<PAGE> 1
AIM INTERMEDIATE
GOVERNMENT FUND
[AIM LOGO APPEARS HERE] SEMIANNUAL REPORT JUNE 30, 1998
<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 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.
The performance of the Fund's Class B and Class C shares will differ from
that of Class A shares due to differing fees and expenses.
o Because Class C shares have been offered for less than one year (since
8/4/97), all total return figures for Class C shares reflect cumulative
total return that has not been annualized.
o The 30-day yield is calculated on the basis of a formula defined by the SEC.
The formula is based on the portfolio's potential earnings from dividends,
interest, yield-to-maturity or yield-to-call of the bonds in the portfolio,
net of all expenses and expressed on an annualized basis.
o The Fund's annualized distribution rate reflects the Fund's most recent
monthly dividend distribution multiplied by 12 and divided by the most
recent month-end net asset value.
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 Past performance cannot guarantee comparable future results.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o The Lehman Brothers Intermediate Government Bond Index is an unmanaged
composite generally considered representative of intermediate U.S. Treasury
and U.S. Government agency securities.
o The Consumer Price Index (CPI) is a measure of change in consumer prices as
determined by the U.S. Bureau of Labor Statistics.
o An investment cannot be made in any index listed. Unless otherwise
indicated, index results include reinvested dividends and do not reflect
sales charges.
MUTUAL FUNDS, ANNUITIES, AND OTHER INVESTMENTS
ARE NOT INSURED BY THE FDIC OR ANY OTHER GOVERNMENT AGENCY;
ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR GUARANTEED BY,
ANY BANK OR ANY AFFILIATE; AND ARE SUBJECT TO INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
This report may be distributed only to current shareholders
or to persons who have received a current prospectus of the Fund.
<PAGE> 3
The Chairman's Letter
Dear Fellow Shareholder:
When we last reported to you, for the fiscal year ended
December 31, 1997, equity markets worldwide were still
shaken by the financial crisis in Asia. By June 30, 1998,
the end of this six-month reporting period, most markets had
recovered nicely, with domestic equities producing generous
[PHOTO OF returns and European markets outpacing the U.S. Only Asian
Charles T. markets remained in the doldrums. High-quality bonds have
Bauer, turned in a solid performance with generous real returns.
Chairman of Good economic news has been arriving almost daily.
the Board of Inflation and joblessness in the U.S. have been at their
THE FUND lowest levels in decades, consumer confidence at its
APPEARS HERE] highest. The economic fundamentals in the U.S. appear sound,
and we at AIM remain cautiously optimistic that the current
economic expansion may continue for the foreseeable future
although market valuations are high compared to historical
standards.
By the close of this reporting period, markets had become less ebullient.
Equities had declined slightly from the heights reached earlier in the period.
Many participants in the U.S. equity markets voiced concern about prices that
continued rising despite slowing earnings growth, especially for larger
companies. The performance of European markets had exceeded everyone's
expectations. Asia's economic woes, especially the continuing recession in
Japan, which markets had shrugged off for a while, seemed more troublesome as
the reporting period closed.
In the face of such uncertainty, the best course for investors is to remain
realistic. We are now in the fourth year of unprecedented market advances. Even
accounting for the steep drop in equities in early August, after the close of
this reporting period, equities still have the potential to produce returns
above 30% again for the full year. We have never experienced this before, and it
may have fostered unrealistic expectations among investors, who would do well to
remember that the long-term average return for equities is closer to 10% per
year.
A well-diversified portfolio is still one of the most effective tools for
coping with market shifts because different asset classes and different national
markets tend to move independently of one another. Your financial consultant
remains your best source of information about how to allocate your investments
based on your goals and situation.
AIM FURTHER DIVERSIFIES ITS OFFERINGS
Shortly before the close of the reporting period, AIM broadened its
offerings to shareholders through the addition of the GT Global group of mutual
funds. During the next few months you will be receiving more details about this
transaction and the products it adds to The AIM Family of Funds--Registered
Trademark--.
This transaction gives you, our shareholders, access to a greater variety
of investment choices. A complete list of the funds now included in The AIM
Family of Funds--Registered Trademark-- appears on the back cover of this
report. We encourage you to discuss with your financial consultant how these
funds may fit into your portfolio.
The transaction also helps strengthen AIM's position as a major participant
in the money-management industry worldwide. Such strength will enable us to
continue enlarging both the scope of our fund offerings and our menu of services
for our shareholders. AIM continuously reviews its products and services with a
view to enhancing our ability to help shareholders meet their investment goals.
YOUR FUND MANAGERS COMMENT
On the pages that follow, the managers of your AIM Fund discuss how the
Fund performed during the six months covered by this report and give their
near-term market outlook. We hope you will find their discussion informative.
We are pleased to send you this report on your Fund. If you have any
questions or comments, please contact our Client Services department at
800-959-4246 or visit our Web site at www.aimfunds.com. You can access
information about your account on our Web site and also on our automated AIM
Investor Line, 800-246-5463.
Thank you for your continued participation in The AIM Family of
Funds--Registered Trademark--.
Sincerely,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
------------------------------------
A well-diversified portfolio
is still one of the most
effective tools for coping with
market shifts because
different asset classes and
different national markets tend
to move independently
of one another.
------------------------------------
<PAGE> 4
The Managers' Overview
AIM INTERMEDIATE GOVERNMENT FUND PERFORMS WELL IN MIXED BOND MARKET
A roundtable discussion with the Fund management team for AIM Intermediate
Government Fund for the six months ended June 30, 1998.
- --------------------------------------------------------------------------------
Q. INVESTORS WERE ATTRACTED TO THE RELATIVE SAFETY OF U.S. GOVERNMENT ISSUES
DURING THE FIRST HALF OF 1998. HOW DID THE FUND PERFORM DURING THIS PERIOD?
A. Current income remained strong. As of June 30, 1998, the 30-day
distribution rate at NAV was 6.65% for Class A shares, 5.82% for Class B
shares, and 5.84% for Class C shares. The 30-day SEC yield at maximum
offering price was 5.33% for Class A shares and 4.82% for Class B and C
shares.
Total return for Class A shares was 3.49%, edging out the Lehman
Brothers Intermediate Government Bond Index return of 3.39% for the first
half of 1998.
Total returns on Class B and C shares for the same period were 3.17% and
3.07%, respectively.
Long term performance has been excellent. For the 10-year period ended
June 30, 1998, the Fund achieved an average annual total return of 7.01%,
including sales charges. (See the inside front cover for additional
long-term performance figures.)
Q. WHAT WERE THE MAJOR ISSUES AFFECTING FIXED-INCOME MARKETS?
A. Overall, the first half of 1998 was a favorable environment for bonds. A
thriving domestic economy and solid corporate cash flows encouraged
fixed-income investors. There was no policy change from the Federal Reserve
Board (the Fed). However, there was significant uncertainty about the
effects of economic turmoil overseas, particularly in emerging markets,
which prompted a flight to quality. During May and June, investors started
to worry about Asia's impact on corporate profits, and they turned to
high-quality, long-term bonds for safety.
The result was a narrow rally that sent the yield on the 30-year
Treasury bond to its lowest levels since the 1960s, falling to 5.63% at the
end of the reporting period. Long bonds vacillated during the reporting
period, but within a very narrow range: from 5.57% to 6.07%.
The yield curve flattened considerably, so that the spread between the
two-year note and the 30-year Treasury note shrank to just 16 basis points
as of June 30, 1998. (A basis point is one one-hundredth of a percentage
point.)
================================================================================
PORTFOLIO COMPOSITION
As of 6/30/98
- --------------------------------------------------------------------------------
Mortgage-Backed Obligations 57.83%
U.S. Agency Obligations 10.25%
Cash Equivalents 13.87%
U.S. Treasury Obligations 18.05%
BREAKDOWN OF
MORTGAGE-BACKED OBLIGATIONS
Federal National Mortgage Assn. 55.60%
Federal Home Loan Mortgage Assn. 23.63
Government National Mortgage Assn. 20.77
Please keep in mind that the Fund's portfolio is subject to change and there is
no assurance the Fund will continue to hold any particular security.
================================================================================
Q. WHAT WAS YOUR MANAGEMENT STRATEGY IN THIS ENVIRONMENT?
A. Our goal in managing the Fund is to achieve low volatility and competitive
returns. With inflation low and no immediate threat of action from the Fed,
the Fund continued to employ a barbell strategy. By holding a combination
of short- and long-term bonds, the Fund is more flexible and able to take
advantage of opportunities in different interest-rate environments. The
shorter-term bond holdings can help temper volatility while the long-term
bonds provide income and total return opportunities.
We also invest in mortgage-backed obligations issued by U.S. government
agencies because they can provide yield. Since inception, the Fund has
achieved 70% of the volatility of the 5-year Treasury note with 103% of the
distribution rate of the 30-year Treasury bond.
See important fund and index disclosures inside front cover.
2
<PAGE> 5
Q. HOW DID YOU MANAGE THE MORTGAGE PORTION OF THE PORTFOLIO?
A. Market volatility has been relatively low, which makes mortgages more
attractive than Treasuries. We're slightly overweighted in mortgage bonds
because of their ability to add incremental yield.
A Treasury rally like the one at the end of the second quarter is often
a sign of a possible increase in mortgage refinancings. However, during the
reporting period, the Fund was not greatly affected by refinancings. That's
due, in part, to our mortgage selection strategy. See the box below to read
about our approach.
Q. HOW WILL CHANGES IN TREASURY SUPPLY AFFECT THE GOVERNMENT BOND MARKET?
A. The government's need for financing is shrinking in light of a substantial
U.S. budget surplus. In May, the Treasury Department announced a major
restructuring of its calendar for selling intermediate-term government
securities. Three-year notes, which have been auctioned monthly since 1976,
will now be eliminated. The Treasury felt that two- and five-year notes
offered investors similar choices. In addition, five-year notes will be
auctioned quarterly instead of monthly.
These changes will allow the Treasury to increase the size of other
auctions (for two-year notes, for instance), while reducing the total amount
of money it borrows. A smaller supply could drive the prices of bonds up,
decreasing yields.
Q. DESCRIBE THE PORTFOLIO AT THE END OF THE REPORTING PERIOD.
A. As always, we diversify our portfolio among different sectors of the
government market to participate in the best-performing areas. While our
emphasis during the reporting period was on mortgage-backed obligations, we
maintained exposure to each of the government market sectors. At the end of
the reporting period, the Fund's investments were divided among the four
asset classes as follows: 57.83% mortgage obligations, 18.05% U.S. Treasury
obligations, 10.25% U.S. Agency debentures, and 13.87% cash equivalents.
The weighted average maturity of the portfolio was 7.37 years and its
average duration was 4.19 years. The Fund's average credit rating was AAA,
the highest credit rating possible, as measured by Standard and Poor's
(S&P), a widely known credit rating agency. These ratings are historical
and are based on analysis of the credit quality of the individual securities
in the Fund's portfolio.
Q. WHAT IS YOUR OUTLOOK FOR THE GOVERNMENT BOND MARKET?
A. Obviously, interest rates can't keep going down forever. However, if
inflation stays low, the Fed will probably remain hesitant to raise rates.
Fed Chairman Alan Greenspan, speaking to Congress in July (after the end of
the reporting period), warned that the tight labor market could eventually
accelerate inflation, which could lead to an increase in rates. We remain
alert to the possibility of a modest resurrection of inflation during 1999.
No matter which way interest rates go, we are able to finesse our
strategy to respond to different market conditions. We can change the
percentage of the portfolio devoted to mortgages versus Treasuries, or we
can adjust our yield curve strategy by investing in shorter Treasuries or
agency issues.
THE MORTGAGE SELECTION PROCESS
Selecting mortgage bonds for the Fund's portfolio is a research-intensive
process. We hope to find mortgages that will add yield and that are less likely
to be refinanced, since refinancings can create uncertain cash flows in the
Fund.
Projecting the rate of refinancing depends, of course, on economic variables
like interest rates, inflation, and business development. But we also consider
demographic variables such as mobility and population trends. In areas populated
by younger homeowners the refinancing rate tends to be higher than in older,
more established areas. Even the month of the year can affect the refinancing
rate. School vacations, homebuilding activity, and weather make relocation (and
possible refinancing) more likely in the late spring and early summer.
Because economic and demographic factors can vary greatly from region to
region, geographic diversification is an important strategy for mitigating the
risk in the portfolio. For instance, compared to middle America, the economies
on both U.S. coasts are more heavily influenced by government spending on
building contracts, and the mortgage markets tend to experience refinancings at
different times in the business cycle.
Another factor is the age of the mortgage itself. We try to emphasize
well-seasoned mortgages-meaning mortgages that have been on the market longer.
These are more likely to have gone through a refinancing before, so we don't
expect them to do it again. Generally, we also emphasize bonds we can purchase
close to face value or at discounted levels. Then, if there are refinancings the
Fund is likely to achieve a capital gain rather than a loss.
After weighing all these factors, we select mortgages with a variety of
maturities, loan ages, and coupons as they will perform differently and help
diversify the Fund's portfolio.
See important fund and index disclosures inside front cover.
3
<PAGE> 6
SCHEDULE OF INVESTMENTS
June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
U.S. GOVERNMENT AGENCY SECURITIES-91.79%
FEDERAL FARM CREDIT-1.71%
Debentures
6.15%, 09/01/00 $ 700,000 $ 707,140
- ---------------------------------------------------------------
6.22%, 06/17/08 4,500,000 4,512,645
- ---------------------------------------------------------------
5,219,785
- ---------------------------------------------------------------
FEDERAL HOME LOAN BANK-4.01%
Debentures
5.97%, 12/11/00 5,000,000 5,033,050
- ---------------------------------------------------------------
7.31%, 07/06/01 4,000,000 4,175,600
- ---------------------------------------------------------------
7.36%, 07/01/04 2,800,000 3,024,084
- ---------------------------------------------------------------
12,232,734
- ---------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORP. ("FHLMC")-18.43%
Pass through certificates
12.00%, 04/01/00 to 02/01/13 24,960 28,386
- ---------------------------------------------------------------
6.50%, 07/01/01 to 02/01/28 14,177,104 14,203,109
- ---------------------------------------------------------------
9.00%, 12/01/05 to 04/01/25 6,486,693 6,853,516
- ---------------------------------------------------------------
8.00%, 07/01/06 to 10/01/10 505,428 521,899
- ---------------------------------------------------------------
8.50%, 07/01/07 81,314 84,795
- ---------------------------------------------------------------
10.50%, 09/01/09 to 01/01/21 2,412,753 2,656,144
- ---------------------------------------------------------------
7.00%, 11/01/10 to 04/01/11 1,797,492 1,838,955
- ---------------------------------------------------------------
10.00%, 11/01/11 to 04/01/20 14,205,804 15,750,597
- ---------------------------------------------------------------
9.50%, 11/01/20 to 04/01/25 13,225,476 14,272,168
- ---------------------------------------------------------------
56,209,569
- ---------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION ("FNMA")-51.45%
Debentures
5.625%, 03/15/01 5,000,000 4,991,400
- ---------------------------------------------------------------
8.50%, 02/01/05 4,500,000 4,680,990
- ---------------------------------------------------------------
5.75%, 06/15/05 5,000,000 4,990,600
- ---------------------------------------------------------------
5.875%, 02/02/06 8,000,000 8,023,600
- ---------------------------------------------------------------
Pass through certificates
8.50%, 01/01/07 to 03/01/07 29,171 30,419
- ---------------------------------------------------------------
6.00%, 1/01/09 to 04/01/24 139,063 137,262
- ---------------------------------------------------------------
7.50%, 06/01/10 to 03/01/27 24,874,399 25,639,066
- ---------------------------------------------------------------
7.00%, 05/01/11 to 10/01/12 10,289,383 10,496,017
- ---------------------------------------------------------------
6.50%, 05/01/13 8,877,856 8,936,095
- ---------------------------------------------------------------
9.50%, 07/01/16 to 08/01/22 2,521,127 2,707,331
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
FEDERAL NATIONAL MORTGAGE ASSOCIATION ("FNMA")-(CONTINUED)
Pass through certificates-(Continued)
10.00%, 12/01/19 to 12/01/21 $ 12,307,899 $ 13,592,303
- ---------------------------------------------------------------
8.00%, 04/01/25 to 07/01/26 9,437,087 9,803,517
- ---------------------------------------------------------------
7.00%, 07/14/28 TBA(a) 60,000,000 60,895,575
- ---------------------------------------------------------------
STRIPS(b)
7.37%, 10/09/19 7,000,000 2,013,620
- ---------------------------------------------------------------
156,937,795
- ---------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION ("GNMA")-16.19%
Pass through certificates
6.00%, 10/15/08 to 11/15/08 636,923 636,521
- ---------------------------------------------------------------
6.50%, 10/15/08 593,693 602,966
- ---------------------------------------------------------------
7.00%, 10/15/08 to 04/15/28 8,619,580 8,770,560
- ---------------------------------------------------------------
9.00%, 10/15/08 to 04/15/21 1,860,561 2,025,163
- ---------------------------------------------------------------
9.50%, 06/15/09 to 03/15/23 6,742,477 7,320,120
- ---------------------------------------------------------------
10.00%, 11/15/09 to 07/15/24 3,543,467 3,912,954
- ---------------------------------------------------------------
11.00%, 12/15/09 to 12/15/15 148,346 166,497
- ---------------------------------------------------------------
12.50%, 11/15/10 174,320 203,355
- ---------------------------------------------------------------
13.00%, 01/15/11 to 05/15/15 387,967 454,736
- ---------------------------------------------------------------
13.50%, 04/15/11 to 04/15/15 374,328 444,182
- ---------------------------------------------------------------
12.00%, 01/15/13 to 07/15/15 608,857 698,518
- ---------------------------------------------------------------
10.50%, 07/15/13 to 02/15/16 221,774 244,435
- ---------------------------------------------------------------
8.00%, 03/15/23 to 06/15/27 12,539,816 13,048,826
- ---------------------------------------------------------------
7.50%, 03/15/26 667,377 688,854
- ---------------------------------------------------------------
7.00%, 07/21/28 TBA(a) 10,000,000 10,166,125
- ---------------------------------------------------------------
49,383,812
- ---------------------------------------------------------------
Total U.S. Government Agency Securities
(Cost $276,188,388) 279,983,695
- ---------------------------------------------------------------
U.S. TREASURY SECURITIES-24.33%
U.S. TREASURY BONDS & NOTES-23.33%
6.125%, 12/31/01 to 11/15/27 24,500,000 25,996,356
- ---------------------------------------------------------------
6.00%, 07/31/02 5,000,000 5,083,750
- ---------------------------------------------------------------
5.625%, 05/15/08
($20,000,000)(c) 20,000,000 20,281,200
- ---------------------------------------------------------------
7.25%, 5/15/16 to 8/15/22 7,600,000 8,934,906
- ---------------------------------------------------------------
7.50%, 11/15/16 8,000,000 9,604,240
- ---------------------------------------------------------------
7.625%, 02/15/25 1,000,000 1,259,200
- ---------------------------------------------------------------
71,159,652
- ---------------------------------------------------------------
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
U.S. TREASURY STRIPS-1.00%(b)
6.79%, 11/15/18 $ 9,750,000 $ 3,046,095
- ---------------------------------------------------------------
Total U.S. Treasury
Securities (Cost
$70,641,921) 74,205,747
- ---------------------------------------------------------------
Total Investments (excluding
Repurchase Agreements) 354,189,442
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
REPURCHASE AGREEMENTS-18.70%(d)
BZW Securities Inc., 6.10%
07/01/98(e) $ 20,390,668 $ 20,390,668
- ---------------------------------------------------------------
SBC Capital Markets, Inc., 5.85%
07/01/98(f) 36,648,077 36,648,077
- ---------------------------------------------------------------
Total Repurchase Agreements
(Cost $57,038,745) 57,038,745
- ---------------------------------------------------------------
TOTAL INVESTMENTS-134.82% 411,228,187
- ---------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-(34.82%) (106,215,173)
- ---------------------------------------------------------------
NET ASSETS-100.00% $ 305,013,014
===============================================================
</TABLE>
Abbreviations:
TBA - To Be Announced
Notes to Schedule of Investments:
(a) At 06/30/98, cost of securities purchased on a when-issued basis totalled
$71,067,188. These securities are also subject to dollar roll transactions.
See section C of Notes to Financial Statements.
(b) 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) Amount in parentheses represents principal amount deposited in escrow with
custodian as collateral for reverse repurchase agreements outstanding at
06/30/97.
(d) 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, private
accounts, and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(e) Joint repurchase agreement entered into 06/30/98 with a maturing value of
$300,050,833. Collateralized by $301,403,000 U.S. Government obligations, 0%
to 6.70% due 08/20/98 to 05/06/08 with an aggregate market value at 06/30/98
of $306,002,831.
(f) Joint repurchase agreement entered into 06/30/98 with a maturing value of
$1,000,162,500. Collateralized by $3,590,870,000 U.S. Government
obligations, 0% due 08/15/00 to 11/15/24 with an aggregate market value at
06/30/98 of $1,148,593,549.
See Notes to Financial Statements.
5
<PAGE> 8
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$346,830,309) $354,189,442
- ---------------------------------------------------------
Repurchase agreements (cost $57,038,745) 57,038,745
- ---------------------------------------------------------
Receivables for:
Fund shares sold 1,620,072
- ---------------------------------------------------------
Interest 3,020,596
- ---------------------------------------------------------
Principal paydowns 1,506,365
- ---------------------------------------------------------
Investment for deferred compensation plan 29,811
- ---------------------------------------------------------
Other assets 59,757
- ---------------------------------------------------------
Total assets 417,464,788
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 89,154,556
- ---------------------------------------------------------
Fund shares reacquired 1,911,257
- ---------------------------------------------------------
Dividends 449,148
- ---------------------------------------------------------
Reverse repurchase agreements (Note 5) 20,350,000
- ---------------------------------------------------------
Interest expense (Note 5) 31,415
- ---------------------------------------------------------
Deferred compensation plan 29,811
- ---------------------------------------------------------
Deferred interest income 81,078
- ---------------------------------------------------------
Accrued advisory fees 116,758
- ---------------------------------------------------------
Accrued administrative services fees 5,731
- ---------------------------------------------------------
Accrued distribution fees 246,750
- ---------------------------------------------------------
Accrued transfer agent fees 49,564
- ---------------------------------------------------------
Accrued operating expenses 25,706
- ---------------------------------------------------------
Total liabilities 112,451,774
- ---------------------------------------------------------
Net assets applicable to shares outstanding $305,013,014
=========================================================
NET ASSETS:
Class A $175,219,890
=========================================================
Class B $105,022,428
=========================================================
Class C $ 24,770,696
=========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 18,495,472
=========================================================
Class B 11,076,461
=========================================================
Class C 2,619,916
=========================================================
Class A:
Net asset value and redemption price per
share $ 9.47
- ---------------------------------------------------------
Offering price per share:
(Net asset value of $9.47
divided by 95.25%) $ 9.95
=========================================================
Class B:
Net asset value and offering price per
share $ 9.48
=========================================================
Class C:
Net asset value and offering price per
share $ 9.45
=========================================================
</TABLE>
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $11,014,729
- ---------------------------------------------------------
EXPENSES:
Advisory fees 665,173
- ---------------------------------------------------------
Administrative services fees 34,389
- ---------------------------------------------------------
Custodian fees 33,204
- ---------------------------------------------------------
Distribution fees -- Class A 212,635
- ---------------------------------------------------------
Distribution fees -- Class B 477,389
- ---------------------------------------------------------
Distribution fees -- Class C 87,060
- ---------------------------------------------------------
Interest (Note 5) 298,952
- ---------------------------------------------------------
Transfer agent fees -- Class A 144,555
- ---------------------------------------------------------
Transfer agent fees -- Class B 81,135
- ---------------------------------------------------------
Transfer agent fees -- Class C 14,796
- ---------------------------------------------------------
Trustees' fees 3,975
- ---------------------------------------------------------
Other 39,639
- ---------------------------------------------------------
Total expenses 2,092,899
- ---------------------------------------------------------
Less: Expenses paid indirectly (1,806)
- ---------------------------------------------------------
Net expenses 2,091,093
- ---------------------------------------------------------
Net investment income 8,923,636
- ---------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES:
Net realized gain from investment securities 2,686,851
- ---------------------------------------------------------
Net unrealized appreciation (depreciation)
of investment securities (1,645,312)
- ---------------------------------------------------------
Net gain on investment securities 1,041,539
- ---------------------------------------------------------
Net increase in net assets resulting from
operations $ 9,965,175
=========================================================
</TABLE>
6
<PAGE> 9
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 8,923,636 $ 15,863,224
- --------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities 2,686,851 (73,291)
- --------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities (1,645,312) 4,443,700
- --------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 9,965,175 20,233,633
- --------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (5,699,989) (10,575,295)
- --------------------------------------------------------------------------------------------
Class B (2,801,213) (4,595,241)
- --------------------------------------------------------------------------------------------
Class C (504,237) (19,501)
- --------------------------------------------------------------------------------------------
Return of capital:
Class A -- (430,314)
- --------------------------------------------------------------------------------------------
Class B -- (214,788)
- --------------------------------------------------------------------------------------------
Class C -- (713)
- --------------------------------------------------------------------------------------------
Share transactions-net:
Class A 7,492,803 (9,731,599)
- --------------------------------------------------------------------------------------------
Class B 15,511,870 8,255,456
- --------------------------------------------------------------------------------------------
Class C 22,505,399 1,834,127
- --------------------------------------------------------------------------------------------
Net increase in net assets 46,469,808 4,755,765
- --------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 258,543,206 253,787,441
- --------------------------------------------------------------------------------------------
End of period $305,013,014 $258,543,206
============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $310,494,952 $264,984,880
- --------------------------------------------------------------------------------------------
Undistributed net investment income (114,287) (32,484)
- --------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities (12,726,784) (15,413,635)
- --------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 7,359,133 9,004,445
- --------------------------------------------------------------------------------------------
$305,013,014 $258,543,206
============================================================================================
</TABLE>
See Notes to Financial Statements.
7
<PAGE> 10
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
(UNAUDITED)
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Intermediate Government Fund (the "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 three different classes of shares: Class A shares,
Class B shares, and Class C shares. Class A shares are sold with a front-end
sales charge. Class B and Class C 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 date 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. It is the policy of the Fund to
declare daily dividends from net investment income. Such dividends are paid
monthly. Distributions from net realized capital gains, if any, are recorded
on ex-dividend date and are paid annually subject to restrictions described
in Note 1 Section "C".
C. 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 $15,253,330 (which may be carried forward to offset future
taxable capital gains, if any) which expires, if not previously utilized,
through the year 2004. The Fund cannot distribute capital gains to
shareholders until the tax loss carryforwards have been utilized.
D. Expenses -- Distribution and transfer agency expenses directly attributable
to a class of shares are charged to that class' operations. All other
expenses which are attributable to more than one class are allocated among
the classes.
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.
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 six months ended June 30, 1998, AIM
was reimbursed $34,386 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 six months ended June 30, 1998, the
Fund paid AFS $130,580 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, Class B and Class C shares of the Fund. The Trust has adopted
distribution plans pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Class A shares and Class C shares (the "Class A and C Plan"), and the
Fund's Class B shares (the "Class B Plan") (collectively, the "Plans"). The
Fund, pursuant to the Class A and C Plan, pays AIM Distributors compensation at
an annual rate of 0.25% of the average daily net assets of the Class A shares
and 1.00% of the average daily net assets of the Class C shares. 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 of the Class B shares. Of these
amounts, the Fund may pay a service fee of 0.25% of the average daily net
8
<PAGE> 11
assets of the Class A, Class B or Class C shares to selected dealers and
financial institutions who furnish continuing personal shareholder services to
their customers who purchase and own the appropriate class of shares of the
Fund. Any amounts not paid as a service fee under the 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 respective
classes. During the six months ended June 30, 1998, the Class A, Class B and
Class C shares paid AIM Distributors $212,635, $477,389 and $87,060
respectively, as compensation under the Plans.
AIM Distributors received commissions of $62,161 from sales of the Class A
shares of the Fund during the six months ended June 30, 1998. 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 six months ended June 30,
1998, AIM Distributors received $54,748 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 six months ended June 30, 1998, the Fund paid legal fees of $1,508
for services rendered by Kramer, Levin, Naftalis & Frankel as counsel to the
Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3-INDIRECT EXPENSES
During the six months ended June 30, 1998, the Fund received reductions in
transfer agency fees from AFS (an affiliate of AIM) and reductions in custodian
fees of $1,716 and $90, respectively under expense offset arrangements. The
effect of the above arrangements resulted in a reduction of the Fund's total
expenses of $1,806 during the six months ended June 30, 1998.
NOTE 4-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 5-BORROWINGS
Reverse repurchase agreements involve 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 maximum amount
outstanding during the six months ended June 30, 1998 was $30,712,500 while
borrowings averaged $14,335,601 per day with a weighted average interest rate of
4.21%.
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 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.
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
Prior to an amendment of the line of credit on May 1, 1998, the Fund was limited
to borrowing up to the lesser of (i) $500,000,000 or (ii) the limits set by its
prospectus for borrowings. During the six months ended June 30, 1998, the Fund
did not borrow under the line of credit agreement. The funds which are parties
to the line of credit are charged a commitment fee of 0.05% on the unused
balance of the committed line. The commitment fee is allocated among such funds
based on their respective average net assets for the period.
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the six months ended June 30, 1998 was
$261,984,727 and $208,784,554, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of June 30, 1998 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $7,625,757
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (266,624)
- ---------------------------------------------------------
Net unrealized appreciation of investment
securities $7,359,133
=========================================================
</TABLE>
Cost of investments for tax purposes is $346,830,309.
9
<PAGE> 12
NOTE 7-SHARE INFORMATION
Changes in shares outstanding during the six months ended June 30, 1998 and the
year ended December 31, 1997 were as follows:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Sold:
Class A 8,021,538 $ 75,930,830 6,693,588 $ 62,348,371
- ------------------------------------------------------------ ----------- ------------ ----------- ------------
Class B 3,704,461 35,063,410 4,448,136 41,365,183
- ------------------------------------------------------------ ----------- ------------ ----------- ------------
Class C* 3,554,329 33,172,865 734,169 6,890,070
- ------------------------------------------------------------ ----------- ------------ ----------- ------------
Issued as reinvestment of dividends:
Class A 487,179 4,606,698 953,629 8,857,846
- ------------------------------------------------------------ ----------- ------------ ----------- ------------
Class B 206,533 1,954,809 349,182 3,245,433
- ------------------------------------------------------------ ----------- ------------ ----------- ------------
Class C* 44,059 414,504 1,978 18,637
- ------------------------------------------------------------ ----------- ------------ ----------- ------------
Reacquired:
Class A (7,719,470) (73,044,725) (8,720,230) (80,937,816)
- ------------------------------------------------------------ ----------- ------------ ----------- ------------
Class B (2,270,969) (21,506,349) (3,920,140) (36,355,160)
- ------------------------------------------------------------ ----------- ------------ ----------- ------------
Class C* (1,174,482) (11,081,970) (540,137) (5,074,580)
- ------------------------------------------------------------ ----------- ------------ ----------- ------------
4,853,178 $ 45,510,072 175 $ 357,984
============================================================ =========== ============ =========== ============
</TABLE>
* Class C shares commenced sales on August 4, 1997.
NOTE 8 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A outstanding
during the six months ended June 30, 1998 and each of the years in the five-year
period ended December 31, 1997; for a share of Class B outstanding during the
six months ended June 30, 1998, each of the years in the four-year period ended
December 31, 1997 and the period September 7, 1993 (date sales commenced)
through December 31, 1993; and for a share of Class C outstanding during the six
months ended June 30, 1998 and the period August 4, 1997 (date sales commenced)
through December 31, 1997.
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------------------
DECEMBER 31,
JUNE 30, --------------------------------------------------------
1998 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.46 $ 9.28 $ 9.70 $ 8.99 $ 10.05 $ 10.19
- ---------------------------------------------------------- -------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.31 0.63 0.63 0.69 0.68 0.74
- ---------------------------------------------------------- -------- -------- -------- -------- -------- --------
Net gains (losses) on securities (both realized and
unrealized) 0.02 0.18 (0.42) 0.73 (1.02) (0.04)
- ---------------------------------------------------------- -------- -------- -------- -------- -------- --------
Total from investment operations 0.33 0.81 0.21 1.42 (0.34) 0.70
- ---------------------------------------------------------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.32) (0.61) (0.59) (0.67) (0.58) (0.70)
- ---------------------------------------------------------- -------- -------- -------- -------- -------- --------
Distributions from net realized gains -- -- -- -- (0.04) (0.14)
- ---------------------------------------------------------- -------- -------- -------- -------- -------- --------
Return of capital -- (0.02) (0.04) (0.04) (0.10) --
- ---------------------------------------------------------- -------- -------- -------- -------- -------- --------
Total distributions (0.32) (0.63) (0.63) (0.71) (0.72) (0.84)
- ---------------------------------------------------------- -------- -------- -------- -------- -------- --------
Net asset value, end of period $ 9.47 $ 9.46 $ 9.28 $ 9.70 $ 8.99 $ 10.05
========================================================== ======== ======== ======== ======== ======== ========
Total return(a) 3.49% 9.07% 2.35% 16.28% (3.44)% 7.07%
========================================================== ======== ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $175,220 $167,427 $174,344 $176,318 $158,341 $139,586
========================================================== ======== ======== ======== ======== ======== ========
Ratio of expenses to average net assets (exclusive of
interest expense)(b) 0.97%(c) 1.00% 1.00% 1.08% 1.04% 1.00%
========================================================== ======== ======== ======== ======== ======== ========
Ratio of net investment income to average net assets(d) 6.61%(c) 6.77% 6.76% 7.36% 7.34% 7.08%
========================================================== ======== ======== ======== ======== ======== ========
Portfolio turnover rate 80% 99% 134% 140% 109% 110%
========================================================== ======== ======== ======== ======== ======== ========
Borrowings for the period:
Amount of debt outstanding at end of period (000s omitted) $ 12,232 -- -- -- -- --
========================================================== ======== ======== ======== ======== ======== ========
Average amount of debt outstanding during the period (000s
omitted)(e) $ 8,617 $ 4,433 -- -- -- --
========================================================== ======== ======== ======== ======== ======== ========
Average number of shares outstanding during the period
(000s omitted)(e) 18,128 17,470 -- -- -- --
========================================================== ======== ======== ======== ======== ======== ========
Average amount of debt per share during the period $ 0.4753 $ 0.2537 -- -- -- --
========================================================== ======== ======== ======== ======== ======== ========
</TABLE>
(a) Does not deduct sales charges and is not annualized for
periods less than one year.
(b) After fee waivers and/or expense reimbursements. Ratios of
expenses to average net assets prior to fee waivers and/or
expense reimbursements were 1.05% and 1.04% for 1994 and
1993, respectively.
(c) Ratios are annualized and based on average net assets of
$171,517,350.
(d) After fee waivers and/or expense reimbursements. Ratios of
net investment income to average net assets prior to fee
waivers and/or expense reimbursements were 7.32% and 7.04%
for 1994 and 1993, respectively.
(e) Averages computed on a daily basis.
10
<PAGE> 13
NOTE 8 - FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
CLASS B CLASS C
--------------------------------------------------------------- -----------------------
DECEMBER 31,
JUNE 30, --------------------------------------------------- JUNE 30, DECEMBER 31,
1998 1997 1996 1995 1994 1993 1998 1997
-------- ------- ------- ------- ------- ------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.46 $ 9.28 $ 9.69 $ 8.99 $ 10.04 $ 10.44 $ 9.44 $ 9.33
- ------------------------------------- -------- ------- ------- ------- ------- ------- ------- -------
Income from investment operations:
Net investment income 0.28 0.56 0.55 0.63 0.61 0.21 0.28 0.24
- ------------------------------------- -------- ------- ------- ------- ------- ------- ------- -------
Net gains (losses) on securities
(both realized and unrealized) 0.02 0.17 (0.41) 0.70 (1.02) (0.27) 0.01 0.10
- ------------------------------------- -------- ------- ------- ------- ------- ------- ------- -------
Total from investment operations 0.30 0.73 0.14 1.33 (0.41) (0.06) 0.29 0.34
- ------------------------------------- -------- ------- ------- ------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income (0.28) (0.53) (0.51) (0.59) (0.50) (0.20) (0.28) (0.22)
- ------------------------------------- -------- ------- ------- ------- ------- ------- ------- -------
Distributions from net realized
gains -- -- -- -- (0.04) (0.14) -- --
- ------------------------------------- -------- ------- ------- ------- ------- ------- ------- -------
Return of capital -- (0.02) (0.04) (0.04) (0.10) -- -- (0.01)
- ------------------------------------- -------- ------- ------- ------- ------- ------- ------- -------
Total distributions (0.28) (0.55) (0.55) (0.63) (0.64) (0.34) (0.28) (0.23)
- ------------------------------------- -------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of period $ 9.48 $ 9.46 $ 9.28 $ 9.69 $ 8.99 $ 10.04 $ 9.45 $ 9.44
===================================== ======== ======= ======= ======= ======= ======= ======= =======
Total return(a) 3.17% 8.16% 1.61% 15.22% (4.13)% (0.52)% 3.07% 3.64%
===================================== ======== ======= ======= ======= ======= ======= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $105,022 $89,265 $79,443 $61,300 $23,415 $ 6,160 $24,771 $ 1,851
===================================== ======== ======= ======= ======= ======= ======= ======= =======
Ratio of expenses to average net
assets (exclusive of interest
expense)(b) 1.72%(c) 1.76% 1.76% 1.86% 1.82% 1.71%(d) 1.72%(c) 1.76%(d)
===================================== ======== ======= ======= ======= ======= ======= ======= =======
Ratio of net investment income to
average net assets(e) 5.85%(c) 6.01% 6.00% 6.58% 6.56% 6.37%(d) 5.85%(c) 6.01%(d)
===================================== ======== ======= ======= ======= ======= ======= ======= =======
Portfolio turnover rate 80% 99% 134% 140% 109% 110% 80% 99%
===================================== ======== ======= ======= ======= ======= ======= ======= =======
Borrowings for the period:
Amount of debt outstanding at ended
of period (000s omitted) $ 6,861 -- -- -- -- -- $ 1,257 --
===================================== ======== ======= ======= ======= ======= ======= ======= =======
Average amount of debt outstanding
during the period (000s omitted)(f) $ 4,834 $ 2,215 -- -- -- -- $ 885 $ 25
===================================== ======== ======= ======= ======= ======= ======= ======= =======
Average number of shares outstanding
during the period (000s omitted)(f) 10,169 8,726 -- -- -- -- 1,863 99
===================================== ======== ======= ======= ======= ======= ======= ======= =======
Average amount of debt per share
during the period $ 0.4753 $0.2537 -- -- -- -- $0.4753 $0.2537
===================================== ======== ======= ======= ======= ======= ======= ======= =======
</TABLE>
(a) Does not deduct contingent deferred sales charges and is not
annualized for periods less than one year.
(b) After fee waivers and/or expense reimbursements. Ratio of
expenses to average net assets prior to fee waivers and/or
expense reimbursements were 1.87% and 2.18% (annualized) for
1994 and 1993, respectively.
(c) Ratios are annualized and based on average net assets of
$96,268,962 and $17,556,349 for Class B and Class C,
respectively.
(d) Annualized.
(e) After fee waivers and/or expense reimbursements. Ratios of
net investment income to average net assets prior to fee
waivers and/or expense reimbursements were 6.50% and 5.90%
(annualized) for 1994 and 1993, respectively.
(f) Averages computed on a daily basis.
11
<PAGE> 14
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 Chairman Suite 100
A I M Management Group Inc. Houston, TX 77046
Robert H. Graham
Bruce L. Crockett President INVESTMENT ADVISOR
Director
ACE Limited; John J. Arthur A I M Advisors, Inc.
Formerly Director, President, and Senior Vice President and Treasurer 11 Greenway Plaza
Chief Executive Officer Suite 100
COMSAT Corporation Carol F. Relihan Houston, TX 77046
Senior Vice President and Secretary
Owen Daly II TRANSFER AGENT
Director Gary T. Crum
Cortland Trust Inc. Senior Vice President A I M Fund Services, Inc.
P.O. Box 4739
Edward K. Dunn Jr. Dana R. Sutton Houston, TX 77210-4739
Chairman, Mercantile Mortgage Corp.; Vice President and Assistant Treasurer
Formerly Vice Chairman and President, CUSTODIAN
Mercantile-Safe Deposit & Trust Co.; and Robert G. Alley
President, Mercantile Bankshares Vice President State Street Bank and Trust Company
225 Franklin Street
Jack Fields Stuart W. Coco Boston, MA 02110
Chief Executive Officer Vice President
Texana Global, Inc.; COUNSEL TO THE FUND
Formerly Member Melville B. Cox
of the U.S. House of Representatives Vice President Ballard Spahr
Andrews & Ingersoll, LLP
Carl Frischling Karen Dunn Kelley 1735 Market Street
Partner Vice President Philadelphia, PA 19103
Kramer, Levin, Naftalis & Frankel
Jonathan C. Schoolar COUNSEL TO THE TRUSTEES
Robert H. Graham Vice President
President and Chief Executive Officer Kramer, Levin, Naftalis & Frankel
A I M Management Group Inc. Renee A. Friedli 919 Third Avenue
Assistant Secretary New York, NY 10022
Lewis F. Pennock
Attorney P. Michelle Grace DISTRIBUTOR
Assistant Secretary
Ian W. Robinson A I M Distributors, Inc.
Consultant; Formerly Executive Jeffrey H. Kupor 11 Greenway Plaza
Vice President and Assistant Secretary Suite 100
Chief Financial Officer Houston, TX 77046
Bell Atlantic Management Nancy L. Martin
Services, Inc. Assistant Secretary
Louis S. Sklar Ofelia M. Mayo
Executive Vice President Assistant Secretary
Hines Interests
Limited Partnership Lisa A. Moss
Assistant Secretary
Kathleen J. Pflueger
Assistant Secretary
Samuel D. Sirko
Assistant Secretary
Stephen I. Winer
Assistant Secretary
Mary J. Benson
Assistant Treasurer
</TABLE>
12
<PAGE> 15
HOW AIM MAKES INVESTING
EASY FOR YOU
o LOW INITIAL INVESTMENT. You can get your investment program started for as
little as $500. Subsequent investments can be made for only $50.
o AUTOMATIC REINVESTMENT OF DIVIDENDS AND/OR CAPITAL GAINS. Distributions may
be received in cash or reinvested in the Fund free of charge. Over time, the
power of compounding can significantly increase the value of your assets.
o AUTOMATIC INVESTMENT PLAN. You may build your investment by regularly
purchasing additional shares. Pre-authorized checks for $50 or more can be
drafted monthly from your personal checking account.
o EASY ACCESS TO YOUR MONEY. Your shares may be redeemed at net asset value
any day the New York Stock Exchange is open. The price of shares sold may be
more or less than their original cost, depending on market conditions.
o SYSTEMATIC WITHDRAWAL PLAN. You may elect to receive checks of at least $50
monthly or quarterly through a systematic withdrawal plan.
o Exchange Privilege. As your goals change, you may exchange all or part of
your assets for those of other funds within the same share class of The AIM
Family of Funds--Registered Trademark--. The exchange privilege may be
modified or discontinued for any of the AIM funds.
o RETIREMENT PLANS. You may purchase shares of the fund for your Individual
Retirement Account (IRA) or any other type of retirement plan, and earn
tax-deferred dollars for your retirement.
o TOLL-FREE ACCESS. Current shareholders can call our AIM Investor Line at
800-246-5463 for 24-hour-a-day account information. Or, of course, you may
contact your financial consultant for assistance.
o www.aimfunds.com. As a current shareholder, you can check account balances
24 hours a day over the Internet. State-of-the-art encryption lets you send
us questions that include confidential information without the fear of
eavesdropping, tampering, or forgery.
------------------------------------
Current shareholders
can call our
AIM Investor Line at
800-246-5463
for 24-hour-a-day
account information.
------------------------------------
<PAGE> 16
<TABLE>
<CAPTION>
THE AIM FAMILY OF FUNDS--REGISTERED TRADEMARK--
GROWTH FUNDS INTERNATIONAL GROWTH FUNDS
<S> <C> <C>
AIM Aggressive Growth Fund(1) AIM Advisor International Value Fund
AIM Blue Chip Fund AIM Asian Growth Fund
AIM Capital Development Fund AIM Developing Markets Fund(2)
AIM Constellation Fund AIM Emerging Markets Fund(2)
AIM Mid Cap Growth Fund(2) AIM Europe Growth Fund(2)
AIM Select Growth Fund(3) AIM European Development Fund
[PHOTO OF AIM Small Cap Equity Fund(2) AIM International Equity Fund
11 GREENWAY PLAZA AIM Small Cap Opportunities Fund AIM International Growth Fund(2)
APPEARS HERE] AIM Value Fund AIM Weingarten Fund AIM Japan Growth Fund(2)
AIM Latin American Growth Fund(2)
GROWTH & INCOME FUNDS AIM New Pacific Growth Fund(2)
AIM Advisor Flex Fund GLOBAL GROWTH FUNDS
AIM Advisor Large Cap Value Fund
AIM Advisor MultiFlex Fund AIM Global Aggressive Growth Fund
AIM Advisor Real Estate Fund AIM Global Growth Fund
AIM America Value Fund(2) AIM Worldwide Growth Fund(2)
AIM Balanced Fund
AIM Charter Fund GLOBAL GROWTH & INCOME FUNDS
INCOME FUNDS AIM Global Growth & Income Fund(2)
AIM Global Utilities Fund
AIM Floating Rate Fund(2)
AIM High Yield Fund GLOBAL INCOME FUNDS
AIM Income Fund
AIM Intermediate Government Fund AIM Global Government Income Fund(2)
AIM Limited Maturity Treasury Fund AIM Global High Income Fund(2)
AIM Global Income Fund
TAX-FREE INCOME FUNDS AIM Strategic Income Fund(2)
AIM High Income Municipal Fund THEME FUNDS
AIM Municipal Bond Fund
AIM Tax-Exempt Bond Fund of Connecticut AIM Global Consumer Products and Services Fund(2)
AIM Tax-Free Intermediate Fund AIM Global Financial Services Fund(2)
AIM Global Health Care Fund(2)
MONEY MARKET FUNDS AIM Global Infrastructure Fund(2)
AIM Global Resources Fund(2)
AIM Dollar Fund(2) AIM Global Telecommunications Fund(2)
AIM Money Market Fund AIM New Dimension Fund(2)
AIM Tax-Exempt Cash Fund
</TABLE>
(1)AIM Aggressive Growth Fund was closed to new investors on June 5, 1997.
(2)Effective May 29, 1998, A I M Advisors, Inc. became advisor to the former GT
Global Funds. (3)On May 1, 1998, AIM Growth Fund was renamed AIM Select Growth
Fund. For more complete information about any AIM Fund(s), including sales
charges and expenses, ask your financial consultant or securities dealer for
a free prospectus(es). Please read the prospectus(es) carefully before you
invest or send money.
A I M Management Group Inc. has provided leadership in the mutual fund industry
since 1976 and managed approximately $101 billion in assets for more than 5.2
million shareholders, including individual investors, corporate clients, and
?nancial institutions, as of June 30, 1998. The AIM Family of Funds--Registered
Trademark-- is distributed nationwide, and AIM today is the ninth-largest mutual
fund complex in the U.S. in assets under management, according to Strategic
Insight, an independent mutual fund monitor.
INVEST WITH DISCIPLINE(SM)
