<PAGE> 1
ANNUAL REPORT / DECEMBER 31 1999
AIM INTERMEDIATE GOVERNMENT FUND
[COVER IMAGE]
[AIM LOGO APPEARS HERE]
<PAGE> 2
[COVER IMAGE]
-------------------------------------
FOURTH OF JULY, 1916
BY FREDERICK CHILDE HASSAM (1839-1935, AMERICAN)
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, BEFORE 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.
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o AIM Intermediate Government Fund's performance figures are historical, and
they reflect changes in net asset value and the reinvestment of
distributions.
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 different sales-charge structure and expenses.
o The fund's 30-day yield is calculated using a formula defined by the SEC.
The formula is based on the port-folio's potential earnings from dividends,
interest, yield-to-maturity or yield-to-call of its holdings, net of all
expenses and annualized.
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 During the fiscal year ended 12/31/99, the fund paid distributions of $0.60
per Class A share, $0.53 per Class B share and $0.53 per Class C share.
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.
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.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o The unmanaged Lehman Intermediate Government Bond Index, which is generally
considered representative of intermediate U.S. Treasury and U.S. government
agency securities, is compiled by Lehman Brothers, a well-known global
investment bank.
o An investment cannot be made in an index. Unless otherwise indicated, index
results include reinvested dividends and do not reflect sales charges.
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 persons who
have received a current prospectus of the fund.
AIM INTERMEDIATE GOVERNMENT FUND
<PAGE> 3
ANNUAL REPORT / CHAIRMAN'S LETTER
Dear Fellow Shareholder:
The fiscal year discussed in this report has reconfirmed our
[PHOTO OF faith in two long-established principles of investing:
Charles T. portfolio diversification and long-term thinking. We could
Bauer, title this report "What a Difference a Year Makes."
Chairman of An investor surveying conditions when the fiscal year
the Board of opened on January 1, 1999, would have seen a market
THE FUND dominated by large-capitalization stocks and high-quality
APPEARS HERE] bonds, especially U.S. Treasuries. During 1998, two well-
known indexes of large-capitalization U.S. companies, the
S&P 500 and the Dow Jones Industrial Average, were up 28.60%
and 18.15%, respectively. By contrast, smaller-company
stocks in the Russell 2000 had lost 2.55%. Overseas, many
markets were languishing, especially in Asia, where so many
financial difficulties had originated in 1997.
In bond markets as well, name-brand quality was the
place to be. The Lehman Government/Corporate Bond Index,
which follows sovereign issues and investment-grade debt,
was up 9.47%, while the Lehman High Yield Index, which
tracks riskier "junk bonds," had risen only 1.60%.
It would be easy for an investor to conclude that blue-chip issues, whether
equity or fixed-income, were the place to be, that it was time to divest himself
of everything else and put all his eggs in the blue-chip basket. The investor,
of course, would be wrong.
MARKETS TURN
While large-capitalization stocks continued to do very well, during 1999 markets
broadened dramatically with many investment sectors performing a complete
turnaround. For example, the small-cap stocks in the Russell 2000 were up 21.26%
for calendar year 1999, and many Asian markets, particularly Japan, had staged a
comeback.
The same holds true of bonds. The higher-quality Lehman index was down 2.15%
during 1999 while the Lehman High Yield index was up 2.39%.
The point, at the risk of sounding repetitive to those of you who have
invested with us for a long time, is that this is why diversification is a
fundamental investing principle. Market sectors and asset classes go in and out
of favor, but over the long run--and the long run is several years--the markets'
overall trend has been upward. Selecting an asset class or a market sector on
the basis of a short-term snapshot of conditions is ~usually unwise, as is
concentrating your portfolio in one asset class. Staying fully invested in a
diversified ~portfolio remains a compelling strategy and one of your best
prospects for long-term gain. We also continue to remind you that the past few
years have seen extraordinary gains in some markets, and there is no ~assurance
that this trend will continue.
LOOKING AHEAD
As we look about at the close of this fiscal year, we are encouraged by multiple
signs of economic health in Europe and Asia, not to mention the prolonged U.S.
economic expansion. However, we are aware of how easily an investor could have
been misled by conditions just 12 months ago. For our shareholders, we therefore
reiterate our commitment to investing through a financial advisor. In addition
to helping you select investments appropriate to your time horizon and risk
tolerance, a financial advisor can keep you informed about how changing market
conditions affect you and your portfolio--and help ensure that when you do alter
your investments, there's a logical reason for doing so. AIM believes every
investor should be guided by a financial professional.
FUND MANAGERS COMMENT
In the pages that follow, your fund's portfolio managers discuss how they
managed your fund during the year ended December 31, how the markets behaved and
what they foresee for the near future. We trust you will find their discussion
informative. If you have any questions or comments, we invite you to contact us,
either at our Web site, aimfunds.com, or through our Client Services department
at 800-959-4246. Information about your account is also available through our
automated AIM Investor Line, 800-246-5463.
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.
-------------------------------------
STAYING FULLY
INVESTED IN A DIVERSIFIED
PORTFOLIO REMAINS
A COMPELLING STRATEGY
AND ONE OF YOUR
BEST PROSPECTS FOR
LONG-TERM GAIN.
-------------------------------------
AIM INTERMEDIATE GOVERNMENT FUND
<PAGE> 4
ANNUAL REPORT / MANAGERS' OVERVIEW
FUND CONTINUES TO PROVIDE INCOME IN
UNFAVORABLE BOND MARKET
IT WAS A DIFFICULT YEAR FOR THE FIXED-INCOME MARKET. HOW DID THE FUND PERFORM
DURING 1999?
Despite unfavorable market conditions, AIM Intermediate Government Fund
continued to provide a high level of current income in 1999. As of December 31,
1999, the fund's 30-day distribution rate at net asset value was 6.55% for Class
A shares, 5.71% for Class B shares and 5.73% for Class C shares. The fund's
30-day SEC yield at maximum offering price was 6.02% for Class A shares and
5.53% for Class B and Class C shares.
The fiscal year ended December 31, 1999, witnessed strong economic growth
and resulting concerns about inflation, which are reflected in the fund's total
annual returns. The fund's total annual return at net asset value was -1.87% for
Class A shares, -2.56% for Class B shares and -2.57% for Class C shares. The
benchmark Lehman Intermediate Government Bond Index returned 0.49% for the same
period.
WHAT MAJOR FACTORS INFLUENCED THE FIXED-INCOME ENVIRONMENT IN 1999?
Major factors influencing the economy in general, and the fixed-income market in
particular, were the strength of the U.S. economy, low unemployment and
inflation concerns. Let's look at each more closely.
The global economy grew in the third and fourth quarters of 1998, despite
Russia's debt default that August, and continued growing through 1999. With
unemployment at its lowest since 1975, wages rose, consumers had more money to
spend and consumer prices rose. The red-hot economy sparked concerns that
inflation--which undermines fixed-income returns--would rise. Bond prices
tumbled and yields, which move in the opposite direction of price, climbed
during the year. The yield of the benchmark 30-year Treasury bond increased to
6.48% by the end of December, up from 5.09% at the beginning of the year. These
factors combined to create the worst bond market since 1994 and the
second-worst since 1973.
HOW DID RISING INTEREST RATES AFFECT THE FIXED-INCOME MARKET?
In an effort to increase liquidity and ease investor anxiety during 1998's
overseas economic crisis, the Federal Reserve Board (the Fed) lowered the
federal funds rate three times. When the global crisis eased in early 1999, the
Fed began to refocus on the domestic issues mentioned above: the strength of the
U.S. economy, low unemployment and inflationary pressures. To cool the economy,
the Fed raised interest rates three times last year, by 25 basis points (0.25%)
each time. The Fed's tightening policy had a negative impact on the bond market.
It seems increasingly likely that the Fed will raise the federal funds rate
again at its next meeting in February 2000. (The Fed did raise the federal funds
rate by 25 basis points at that meeting.)
HOW DID THE FUND RESPOND TO RISING INTEREST RATES?
Rising interest rates lowered the value of the bonds in the fund's portfolio.
However, the rising-interest-rate environment also afforded us opportunities to
buy bonds at lower prices and higher yields.
The holdings that performed best were those whose prices were less volatile
in an environment of rising interest rates, that is, short-maturity Treasury and
government agency notes. As the chart on the next page illustrates, the average
bond maturity in the portfolio was reduced during 1999 from 7.24 years to 6.36
years. The average duration of the fund's portfolio was reduced from 4.14 years
to 3.78 years. However, the fund's average duration was longer than the
3.12-year duration of the Lehman Intermediate Government Bond Index. The fund's
longer duration partly explains its lower performance against that index.
(Longer-duration bonds are more interest-rate-sensitive than shorter-duration
bonds.) The fund also buys bonds outside the limited universe of the Lehman
Intermediate Government Bond Index.
In addition, the percentage of mortgage-backed securities in the fund's
portfolio was decreased. The fund generally relies on its mortgage-backed
securities, whose prices have historically been less volatile, to provide
relative fund-price stability. While the prices of most debt securities decrease
with rising interest rates, those of mortgage-backed securities generally do not
fall 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 year, mortgage-backed securities
-------------------------------------
THE FUND DELIVERED 114% OF THE YIELD
OF A 30-YEAR TREASURY BOND WITH
82% OF THE PRICE VOLATILITY OF A
FIVE-YEAR TREASURY NOTE.
-------------------------------------
-------------------------------------
THE FUND'S PRIMARY GOAL IS TO PRODUCE
COMPETITIVE RETURNS WHILE MAINTAINING
RELATIVE SHARE-PRICE STABILITY.
-------------------------------------
See important fund and index disclosures inside front cover.
AIM INTERMEDIATE GOVERNMENT FUND
2
<PAGE> 5
ANNUAL REPORT / MANAGERS' OVERVIEW
were at times as volatile as Treasuries. Therefore, the percentage of
mortgage-backed securities was reduced from 62.8% at the beginning of the year
to 53.0% at year's end. The sales proceeds were invested in short-maturity
Treasury and government-agency notes.
WHAT IS THE FUND'S STRATEGY AND DO YOU ADJUST IT IN UNCERTAIN BOND MARKETS?
The fund is managed for relative share-price stability, without sacrificing a
competitive level of monthly income. The fund's disciplined strategy remains
the same in all market conditions. We combine cash equivalents, Treasuries,
government agency securities and mortgage-backed securities in an attempt to
provide the yield of a 30-year Treasury bond with the relatively low price
volatility of a five-year Treasury note. To achieve this goal, we may adjust the
relative mix of portfolio holdings periodically, as we did in 1999.
WHAT IS YOUR OUTLOOK FOR THE NEAR TERM?
The key issue currently under debate is whether inflation looms ahead. Despite
an economic expansion that will soon enter a record-breaking ninth year, the
technological revolution is helping maintain a healthy economic balance by
boosting productivity, thereby keeping inflation under control. However,
economic analysts expect the Fed to continue raising the federal funds rate,
perhaps through the first half of 2000, until the U.S. economy shows signs of
slowing.
What does this mean for the bond market? Most analysts anticipate a rebound
in the second half of 2000. In most cases in recent history, the bond market has
bounced back the year following a decline.
Lower bond prices will reduce the value of the bonds currently in AIM
Intermediate Government Fund's portfolio, but the relatively high dividend paid
to shareholders will help offset falling prices. Moreover, lower prices afford
attractive bond purchase and fund investment opportunities. Therefore, we are
optimistic about the fund's performance in 2000.
AIM INTERMEDIATE GOVERNMENT FUND PORTFOLIO COMPOSITION
================================================================================
December 31, 1998 December 31, 1999*
- --------------------------------------------------------------------------------
Agencies 6.7% Agencies 2.1%
Cash Equivalents 8.9% Cash Equivalents 18.7%
Mortgages 62.8% Mortgages 53.0%
Treasuries 21.6% Treasuries 26.3%
================================================================================
================================================================================
Average Coupon 6.58% Average Coupon 6.72%
Average Maturity 7.24 years Average Maturity 6.36 years
Average Duration 4.14 years Average Duration 3.78 years
*Percentages total more than 100% because they were rounded up to the next
decimal.
The fund's portfolio is subject to change, and there is no assurance that the
fund will continue to hold any particular security.
================================================================================
See important fund and index disclosures inside front cover.
AIM INTERMEDIATE GOVERNMENT FUND
[ARTWORK]
3
<PAGE> 6
ANNUAL REPORT / PERFORMANCE HISTORY
YOUR FUND'S LONG-TERM PERFORMANCE
RESULTS OF A $10,000 INVESTMENT
AIM INTERMEDIATE GOVERNMENT FUND VS. BENCHMARK INDEX
4/28/87-12/31/99
In thousands
================================================================================
AIM Lehman
Intermediate Intermediate
Government Government
- --------------------------------------------------------------------------------
12/87 $ 9,524 $10,424
12/88 10,560 11,090
12/89 11,752 12,497
12/90 12,855 13,691
12/91 14,524 15,623
12/92 15,432 16,706
12/93 16,524 18,071
12/94 15,955 17,755
12/95 18,552 20,314
12/96 18,989 21,139
12/97 20,711 22,772
12/98 22,404 24,704
12/99 21,985 24,825
Source: Lipper, Inc.
Past performance cannot guarantee comparable future results.
================================================================================
MARKET VOLATILITY CAN SIGNIFICANTLY IMPACT SHORT-TERM PERFORMANCE. RESULTS OF AN
INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL PERFORMANCE
SHOWN.
ABOUT THIS CHART
The chart above compares the performance of your fund's Class A shares to the
performance of the Lehman Intermediate Government Bond Index. It is intended to
give you a general idea of how your fund compared to the government bond market
for the period 4/28/87-12/31/99. ~(Data for the index are for the period
4/30/87-12/31/99.) It is important to understand the differences between your
fund and this index. An index measures the performance of a hypothetical
portfolio. Unlike your fund, an index is not managed, incurring no sales
charges, expenses or fees. If you could buy all the securities that make up a
market index, you would incur expenses that would lower your investment's
return.
AVERAGE ANNUAL TOTAL RETURNS
As of 12/31/99, including sales charges
================================================================================
CLASS A SHARES
Inception (4/28/87) 6.41%
10 Years 5.95%
5 Years 5.59%
1 Year -6.55%*
*-1.87% excluding sales charge
CLASS B SHARES
Inception (9/7/93) 3.78%
5 Years 5.48%
1 Year -7.16%*
*-2.56% excluding CDSC
CLASS C SHARES
Inception (8/4/97) 3.39%
1 Year -3.49%*
*-2.57% excluding CDSC
================================================================================
Your fund's total return includes sales charges, expenses and management fees.
The performance of the fund's Class B and C shares will differ from that of its
Class A shares due to different sales-charge structures and expenses. For fund
performance calculations and a description of the index cited on this page,
please see the inside front cover.
AIM INTERMEDIATE GOVERNMENT FUND
4
<PAGE> 7
ANNUAL REPORT / FOR CONSIDERATION
EVERY INVESTMENT PORTFOLIO
CAN BENEFIT FROM REGULAR CHECKUPS
[PHOTO]
CONSULTATION CHECKLIST
WHAT TO BRING:
o A list of all your assets, including real estate, life insurance, stocks and
bonds, and mutual funds
o A list of all your expenses, including likely future expenses
o A timetable of your financial goals, including an estimate of when you want
to retire
WHAT TO ASK:
o How can I estimate what my goals will cost?
o How much money do I need to invest, and how often?
o How many different kinds of investments do I need?
o How do I determine my risk tolerance?
o What are the possible risks of the investments you've suggested?
o What effect will these investments have on my taxes? What forms will I need
to file?
o How often do I need to revise my plan?
o How will I know how my investments are doing?
o How can I make changes to my plan?
o What kinds of communication will I get from you?
o Where can I get more information on what we've talked about?
o What do I need to do after this meeting?
Once a year, you and your financial advisor should meet to look ahead, review
investments and take another look at your goals, according to the Forum for
Investor Advice, a nonprofit association that educates investors about the role
and value of professional financial advisors.
Financial advisors can help you with every kind of financial goal, whether
that's saving up for a house, eliminating debt or saving for a comfortable
retirement. An advisor who knows you well and understands your needs can make
all the difference in your financial future. He or she can
o evaluate your total financial situation and help you formulate a
comprehensive financial plan;
o explain different types of investments, as well as their potential risks and
benefits;
o suggest an investment portfolio that can handle changing market conditions;
and
o help you make clear-headed decisions during market volatility.
GETTING THE MOST FROM YOUR PLANNING SESSION
Your advisor needs a complete picture of your financial status to prepare a
workable plan. Come prepared to talk about your financial situation, your goals
and your feelings about risk. And don't be afraid to ask lots of questions. Good
financial advisors take investor education seriously, so take advantage of their
store of knowledge and materials.
The Forum for Investor Advice suggests that you discuss the following with
your financial advisor:
o changes in the financial markets
o changes in your goals and current situation
o retirement plans
o estate planning
o outlook for the markets
Take along our checklist (left) to get you started on the path to good
planning. And don't forget to stay in touch. Maintaining regular contact with
your financial advisor can keep you moving toward your goals, especially when
your life circumstances or financial needs change.
AIM INTERMEDIATE GOVERNMENT FUND
5
<PAGE> 8
SCHEDULE OF INVESTMENTS
December 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
U.S. GOVERNMENT AGENCY
SECURITIES-61.87%
FEDERAL FARM CREDIT BANK-0.96%
Debentures
6.15%, 09/01/00 $ 700,000 $ 700,140
- --------------------------------------------------------------
6.22%, 06/17/08 4,500,000 4,163,625
- --------------------------------------------------------------
4,863,765
- --------------------------------------------------------------
FEDERAL HOME LOAN BANK-1.36%
Debentures
7.31%, 07/06/01 4,000,000 4,047,920
- --------------------------------------------------------------
7.36%, 07/01/04 2,800,000 2,852,332
- --------------------------------------------------------------
6,900,252
- --------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORP.
("FHLMC")-13.45%
Debentures
6.745%, 08/01/01 10,000,000 10,033,900
- --------------------------------------------------------------
6.45%, 04/29/09 10,000,000 9,360,500
- --------------------------------------------------------------
Pass Through Certificates
12.00%, 04/01/00 to 02/01/13 15,475 17,586
- --------------------------------------------------------------
6.50%, 07/01/01 to 01/01/28 6,960,616 6,668,918
- --------------------------------------------------------------
9.00%, 12/01/05 to 04/01/25 3,378,074 3,536,455
- --------------------------------------------------------------
8.00%, 07/01/06 to 10/01/10 270,236 275,839
- --------------------------------------------------------------
8.50%, 07/01/07 to 12/01/26 11,651,571 12,059,727
- --------------------------------------------------------------
10.50%, 09/01/09 to 01/01/21 1,216,474 1,330,883
- --------------------------------------------------------------
7.00%, 11/01/10 to 04/01/11 993,920 987,302
- --------------------------------------------------------------
10.00%, 11/01/11 to 04/01/20 7,508,485 8,109,817
- --------------------------------------------------------------
6.00%, 12/01/13 9,058,069 8,613,680
- --------------------------------------------------------------
9.50%, 11/01/20 to 04/01/25 6,658,156 7,151,681
- --------------------------------------------------------------
68,146,288
- --------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION
("FNMA")-33.10%
Debentures
8.25%, 12/18/00 5,000,000 5,086,400
- --------------------------------------------------------------
7.50%, 02/11/02 9,000,000 9,154,350
- --------------------------------------------------------------
6.80%, 01/10/03 5,000,000 5,003,150
- --------------------------------------------------------------
8.50%, 02/01/05 4,500,000 4,508,865
- --------------------------------------------------------------
5.875%, 02/02/06 8,000,000 7,562,080
- --------------------------------------------------------------
Medium Term Notes
6.33%, 08/11/00 5,000,000 5,006,350
- --------------------------------------------------------------
6.625%, 05/21/01 5,250,000 5,260,763
- --------------------------------------------------------------
6.69%, 08/07/01 3,500,000 3,511,550
- --------------------------------------------------------------
6.40%, 09/27/05 4,610,000 4,497,332
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
Pass Through Certificates
8.50%, 01/01/07 to 11/01/26 $ 54,233,551 $ 55,639,934
- --------------------------------------------------------------
6.00%, 01/01/09 to 04/01/24 21,008,452 19,976,083
- --------------------------------------------------------------
7.50%, 06/01/10 to 03/01/27 14,116,651 14,161,231
- --------------------------------------------------------------
7.00%, 05/01/11 to 10/01/12 6,949,305 6,898,643
- --------------------------------------------------------------
6.50%, 05/01/13 to 11/01/28 7,752,270 7,527,248
- --------------------------------------------------------------
9.50%, 07/01/16 to 08/01/22 1,351,170 1,438,846
- --------------------------------------------------------------
10.00%, 12/20/19 to 12/20/21 6,536,702 7,170,433
- --------------------------------------------------------------
8.00%, 04/01/25 to 07/01/26 5,310,416 5,374,328
- --------------------------------------------------------------
167,777,586
- --------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION ("GNMA")-13.00%
Pass Through Certificates
6.00%, 10/15/08 to 11/15/08 441,623 422,162
- --------------------------------------------------------------
6.50%, 10/15/08 401,290 392,634
- --------------------------------------------------------------
7.00%, 10/15/08 to 07/15/28 15,943,777 15,456,239
- --------------------------------------------------------------
9.00%, 10/15/08 to 04/15/21 1,041,608 1,104,058
- --------------------------------------------------------------
9.50%, 06/15/09 to 03/15/23 3,870,767 4,133,332
- --------------------------------------------------------------
10.00%, 11/15/09 to 07/15/24 8,170,457 8,894,475
- --------------------------------------------------------------
11.00%, 12/15/09 to 12/15/15 75,512 83,282
- --------------------------------------------------------------
13.50%, 07/15/10 to 04/15/15 242,152 283,018
- --------------------------------------------------------------
12.50%, 11/15/10 95,001 109,370
- --------------------------------------------------------------
13.00%, 01/15/11 to 05/15/15 223,307 257,840
- --------------------------------------------------------------
12.00%, 01/15/13 to 07/15/15 379,120 428,437
- --------------------------------------------------------------
10.50%, 07/15/13 to 02/15/16 81,861 89,404
- --------------------------------------------------------------
8.00%, 01/15/22 to 06/15/27 27,571,100 28,011,192
- --------------------------------------------------------------
7.50%, 03/15/26 to 08/15/28 6,248,090 6,196,000
- --------------------------------------------------------------
65,861,443
- --------------------------------------------------------------
Total U.S. Government Agency Securities
(Cost $321,634,272) 313,549,334
- --------------------------------------------------------------
U.S. TREASURY SECURITIES-29.56%
U.S. TREASURY BONDS-7.32%
7.50%, 11/15/16 5,500,000 5,879,225
- --------------------------------------------------------------
7.25%, 08/15/22 1,100,000 1,158,872
- --------------------------------------------------------------
6.125%, 08/15/29(a) 31,500,000 30,038,085
- --------------------------------------------------------------
37,076,182
- --------------------------------------------------------------
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
U.S. TREASURY NOTES-20.77%
6.625%, 07/31/01 $ 25,000,000 $ 25,160,000
- --------------------------------------------------------------
6.375%, 08/15/02 25,000,000 25,038,250
- --------------------------------------------------------------
6.00%, 08/15/04 to 08/15/09 35,000,000 34,226,850
- --------------------------------------------------------------
7.50%, 02/15/05 20,000,000 20,860,600
- --------------------------------------------------------------
105,285,700
- --------------------------------------------------------------
U.S. TREASURY STRIPS-1.47%(B)
6.605%, 05/15/06 8,000,000 5,272,400
- --------------------------------------------------------------
6.775%, 11/15/18 7,750,000 2,152,408
- --------------------------------------------------------------
7,424,808
- --------------------------------------------------------------
Total U.S. Treasury Securities
(Cost $153,089,107) 149,786,690
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MONEY MARKET FUNDS-20.99%
STIT Government & Agency
Portfolio (Cost
$106,386,819)(c) 106,386,819 $106,386,819
- --------------------------------------------------------------
TOTAL INVESTMENTS-112.42%
(Cost $581,110,198) 569,722,843
- --------------------------------------------------------------
LIABILITIES LESS OTHER
ASSETS-(12.42%) (62,923,368)
- --------------------------------------------------------------
NET ASSETS-100.00% $506,799,475
==============================================================
</TABLE>
Abbreviations:
STRIPS - Separately Traded Registered Interest and Principal Security
Notes to Schedule of Investments:
(a) Principal amount has been deposited in escrow with custodian as collateral
for reverse repurchase agreements outstanding at 12/31/99.
(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) The money market fund has the same investment advisor as the Fund.
See Notes to Financial Statements.
7
<PAGE> 10
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments at market value
(cost $581,110,198) $569,722,843
- ---------------------------------------------------------
Receivables for:
Investments sold 75,753,906
- ---------------------------------------------------------
Fund shares sold 1,257,172
- ---------------------------------------------------------
Interest 7,591,996
- ---------------------------------------------------------
Principal paydowns 199,003
- ---------------------------------------------------------
Investment for deferred compensation plan 42,785
- ---------------------------------------------------------
Other assets 51,430
- ---------------------------------------------------------
Total assets 654,619,135
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased (on when issued or
delayed delivery basis) 76,453,125
- ---------------------------------------------------------
Fund shares reacquired 3,009,900
- ---------------------------------------------------------
Dividends 799,791
- ---------------------------------------------------------
Reverse repurchase agreements (note 5) 66,632,500
- ---------------------------------------------------------
Interest expense (note 5) 13,926
- ---------------------------------------------------------
Deferred compensation plan 42,785
- ---------------------------------------------------------
Dollar roll fees 79,814
- ---------------------------------------------------------
Accrued advisory fees 191,893
- ---------------------------------------------------------
Accrued administrative services fees 10,272
- ---------------------------------------------------------
Accrued distribution fees 493,144
- ---------------------------------------------------------
Accrued transfer agent fees 36,662
- ---------------------------------------------------------
Accrued operating expenses 55,848
- ---------------------------------------------------------
Total liabilities 147,819,660
- ---------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES
OUTSTANDING $506,799,475
=========================================================
</TABLE>
<TABLE>
<S> <C>
NET ASSETS:
Class A $238,956,779
=========================================================
Class B $228,831,672
=========================================================
Class C $ 39,011,024
=========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 27,152,824
=========================================================
Class B 25,957,333
=========================================================
Class C 4,438,768
=========================================================
Class A:
Net asset value and redemption price per
share $ 8.80
- ---------------------------------------------------------
Offering price per share:
(Net asset value of $8.80
divided by 95.25%) $ 9.24
=========================================================
Class B:
Net asset value and offering price per
share $ 8.82
=========================================================
Class C:
Net asset value and offering price per
share $ 8.79
=========================================================
</TABLE>
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 39,664,653
- ---------------------------------------------------------
Dividends 1,139,420
- ---------------------------------------------------------
Total investment income 40,804,073
- ---------------------------------------------------------
EXPENSES:
Advisory fees 2,310,621
- ---------------------------------------------------------
Administrative services fees 97,900
- ---------------------------------------------------------
Custodian fees 68,252
- ---------------------------------------------------------
Distribution fees - Class A 622,422
- ---------------------------------------------------------
Distribution fees - Class B 2,414,889
- ---------------------------------------------------------
Distribution fees - Class C 411,484
- ---------------------------------------------------------
Interest (Note 5) 984,822
- ---------------------------------------------------------
Transfer agent fees - Class A 318,908
- ---------------------------------------------------------
Transfer agent fees - Class B 341,419
- ---------------------------------------------------------
Transfer agent fees - Class C 59,001
- ---------------------------------------------------------
Trustees' fees 10,971
- ---------------------------------------------------------
Other 255,687
- ---------------------------------------------------------
Total expenses 7,896,376
- ---------------------------------------------------------
Less: Expenses paid indirectly (6,776)
- ---------------------------------------------------------
Net expenses 7,889,600
- ---------------------------------------------------------
Net investment income 32,914,473
- ---------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES:
Net realized gain (loss) from investment
securities (27,037,801)
- ---------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of investment securities (17,820,871)
- ---------------------------------------------------------
Net gain (loss) on investment securities (44,858,672)
- ---------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations $(11,944,199)
=========================================================
</TABLE>
8
<PAGE> 11
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 32,914,473 $ 21,481,081
- --------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities (27,037,801) 6,570,449
- --------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities (17,820,871) (2,570,929)
- --------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations (11,944,199) 25,480,601
- --------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Class A (16,289,770) (12,395,672)
- --------------------------------------------------------------------------------------------
Class B (13,961,515) (7,690,274)
- --------------------------------------------------------------------------------------------
Class C (2,201,216) (1,395,135)
- --------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS IN EXCESS OF NET INVESTMENT INCOME:
Class A -- (247,750)
- --------------------------------------------------------------------------------------------
Class B -- (176,643)
- --------------------------------------------------------------------------------------------
Class C -- (32,108)
- --------------------------------------------------------------------------------------------
RETURN OF CAPITAL:
Class A (133,023) --
- --------------------------------------------------------------------------------------------
Class B (129,047) --
- --------------------------------------------------------------------------------------------
Class C (21,986) --
- --------------------------------------------------------------------------------------------
SHARE TRANSACTIONS-NET:
Class A 14,339,321 76,269,628
- --------------------------------------------------------------------------------------------
Class B 11,152,000 147,670,216
- --------------------------------------------------------------------------------------------
Class C 4,431,396 35,531,445
- --------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (14,758,039) 263,014,308
- --------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 521,557,514 258,543,206
- --------------------------------------------------------------------------------------------
End of period $506,799,475 $521,557,514
============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $553,973,791 $524,340,223
- --------------------------------------------------------------------------------------------
Undistributed net investment income (loss) (52,483) (42,488)
- --------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities (35,734,478) (9,173,737)
- --------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities (11,387,355) 6,433,516
- --------------------------------------------------------------------------------------------
$506,799,475 $521,557,514
============================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
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 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 shares 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.
Information presented in these financial statements pertains only to the Fund.
The Fund's investment objective is to achieve a high level of current income
consistent with reasonable concern for safety of principal by investing
primarily in debt securities issued, guaranteed or otherwise backed by the U.S.
Government.
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
9
<PAGE> 12
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. The following is a summary of
the significant accounting policies followed by the Fund in the preparation of
its financial statements.
A. Security Valuations -- A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the closing bid price on that day. Each
security reported on the NASDAQ National Market System is valued at the last
sales price on the valuation date or absent a last sales price, at the
closing bid price. Debt obligations (including convertible bonds) are valued
on the basis of prices provided by an independent pricing service. Prices
provided by the pricing service may be determined without exclusive reliance
on quoted prices, and may reflect appropriate factors such as yield, type of
issue, coupon rate and maturity date. Securities for which market prices are
not provided by any of the above methods are valued based upon quotes
furnished by independent sources and are valued at the last bid price in the
case of equity securities and in the case of debt obligations, the mean
between the last bid and asked prices. Securities for which market
quotations are not readily available or are questionable are valued at fair
value as determined in good faith by or under the supervision of the Trust's
officers in a manner specifically authorized by the Board of Trustees.
Short-term obligations having 60 days or less to maturity are valued at
amortized cost which approximates market value. For purposes of determining
net asset value per share, futures and option contracts generally will be
valued 15 minutes after the close of trading of the New York Stock Exchange
("NYSE").
B. Securities Transactions and Investment Income -- 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
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. Dividend income
is recorded on the ex-dividend date. On December 31, 1999, undistributed net
investment income was decreased by $187,911, undistributed net realized
gains increased by $477,060 and paid-in capital decreased by $289,149 as a
result of differing book/tax treatment of paydowns and other
reclassifications. Net assets of the Fund were unaffected by the
reclassifications.
C. Distributions -- 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 generally paid
annually and recorded on ex-dividend date. The Fund may elect to use a
portion of the proceeds of fund share redemptions as distributions for
federal income tax purposes.
D. Federal Income Taxes -- The Fund intends to comply with the requirements
of the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements. The Fund has a capital loss
carryforward of $33,920,463 as of December 31, 1999 which may be carried
forward to offset future taxable gains, if any, which expires in varying
increments, if not previously utilized, in the year 2007.
E. Expenses -- Distribution expenses 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 an advisory fee to AIM at an annual rate of 0.50% on
the first $200 million of the Fund's average daily net assets, plus 0.40% on the
next $300 million of the Fund's average daily net assets, plus 0.35% on the next
$500 million of the Fund's average daily net assets, plus 0.30% on 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. For the year ended December 31, 1999, AIM was
paid $97,900 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. For the year ended December 31, 1999, AFS was
paid $398,305 for such services.
10
<PAGE> 13
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B and Class C shares of the Fund. The Trust has adopted plans
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A
shares, Class B shares and Class C shares (collectively, the "Plans"). The Fund,
pursuant to the Plans, pays AIM Distributors compensation at the annual rate of
0.25% of the Fund's average daily net assets of Class A shares and 1.00% of the
average daily net assets of Class B and C 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. For the year ended December 31,
1999, the Class A, Class B and Class C shares paid AIM Distributors $622,422,
$2,414,889 and $411,484, respectively, as compensation under the Plans. AIM
Distributors received commissions of $297,352 from sales of the Class A shares
of the Fund during the year ended December 31, 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 year ended December 31, 1999,
AIM Distributors received $171,470 in contingent deferred sales charges imposed
on redemptions of Fund shares. Certain officers and trustees of the Trust are
officers and directors of AIM, AFS and AIM Distributors. During the year ended
December 31, 1999, the Fund paid legal fees of $4,381 for services rendered by
Kramer, Levin, Naftalis & Frankel LLP as counsel to the Board of Trustees. A
member of that firm is a trustee of the Trust.
NOTE 3-INDIRECT EXPENSES
During the year ended December 31, 1999, the Fund received reductions in
transfer agency fees from AFS (an affiliate of AIM) and reductions in custodian
fees of $6,004 and $772, respectively, under expense offset arrangements. The
effect of the above arrangements resulted in a reduction of the Fund's total
expenses of $6,776 during the year ended December 31, 1999.
NOTE 4-TRUSTEES' FEES
Trustees' fees represent remuneration paid to trustees who are not an
"interested person" of AIM. The Trust invests 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 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 year ended December 31,
1999 was $68,903,125, while borrowings averaged $29,142,158 per day with a
weighted average interest rate of 3.38%.
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. During the year
ended December 31, 1999, the Fund did not borrow under the line of credit
agreement. The funds which are party to the line of credit are charged a
commitment fee of 0.09% on the unused balance of the committed line. Prior to
May 28, 1999, the commitment fee rate was 0.05%. The commitment fee is allocated
among the funds based on their respective average net assets for the period.
11
<PAGE> 14
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended December 31, 1999 was
$739,215,875 and $689,864,111, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, for tax purposes, as of December 31, 1999 was as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $ 1,097,791
- --------------------------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (12,634,599)
- --------------------------------------------------------------------------
Net unrealized appreciation (depreciation)
of investment securities $(11,536,808)
==========================================================================
</TABLE>
Cost of investments for tax purposes is $581,259,651.
NOTE 7-SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 1999 and 1998
were as follows:
<TABLE>
<CAPTION>
1999 1998
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Sold:
Class A 43,994,368 $ 405,966,986 29,655,462 $ 283,586,927
- -----------------------------------------------------------------------------------------------------------------------
Class B 24,981,699 228,902,826 27,535,042 264,070,374
- -----------------------------------------------------------------------------------------------------------------------
Class C 4,401,944 40,514,763 6,742,689 63,813,508
- -----------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 1,422,251 12,951,091 1,069,069 10,191,327
- -----------------------------------------------------------------------------------------------------------------------
Class B 1,015,685 9,277,928 568,105 5,430,298
- -----------------------------------------------------------------------------------------------------------------------
Class C 193,191 1,758,352 143,118 1,253,716
- -----------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (43,911,017) (404,578,756) (22,783,533) (217,508,626)
- -----------------------------------------------------------------------------------------------------------------------
Class B (24,856,772) (227,028,754) (12,722,862) (121,830,456)
- -----------------------------------------------------------------------------------------------------------------------
Class C (4,134,353) (37,841,719) (3,103,831) (29,535,779)
- -----------------------------------------------------------------------------------------------------------------------
3,106,996 $ 29,922,717 27,103,259 $ 259,471,289
=======================================================================================================================
</TABLE>
12
<PAGE> 15
NOTE 8-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A and a share of
Class B outstanding during each of the years in the five-year period ended
December 31, 1999 and for a share of Class C outstanding during each of the
years in the two-year period ended December 31, 1999 and the period August 4,
1997 (date sales commenced) through December 31, 1997.
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.58 $ 9.46 $ 9.28 $ 9.70 $ 8.99
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.60 0.62 0.63 0.63 0.69
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Net gains (losses) on securities (both realized and
unrealized) (0.78) 0.13 0.18 (0.42) 0.73
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Total from investment operations (0.18) 0.75 0.81 0.21 1.42
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.60) (0.63) (0.61) (0.59) (0.67)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Return of capital -- -- (0.02) (0.04) (0.04)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Total distributions (0.60) (0.63) (0.63) (0.63) (0.71)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Net asset value, end of period $ 8.80 $ 9.58 $ 9.46 $ 9.28 $ 9.70
============================================================ ======== ======== ======== ======== ========
Total return(a) (1.87)% 8.17% 9.07% 2.35% 16.28%
============================================================ ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $238,957 $245,613 $167,427 $174,344 $176,318
============================================================ ======== ======== ======== ======== ========
Ratio of expenses to average net assets including interest
expense 1.08%(b) 1.20% 1.11% 1.08% 1.19%
============================================================ ======== ======== ======== ======== ========
Ratio of expenses to average net assets exclusive of
interest expense 0.89%(b) 0.96% 1.00% 1.00% 1.08%
============================================================ ======== ======== ======== ======== ========
Ratio of interest expense to average net assets 0.19%(b) 0.24% 0.11% 0.08% 0.11%
============================================================ ======== ======== ======== ======== ========
Ratio of net investment income to average net assets 6.60%(b) 6.43% 6.77% 6.76% 7.36%
============================================================ ======== ======== ======== ======== ========
Portfolio turnover rate 141% 147% 99% 134% 140%
============================================================ ======== ======== ======== ======== ========
</TABLE>
(a) Does not deduct sales charges.
(b) Ratios are based on average net assets of $248,968,723.
13
<PAGE> 16
NOTE 8-FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
CLASS B CLASS C
----------------------------------------------------- -----------------------------
1999 1998 1997 1996 1995 1999 1998 1997
-------- -------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.59 $ 9.46 $ 9.28 $ 9.69 $ 8.99 $ 9.56 $ 9.44 $ 9.33
- ---------------------------------------- -------- -------- ------- ------- ------- ------- ------- -------
Income from investment operations:
Net investment income 0.53 0.55 0.56 0.55 0.63 0.53 0.56 0.24
- ---------------------------------------- -------- -------- ------- ------- ------- ------- ------- -------
Net gains (losses) on securities (both
realized and unrealized) (0.77) 0.13 0.17 (0.41) 0.70 (0.77) 0.11 0.10
- ---------------------------------------- -------- -------- ------- ------- ------- ------- ------- -------
Total from investment operations (0.24) 0.68 0.73 0.14 1.33 (0.24) 0.67 0.34
- ---------------------------------------- -------- -------- ------- ------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income (0.53) (0.55) (0.53) (0.51) (0.59) (0.53) (0.55) (0.22)
- ---------------------------------------- -------- -------- ------- ------- ------- ------- ------- -------
Return of capital -- -- (0.02) (0.04) (0.04) -- -- (0.01)
- ---------------------------------------- -------- -------- ------- ------- ------- ------- ------- -------
Total distributions (0.53) (0.55) (0.55) (0.55) (0.63) (0.53) (0.55) (0.23)
- ---------------------------------------- -------- -------- ------- ------- ------- ------- ------- -------
Net asset value, end of period $ 8.82 $ 9.59 $ 9.46 $ 9.28 $ 9.69 $ 8.79 $ 9.56 $ 9.44
======================================== ======== ======== ======= ======= ======= ======= ======= =======
Total return(a) (2.56)% 7.40% 8.16% 1.61% 15.22% (2.57)% 7.31% 3.64%
======================================== ======== ======== ======= ======= ======= ======= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $228,832 $237,919 $89,265 $79,443 $61,300 $39,011 $38,026 $ 1,851
======================================== ======== ======== ======= ======= ======= ======= ======= =======
Ratio of expenses to average net assets
including interest expense 1.85%(b) 1.96% 1.87% 1.84% 1.97% 1.85%(b) 1.96% 1.87%(c)
======================================== ======== ======== ======= ======= ======= ======= ======= =======
Ratio of expenses to average net assets
exclusive of interest expense 1.66%(b) 1.72% 1.76% 1.76% 1.86% 1.66%(b) 1.72% 1.76%(c)
======================================== ======== ======== ======= ======= ======= ======= ======= =======
Ratio of interest expense to average net
assets 0.19%(b) 0.24% 0.11% 0.08% 0.11% 0.19%(b) 0.24% 0.11%(c)
======================================== ======== ======== ======= ======= ======= ======= ======= =======
Ratio of net investment income to
average net assets 5.83%(b) 5.68% 6.01% 6.00% 6.58% 5.83%(b) 5.68% 6.01%(c)
======================================== ======== ======== ======= ======= ======= ======= ======= =======
Portfolio turnover rate 141% 147% 99% 134% 140% 141% 147% 99%
======================================== ======== ======== ======= ======= ======= ======= ======= =======
</TABLE>
(a) Does not deduct contingent deferred sales charges and is not
annualized for periods less than one year.
(b) Ratios are based on average net assets of $241,488,881 and
$41,148,444 for Class B and Class C, respectively.
(c) Annualized.
14
<PAGE> 17
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of
AIM Intermediate Government Fund:
We have audited the accompanying statement of assets and
liabilities of AIM Intermediate Government Fund (a
portfolio of AIM Funds Group), including the schedule of
investments, as of December 31, 1999, and the related
statement of operations for the year then ended, the
statement of changes in net assets for each of the years
in the two-year period then ended and the financial
highlights for each of the years in the five-year period
then ended. These financial statements and financial
highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion
on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of
securities owned as of December 31, 1999, by
correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all
material respects, the financial position of AIM
Intermediate Government Fund as of December 31, 1999, the
results of its operations for the year then ended, the
changes in its net assets for each of the years in the
two-year period then ended and the financial highlights
for each of the years in the five-year period then ended,
in conformity with generally accepted accounting
principles.
KPMG LLP
February 4, 2000
Houston, Texas
15
<PAGE> 18
<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, President CUSTODIAN
and Chief Operating Officer Stuart W. Coco
Mercantile-Safe Deposit & Trust Co.; and Vice President State Street Bank and Trust Company
President, Mercantile Bankshares 225 Franklin Street
Melville B. Cox Boston, MA 02110
Jack Fields Vice President
Chief Executive Officer COUNSEL TO THE FUND
Texana Global, Inc.; Karen Dunn Kelley
Formerly Member Vice President Ballard Spahr
of the U.S. House of Representatives Andrews & Ingersoll, LLP
Edgar M. Larsen 1735 Market Street
Carl Frischling Vice President Philadelphia, PA 19103
Partner
Kramer, Levin, Naftalis & Frankel LLP Mary J. Benson COUNSEL TO THE TRUSTEES
Assistant Vice President and
Robert H. Graham Assistant Treasurer Kramer, Levin, Naftalis & Frankel LLP
President and Chief Executive Officer 919 Third Avenue
A I M Management Group Inc. Sheri Morris New York, NY 10022
Assistant Vice President and
Prema Mathai-Davis Assistant Treasurer DISTRIBUTOR
Chief Executive Officer, YWCA of the U.S.A.
Renee A. Friedli A I M Distributors, Inc.
Lewis F. Pennock Assistant Secretary 11 Greenway Plaza
Attorney Suite 100
P. Michelle Grace Houston, TX 77046
Louis S. Sklar Assistant Secretary
Executive Vice President AUDITORS
Hines Interests Nancy L. Martin
Limited Partnership Assistant Secretary KPMG LLP
700 Louisiana
Ofelia M. Mayo Houston, TX 77002
Assistant Secretary
Lisa A. Moss
Assistant Secretary
Kathleen J. Pflueger
Assistant Secretary
Samuel D. Sirko
Assistant Secretary
Stephen I. Winer
Assistant Secretary
</TABLE>
(UNAUDITED)
REQUIRED FEDERAL INCOME TAX INFORMATION
AIM Intermediate Government Fund Class A, Class B, and Class C shares paid
ordinary dividends in the amount of $0.603, $0.528, and $0.528 per share,
respectively, to shareholders during its tax year ended December 31, 1999. Of
these amount, 0.00% is eligible for the dividends received deduction for
corporations.
REQUIRED STATE INCOME TAX INFORMATION
Of the total ordinary dividends paid, 24.98% was derived from U.S. Treasury
obligations.
16
<PAGE> 19
AIM FUNDS(SM) MAKES
INVESTING EASY
o AIM BANK CONNECTION(SM). You can make investments in your AIM account in
amounts from $50 to $100,000 without writing a check. Once you set up this
convenient feature, AIM will draw the funds from your pre-authorized
checking account at your request.
o AIM INTERNET CONNECT(SM). With this service, you can purchase, redeem or
exchange shares of AIM funds in your current AIM account simply by accessing
our Web site at www.aimfunds.com. For a retirement account, such as an IRA
or 403(b), only exchanges are allowed over the Internet because of the
tax-reporting and record-keeping requirements these accounts involve.
o AUTOMATIC REINVESTMENT OF DIVIDENDS AND/OR CAPITAL GAINS. You can receive
distributions in cash, or you can reinvest them in your account without
paying a sales charge. Over time, the power of compounding can significantly
increase the value of your account.
o AUTOMATIC INVESTMENT PLAN. You can add to your account by authorizing your
AIM fund to withdraw a specified amount, minimum $50, from your bank account
on a regular schedule.
o EASY ACCESS TO YOUR MONEY. You can redeem shares of your AIM fund any day
the New York Stock Exchange is open. The value of the shares may be more or
less than their original cost depending on market conditions.
o EXCHANGE PRIVILEGE. As your investment goals change, you may exchange part
or all of your shares of one fund for shares of a different AIM fund within
the same share class. You may make up to 10 such exchanges per calendar
year.
o TAX-ADVANTAGED RETIREMENT PLANS. You can enjoy the tax advantages offered by
a variety of investment plans, including Traditional IRAs, Roth IRAs and
education IRAs, among others.
o E-MAIL ACCESS. You can contact us at [email protected] for general
information. For account information, contact us at
[email protected].
o www.aimfunds.com. Our award-winning Web site provides account information,
shareholder education and fund performance information.
-------------------------------------
OUR AUTOMATED
AIM INVESTOR LINE,
800-246-5463,
PROVIDES CURRENT ACCOUNT
INFORMATION AND THE PRICE,
YIELD AND TOTAL RETURN
ON ALL AIM FUNDS
24 HOURS A DAY.
-------------------------------------
AIM INTERMEDIATE GOVERNMENT FUND
<PAGE> 20
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 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 $160 billion in assets
AIM Constellation Fund(1) INTERNATIONAL GROWTH FUNDS for more than 6.6 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 AIM Developing Markets Fund financial institutions, as of December
AIM Mid Cap Growth Fund AIM Euroland Growth Fund(4) 31, 1999.
AIM Mid Cap Opportunities Fund AIM European Development Fund The AIM Family of Funds
AIM Select Growth Fund AIM International Equity Fund --Registered Trademark-- is
AIM Small Cap Growth Fund(2) AIM Japan Growth Fund distributed nationwide, and AIM today
AIM Small Cap Opportunities Fund(3) AIM Latin American Growth Fund is the eighth-largest mutual fund
AIM Value Fund AIM Weingarten Fund AIM New Pacific Growth Fund complex in the United States in assets
under management, according to
GROWTH & INCOME FUNDS GLOBAL GROWTH FUNDS Strategic Insight, an independent
AIM Advisor Flex Fund AIM Global Aggressive Growth Fund mutual fund monitor.
AIM Advisor Large Cap Value Fund AIM Global Growth Fund
AIM Advisor Real Estate Fund
AIM Balanced Fund GLOBAL GROWTH & INCOME FUNDS
AIM Basic Value Fund AIM Global Growth & Income Fund
AIM Charter Fund AIM Global Utilities Fund
INCOME FUNDS GLOBAL INCOME FUNDS
AIM Floating Rate Fund AIM Emerging Markets Debt Fund
AIM High Yield Fund AIM Global Government Income Fund
AIM High Yield Fund II AIM Global Income Fund
AIM Income Fund AIM Strategic Income Fund
AIM Intermediate Government Fund
AIM Limited Maturity Treasury Fund THEME FUNDS
AIM Global Consumer Products and Services Fund
TAX-FREE INCOME FUNDS AIM Global Financial Services Fund
AIM High Income Municipal Fund AIM Global Health Care Fund
AIM Municipal Bond Fund AIM Global Infrastructure Fund
AIM Tax-Exempt Bond Fund of Connecticut AIM Global Resources Fund
AIM Tax-Free Intermediate Fund AIM Global Telecommunications and Technology Fund(5)
AIM Global Trends Fund(6)
</TABLE>
(1) Effective December 1, 1999, AIM Constellation Fund's investment strategy
broadened to allow investments across all market capitalizations. (2) AIM Small
Cap Growth Fund closed to new investors on November 8, 1999. (3) AIM Small Cap
Opportunities Fund closed to new investors on November 4, 1999. (4) On September
1, 1999, AIM Europe Growth Fund was renamed AIM~Euroland Growth Fund.
Previously the fund invested in all size companies in most areas of Europe. The
fund now seeks to invest at least 65% of its assets in large-cap companies
within countries using the euro as their currency (EMU-member countries). (5) On
June 1, 1999, AIM Global Telecommunications Fund was renamed AIM Global
Telecommunications and Technology Fund. (6) Effective August 27, 1999, AIM
Global Trends Fund was restructured to operate as a traditional mutual fund.
Before that date, the fund operated as a fund of funds. For more complete
information about any AIM fund(s), including sales charges and expenses, ask
your financial advisor or securities dealer for a free prospectus(es). Please
read the prospectus(es) carefully before you invest or send money. If used as
sales material after April 20, 2000, this report must be accompanied by a
current Quarterly Review of Performance for AIM Funds.
[AIM LOGO APPEARS HERE]
INVEST WITH DISCIPLINE
--Registered Trademark--
AIM Distributors, Inc. GOV-AR-1
