------- -------- -------- -------- -------- -------- -------
Total from investment operations 1.42 (0.34) 0.70 0.62 1.23 0.88
- ---------------------------------------------- -------- -------- -------- -------- -------- -------
Less distributions:
Dividends from net investment income (0.67) (0.58) (0.70) (0.74) (0.84) (0.84)
- ---------------------------------------------- -------- -------- -------- -------- -------- -------
Distributions from net realized capital gains -- (0.04) (0.14) (0.03) -- --
- ---------------------------------------------- -------- -------- -------- -------- -------- -------
Distributions from capital (0.04) (0.10) -- -- -- --
- ---------------------------------------------- -------- -------- -------- -------- -------- -------
Total distributions (0.71) (0.72) (0.84) (0.77) (0.84) (0.84)
- ---------------------------------------------- -------- -------- -------- -------- -------- -------
Net asset value, end of period $ 9.70 $ 8.99 $ 10.05 $ 10.19 $ 10.34 $ 9.95
============================================== ======== ======== ======== ======== ======== =======
Total return(b) 16.28% (3.44)% 7.07% 6.26% 12.98% 9.39%
============================================== ======== ======== ======== ======== ======== =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $176,318 $158,341 $139,586 $123,484 $101,409 $61,463
============================================== ======== ======== ======== ======== ======== =======
Ratio of expenses to average net assets
(exclusive of interest expense)(d) 1.08%(c) 1.04% 1.00% 0.98% 1.00% 1.00%
============================================== ======== ======== ======== ======== ======== =======
Ratio of net investment income to average net
assets(e) 7.36%(c) 7.34% 7.08% 7.53% 8.15% 8.85%
============================================== ======== ======== ======== ======== ======== =======
Portfolio turnover rate 140% 109% 110% 42% 26% 16%
============================================== ======== ======== ======== ======== ======== =======
<CAPTION>
CLASS A: 1989 1988 1987
------- ------- -------
<S> <C> <C> <C>
Net asset value, beginning of period $ 9.70 $ 9.92 $ 10.00
- ---------------------------------------------- ------- ------- -------
Income from investment operations:
Net investment income 0.90 0.89 0.55
- ---------------------------------------------- ------- ------- -------
Net gains (losses) on securities (both
realized and unrealized) 0.15 (0.27) (0.14)
- ---------------------------------------------- ------- ------- -------
Total from investment operations 1.05 0.62 0.41
- ---------------------------------------------- ------- ------- -------
Less distributions:
Dividends from net investment income (0.84) (0.84) (0.49)
- ---------------------------------------------- ------- ------- -------
Distributions from net realized capital gains -- -- --
- ---------------------------------------------- ------- ------- -------
Distributions from capital -- -- --
- ---------------------------------------------- ------- ------- -------
Total distributions (0.84) (0.84) (0.49)
- ---------------------------------------------- ------- ------- -------
Net asset value, end of period $ 9.91 $ 9.70 $ 9.92
============================================== ======= ======= =======
Total return(b) 11.28% 6.43% 4.18%
============================================== ======= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $57,077 $48,372 $28,052
============================================== ======= ======= =======
Ratio of expenses to average net assets
(exclusive of interest expense)(d) 1.00% 1.00% 1.20%(f)
============================================== ======= ======= =======
Ratio of net investment income to average net
assets(e) 9.10% 9.11% 8.64%(f)
============================================== ======= ======= =======
Portfolio turnover rate 15% 15% 35%
============================================== ======= ======= =======
</TABLE>
(a) The Fund changed investment advisors on June 30, 1992.
(b) Does not deduct sales charges and is not annualized for periods less than
one year.
(c) Ratios are based on average net assets of $161,543,053.
(d) Ratios of expenses to average net assets prior to reduction of advisory fee
and expense reimbursement were 1.05%, 1.04%, 1.04%, 1.10%, 1.13%, 1.08% and
1.08% for 1994-88, respectively.
(e) Ratios of net investment income to average net assets prior to reduction of
advisory fee and expense reimbursement were 7.32%, 7.04%, 7.48%, 8.05%,
8.72%, 9.03% and 9.03% for 1994-88, respectively.
(f) Annualized.
<TABLE>
<CAPTION>
CLASS B: 1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Net asset value, beginning of period $ 8.99 $ 10.04 $ 10.44
- ------------------------------------------------------------------------------------------- ------- ------- -------
Income from investment operations:
Net investment income 0.63 0.61 0.21
- ------------------------------------------------------------------------------------------- ------- ------- -------
Net gains (losses) on securities (both realized and unrealized) 0.70 (1.02) (0.27)
- ------------------------------------------------------------------------------------------- ------- ------- -------
Total from investment operations 1.33 (0.41) (0.06)
- ------------------------------------------------------------------------------------------- ------- ------- -------
Less distributions:
Dividends from net investment income (0.59) (0.50) (0.20)
- ------------------------------------------------------------------------------------------- ------- ------- -------
Distributions from net realized capital gains -- (0.04) (0.14)
- ------------------------------------------------------------------------------------------- ------- ------- -------
Distributions from capital (0.04) (0.10) --
- ------------------------------------------------------------------------------------------- ------- ------- -------
Total distributions (0.63) (0.64) (0.34)
- ------------------------------------------------------------------------------------------- ------- ------- -------
Net asset value, end of period $ 9.69 $ 8.99 $ 10.04
=========================================================================================== ======= ======= =======
Total return(a) 15.22% (4.13)% (0.52)%
=========================================================================================== ======= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $61,300 $23,415 $ 6,160
=========================================================================================== ======= ======= =======
Ratio of expenses to average net assets (exclusive of interest expense)(c) 1.86%(b) 1.82% 1.71%(e)
=========================================================================================== ======= ======= =======
Ratio of net investment income to average net assets(d) 6.58%(b) 6.56% 6.37%(e)
=========================================================================================== ======= ======= =======
Portfolio turnover rate 140% 109% 110%
=========================================================================================== ======= ======= =======
</TABLE>
(a) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(b) Ratios are based on average net assets of $37,793,057.
(c) Ratio of expenses to average net assets prior to reduction of advisory fee
and expense reimbursement for the year ended December 31, 1994 and the
period ended December 31, 1993 were 1.87% and 2.18% (annualized),
respectively.
(d) Ratio of net investment income to average net assets prior to reduction of
advisory fee and expense reimbursement for the year ended December 31, 1994
and the period ended December 31, 1993 were 6.50% and 5.90% (annualized),
respectively.
(e) Annualized.
15
<PAGE> 18
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of
AIM Intermediate Government Fund:
We have audited the accompanying statement of assets and liabilities of AIM
Intermediate Government Fund (a portfolio of AIM Funds Group), including the
schedule of investments, as of December 31, 1995, and the related statement of
operations for the year then ended, the statement of changes in its net assets
for the two-year period then ended and the financial highlights for each of the
years in the three-year period then ended. These financial statements and the
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and the
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and the financial highlights referred
to above present fairly in all material respects, the financial position of AIM
Intermediate Government Fund as of December 31, 1995, the results of its
operations for the year then ended, the changes in its net assets for the
two-year period then ended and the financial highlights for each of the years in
the three-year period then ended, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Houston, Texas
February 7, 1996
16
<PAGE> 19
Trustees
& Officers
<TABLE>
<CAPTION>
BOARD OF TRUSTEES OFFICERS OFFICE OF THE FUND
<S> <C> <C>
Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
Chairman and Chairman Suite 1919
Chief Executive Officer Houston, TX 77046
A I M Management Group Inc. Robert H. Graham
President INVESTMENT ADVISOR
Bruce L. Crockett
Director, President, and John J. Arthur A I M Advisors, Inc.
Chief Executive Officer Senior Vice President 11 Greenway Plaza
COMSAT Corporation and Treasurer Suite 1919
Houston, TX 77046
Owen Daly II Gary T. Crum
Director Senior Vice President TRANSFER AGENT
Cortland Trust Inc.
Carol F. Relihan A I M Fund Services, Inc.
Carl Frischling Vice President and P.O. Box 4739
Partner Secretary Houston, TX 77210-4739
Kramer, Levin, Naftalis,
Nessen, Kamin & Frankel Dana R. Sutton CUSTODIAN
Vice President
Robert H. Graham and Assistant Treasurer State Street Bank & Trust Co.
President and Chief 225 Franklin Street
Operating Officer Robert G. Alley Boston, MA 02110
A I M Management Group Inc. Vice President
COUNSEL TO THE FUND
John F. Kroeger Stuart W. Coco
Formerly, Consultant Vice President Ballard Spahr
Wendell & Stockel Andrews & Ingersoll
Associates, Inc. Melville B. Cox 1735 Market Street
Vice President Philadelphia, PA 19103
Lewis F. Pennock
Attorney Karen Dunn Kelley COUNSEL TO THE TRUSTEES
Vice President
Ian W. Robinson Kramer, Levin, Naftalis,
Consultant; Former Executive Jonathan C. Schoolar Nessen, Kamin & Frankel
Vice President and Chief Vice President 919 Third Avenue
Financial Officer New York, NY 10022
Bell Atlantic Management P. Michelle Grace
Services, Inc. Assistant Secretary DISTRIBUTOR
Louis S. Sklar David L. Kite A I M Distributors, Inc.
Executive Vice President Assistant Secretary 11 Greenway Plaza
Hines Interests Suite 1919
Limited Partnership Nancy L. Martin Houston, TX 77046
Assistant Secretary
AUDITORS
Ofelia M. Mayo
Assistant Secretary KPMG Peat Marwick LLP
700 Louisiana
Kathleen J. Pflueger NationsBank Bldg.
Assistant Secretary Houston, TX 77002
Samuel D. Sirko
Assistant Secretary
Stephen I. Winer
Assistant Secretary
Mary J. Benson
Assistant Treasurer
</TABLE>
REQUIRED FEDERAL INCOME TAX INFORMATION
AIM Intermediate Government Fund Class A and Class B shares paid ordinary
dividends in the amounts of $0.663 and $0.585 per share, respectively, to
shareholders during the Fund's tax year ended December 31, 1995.
STATE INCOME TAX INFORMATION
Of the total income dividends paid, 29.97% for both Class A and Class B shares
was derived from U.S. Treasury obligations.
<PAGE> 20
<TABLE>
<CAPTION>
[PHOTO OF 11 GREENWAY PLAZA] THE AIM FAMILY OF FUNDS(R)
<S> <C>
AGGRESSIVE GROWTH
AIM Aggressive Growth Fund*
AIM Constellation Fund
AIM Global Aggressive Growth Fund
GROWTH
AIM Global Growth Fund
AIM Growth Fund
AIM International Equity Fund
AIM Value Fund
AIM Weingarten Fund
GROWTH AND INCOME
AIM Balanced Fund
AIM Charter Fund
INCOME AND GROWTH
AIM Global Utilities Fund**
HIGH CURRENT INCOME
AIM High Yield Fund
CURRENT INCOME
AIM Global Income Fund
AIM Income Fund
CURRENT TAX-FREE INCOME
AIM Municipal Bond Fund
AIM Tax-Exempt Bond Fund of CT
AIM Tax-Free Intermediate Shares
CURRENT INCOME AND HIGH DEGREE
OF SAFETY
AIM Intermediate Government Fund***
HIGH DEGREE OF SAFETY AND
CURRENT INCOME
AIM Limited Maturity Treasury Shares
STABILITY, LIQUIDITY, AND
CURRENT INCOME
AIM Money Market Fund
STABILITY, LIQUIDITY, AND
CURRENT TAX-FREE INCOME
AIM Tax-Exempt Cash Fund
*AIM Aggressive Growth Fund was closed
to new investors on July 18, 1995.
**On May 1, 1995, AIM Utilities Fund
broadened its investment strategy to
permit up to 80% of its total assets
AIM Management Group has provided leadership to be invested in foreign securities,
in the mutual fund industry since 1976 and and was renamed AIM Global Utilities
currently manages approximately $42 billion Fund. ***On September 25, 1995, AIM
in assets for more than 2 million shareholders, Government Securities Fund was renamed
including individual investors, corporate clients, AIM Intermediate Government Fund. For
and financial institutions. The AIM Family of more complete information about any
Funds(R) is distributed nationwide, and AIM AIM Fund(s), including sales charges
today ranks among the nation's top 20 mutual and expenses, ask your financial
fund companies in assets under management, consultant or securities dealer for
according to Lipper Analytical Services, Inc. a free prospectus(es). Please read the
prospectus(es) carefully before you
invest or send money.
[AIM LOGO APPEARS HERE] --------------
BULK RATE
A I M Distributors, Inc. U.S. POSTAGE
11 Greenway Plaza, Suite 1919 PAID
Houston, TX 77046 HOUSTON, TX
Permit No.1919
--------------
</TABLE>
