<PAGE> 1
SEMIANNUAL REPORT / JUNE 30 1999
AIM INTERMEDIATE GOVERNMENT FUND
[COVER IMAGE]
[AIM LOGO APPEARS HERE]
<PAGE> 2
[COVER IMAGE]
-------------------------------------
FOURTH OF JULY, 1916
BY FREDERICK CHILDE HASSAM
HASSAM WAS AN AMERICAN IMPRESSIONIST PAINTER FAMOUS FOR
HIS LUMINOUS PAINTINGS OF FLAGS AND NEW YORK STREET
SCENES. THIS VIBRANT PAINTING DEPICTS A PARADE ROUTE ON
FIFTH AVENUE IN 1916, PRIOR TO THE U.S. ENTRY INTO WORLD
WAR I. HASSAM CAPTURES THE PATRIOTIC FERVOR OF THE DAY
AND THE BURGEONING STRENGTH OF THE AMERICAN SPIRIT.
-------------------------------------
AIM Intermediate Government Fund is 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 performance figures are historical and
reflect reinvestment of all distributions and changes in net asset value.
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 differences in sales charge structure and fund
expenses.
o Past performance is no guarantee of comparable future results.
o The fund's investment return and principal value will fluctuate, so an
investor's shares, when redeemed, may be worth more or less than their
original cost.
o The 30-day yield is calculated using a formula defined by the Securities and
Exchange Commission (SEC). The formula is based on the portfolio's potential
earnings from dividends, interest, yield-to-maturity or yield-to-call of its
holdings, net of all expenses and expressed on an annualized basis.
o The fund's 30-day distribution rate reflects its most recent monthly
dividend distribution multiplied by 12 and divided by the most recent
month-end maximum offering price. The fund's distribution rate and 30-day
SEC yield will differ.
o Government securities, such as U.S. Treasury bills, notes and bonds, offer a
high degree of safety and are guaranteed as to the timely payment of
principal and interest if held to maturity. Fund shares are not insured and
their value and yield will vary with market conditions.
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 An investment cannot be made in any index listed. Unless otherwise
indicated, index results include reinvested dividends and do not reflect
sales charges.
o The unmanaged Lipper Intermediate U.S. Government Fund Index represents an
average of the performance of the largest government securities funds. These
funds invest at least 65% of assets in securities issued or guaranteed by
the U.S. Government, its agencies, or instrumentalities with dollar-weighted
average maturities of five to 10 years. It is compiled by Lipper Analytical
Services, Inc., an independent mutual-fund performance monitor.
AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OF A BANK AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY
OTHER GOVERNMENT AGENCY. THERE IS A RISK THAT YOU
COULD LOSE SOME OR ALL OF YOUR MONEY.
This report may be distributed only to current shareholders or to person
who have received a current prospectus of the fund.
AIM INTERMEDIATE GOVERNMENT FUND
<PAGE> 3
SEMIANNUAL REPORT / CHAIRMAN'S LETTER
Dear Fellow Shareholder:
With only several months remaining in 1999, the question on
[PHOTO OF many of your minds may be, "How will the year 2000 computer
Charles T. issue affect AIM and my investments?" We would like you to
Bauer, feel comfortable. We are pleased to be able to report to you
Chairman of that as of June 1999 we achieved a major milestone toward
the Board of year 2000 compliance status: we have successfully completed
THE FUND the testing of all of our mission-critical systems.
APPEARS HERE] Earlier this year, AIM participated in an industrywide
test that gave us a chance to see how our technology systems
might be affected by the changeover to the year 2000 (Y2K).
Everything went as well as we had hoped; in general, the
industry sailed through the testing process with flying
colors. The financial industry has been seen as a leader in
planning for year 2000 concerns. Thus, it was no surprise to
most participants that the test was an overwhelming success.
The general purpose of the process was to test
electronic interfaces among financial industry members in the United States and
to follow transactions through a typical trading cycle--from order entry to the
settlement process. Investment banks, broker-dealers, custodian banks and mutual
fund companies all worked together to make this possible. Approximately 400
firms were involved in the testing; AIM was one of 70 asset managers.
During the testing process, thousands of transactions were submitted and
approximately 260,000 steps were tested. Of those, only a handful experienced
minor glitches--just 0.02% of the total number of transactions. All problems
were worked through quickly before the hypothetical trades were settled. Of
course, AIM will keep testing and planning throughout 1999 as a precaution.
AIM'S INTERNAL EFFORTS CONTINUE
As you know from our previous communications to you, AIM has been addressing the
year 2000 issue for several years. Now that we have finished adjusting our
applications and systems, our focus for the rest of 1999 is to continue
monitoring the year 2000 readiness status of outside sources we're linked to
electronically. On the investment side, our portfolio management staff is
continually evaluating the Y2K preparedness of the domestic and foreign
companies in which we invest.
We feel that our preparations for 2000 are very comprehensive, and the
industrywide testing showed that our colleagues in the financial industry are
also working hard to be ready for the new year. We do not think shareholders
need to take any extraordinary measures with their investments to prepare for
2000. However, if you have any lingering concerns, it may reassure you to know
that AIM is finalizing contingency plans that will be ready if necessary. Our
plans will give AIM employees guidelines to follow for a wide variety of
situations.
For a more comprehensive discussion of our Y2K efforts and for periodic
updates, please visit our Web site, www.aimfunds.com.
We are pleased to send you this report covering your fund's performance over
the last six months. If you have any questions or comments, please contact our
Client Services department at 800-959-4246, or e-mail your inquiry to us at
[email protected]. You can access information about your account through our
automated AIM Investor Line at 800-246-5463 or at our Web site.
Thank you for your continued participation in The AIM Family of
Funds--Registered Trademark--. We appreciate your business.
Sincerely,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
A I M Advisors, Inc.
-------------------------------------
THE FINANCIAL INDUSTRY
HAS BEEN SEEN AS A
LEADER IN PLANNING FOR
YEAR 2000 CONCERNS.
-------------------------------------
PLEASE NOTE THAT THE INFORMATION ABOUT THE YEAR 2000 IN THIS LETTER IS DEEMED
AIM'S YEAR 2000 READINESS DISCLOSURE.
AIM INTERMEDIATE GOVERNMENT FUND
<PAGE> 4
SEMIANNUAL REPORT / MANAGERS' OVERVIEW
FUND CONTINUES TO PROVIDE INCOME, STABILITY IN VOLATILE BOND MARKET
HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
Strong economic growth and resulting inflationary concerns created a difficult
environment for intermediate-term debt securities. For the six months ended June
30, 1999, the fund's total return was -2.50% for Class A Shares, -2.79% for
Class B shares and -2.80% for Class C shares. These figures were calculated at
net asset value, without a sales charge. Comparatively, the Lehman Brothers
Intermediate Government Bond Index returned -0.47%.
Despite unfavorable market conditions, the fund continued to provide a high
level of current income during the six-month reporting period. As of June 30,
1999, the fund's 30-day distribution rate at net asset value was 6.98% for Class
A shares, 6.10% for Class B shares and 6.12% for Class C Shares. The fund's
30-day SEC yield at maximum offering price was 5.38% for Class A shares and
4.86% for both Class B and Class C shares.
WHAT EVENTS HAVE SHAPED THE MARKET ENVIRONMENT OVER THE LAST SIX MONTHS?
Despite the global economic struggles of the second half of 1998, the United
States enjoyed unexpectedly strong growth of 6.1% in the fourth quarter of 1998
and 4.1% in the first quarter of 1999. This robust economic expansion alleviated
concerns that problems in developing nations would lead to a global recession.
As investor confidence returned, yield replaced safety as the driving force in
the bond market. Demand for government debt securities weakened in favor of
lower-rated higher-yielding securities.
In addition to weakening demand, a combination of factors, most notably
comments by Federal Reserve Board (the Fed) Chairman Alan Greenspan in February
and surprisingly high Consumer Price Index (CPI) data in April, led investors to
speculate that this strong economic growth would necessitate the tightening of
interest rates. The possibility of a rate hike created further demand for
securities with higher yields and less sensitivity to interest-rate moves than
government-issued debt. Treasury securities in particular were hurt by this
shift in market favor.
To a degree, investor concern was warranted, as on June 30 the Fed bumped
the federal funds rate upward from 4.75% to 5%. The increase was only a small
nudge, but was just enough to moderate the possibility of inflation. More
important, however, was the Fed's declaration of a neutral bias, indicating its
reluctance to adjust rates further in the near future. This declaration removed
some uncertainty and created some relative stability within the fixed-income
marketplace.
HOW DID THE FUND'S HOLDINGS REACT TO THIS VOLATILE ENVIRONMENT?
The fund's performance during the reporting period was largely defined by a
rising-interest-rate environment. For the six-months ending June 30, 1999 yield
on the two-year Treasury note rose from 4.53% to 5.52%. Similarly, yield on the
30-year Treasury bond rose from 5.09% to 5.97%. As interest rates continued to
rise during the reporting period, the value of the fund's holdings declined.
This was not unexpected, however. In a rising-interest-rate environment, it is
normal for the value of existing debt securities to decrease, as a security's
yield and price have an inverse relationship.
To counter rising interest rates, the fund typically relies on its
mortgage-backed securities, which historically have had less volatile yields and
thus helped the fund's price stability. While yields of most debt securities
will climb with rising interest rates, the yields of mortgage-backed securities
generally do not increase as much as those of Treasuries.
However, as demand for the safety of government securities dwindled in favor
of higher-yielding, lower-rated debt securities during the reporting period,
mortgage-backed securities have been surprisingly more volatile than Treasuries.
As a result, the fund's mortgage-backed securities did not dampen the volatility
of the fund's net asset value, but instead contributed to it.
================================================================================
YIELD AT NET ASSET VALUE
As of 6/30/99
- --------------------------------------------------------------------------------
BAR CHART HERE
Class A Shares 6.98%
Class B Shares 6.10%
Class C Shares 6.12%
30-Year Treasury Bond 5.97%
Average Intermediate U.S. Gov. Fund 5.45%
Source: Lipper Analytical Services, Inc.; Bloomberg
================================================================================
-------------------------------------
DESPITE UNFAVORABLE MARKET CONDI-
TIONS, THE FUND CONTINUED TO PROVIDE
A HIGH LEVEL OF CURRENT INCOME . . .
-------------------------------------
See important fund and index disclosures inside front cover.
AIM INTERMEDIATE GOVERNMENT FUND
2
<PAGE> 5
SEMIANNUAL REPORT / MANAGERS' OVERVIEW
HOW DID THE FUND ADJUST ITS STRATEGY UNDER THESE MARKET CONDITIONS?
In a rising-interest-rate environment, the securities most susceptible to price
fluctuation are those with the longest duration. Treasury securities like
10-year notes and 30-year bonds are among the securities more prone to price
fluctuation, while two- and five-year notes are historically more stable. In
response to rising interest rates, then, we have shortened the average duration
of the fund's holdings to reduce price and interest-rate risk. At the end of the
reporting period, the fund's average duration was 3.23 years compared to 4.14
six months ago.
In general, however, we are remaining true to our investment discipline.
While the fund did experience some fluctuation in its net asset value, it held
to its objective of providing the price stability of a five-year Treasury note.
Additionally, the fund's yield continues to be higher than the benchmark yield
of the 30-year Treasury bond. And despite the setbacks we've experienced with
mortgage-backed securities in recent months, our research still indicates that
these securities offer good value and opportunity for high yield and
preservation of capital.
We believe that lowering the fund's duration and maintaining our positions
in mortgage-backed securities will continue to keep the fund in line with its
investment objectives and provide our shareholders with the income and price
stability to which they have grown accustomed.
WHAT DOES THE HIKE IN THE FEDERAL FUNDS RATE MEAN FOR THE FIXED-INCOME MARKET?
The Fed's decision to raise the rate to 5% was a prudent move. With such strong
economic growth, it is crucial that the Fed monitor and temper the rate of
inflation. And while the alarmingly high upturn in retail inflation reflected in
April's CPI data appears to have been a one time aberration, the Fed's action
should provide a good cushion for the economy should inflation rise in the near
term.
WHAT IS YOUR OUTLOOK FOR THE NEAR TERM?
At the close of the reporting period, the benchmark 30-year Treasury bond was
yielding 5.97% versus 5.09% at the period's outset. While it has been a bumpy
ride, the bottom line is that higher yields can offer a greater degree of income
for investors.
Overall, the market environment for fixed-income securities appears
favorable. We believe the fund is well positioned to capitalize on this
environment and to provide shareholders with the stability and income they have
come to expect from AIM Intermediate Government Fund.
MONTH-END FUND NET ASSET DEVIATION VALUE
6/87-6/99
On a rolling 12-month basis, the fund's NAV has deviated only 3.29%, as compared
to the five-year Treasury note's 4.55% deviation.
CLASS A SHARES NET ASSET VALUE VS. FIVE-YEAR TREASURY BOND
================================================================================
Years AIM Interm Gov't NAV Volatility 5-Year Treasury Volatility
- --------------------------------------------------------------------------------
Jun-87 10.11 108
Jun-88 9.94 106
Jun-89 9.89 108
Jun-90 9.79 107
Jun-91 9.92 109
Jun-92 10.26 116
Jun-93 10.36 122
Jun-94 9.32 112
Jun-95 9.48 117
Jun-96 9.21 114
Jun-97 9.24 115
Jun-98 9.47 119
Jun-99 9.03 118.03
CLASS A SHARES NAV
FIVE-YEAR TREASURY BOND
Sources: Bloomberg, Towers Data Systems HYPO. There is no guarantee that the
fund will maintain a constant NAV.
================================================================================
================================================================================
AVERAGE ANNUAL TOTAL RETURNS
For periods ending June 30, 1999, including sales charges
CLASS A SHARES
Inception (4/28/87) 6.63%
10 years 6.35%
5 years 5.53%
1 year -2.90%
CLASS B SHARES
Inception (9/7/93) 3.95%
5 years 5.40%
1 year -3.58%
CLASS C SHARES
Inception ( 8/4/97) 4.18%
1 year 0.24%
================================================================================
-------------------------------------
OVERALL, THE MARKET ENVIRONMENT
FOR FIXED-INCOME SECURITIES APPEARS
FAVORABLE.
-------------------------------------
See important fund and index disclosures inside front cover.
AIM INTERMEDIATE GOVERNMENT FUND
3
<PAGE> 6
SEMIANNUAL REPORT / FOR CONSIDERATION
CHOOSE YOUR INVESTMENT PALETTE
[GRAPHIC]
No two pieces of art are exactly alike. Just as an artist may use different
paints to create a piece, so does an investor use different kinds of investments
to create a portfolio. And as with art, tastes can change over time--most
investors have different goals at different stages in their lives, as well as
varying tolerance for risk. The biggest advantage mutual funds offer is the
potential for diversification. Providing funds with assorted objectives and
goals allows investors to shape their portfolios to their specific needs and
spread their risk over several different funds, rather than painting their
portfolios all one color.
GROWTH VS INCOME
If you look at the list of AIM's retail mutual funds on the back of your fund
report, you'll notice that they are divided into different types. Two that
frequently appear are growth and income. Common stock is normally the growth
component of a mutual fund with growth as a primary or secondary objective.
Bonds are typically the income components of a mutual fund with income as a
primary or secondary objective.
Let's take a closer look at the categories into which AIM's retail mutual
funds are divided. Keep in mind that funds listed under the same category don't
necessarily have the same kind of investment strategy or portfolio, even if they
have the same objective.
DOMESTIC MUTUAL FUNDS
GROWTH FUNDS
Growth funds typically invest in common stocks of companies whose businesses are
growing. Growth companies tend to reinvest their profits toward expansion of
their potential to produce greater returns instead of paying dividends. So
growth mutual funds focus on generating capital gains--increasing the value of
the stocks they hold--rather than current income, which means they generally
don't pay regular income dividends. Growth funds usually do, however, make one
capital-gains distribution per year, when there are gains.
An increase over time in the value of a growth fund's portfolio means the
fund's value, or share price, increases over time also. Shareholders in a growth
fund, then, make money by selling their shares for more than they paid for them.
Of course, the opposite is also true--shareholders can lose money by selling
their shares for less than they paid for them. Growth funds usually range from
moderate to very aggressive, depending on the size and types of companies in
which they invest.
GROWTH AND INCOME FUNDS
A growth and income fund generally invests in common and preferred stocks and
bonds of older, more established companies that have a longer track record of
growth and paying dividends.
A typical growth and income mutual fund will pay quarterly or annual income
dividends to its shareholders. (Monthly dividends are not common.) In this way,
growth and income funds can potentially provide long-term growth of investments
and also current income. These funds tend to be more conservative than growth
funds.
INCOME FUNDS
Income funds are generally designed to provide high current income rather than
long-term growth. To that end, income funds usually invest chiefly in
interest-paying corporate and government bonds. They may also own stocks of
companies that pay regular dividends. Some income funds are more aggressive than
others. The aggressiveness of a particular fund depends not only on the kinds of
securities in which it invests, but also on the fund's sector allocation and
maturity structure.
For example, Treasury securities are considered a relatively safe investment
because they are guaranteed by the U.S. government. However, lower risk also
means lower return potential. On the other hand, lower-rated corporate bonds,
often called junk bonds, involve more risk because they are not guaranteed--they
are only as good as the companies that issue them. But the added risk also means
higher return potential.
Income funds are considered more conservative and are suited for investors
seeking income rather than growth.
[GRAPHIC]
AIM INTERMEDIATE GOVERNMENT FUND
4
<PAGE> 7
SEMIANNUAL REPORT / FOR CONSIDERATION
TAX-FREE INCOME OR MUNICIPAL FUNDS
These funds provide shareholders with current income that is tax-exempt at some
level, depending on the securities in which they invest. So municipal mutual
funds appeal to investors who are looking to reduce income that would otherwise
be subject to tax. Municipal bonds or notes, which are issued by state or local
governments, are generally exempt from federal taxes. Federal securities, like
Treasury bonds, are usually exempt from state taxes. And then there are some
securities that are exempt from both federal and state taxes.(1)
MONEY-MARKET FUNDS
A money-market fund is one of the safest types of mutual funds available because
its main goal is preserving your investment while paying current income in the
form of interest. As a result, these funds tend to appeal to investors looking
for safety, liquidity and some income from their investment. Money-market funds
invest in high-quality, short-term securities such as commercial paper and U.S.
government agency securities. Although money-market funds are not guaranteed or
insured by the U.S. government, the securities they hold are less risky than
other types of fixed-income securities. The trade-off for safety of principal
investment is a lower rate of return.(2)
INTERNATIONAL AND GLOBAL MUTUAL FUNDS
INTERNATIONAL GROWTH FUNDS
An international growth fund has the same objective as a domestic growth fund,
except it invests in stocks of companies located outside the United States. Like
their domestic counterparts, international growth funds tend to pay
distributions in the form of capital gains rather than dividends. An
international growth mutual fund might invest in a particular country, region or
continent depending on the investment strategy shown in its prospectus.
International funds carry different risks than domestic funds because most
foreign markets are not as established as the markets in the United States.
Other risks include changes in the value of the U.S. dollar compared to foreign
currencies, accounting differences, political risks and foreign regulatory
differences.
GLOBAL GROWTH, GLOBAL GROWTH AND INCOME, AND GLOBAL INCOME FUNDS
These funds are similar to their domestic equivalents in terms of their goals
and the income distributions they pay. Global funds are comparable to
international funds in that they can invest in stocks of companies outside the
United States. But global funds can also invest substantially in U.S. stocks;
international funds generally do not. The amount of a global fund's portfolio
that can be invested in the United States varies greatly from fund to fund,
according to a fund's prospectus. Global funds carry the same risks as
international funds.
SPECIALIZED FUNDS
THEME FUNDS
Theme or sector funds invest primarily in a particular industry or sector of the
economy, either domestically or globally. Theme funds are required by prospectus
to invest a certain percentage of their assets in their industry or sector of
choice under normal market conditions. As a result, theme funds present greater
risk and potential reward than more diversified funds. The types of securities
held by a theme fund determine its goal of growth and/or income.
TYPES OF FUND DISTRIBUTIONS
INCOME DIVIDENDS are paid from dividends and/or interest from securities in a
fund's portfolio. For example, if a company in which a mutual fund owns stock
distributes some of its earnings to its shareholders as a dividend, the fund
passes on those earnings to its own shareholders. Income dividends are usually
taxed as ordinary income.
CAPITAL GAINS represent the net profit realized from the growth in value of the
holdings in a fund's portfolio. These distributions are usually made once per
year. There are two types of capital gains:
o Short-term capital gains are paid from net profits gained when a mutual fund
sells stocks or bonds it has held for less than a year. Short-term capital
gains are taxed as ordinary income.
o Long-term capital gains are paid from net profits gained when a mutual fund
sells stocks or bonds it has held for more than a year. Long-term capital
gains are usually taxed at the capital-gains rate, which is typically lower
than ordinary income-tax rates.
(1) Investors in tax-free income funds still have a risk of incurring taxes on
capital-gains distributions, for example, so it's wise to see your tax
advisor before investing in such funds.
(2) There is no guarantee that a money-market fund will be able to maintain a
stable net asset value of $1.00 per share.
See the back cover for a complete list of AIM's retail mutual funds. For more
information about your fund's objective, read your fund prospectus. 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.
AIM INTERMEDIATE GOVERNMENT FUND
5
<PAGE> 8
SCHEDULE OF INVESTMENTS
June 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
U.S. GOVERNMENT AGENCY
SECURITIES-61.17%
FEDERAL FARM CREDIT BANK-0.96%
Debentures
6.15%, 09/01/00 $ 700,000 $ 705,026
- --------------------------------------------------------------
6.22%, 06/17/08 4,500,000 4,352,715
- --------------------------------------------------------------
5,057,741
- --------------------------------------------------------------
FEDERAL HOME LOAN BANK-1.34%
Debentures
7.31%, 07/06/01 4,000,000 4,117,040
- --------------------------------------------------------------
7.36%, 07/01/04 2,800,000 2,934,484
- --------------------------------------------------------------
7,051,524
- --------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORP.
("FHLMC")-12.62%
Debentures
6.45%, 04/29/09 10,000,000 9,681,400
- --------------------------------------------------------------
Pass Through Certificates
12.00%, 04/01/00 to 02/01/13 18,391 20,896
- --------------------------------------------------------------
6.50%, 07/01/01 to 01/01/28 7,511,739 7,350,021
- --------------------------------------------------------------
9.00%, 12/01/05 to 04/01/25 4,088,543 4,317,980
- --------------------------------------------------------------
8.00%, 07/01/06 to 10/01/10 315,558 325,252
- --------------------------------------------------------------
8.50%, 07/01/07 to 12/01/26 13,986,551 14,707,665
- --------------------------------------------------------------
10.50%, 09/01/09 to 01/01/21 1,486,289 1,631,700
- --------------------------------------------------------------
7.00%, 11/01/10 to 04/01/11 1,107,313 1,117,229
- --------------------------------------------------------------
10.00%, 11/01/11 to 04/01/20 8,525,144 9,349,601
- --------------------------------------------------------------
6.00%, 12/01/13 9,585,697 9,262,180
- --------------------------------------------------------------
9.50%, 11/01/20 to 04/01/25 7,941,019 8,586,058
- --------------------------------------------------------------
66,349,982
- --------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION ("FNMA")-32.04%
Debentures
8.25%, 12/18/00 5,000,000 5,185,400
- --------------------------------------------------------------
7.50%, 02/11/02 9,000,000 9,324,630
- --------------------------------------------------------------
8.50%, 02/01/05 4,500,000 4,576,455
- --------------------------------------------------------------
5.875%, 02/02/06 8,000,000 7,825,760
- --------------------------------------------------------------
Medium Term Notes
6.40%, 09/27/05 4,610,000 4,639,457
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
FEDERAL NATIONAL MORTGAGE ASSOCIATION
("FNMA")-(CONTINUED)
Pass Through Certificates
8.50%, 01/01/07 to 11/01/26 $63,665,242 $ 66,470,185
- --------------------------------------------------------------
6.00%, 01/01/09 to 04/01/24 22,254,965 21,495,636
- --------------------------------------------------------------
7.50%, 06/01/10 to 12/01/26 15,867,618 16,143,712
- --------------------------------------------------------------
7.00%, 05/01/11 to 10/01/12 7,593,285 7,649,416
- --------------------------------------------------------------
6.50%, 05/01/13 to 11/01/28 8,432,726 8,317,577
- --------------------------------------------------------------
9.50%, 07/01/16 to 08/01/22 1,635,397 1,757,390
- --------------------------------------------------------------
10.00%, 12/20/19 to 12/20/21 8,134,017 8,952,803
- --------------------------------------------------------------
8.00%, 04/01/25 to 07/01/26 5,954,380 6,131,406
- --------------------------------------------------------------
168,469,827
- --------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION ("GNMA")-14.21%
Pass Through Certificates
6.00%, 10/15/08 to 11/15/08 487,394 473,683
- --------------------------------------------------------------
6.50%, 10/15/08 452,343 449,091
- --------------------------------------------------------------
7.00%, 10/15/08 to 07/15/28 16,706,151 16,537,360
- --------------------------------------------------------------
9.00%, 10/15/08 to 04/15/21 1,247,693 1,340,995
- --------------------------------------------------------------
9.50%, 06/15/09 to 03/15/23 4,525,615 4,887,879
- --------------------------------------------------------------
10.00%, 11/15/09 to 07/15/24 9,766,172 10,667,637
- --------------------------------------------------------------
11.00%, 12/15/09 to 12/15/15 99,094 109,670
- --------------------------------------------------------------
13.50%, 07/15/10 to 04/15/15 279,355 327,554
- --------------------------------------------------------------
12.50%, 11/15/10 136,648 157,829
- --------------------------------------------------------------
13.00%, 01/15/11 to 05/15/15 266,785 309,042
- --------------------------------------------------------------
12.00%, 01/15/13 to 07/15/15 445,734 505,437
- --------------------------------------------------------------
10.50%, 07/15/13 to 02/15/16 153,186 167,968
- --------------------------------------------------------------
8.00%, 01/15/22 to 06/15/27 30,787,316 31,790,599
- --------------------------------------------------------------
7.50%, 03/15/26 to 08/15/28 6,897,906 6,980,946
- --------------------------------------------------------------
74,705,690
- --------------------------------------------------------------
Total U.S. Government Agency
Securities (Cost
$319,388,639) 321,634,764
- --------------------------------------------------------------
U.S. TREASURY SECURITIES-26.75%
U.S. TREASURY BONDS-4.03%
5.625%, 05/15/08 10,000,000 9,802,500
- --------------------------------------------------------------
7.25%, 08/15/22 1,100,000 1,229,723
- --------------------------------------------------------------
5.25%, 11/15/28 11,500,000 10,191,875
- --------------------------------------------------------------
21,224,098
- --------------------------------------------------------------
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
U.S. TREASURY NOTES-21.27%
6.625%, 07/31/01 $25,000,000 $ 25,524,750
- --------------------------------------------------------------
6.125%, 12/31/01 5,000,000 5,060,100
- --------------------------------------------------------------
6.00%, 07/31/02 5,000,000 5,052,300
- --------------------------------------------------------------
6.375%, 08/15/02 25,000,000 25,501,500
- --------------------------------------------------------------
5.50%, 05/31/03 5,000,000 4,961,600
- --------------------------------------------------------------
5.25%, 08/15/03 16,000,000 15,721,600
- --------------------------------------------------------------
4.75%, 02/15/04 to 11/15/08 25,000,000 23,819,650
- --------------------------------------------------------------
7.50%, 11/15/16 5,500,000 6,203,450
- --------------------------------------------------------------
111,844,950
- --------------------------------------------------------------
U.S. TREASURY STRIPS-1.45%(a)
5.38% to 6.85%, 05/15/06 to
11/15/18 ($8,000,000) 15,750,000 7,610,913
- --------------------------------------------------------------
Total U.S. Treasury Securities
(Cost $148,770,451) 140,679,961
- --------------------------------------------------------------
Total Investments (excluding
Repurchase Agreements) 462,314,725
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
REPURCHASE AGREEMENT-11.62%(b)
CIBC Oppenheimer Corp, 4.95%,
07/01/99(c) (Cost $61,121,047) $61,121,047 $ 61,121,047
- --------------------------------------------------------------
TOTAL INVESTMENTS-99.54% 523,435,772
- --------------------------------------------------------------
LIABILITIES LESS OTHER
ASSETS-0.46% 2,430,275
- --------------------------------------------------------------
NET ASSETS-100.00% $525,866,047
- --------------------------------------------------------------
</TABLE>
Abbreviation:
STRIPS - Separately Traded Registered Interest and Principal Security
Notes to Schedule of Investments:
(a)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.
(b)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 is at least 102% 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.
(c)Joint repurchase agreement entered into 06/30/99 with a maturing value of
$300,041,250. Collateralized by U.S. Government obligations.
See Notes to Financial Statements.
7
<PAGE> 10
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1999
(unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments, excluding repurchase
agreements, at market value (cost
$468,159,090) $462,314,725
- ---------------------------------------------------------
Repurchase agreement (cost $61,121,047) 61,121,047
- ---------------------------------------------------------
Receivables for:
Investments sold 73,992,188
- ---------------------------------------------------------
Fund shares sold 2,689,015
- ---------------------------------------------------------
Interest 5,584,815
- ---------------------------------------------------------
Principal paydowns 948,164
- ---------------------------------------------------------
Investment for deferred compensation plan 34,419
- ---------------------------------------------------------
Other assets 24,221
- ---------------------------------------------------------
Total assets 606,708,594
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 73,979,688
- ---------------------------------------------------------
Fund shares reacquired 4,907,452
- ---------------------------------------------------------
Dividends 957,300
- ---------------------------------------------------------
Deferred compensation plan 34,419
- ---------------------------------------------------------
Accrued advisory fees 191,859
- ---------------------------------------------------------
Accrued administrative services fees 7,139
- ---------------------------------------------------------
Accrued distribution fees 498,548
- ---------------------------------------------------------
Accrued transfer agent fees 52,118
- ---------------------------------------------------------
Accrued operating expenses 214,024
- ---------------------------------------------------------
Total liabilities 80,842,547
- ---------------------------------------------------------
Net assets applicable to shares outstanding $525,866,047
- ---------------------------------------------------------
NET ASSETS:
Class A $244,554,929
- ---------------------------------------------------------
Class B $239,031,523
- ---------------------------------------------------------
Class C $ 42,279,595
- ---------------------------------------------------------
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 27,068,064
=========================================================
Class B 26,414,820
=========================================================
Class C 4,686,367
=========================================================
Class A:
Net asset value and redemption price per
share $ 9.03
=========================================================
Offering price per share:
(Net asset value of $9.03
divided by 95.25%) $ 9.48
=========================================================
Class B:
Net asset value and offering price per
share $ 9.05
=========================================================
Class C:
Net asset value and offering price per
share $ 9.02
=========================================================
</TABLE>
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
For the six months ended June 30, 1999
(unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 20,341,791
- ---------------------------------------------------------
EXPENSES:
Advisory fees 1,144,652
- ---------------------------------------------------------
Administrative services fees 44,021
- ---------------------------------------------------------
Custodian fees 38,570
- ---------------------------------------------------------
Distribution fees - Class A 309,466
- ---------------------------------------------------------
Distribution fees - Class B 1,195,816
- ---------------------------------------------------------
Distribution fees - Class C 199,181
- ---------------------------------------------------------
Interest (Note 5) 224,014
- ---------------------------------------------------------
Transfer agent fees - Class A 152,591
- ---------------------------------------------------------
Transfer agent fees - Class B 159,674
- ---------------------------------------------------------
Transfer agent fees - Class C 26,547
- ---------------------------------------------------------
Trustees' fees 5,694
- ---------------------------------------------------------
Other 235,852
- ---------------------------------------------------------
Total expenses 3,736,078
- ---------------------------------------------------------
Less: Expenses paid indirectly (3,360)
- ---------------------------------------------------------
Net expenses 3,732,718
- ---------------------------------------------------------
Net investment income 16,609,073
- ---------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES:
Net realized gain (loss) from investment
securities (18,452,743)
- ---------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of investment securities (12,277,881)
- ---------------------------------------------------------
Net gain (loss) on investment securities (30,730,624)
- ---------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations $(14,121,551)
=========================================================
</TABLE>
8
<PAGE> 11
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1999 and the year ended December 31, 1998
(unaudited)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 16,609,073 $ 21,481,081
- --------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities (18,452,743) 6,570,449
- --------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities (12,277,881) (2,570,929)
- --------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations (14,121,551) 25,480,601
- --------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (8,360,632) (12,395,672)
- --------------------------------------------------------------------------------------------
Class B (7,068,011) (7,690,274)
- --------------------------------------------------------------------------------------------
Class C (1,180,430) (1,395,135)
- --------------------------------------------------------------------------------------------
Distributions in excess of net investment income:
Class A (65,835) (247,750)
- --------------------------------------------------------------------------------------------
Class B (63,599) (176,643)
- --------------------------------------------------------------------------------------------
Class C (10,593) (32,108)
- --------------------------------------------------------------------------------------------
Share transactions-net:
Class A 13,473,598 76,269,628
- --------------------------------------------------------------------------------------------
Class B 15,100,607 147,670,216
- --------------------------------------------------------------------------------------------
Class C 6,604,979 35,531,445
- --------------------------------------------------------------------------------------------
Net increase in net assets 4,308,533 263,014,308
- --------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 521,557,514 258,543,206
- --------------------------------------------------------------------------------------------
End of period $525,866,047 $521,557,514
============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $559,519,407 $524,340,223
- --------------------------------------------------------------------------------------------
Undistributed net investment income (182,515) (42,488)
- --------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities (27,626,480) (9,173,737)
- --------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities (5,844,365) 6,433,516
- --------------------------------------------------------------------------------------------
$525,866,047 $521,557,514
============================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
June 30, 1999
(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
9
<PAGE> 12
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. The Fund may engage
in dollar roll transactions with respect to mortgage backed securities
issued by GNMA, FNMA and FHLMC. In a dollar roll transaction, the Fund
sells a mortgage backed security held in the Fund to a financial
institution such as a bank or broker-dealer, and simultaneously agrees to
repurchase a substantially similar security (same type, coupon and
maturity) from the institution at a later date at an agreed upon price. The
mortgage backed 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.
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 distributions 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 $8,696,199 as of December 31, 1998 (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 pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the six months ended June 30, 1999, AIM
was paid $44,021 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, 1999, the
Fund paid AFS $192,819 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 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, 1999 the Class A, Class B and
Class C shares paid AIM Distributors $309,466, $1,195,816 and $199,181
respectively, as compensation under the Plans.
AIM Distributors received commissions of $176,296 from sales of the Class A
shares of the Fund during the six months ended June 30, 1999. 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,
1999, AIM Distributors received $108,249 in contingent deferred
10
<PAGE> 13
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, 1999, the Fund paid legal fees of $9,707
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, 1999, the Fund received reductions in
transfer agency fees from AFS (an affiliate of AIM) and reductions in custodian
fees of $3,352 and $8, respectively under expense offset arrangements. The
effect of the above arrangements resulted in a reduction of the Fund's total
expenses of $3,360 during the six months ended June 30, 1999.
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 Fund will use the proceeds of a reverse repurchase
agreement (which are considered to be borrowings under the 1940 Act) to purchase
other permitted securities either maturing, or under an agreement to resell, at
a date simultaneous with or prior to the expiration of the reverse repurchase
agreement. The Fund will enter into a reverse repurchase agreement only when the
interest income to be earned from the investment of the proceeds of the
transaction is greater than the interest expense of the transaction. 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, 1999 was $55,370,000 while borrowings averaged $19,109,462 per day with
a weighted average interest rate of 2.36%.
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) $975,000,000 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. During the six
months ended June 30, 1999, 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 0.09% 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. Prior to May 28, 1999, the commitment fee rate was
0.05%.
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, 1999 was
$381,030,901 and $418,317,279, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of June 30, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $ 2,788,585
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (8,632,950)
- ---------------------------------------------------------
Net unrealized appreciation (depreciation)
of investment securities $(5,844,365)
=========================================================
</TABLE>
Investments have the same cost for tax and financial statement purposes.
NOTE 7-SHARE INFORMATION
Changes in shares outstanding during the six months ended June 30, 1999 and the
year ended December 31, 1998 were as follows:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Sold:
Class A 32,440,910 $ 302,506,624 29,655,462 $ 283,586,927
- ---------------------------------------------------------------------------------
Class B 12,928,409 120,872,829 27,535,042 264,070,374
- ---------------------------------------------------------------------------------
Class C 3,003,073 28,002,319 6,742,689 63,813,508
- ---------------------------------------------------------------------------------
Issued as
reinvestment of
dividends:
Class A 732,107 6,798,343 1,069,069 10,191,327
- ---------------------------------------------------------------------------------
Class B 542,235 5,047,650 568,105 5,430,298
- ---------------------------------------------------------------------------------
Class C 102,473 950,283 143,118 1,253,716
- ---------------------------------------------------------------------------------
Reacquired:
Class A (31,752,175) (295,831,369) (22,783,533) (217,508,626)
- ---------------------------------------------------------------------------------
Class B (11,872,546) (110,819,872) (12,722,862) (121,830,456)
- ---------------------------------------------------------------------------------
Class C (2,397,165) (22,347,623) (3,103,831) (29,535,779)
- ---------------------------------------------------------------------------------
3,727,321 $ 35,179,184 27,103,259 $ 259,471,289
=================================================================================
</TABLE>
11
<PAGE> 14
NOTE 8-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A and a share of
Class B outstanding during the six months ended June 30, 1999 and each of the
years in the five-year period ended December 31, 1998 and for a share of Class C
outstanding during the six months ended June 30, 1999, the year ended December
31, 1998 and the period August 4, 1997 (date sales commenced) through December
31, 1997.
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------------------
DECEMBER 31,
JUNE 30, ---------------------------------------------------------
1999 1998 1997 1996 1995 1994
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.58 $ 9.46 $ 9.28 $ 9.70 $ 8.99 $ 10.05
- --------------------------------------------------------- -------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.31 0.62 0.63 0.63 0.69 0.68
- --------------------------------------------------------- -------- -------- -------- -------- -------- --------
Net gains (losses) on securities (both realized and
unrealized) (0.54) 0.13 0.18 (0.42) 0.73 (1.02)
- --------------------------------------------------------- -------- -------- -------- -------- -------- --------
Total from investment operations (0.23) 0.75 0.81 0.21 1.42 (0.34)
- --------------------------------------------------------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.32) (0.63) (0.61) (0.59) (0.67) (0.58)
- --------------------------------------------------------- -------- -------- -------- -------- -------- --------
Distributions from net realized gains -- -- -- -- -- (0.04)
- --------------------------------------------------------- -------- -------- -------- -------- -------- --------
Return of capital -- -- (0.02) (0.04) (0.04) (0.10)
- --------------------------------------------------------- -------- -------- -------- -------- -------- --------
Total distributions (0.32) (0.63) (0.63) (0.63) (0.71) (0.72)
- --------------------------------------------------------- -------- -------- -------- -------- -------- --------
Net asset value, end of period $ 9.03 $ 9.58 $ 9.46 $ 9.28 $ 9.70 $ 8.99
========================================================= ======== ======== ======== ======== ======== ========
Total return(a) (2.50)% 8.17% 9.07% 2.35% 16.28% (3.44)%
========================================================= ======== ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $244,555 $245,613 $167,427 $174,344 $176,318 $158,341
========================================================= ======== ======== ======== ======== ======== ========
Ratio of expenses to average net assets (exclusive of
interest expense) 0.93%(b) 0.96% 1.00% 1.00% 1.08% 1.04%(c)
========================================================= ======== ======== ======== ======== ======== ========
Ratio of net investment income to average net assets 6.80%(b) 6.43% 6.77% 6.76% 7.36% 7.34%(d)
========================================================= ======== ======== ======== ======== ======== ========
Portfolio turnover rate 79% 147% 99% 134% 140% 109%
========================================================= ======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<S> <C>
(a) Does not deduct sales charges and is not annualized for
periods less than one year.
(b) Ratios are annualized and based on average net assets of
$249,624,732.
(c) After fee waivers and/or expense reimbursements. Ratio of
expenses to average net assets prior to fee waivers and/or
expense reimbursements was 1.05%.
(d) After fee waivers and/or expense reimbursements. Ratio of
net investment income to average net assets prior to fee
waivers and/or expense reimbursements was 7.32%.
</TABLE>
<TABLE>
<CAPTION>
CLASS B CLASS C
--------------------------------------------------------------- ------------------------------
DECEMBER 31, DECEMBER 31,
JUNE 30, --------------------------------------------------- JUNE 30, ------------------
1999 1998 1997 1996 1995 1994 1999 1998 1997
-------- -------- ------- ------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 9.59 $ 9.46 $ 9.28 $ 9.69 $ 8.99 $ 10.04 $ 9.56 $ 9.44 $ 9.33
- ----------------------------- -------- -------- ------- ------- ------- ------- ------- ------- -------
Income from investment
operations:
Net investment income 0.28 0.55 0.56 0.55 0.63 0.61 0.27 0.56 0.24
- ----------------------------- -------- -------- ------- ------- ------- ------- ------- ------- -------
Net gains (losses) on
securities (both realized
and unrealized) (0.54) 0.13 0.17 (0.41) 0.70 (1.02) (0.53) 0.11 0.10
- ----------------------------- -------- -------- ------- ------- ------- ------- ------- ------- -------
Total from investment
operations (0.26) 0.68 0.73 0.14 1.33 (0.41) (0.26) 0.67 0.34
- ----------------------------- -------- -------- ------- ------- ------- ------- ------- ------- -------
Less distributions:
Dividends from net
investment income (0.28) (0.55) (0.53) (0.51) (0.59) (0.50) (0.28) (0.55) (0.22)
- ----------------------------- -------- -------- ------- ------- ------- ------- ------- ------- -------
Distributions from net
realized gains -- -- -- -- -- (0.04) -- -- --
- ----------------------------- -------- -------- ------- ------- ------- ------- ------- ------- -------
Return of capital -- -- (0.02) (0.04) (0.04) (0.10) -- -- (0.01)
- ----------------------------- -------- -------- ------- ------- ------- ------- ------- ------- -------
Total distributions (0.28) (0.55) (0.55) (0.55) (0.63) (0.64) (0.28) (0.55) (0.23)
- ----------------------------- -------- -------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of
period $ 9.05 $ 9.59 $ 9.46 $ 9.28 $ 9.69 $ 8.99 $ 9.02 $ 9.56 $ 9.44
============================= ======== ======== ======= ======= ======= ======= ======= ======= =======
Total return(a) (2.79)% 7.40% 8.16% 1.61% 15.22% (4.13)% (2.80)% 7.31% 3.64%
============================= ======== ======== ======= ======= ======= ======= ======= ======= =======
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $339,032 $237,919 $89,265 $79,443 $61,300 $23,415 $42,280 $38,026 $ 1,851
============================= ======== ======== ======= ======= ======= ======= ======= ======= =======
Ratio of expenses to average
net assets (exclusive of
interest expense) 1.69%(b) 1.72% 1.76% 1.76% 1.86% 1.82%(c) 1.69%(b) 1.72% 1.76%(d)
============================= ======== ======== ======= ======= ======= ======= ======= ======= =======
Ratio of net investment
income to average net
assets 6.04%(b) 5.68% 6.01% 6.00% 6.58% 6.56%(e) 6.04%(b) 5.68% 6.01%(d)
============================= ======== ======== ======= ======= ======= ======= ======= ======= =======
Portfolio turnover rate 79% 147% 99% 134% 140% 109% 79% 147% 99%
============================= ======== ======== ======= ======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<S> <C>
(a) Does not deduct contingent deferred sales charges and is not
annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of
$241,145,150 and $40,166,421 for Class B and Class C,
respectively.
(c) After fee waivers and/or expense reimbursements. Ratio of
expenses to average net assets prior to fee waivers and/or
expense reimbursements was 1.87%.
(d) Annualized.
(e) After fee waivers and/or expense reimbursements. Ratio of
net investment income to average net assets prior to fee
waivers and/or expense reimbursements was 6.50%.
</TABLE>
12
<PAGE> 15
<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; Carol F. Relihan A I M Advisors, Inc.
Formerly Director, President, and Senior Vice President and Secretary 11 Greenway Plaza
Chief Executive Officer Suite 100
COMSAT Corporation Gary T. Crum Houston, TX 77046
Senior Vice President
Owen Daly II TRANSFER AGENT
Director Dana R. Sutton
Cortland Trust Inc. Vice President and Treasurer A I M Fund Services, Inc.
P.O. Box 4739
Edward K. Dunn Jr. Robert G. Alley Houston, TX 77210-4739
Chairman, Mercantile Mortgage Corp.; Vice President
Formerly Vice Chairman and President, CUSTODIAN
Mercantile-Safe Deposit & Trust Co.; and Stuart W. Coco
President, Mercantile Bankshares Vice President State Street Bank and Trust Company
225 Franklin Street
Jack Fields Melville B. Cox Boston, MA 02110
Chief Executive Officer Vice President
Texana Global, Inc.; COUNSEL TO THE FUND
Formerly Member Karen Dunn Kelley
of the U.S. House of Representatives Vice President Ballard Spahr
Andrews & Ingersoll, LLP
Carl Frischling Edgar M. Larsen 1735 Market Street
Partner Vice President Philadelphia, PA 19103
Kramer, Levin, Naftalis & Frankel LLP
Mary J. Benson COUNSEL TO THE TRUSTEES
Robert H. Graham Assistant Vice President and
President and Chief Executive Officer Assistant Treasurer Kramer, Levin, Naftalis & Frankel LLP
A I M Management Group Inc. 919 Third Avenue
Sheri Morris New York, NY 10022
Prema Mathai-Davis Assistant Vice President and
Chief Executive Officer, YWCA of the U.S.A., Assistant Treasurer DISTRIBUTOR
Commissioner, New York City Dept. for
the Aging; and member of the Board of Directors Renee A. Friedli A I M Distributors, Inc.
Metropolitan Transportation Authority of Assistant Secretary 11 Greenway Plaza
New York State Suite 100
P. Michelle Grace Houston, TX 77046
Lewis F. Pennock Assistant Secretary
Attorney
Jeffrey H. Kupor
Louis S. Sklar Assistant Secretary
Executive Vice President
Hines Interests Nancy L. Martin
Limited Partnership Assistant Secretary
Ofelia M. Mayo
Assistant Secretary
Lisa A. Moss
Assistant Secretary
Kathleen J. Pflueger
Assistant Secretary
Samuel D. Sirko
Assistant Secretary
Stephen I. Winer
Assistant Secretary
</TABLE>
<PAGE> 16
THE AIM FAMILY OF FUNDS--Registered Trademark--
<TABLE>
<S> <C> <C>
GROWTH FUNDS MONEY MARKET FUNDS A I M Management Group Inc. has
AIM Aggressive Growth Fund(1) AIM Money Market Fund provided leadership in the mutual-fund
AIM Blue Chip Fund AIM Tax-Exempt Cash Fund industry since 1976 and managed
AIM Capital Development Fund approximately $121 billion in assets
AIM Constellation Fund INTERNATIONAL GROWTH FUNDS for more than 6.3 million
AIM Dent Demographic Trends Fund AIM Advisor International Value Fund shareholders, including individual
AIM Large Cap Growth Fund AIM Asian Growth Fund investors, corporate clients and
AIM Mid Cap Equity Fund(A) AIM Developing Markets Fund financial institutions, as of June 30,
AIM Select Growth Fund AIM Europe Growth Fund 1999.
AIM Small Cap Growth Fund(B) AIM European Development Fund The AIM Family of Funds--Registered
AIM Small Cap Opportunities Fund AIM International Equity Fund Trademark-- is distributed nationwide,
AIM Value Fund AIM Japan Growth Fund and AIM today is the 10th-largest
AIM Weingarten Fund AIM Latin American Growth Fund mutual-fund complex in the United
AIM New Pacific Growth Fund States in assets under management,
GROWTH & INCOME FUNDS according to Strategic Insight, an
AIM Advisor Flex Fund GLOBAL GROWTH FUNDS independent mutual-fund monitor.
AIM Advisor Large Cap Value Fund AIM Global Aggressive Growth Fund
AIM Advisor Real Estate Fund AIM Global Growth Fund
AIM Balanced Fund
AIM Basic Value Fund(C) GLOBAL GROWTH & INCOME FUNDS
AIM Charter Fund AIM Global Growth & Income Fund
AIM Global Utilities Fund
INCOME FUNDS
AIM Floating Rate Fund GLOBAL INCOME FUNDS
AIM High Yield Fund AIM Emerging Markets Debt Fund(D)
AIM High Yield Fund II AIM Global Government Income Fund
AIM Income Fund AIM Global Income Fund
AIM Intermediate Government Fund AIM Strategic Income Fund
AIM Limited Maturity Treasury Fund
THEME FUNDS
TAX-FREE INCOME FUNDS AIM Global Consumer Products and Services Fund
AIM High Income Municipal Fund AIM Global Financial Services Fund
AIM Municipal Bond Fund AIM Global Health Care Fund
AIM Tax-Exempt Bond Fund of Connecticut AIM Global Infrastructure Fund
AIM Tax-Free Intermediate Fund AIM Global Resources Fund
AIM Global Telecommunications and Technology Fund(E)
AIM Global Trends Fund(F)
</TABLE>
(1) AIM Aggressive Growth Fund reopened to new investors November 16, 1998. (A)
On September 8, 1998, AIM Mid Cap Growth Fund was renamed AIM Mid Cap Equity
Fund. (B) On September 8, 1998, AIM Small Cap Equity Fund was renamed AIM Small
Cap Growth Fund. (C) On September 8, 1998, AIM America Value Fund was renamed
AIM Basic Value Fund. (D) On September 8, 1998, AIM Global High Income Fund was
renamed AIM Emerging Markets Debt Fund. (E) On June 1, 1999, AIM Global
Telecommunications Fund was renamed AIM Global Telecommunications and Technology
Fund. (F) On September 8, 1998, AIM New Dimension Fund was renamed AIM Global
Trends 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.
[AIM LOGO APPEARS HERE]
INVEST WITH DISCIPLINE--Registered Trademark--
