<PAGE> 1
[AIM LOGO APPEARS HERE]
[PHOTO APPEARS HERE]
AIM INCOME FUND
ANNUAL REPORT
DECEMBER 31, 1995
<PAGE> 2
AIM INCOME FUND
For shareholders who seek a high level of current income consistent with a
reasonable concern for safety of principal by investing in a portfolio
consisting primarily of fixed-rate corporate debt and U.S. government
obligations.
ABOUT FUND PERFORMANCE AND DATA THROUGHOUT THIS REPORT:
o AIM Income Fund's performance figures are historical and reflect all
distributions and changes in net asset value. Unless otherwise indicated,
the Fund's performance is computed without a sales charge.
o When sales charges are included in performance figures, Class A share
performance reflects the maximum 4.75% sales charge, and Class B share
performance reflects the applicable contingent deferred sales charge
(CDSC) for the period involved. The CDSC declines from 5% to 0% at the
beginning of the seventh year. The performance of the Fund's Class B
shares will differ from that of Class A shares.
o In 1995, the Fund paid distributions for Class A and Class B shares of
$0.613 and $0.542 per share, respectively.
o The Fund's investment return and principal value will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than their
original cost.
o Past performance cannot guarantee comparable future results.
o The Fund's portfolio composition is subject to change, and there is no
assurance the Fund will continue to hold any one particular security.
o International investing presents certain risks not associated with
investing solely in the U.S. These include risks relating to fluctuations
in the value of the U.S. dollar relative to the value of other currencies,
the custody arrangements made for the Fund's foreign holdings,
differences in accounting, political risks, and the lesser degree of
public information required to be provided by non-U.S. companies.
o Government securities, such as U.S. Treasury bills and bonds, offer a high
degree of safety and are guaranteed as to the timely payment of principal
and interest. Fund shares are not insured and their value and yield will
vary with market conditions.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o Lipper Analytical Services, Inc., is an independent mutual fund
performance monitor. The Lipper General Bond Fund Index represents an
average of the performance of the 10 largest general bond funds.
o The Lehman Brothers Aggregate Bond Index is an unmanaged index
generally representative of intermediate- and long-term government and
investment-grade corporate debt securities. The Lehman Corporate Bond Long
Term Index is an unmanaged index generally representative of long-term
investment-grade corporate debt securities.
o The Salomon Brothers Non-U.S. World Government Bond Index is an
unmanaged index of foreign government debt securities from the following
countries: Austria, Australia, Belgium, Canada, Denmark, France, Germany,
Italy, Japan, Netherlands, Spain, Sweden, and the United Kingdom.
o The First Boston High Yield Index tracks more than 270 segments
within the high-yield universe and includes credit quality, industry,
security type, and maturity.
o An investment cannot be made in any index listed. Unless otherwise
indicated, index results include reinvested interest and do not
reflect sales charges.
This report may be distributed only to current shareholders or to persons
who have received a current prospectus of the Fund.
<PAGE> 3
A Message from
the Chairman
Dear Fellow Shareholder:
In one of the best years on record for the bond market, AIM
Income Fund delivered excellent returns in the fiscal year
[PHOTO OF ended December 31, 1995. Total returns during the 12 months
Charles T. Bauer, that ended December 31, 1995, for Class A and Class B
Chairman of shares were 22.77% and 21.72%, respectively.
the Board of The Fund outperformed the 16.56% total return of the
the Fund, Lipper General Bond Fund Index, an average of the
APPEARS HERE] performance of the 10 largest general bond funds tracked
by Lipper. As of December 31, combined net assets of the
Fund's Class A and B shares were $295.6 million, up 38%
from $214.0 million a year ago.
AIM Income Fund's key investment categories--investment grade issues,
high-yield corporate securities and international investments denominated in
foreign currencies--each performed well in the one-year period ended December
31, 1995. The bond market rebounded from a tumultuous 1994 that saw seven hikes
in short-term interest rates. The Fed eased rates twice in 1995 as the economy
slowed to a moderate pace. As the year ended, the possibility of a balanced
budget agreement gave the bond market hope for continued strength in 1996. A
more complete discussion about the economy and your Fund's portfolio begins on
the following page.
Your Fund has built an impressive record of long-term results. Over the past
10 years, the Fund's Class A shares have turned in an average annual total
return of 9.71%, outperforming the Lehman Brothers Aggregate Bond Index's
9.63%. The Fund's Class A shares' five-year average annual total return of
10.65% also outpaces the Lehman index's 9.48%.
It is important to remember, however, that AIM Income Fund and the financial
markets in general have experienced ups and downs over time. Although past
performance does not ensure comparable future results, we believe shareholders
who keep a long-range outlook will enjoy the greatest returns on their
investments.
In 1996, debate over the federal budget deficit--which affects the
future of Medicare and Social Security--brings home the need for all of us to
plan for retirement. It's more important than ever to build our nest eggs
independent from government programs that may, or may not, exist by the time we
retire. And for some baby boomers, that time is just 10 years away.
We remain committed to managing your Fund according to AIM's research-based,
credit-quality-oriented investment discipline. During the period covered by
this report, total assets under AIM's management increased by about 48%, from
about $27 billion to about $42 billion. While part of this growth can be
attributed to favorable market conditions, it also reflects the opening of
approximately 622,000 new shareholder accounts during the period.
We are pleased to send you this shareholder report for AIM Income Fund. If
you have any questions or comments, please call Client Services at 800-959-4246
during regular business hours. For automated account information, call the
24-hour AIM Investor Line toll-free at 800-246-5463.
Respectfully submitted,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
- --------------------------------------------------------------------------------
LIPPER RANKINGS
(As of 12/31/95)
- --------------------------------------------------------------------------------
AIM Income Fund Class A Shares
<TABLE>
<CAPTION>
RANK VS. ALL
PERIOD FIXED-INCOME FUNDS TOP %
<S> <C> <C>
10 Years 45 of 660 7%
5 Years 122 of 1,659 8%
1 Year 99 of 4,330 3%
</TABLE>
- --------------------------------------------------------------------------------
Lipper ranking for the Fund's Class B shares:
one year, 129 of 4,330, 3%. Fund performance
rankings are based on total reurns and are
versus all fixed-income funds tracked by Lipper,
excluding sales charges, and including fees
and expenses. Of course, past performance
cannot guarantee comparable future results.
<PAGE> 4
Management's
Discussion & Analysis
- ----------------------
A continuation of
low inflation, moder-
ately expanding
economic activity
and a less restrictive
monetary policy
should provide
positive
underpinnings for
bond markets.
- ----------------------
WIDESPREAD BOND RALLY DRIVES AIM INCOME FUND
Declining interest rates, modest inflation, moderating economic growth and
strong corporate earnings converged to make 1995 ripe for a strong bond market
rally.
In July and December, the Federal Reserve lowered the federal funds
rate--the interest rate banks use to lend overnight reserves to each other. On
each occasion, commercial banks responded by reducing loan interest rates to
their largest and most creditworthy customers. Falling short- and long-term
interest rates are good news for bonds, whose prices move inversely to interest
rates. Investment returns across the maturity spectrum--short- to
long-term--posted significant gains as yield levels moved lower throughout 1995.
For example, the yield on the 10-year U.S. Treasury note, a benchmark for
longer term rates, fell 2.26% over the year to 5.57% on December 29, 1995.
Bond prices surged amid signs of a moderating pace of economic activity.
Modest growth means the demand for borrowed money tends to be lower, which
allows the cost of money, or interest rates, to fall. Inflation levels tended
to post modest increases over the year, continuing a trend of modest price
rises over the last few years. Low and stable inflation rates mean bond
investors earn good real rates of return after adjustments are made for the
effects of inflation.
Favorable corporate earnings growth provided another positive development
because rising earnings are an indication of improving credit worthiness. Many
companies took advantage of lower interest rates and issued more than $155
billion in new debt securities.
At year-end, the market was focused on the potential for a balanced budget
accord which might reduce the federal government borrowing requirements and
trim government spending over the next seven years. This agreement would be
likely to lower longer-term interest rates and encourage private sector
economic growth.
YOUR INVESTMENT PORTFOLIO
AIM Income Fund is a diversified portfolio of investment-grade, U.S. and
international corporate and government securities, and lower-quality,
high-yield issues. For the year ending December 31, 1995, all sectors of the
portfolio posted good results.
- -------------------------------------------------------------------------------
SHAPE OF YIELD CURVE RETURNS TO NORMAL IN 1995
The yield curve is a graphic representation of bond interest rates relative to
maturithy, the length of time until repayment is scheduled. It illustrates
three broad maturity ranges--short-term (less than two years),
intermediate-term (two to 10 years), and long-term(more than 10 years). The
shape of the yield curve is key--it provies a snapshot of the current
conditions in the U.S. government secirities market.
On December 30, 1994, investors were concerned that interest rates would
continue to rise and were reluctant to commit their funds to longer-term
securities. The yield curve's shape was upward sloping and steep for maturities
up to three years and flat beyond three years to 30 years.
As 1995 progressed, several factors, including moderating growth, low
inflation and a less restrictive monetary policy, restored investor confidence
and created a bond market rally. On December 29, 1995, the shape of the yield
curve sloped gently upward. Investors were willing to lock in the higher yield
for longer-term securities because the economic environment for bonds had
significantly improved.
HISTORICAL YIELD CURVE: 12/30/94 vs. 12/29/95
<TABLE>
<CAPTION>
MATURITY 1994 YIELD 1995 YIELD
<S> <C> <C>
3 Month 6% 5%
6 Month 6% 5%
1 Year 7% 5%
2 Years 8% 5%
3 Years 8% 5%
5 Years 8% 5%
10 Years 8% 6%
30 Years 8% 6%
</TABLE>
Source: Bloomberg
See important Fund disclosure on inside front cover.
2
<PAGE> 5
Management's
Discussion & Analysis
The domestic segment, comprising about 66.28% of the Fund, holds 52.51% in
corporate securities, 13.33% in U.S. Treasuries and the remainder in
convertible bonds. The managers increased holdings in finance, cable,
telecommunications and industrial issues during the year. Holdings of electric
utility companies were reduced because of concerns over increasing competitive
pressures leading to lower margins, lower earnings, and potentially lower
credit ratings.
The Fund increased the international segment to approximately 31.35%, up from
28.31% at the beginning of the year. These international securities were
denominated in foreign currencies, 20.82%, and the U.S. dollar, 10.53%. Foreign
bond markets provided very favorable returns in 1995, as many benefited from
generally declining interest rates. The Fund owned issues in Australia, Canada,
Denmark, France, Germany, Italy, Japan and the United Kingdom.
The Fund was further diversified with 71.3% in investment-grade issues rated
BBB- by Moody's Investor Services Ltd. and Baa3 or better by Standard & Poor's,
two widely known credit agencies. The high-yield segment stood at 28.7%
and included securities rated BB+ and Ba1 or lower by Moody's and Standard &
Poor's, respectively. In most years, investment-grade and high-yield bonds
serve as counterweights to each other because they respond to different
stimuli. Investment-grade securities are most sensitive to changing levels of
interest rates, and high-yield bonds tend to respond best to a healthy, growing
economy. With interest rates falling and the economy showing reasonable growth,
each sector performed well in 1995.
OUTLOOK FOR THE FUTURE
The outlook for 1996 appears to be favorable for investors. A continuation
of low inflation, moderately expanding economic activity and a less restrictive
monetary policy should provide positive underpinnings for bond markets. AIM
Income Fund provides longer-term investors with attractive income, strong total
return results and the advantages of a broadly diversified investment strategy.
- -------------------------------------------------------------------------------
TOP 5 HOLDINGS
(As of 12/31/95)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ISSUER COUPON MATURITY
<S> <C> <C>
1. U.S. Treasury 6.50% 04/99
2. Indiana Michigan Power Co. 9.82 12/22
3. Time Warner, Inc. 9.15 02/23
4. News America Holdings, Inc. 9.25 02/13
5. Province of Manitoba 7.75 07/16
</TABLE>
- -------------------------------------------------------------------------------
THE ADVANTAGE OF DIVERSIFICATION
Broad market sector diversification allows an investor the advantages of better
income potential, reduced sensitivity to single market volatility, and
enhanced total rates of return over time. The chart demonstrates that
securities owned in AIM Income Fund, represented by different indexes, perform
independently from one another. Long-term bonds, represented in the chart by
the Lehman Corporate Bond Long Term Index, are more sensitive to interest
rates. High-yield securities, represented by First Boston High Yield Index,
react most favorably to a healthy, growing economy. Foreign bonds, represented
by Salomon Brothers Non-U.S. World Government Bond Index, provide further
diversification for incremental income and returns. In 1995, all sectors
performed well.
AVERAGE ANNUAL TOTAL RETURNS: 12/31/89-12/31/95
Salomon Brothers
Lehman Corporate Non-U.S. World First Boston
Bond Long Term Government Bond Index High Yield
12/31/89-12/31/90 6.48% 15.29% -6.38%
12/31/90-12/31/91 20.98 16.22 43.75
12/31/91-12/31/92 9.34 4.77 16.67
12/31/92-12/31/93 13.64 15.12 18.91
12/31/93-12/31/94 -5.76 5.99 -2.15
12/31/94-12/31/95 27.92 19.55 17.38
Source: Towers Data Systems HYPO(R)
PORTFOLIO COMPOSITION
As of 12/31/95
(As a percentage of total net assets)
Domestic
Government 13.33%
Corporate Bonds 52.51
Convertible Bonds 0.43
Common Stock 0.01
Foreign
Government 13.53%
Corporate Bonds 13.81
Convertible Bonds 3.86
Common Stock 0.15
Cash 0.25%
Other Assets 2.12%
Average maturity: 11.27 years
Duration: 6.25 years
Number of Holdings: 106
See important Fund disclosure on inside front cover.
3
<PAGE> 6
Long-Term
Performance
GROWTH OF A $10,000 INVESTMENT
The chart below compares your Fund to a benchmark index. It is intended
to give you a general idea of how your Fund performed compared to the bond
market over the past 10 years. It is important to understand the difference
between your Fund and an index. Your Fund's total return is shown with and
without a sales charge and includes Fund expenses and management fees. An index
measures the performance of a hypothetical portfolio, in this case, the Lehman
Brothers Aggregate Bond Index. Unlike your Fund, the index is not managed;
therefore there are no sales charges, expenses or fees. You cannot invest in an
index. But if you could buy all the securities that make up a particular index,
you would incur expenses that would affect the return on your investment.
- -------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
For periods ended December 31, 1995
<TABLE>
<CAPTION>
Without With
Sales Charge Sales Charge
<S> <C> <C>
CLASS A SHARES
10 Years 9.71% 9.17%
5 Years 10.65 9.57
1 Year 22.77 16.93
CLASS B SHARES
Inception (9/1/93) 4.41% 3.29%
1 Year 21.72 6.72
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AIM Income Fund AIM Income Fund Lehman Bros. Aggregrate
Class A Shares (w/o sales charge) Class A Shares (w/sales charge) Bond Index
<S> <C> <C> <C>
12/85 $10,000 $9,520 $10,000
12/86 11,804 11,237 11,653
12/87 11,871 11,301 11,951
12/88 12,941 12,319 13,053
12/89 14,695 13,989 14,893
12/90 15,231 14,499 15,930
12/91 17,974 17,110 18,880
12/92 19,307 18,379 20,520
12/93 22,276 21,206 23,016
12/94 20,573 19,584 22,091
12/95 25,258 24,044 26,923
</TABLE>
PAST PERFORMANCE CANNOT GUARANTEE COMPARABLE FUTURE RESULTS.
Source: Towers Data Systems HYPO(R)
An investment cannot be made in any index listed. Unless otherwise indicated,
index results include reinvested dividends and do not reflect sales charges.
The performance of Class B shares will differ from that of Class A shares
due to differing fees and expenses.
For Fund performance calculations and descriptions of any indexes cited
on this page, please refer to the inside front cover of this report.
4
<PAGE> 7
Financials
SCHEDULE OF INVESTMENTS
December 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL
MATURITY AMOUNT(a) MARKET VALUE
<S> <C> <C> <C>
U.S. DOLLAR DENOMINATED NON-CONVERTIBLE BONDS
& NOTES-62.30%
ADVERTISING/BROADCASTING-0.36%
Comcast Corp.,
Sr. Sub. Deb., 9.50% 01/15/08 $ 1,000,000 $ 1,060,000
- ------------------------------------------------------------------------------------------------
AIRLINES-2.77%
Delta Air Lines,
Deb., 10.375% 02/01/11 1,500,000 1,876,215
- ------------------------------------------------------------------------------------------------
Equipment Trust Certificates, 10.50% 04/30/16 5,000,000 6,303,250
- ------------------------------------------------------------------------------------------------
8,179,465
- ------------------------------------------------------------------------------------------------
AUTOMOBILE (MANUFACTURERS)-2.79%
General Motors Corp.,
Deb., 8.80% 03/01/21 6,700,000 8,257,951
- ------------------------------------------------------------------------------------------------
AUTOMOBILE/TRUCK PARTS & TIRES-0.21%
Harvard Industries Inc.,
Sr. Notes, 11.125% 08/01/05 610,000 610,000
- ------------------------------------------------------------------------------------------------
CABLE TELEVISION-3.77%
CAI Wireless Systems Inc.,
Sr. Notes, 12.25% 09/15/02 990,000 1,056,825
- ------------------------------------------------------------------------------------------------
Comcast UK Cable,
Sr. Unsecured Disc. Deb., 11.20%(b) 11/15/07 5,000,000 2,925,000
- ------------------------------------------------------------------------------------------------
Marcus Cable Operating Co.,
Sr. Disc. Notes, 13.50%(b) 08/01/04 1,690,000 1,271,725
- ------------------------------------------------------------------------------------------------
Viacom, Inc.,
Sr. Notes, 7.75% 06/01/05 3,650,000 3,876,191
- ------------------------------------------------------------------------------------------------
Videotron, Ltd.,
Yankee Sr. Sub. Notes, 10.625% 02/15/05 1,000,000 1,072,500
- ------------------------------------------------------------------------------------------------
Wireless One Inc.,
Units, 13.00%(c) 10/15/03 890,000 938,950
- ------------------------------------------------------------------------------------------------
11,141,191
- ------------------------------------------------------------------------------------------------
CHEMICALS-0.70%
Crain Industries,
Sr. Sub. Notes, 13.50%
(acquired 08/22/95; cost $1,070,000)(d) 08/15/05 1,070,000 1,086,050
- ------------------------------------------------------------------------------------------------
RBX Corp.,
Sr. Sub. Notes, 11.25%
(acquired 10/06/95-11/07/95; cost
$1,006,638)(d) 10/15/05 1,000,000 982,500
- ------------------------------------------------------------------------------------------------
2,068,550
- ------------------------------------------------------------------------------------------------
CONSUMER NON-DURABLES-0.30%
Hines Horticulture,
Sr. Sub. Notes, 11.75%
(acquired 10/16/95-10/20/95; cost $858,550)(d) 10/15/05 850,000 888,250
- ------------------------------------------------------------------------------------------------
CONTAINERS-1.25%
Ivex Packaging,
Sr. Sub. Notes, 12.50% 12/15/02 1,500,000 1,590,000
- ------------------------------------------------------------------------------------------------
Owens-Illinois Inc.,
Sr. Sub. Notes, 10.00% 08/01/02 2,000,000 2,100,000
- ------------------------------------------------------------------------------------------------
3,690,000
- ------------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE> 8
Financials
<TABLE>
<CAPTION>
PRINCIPAL
MATURITY AMOUNT(a) MARKET VALUE
<S> <C> <C> <C>
FINANCE (CONSUMER CREDIT)-6.53%
Associates Corp.,
Deb., 7.95% 02/15/10 $ 6,000,000 $ 6,828,420
- ------------------------------------------------------------------------------------------------
GMAC,
Notes, 9.00% 10/15/02 3,425,000 3,961,115
- ------------------------------------------------------------------------------------------------
GPA Delaware Inc.,
Deb., 8.75% 12/15/98 1,240,000 1,165,600
- ------------------------------------------------------------------------------------------------
ITT Corp.,
Deb., 7.375% 11/15/15 3,350,000 3,460,972
- ------------------------------------------------------------------------------------------------
Loehmann's Holdings,
Sr. Sub. Deb., 13.75% 02/15/99 1,235,000 1,160,900
- ------------------------------------------------------------------------------------------------
Olympic Financial Ltd.,
Deb., 13.00% 05/01/00 700,000 764,750
- ------------------------------------------------------------------------------------------------
Sea Containers,
Sr. Sub. Deb., 12.50% 12/01/04 1,825,000 1,971,000
- ------------------------------------------------------------------------------------------------
19,312,757
- ------------------------------------------------------------------------------------------------
FOOD PROCESSING-1.34%
American Rice Inc.,
Sec. Notes, 13.00% 07/31/02 1,830,000 1,729,350
- ------------------------------------------------------------------------------------------------
Curtice-Burns Foods, Inc.,
Sr. Sub. Notes, 12.25% 02/01/05 1,300,000 1,339,000
- ------------------------------------------------------------------------------------------------
Pilgrim's Pride Corp.,
Sr. Sub. Notes, 10.875% 08/01/03 1,000,000 885,000
- ------------------------------------------------------------------------------------------------
3,953,350
- ------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT-3.16%
Province of Manitoba,
Yankee Bonds 7.75% 07/17/16 7,500,000 8,328,525
- ------------------------------------------------------------------------------------------------
United Mexican States,
Deb., 11.1875%
(acquired 07/12/95; cost $1,000,000)(d) 07/21/97 1,000,000 1,024,380
- ------------------------------------------------------------------------------------------------
9,352,905
- ------------------------------------------------------------------------------------------------
GAMING-1.59%
Aztar Corp.,
Sr. Sub. Notes, 11.00% 10/01/02 690,000 690,000
- ------------------------------------------------------------------------------------------------
Showboat, Inc.,
First Mortgage Notes, 9.25% 05/01/08 4,000,000 4,020,000
- ------------------------------------------------------------------------------------------------
4,710,000
- ------------------------------------------------------------------------------------------------
HOTELS/MOTELS-1.29%
John Q. Hammons Hotels Inc.,
Gtd. First Mortgage Notes, 9.75%
(acquired 10/06/95-11/16/95; cost
$3,808,125)(d) 10/01/05 3,800,000 3,828,500
- ------------------------------------------------------------------------------------------------
INSURANCE (LIFE & HEALTH)-1.43%
American Life Holding Co.,
Sr. Sub. Notes, 11.25% 09/15/04 1,300,000 1,365,000
- ------------------------------------------------------------------------------------------------
Americo Life Inc.,
Sr. Sub. Notes, 9.25% 06/01/05 3,000,000 2,857,500
- ------------------------------------------------------------------------------------------------
4,222,500
- ------------------------------------------------------------------------------------------------
LEISURE & RECREATION-0.70%
Icon Health & Fitness Inc.,
Sr. Sub. Notes, 13.00% 07/15/02 1,200,000 1,299,000
- ------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE> 9
Financials
<TABLE>
<CAPTION>
PRINCIPAL
MATURITY AMOUNT(a) MARKET VALUE
<S> <C> <C> <C>
LEISURE & RECREATION (continued)
Stratosphere Corp.,
First Mortgage Notes, 14.25% 05/15/02 $ 670,000 $ 757,938
- ------------------------------------------------------------------------------------------------
2,056,938
- ------------------------------------------------------------------------------------------------
MACHINERY (HEAVY)-2.81%
Caterpillar Inc.,
Deb., 9.375% 08/15/11 5,000,000 6,368,750
- ------------------------------------------------------------------------------------------------
Fairfield Manufacturing,
Sr. Sub. Notes, 11.375% 07/01/01 1,000,000 975,000
- ------------------------------------------------------------------------------------------------
Primeco Inc.,
Sr. Sub. Notes, 12.75% 03/01/05 940,000 968,200
- ------------------------------------------------------------------------------------------------
8,311,950
- ------------------------------------------------------------------------------------------------
MACHINERY (MISCELLANEOUS)-1.19%
AM General Corp.,
Sr. Notes, 12.875% 05/01/02 1,500,000 1,503,750
- ------------------------------------------------------------------------------------------------
Interlake Corp.,
Sr. Notes, 12.00% 11/15/01 1,000,000 1,010,000
- ------------------------------------------------------------------------------------------------
MVE Inc.,
Sr. Sec. Notes, 12.50% 02/15/02 1,000,000 1,002,500
- ------------------------------------------------------------------------------------------------
3,516,250
- ------------------------------------------------------------------------------------------------
MEDICAL INSTRUMENTS/PRODUCTS-0.21%
Graphic Controls Corp.,
Sr. Sub. Notes, 12.00% (acquired 09/21/95;
cost $600,000)(d) 09/15/05 600,000 624,000
- ------------------------------------------------------------------------------------------------
MEDICAL (PATIENT SERVICES)-0.38%
OrNda Healthcorp,
Sr. Sub. Notes, 11.375% 08/15/04 1,000,000 1,125,000
- ------------------------------------------------------------------------------------------------
METALS (MISCELLANEOUS)-0.86%
Rio Algom Ltd.,
Yankee Deb., 7.05% 11/01/05 2,500,000 2,544,250
- ------------------------------------------------------------------------------------------------
NATURAL GAS PIPELINE-3.11%
Talisman Energy Inc.,
Yankee Deb., 7.125% 06/01/07 3,750,000 3,935,100
- ------------------------------------------------------------------------------------------------
Transco Energy Co.,
Deb., 9.875%, 06/15/20 4,000,000 5,254,760
- ------------------------------------------------------------------------------------------------
9,189,860
- ------------------------------------------------------------------------------------------------
OIL & GAS-2.82%
HS Resources Inc.,
Sr. Sub. Notes, 9.875% 12/01/03 1,190,000 1,175,125
- ------------------------------------------------------------------------------------------------
Petroleum Heat & Power Co. Inc.,
Sub. Deb., 12.25% 02/01/05 1,370,000 1,510,425
- ------------------------------------------------------------------------------------------------
Sun Company,
Deb., 9.00% 11/01/24 4,000,000 4,870,360
- ------------------------------------------------------------------------------------------------
United Meridian Corp.,
Gtd. Sr. Sub. Notes, 10.375% 10/15/05 270,000 285,526
- ------------------------------------------------------------------------------------------------
Wainoco Oil Corp.,
Sr. Notes, 12.00% 08/01/02 500,000 482,500
- ------------------------------------------------------------------------------------------------
8,323,936
- ------------------------------------------------------------------------------------------------
OIL EQUIPMENT & SUPPLIES-0.14%
Falcon Drilling Co. Inc.
Sr. Notes, 9.75% 01/15/01 410,000 421,275
- ------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 10
Financials
<TABLE>
<CAPTION>
PRINCIPAL
MATURITY AMOUNT(a) MARKET VALUE
<S> <C> <C> <C>
PAPER & FOREST PRODUCTS-0.52%
Pacific Lumber Co.,
Sr. Notes, 10.50% 03/01/03 $ 600,000 $ 568,500
- ------------------------------------------------------------------------------------------------
Rapp International Finance,
Gtd. Yankee Sec. Notes, 11.50% 12/15/00 970,000 966,363
- ------------------------------------------------------------------------------------------------
1,534,863
- ------------------------------------------------------------------------------------------------
PUBLISHING-6.09%
News America Holdings,
Gtd. Sr. Deb., 9.25% 02/01/13 7,100,000 8,362,664
- ------------------------------------------------------------------------------------------------
Time Warner Inc.,
Deb., 9.15% 02/01/23 8,500,000 9,639,340
- ------------------------------------------------------------------------------------------------
18,002,004
- ------------------------------------------------------------------------------------------------
RAILROADS-0.34%
Johnstown American Industries Inc.,
Sr. Sub. Notes, 11.75% 08/15/05 1,100,000 1,001,000
- ------------------------------------------------------------------------------------------------
RETAIL (FOOD & DRUG)-2.61%
Grand Union Co.,
Sr. Notes, 12.00% 09/01/04 1,210,000 1,046,650
- ------------------------------------------------------------------------------------------------
Great Atlantic & Pacific,
Yankee Notes, 7.78%
(acquired 10/18/95; cost $3,900,000)(d) 11/01/00 3,900,000 3,954,639
- ------------------------------------------------------------------------------------------------
Penn Traffic Co.,
Sr. Notes, 10.65% 11/01/04 1,580,000 1,508,901
- ------------------------------------------------------------------------------------------------
Ralph's Grocery Co.,
Sr. Notes, 11.00% 06/15/05 1,210,000 1,197,900
- ------------------------------------------------------------------------------------------------
7,708,090
- ------------------------------------------------------------------------------------------------
RETAIL (STORES)-1.87%
Fleming Companies Inc.,
Sr. Notes, 10.625% 12/15/01 1,000,000 970,000
- ------------------------------------------------------------------------------------------------
Pamida Inc.,
Sr. Sub. Notes, 11.75% 03/15/03 1,000,000 770,000
- ------------------------------------------------------------------------------------------------
Samsonite Corp.,
Sr. Sub. Notes, 11.125% 07/15/05 900,000 864,000
- ------------------------------------------------------------------------------------------------
Specialty Retailers, Inc.,
Sr. Sub. Notes, 11.00% 08/15/03 2,000,000 1,820,000
- ------------------------------------------------------------------------------------------------
United Stationer Supply,
Sr. Sub. Notes, 12.75% 05/01/05 1,000,000 1,092,500
- ------------------------------------------------------------------------------------------------
5,516,500
- ------------------------------------------------------------------------------------------------
SCHOOLS-0.12%
Herff Jones Inc.,
Sr. Sub. Notes, 11.00% 08/15/05 330,000 353,925
- ------------------------------------------------------------------------------------------------
STEEL-0.75%
GS Technologies Inc.,
Sr. Notes, 12.00% 09/01/04 1,000,000 992,500
- ------------------------------------------------------------------------------------------------
Gulf States Steel Corp.,
First Mortgage Notes, 13.50% 04/15/03 1,360,000 1,224,000
- ------------------------------------------------------------------------------------------------
2,216,500
- ------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS-3.50%
A+ Network Inc.,
Sr. Sub. Notes, 11.875% 11/01/05 930,000 941,625
- ------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE> 11
Financials
<TABLE>
<CAPTION>
PRINCIPAL
MATURITY AMOUNT(a) MARKET VALUE
<S> <C> <C> <C>
TELECOMMUNICATIONS (continued)
Clearnet Communications,
Yankee Units, 14.75%(b)(e) 12/15/05 $ 700,000 $ 364,000
- ------------------------------------------------------------------------------------------------
Dictaphone Corp.,
Gtd. Sr. Sub. Notes, 11.75% 08/01/05 610,000 603,900
- ------------------------------------------------------------------------------------------------
Pronet Inc.,
Sr. Sub. Notes, 11.875% 06/15/05 1,000,000 1,105,000
- ------------------------------------------------------------------------------------------------
TCI Communications Inc.,
Sr. Notes, 8.75% 08/01/15 6,000,000 6,652,020
- ------------------------------------------------------------------------------------------------
Telewest PLC,
Yankee Sr. Disc. Deb. 11.00%(b) 10/01/07 1,100,000 664,125
- ------------------------------------------------------------------------------------------------
10,330,670
- ------------------------------------------------------------------------------------------------
TEXTILES-1.06%
Consoltex Group,
Sr. Sub. Notes, 11.00% 10/01/03 1,700,000 1,534,250
- ------------------------------------------------------------------------------------------------
Tarkett International,
Sr. Sub. Notes, 9.00% 03/01/02 1,500,000 1,601,250
- ------------------------------------------------------------------------------------------------
3,135,500
- ------------------------------------------------------------------------------------------------
TRANSPORTATION (MISCELLANEOUS)-1.23%
Gearbulk Holdings Ltd,
Sr. Notes, 11.25% 12/01/04 1,000,000 1,070,000
- ------------------------------------------------------------------------------------------------
Stena AB,
Yankee Sr. Notes, 10.50% 12/15/05 1,500,000 1,535,625
- ------------------------------------------------------------------------------------------------
Trans Ocean Container,
Sr. Sub. Notes, 12.25% 07/01/04 1,000,000 1,040,000
- ------------------------------------------------------------------------------------------------
3,645,625
- ------------------------------------------------------------------------------------------------
UTILITIES-4.50%
California Energy Company, Inc.,
Sr. Disc. Notes, 10.25%(b) 01/15/04 1,500,000 1,417,500
- ------------------------------------------------------------------------------------------------
Indiana-Michigan Power Co.,
Sec. Lease Obligation Bonds, 9.82% 12/07/22 8,992,275 11,888,508
- ------------------------------------------------------------------------------------------------
13,306,008
- ------------------------------------------------------------------------------------------------
Total U.S. Dollar Denominated
Non-Convertible Bonds & Notes 184,139,563
- ------------------------------------------------------------------------------------------------
U.S. DOLLAR DENOMINATED CONVERTIBLE BONDS &
NOTES-1.02%
COMPUTER NETWORKING-0.43%
3COM Corp.,
Conv. Sub. Notes, 10.25%
(acquired 11/08/94; cost $800,000)(d) 11/01/01 800,000 1,284,000
- ------------------------------------------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-0.59%
Henderson Capital,
Conv. Bonds, 4.50% 10/27/96 1,700,000 1,746,750
- ------------------------------------------------------------------------------------------------
Total U.S. Dollar Denominated Convertible
Bonds & Notes 3,030,750
- ------------------------------------------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED NON-CONVERTIBLE
BONDS & NOTES(f)-7.19%
CANADA-3.00%
Bell Canada (Telecommunications),
Deb., 10.875% 10/11/04 CAD 3,000,000 2,625,192
- ------------------------------------------------------------------------------------------------
Canadian Oil Debco Inc. (Oil & Gas),
Deb., 11.00% 10/31/00 3,200,000 2,679,047
- ------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 12
Financials
<TABLE>
<CAPTION>
PRINCIPAL
MATURITY AMOUNT(a) MARKET VALUE
<S> <C> <C> <C>
CANADA (continued)
IPL Energy Inc. (Oil Equipment & Supplies),
Deb., Series A, 9.67% 02/23/00 CAD 3,100,000 $ 2,483,065
- ------------------------------------------------------------------------------------------------
Rogers Cablesystem, Inc. (Cable Television),
Sr. Sec. 2nd Priority Deb., 9.65% 01/15/14 1,750,000 1,082,937
- ------------------------------------------------------------------------------------------------
8,870,241
- ------------------------------------------------------------------------------------------------
GERMANY-3.87%
International Bank for Reconstruction &
Development (Supranational Organization),
Unsub. Global Bonds, 5.875% 11/10/03 DEM 7,000,000 4,901,952
- ------------------------------------------------------------------------------------------------
Unsub. Global Bonds, 7.125% 04/12/05 8,800,000 6,534,821
- ------------------------------------------------------------------------------------------------
11,436,773
- ------------------------------------------------------------------------------------------------
ITALY-0.32%
KFW International Finance Inc. (Finance-Consumer
Credit), Gtd. Notes, 11.625% 11/27/98 ITL 1,430,000,000 936,225
- ------------------------------------------------------------------------------------------------
Total Non-U.S. Dollar Denominated
Non-Convertible Bonds & Notes 21,243,239
- ------------------------------------------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED CONVERTIBLE BONDS &
NOTES(f)-3.27%
UNITED KINGDOM-3.27%
ELF Enterprise Finance PLC (Finance-Consumer
Credit), Gtd. Conv. Bonds, 8.75% 06/27/06 BPS 2,900,000 4,481,285
- ------------------------------------------------------------------------------------------------
Lasmo PLC (Oil Equipment & Supplies),
Conv. Deb., 7.75% 10/04/05 3,700,000 5,193,159
- ------------------------------------------------------------------------------------------------
Total Non-U.S. Dollar Denominated
Convertible Bonds & Notes 9,674,444
- ------------------------------------------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED GOVERNMENT BONDS &
NOTES(f)-10.36%
AUSTRALIA-3.98%
Australian Government,
Gtd. Deb., 9.00% 09/15/04 AUD 2,500,000 1,957,299
- ------------------------------------------------------------------------------------------------
Queensland Treasury Corp.,
Gtd. Notes, 6.50% 06/14/05 10,400,000 6,786,437
- ------------------------------------------------------------------------------------------------
Western Australia Treasury Corp.,
Gtd. Notes, 9.00% 04/15/99 3,900,000 3,017,470
- ------------------------------------------------------------------------------------------------
11,761,206
- ------------------------------------------------------------------------------------------------
CANADA-0.90%
New Brunswick (Province of),
Deb., 8.94% 01/15/05 CAD 3,500,000 2,662,486
- ------------------------------------------------------------------------------------------------
DENMARK-0.98%
Kingdom of Denmark,
Deb., 8.00% 11/15/01 DKK 15,000,000 2,895,722
- ------------------------------------------------------------------------------------------------
FRANCE-1.05%
French Treasury Bill,
Notes, 5.75% 11/12/98 FRF 15,000,000 3,094,649
- ------------------------------------------------------------------------------------------------
GERMANY-3.45%
Bundesrepublik Deutschland,
Deb., 6.75% 07/15/04 DEM 5,250,000 3,846,462
- ------------------------------------------------------------------------------------------------
Deb., 6.875% 05/12/05 8,600,000 6,349,731
- ------------------------------------------------------------------------------------------------
10,196,193
- ------------------------------------------------------------------------------------------------
Total Non-U.S. Dollar Denominated
Government Bonds & Notes 30,610,256
- ------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE> 13
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
EQUITY SECURITIES-0.16%
COMMON STOCKS-0.15%
UTILITIES-0.15%
National Power PLC-ADR 24,300 $ 224,775
- ------------------------------------------------------------------------------------------------
PowerGen PLC-ADR 17,300 227,063
- ------------------------------------------------------------------------------------------------
Total Common Stocks 451,838
- ------------------------------------------------------------------------------------------------
WARRANTS-0.01%
LEISURE & RECREATION-0.01%
IHF Holdings-Wt., expiring 11/14/99(g) 1,200 30,000
- ------------------------------------------------------------------------------------------------
STEEL-0.00%
Gulf States Steel Corp.-Wt., expiring
04/15/03(g) 1,360 6,800
- ------------------------------------------------------------------------------------------------
Total Warrants 36,800
- ------------------------------------------------------------------------------------------------
Total Equity Securities 488,638
- ------------------------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL
MATURITY AMOUNT
<S> <C> <C> <C>
U.S. TREASURY SECURITIES-13.33%
U.S. Treasury Notes, 6.50% 04/30/99 $ 38,000,000 39,396,500
- ------------------------------------------------------------------------------------------------
Total U.S. Treasury Securities 39,396,500
- ------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT(h)-0.25%
Daiwa Securities America, Inc. 5.92%(i) 01/02/96 733,341 733,341
- ------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS-97.88% 289,316,731
- ------------------------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-2.12% 6,266,965
- ------------------------------------------------------------------------------------------------
NET ASSETS-100.00% $295,583,696
================================================================================================
</TABLE>
Notes to Schedule of Investments:
(a) Principal amount is in U.S. Dollars, except as indicated by note (f).
(b) Discounted bond at purchase. Interest rate represents coupon rate at
which the bond will accrue at a specified future date.
(c) Issued as a unit. This unit consists of $1,000,000 Sr. Notes plus 3
warrants to purchase one share of common stock each at $11.55 per share.
(d) Restricted securities. May be resold to qualified institutional buyers in
accordance with provisions of Rule 144A under the Securities Act of 1933,
as amended. The valuation of these securities has been determined in
accordance with procedures established by the Board of Trustees. The
aggregate market value of these securities at December 31, 1995 was
$13,672,319 which represented 4.63% of the Fund's net assets.
(e) Issued as a unit. This unit consists of ten $1,000,000 Sr. Disc. Notes
plus 33 warrants to purchase shares of common stock.
(f) Foreign denominated security. Par value and coupon are denominated in
currency of country indicated.
(g) Non-income producing security acquired as part of a unit with or in
exchange for other securities.
(h) Collateral on repurchase agreements, including the Fund's pro-rata
interest in joint repurchase agreements, is taken into possession by the
Fund upon entering into the repurchase agreement. The collateral is
marked to market daily to ensure its market value as being 102% of the
sales price of the repurchase agreement. The investments in some
repurchase agreements are through participation in joint accounts with
other mutual funds managed by the investment advisor.
(i) Joint repurchase agreement entered into 12/29/95 with a maturing value of
$646,679,181. Collateralized by $537,995,000 U.S. Treasury obligations,
7.875% to 11.25% due 11/15/07 to 02/15/15.
<TABLE>
<CAPTION>
Abbreviations:
<S> <C> <C>
AUD - Australian Dollar Disc. - Discounted Sec. - Secured
BPS - British Pound Sterling DKK - Danish Krone Sr. - Senior
CAD - Canadian Dollar FRF - French Franc Sub. - Subordinated
Conv. - Convertible Gtd. - Guaranteed Unsub. - Unsubordinated
Deb. - Debentures ITL - Italian Lire Wt. - Warrant
DEM - German Deutschemark Pfd. - Preferred
</TABLE>
See Notes to Financial Statements.
11
<PAGE> 14
Financials
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $277,224,608) $289,316,731
- ---------------------------------------------------------------------------------------
Foreign currencies, at market value (cost $299,615) 302,561
- ---------------------------------------------------------------------------------------
Receivables for:
Forward contracts 105,029
- ---------------------------------------------------------------------------------------
Fund shares sold 991,585
- ---------------------------------------------------------------------------------------
Interest 6,013,360
- ---------------------------------------------------------------------------------------
Investment for deferred compensation plan 67,591
- ---------------------------------------------------------------------------------------
Other assets 44,789
- ---------------------------------------------------------------------------------------
Total assets 296,841,646
- ---------------------------------------------------------------------------------------
LIABILITIES:
Payables for:
Fund shares reacquired 251,222
- ---------------------------------------------------------------------------------------
Dividends to shareholders 497,048
- ---------------------------------------------------------------------------------------
Deferred compensation plan 67,591
- ---------------------------------------------------------------------------------------
Accrued advisory fees 114,823
- ---------------------------------------------------------------------------------------
Accrued distribution fees 191,505
- ---------------------------------------------------------------------------------------
Accrued administrative service fees 12,413
- ---------------------------------------------------------------------------------------
Accrued transfer agent fees 39,684
- ---------------------------------------------------------------------------------------
Accrued trustees' fees 1,800
- ---------------------------------------------------------------------------------------
Accrued operating expenses 81,864
- ---------------------------------------------------------------------------------------
Total liabilities 1,257,950
- ---------------------------------------------------------------------------------------
Net assets applicable to shares outstanding $295,583,696
=======================================================================================
NET ASSETS:
Class A $251,279,503
=======================================================================================
Class B $44,304,193
=======================================================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE
Class A 30,771,741
=======================================================================================
Class B 5,434,354
=======================================================================================
CLASS A:
Net asset value and redemption price per share $ 8.17
=======================================================================================
Offering price per share:
(Net asset value of $8.17 divided by 95.25%) $ 8.58
=======================================================================================
CLASS B:
Net asset value and offering price per share $ 8.15
=======================================================================================
</TABLE>
See Notes to Financial Statements.
12
<PAGE> 15
Financials
STATEMENT OF OPERATIONS
For the year ended December 31, 1995
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $20,643,014
- ----------------------------------------------------------------------------------------
Dividends 112,212
- ----------------------------------------------------------------------------------------
Total investment income 20,755,226
- ----------------------------------------------------------------------------------------
EXPENSES:
Advisory fees 1,176,249
- ----------------------------------------------------------------------------------------
Custodian fees 68,276
- ----------------------------------------------------------------------------------------
Distribution fees -- Class A 550,802
- ----------------------------------------------------------------------------------------
Distribution fees -- Class B 237,414
- ----------------------------------------------------------------------------------------
Trustees' fees 6,846
- ----------------------------------------------------------------------------------------
Transfer agent fees -- Class A 265,784
- ----------------------------------------------------------------------------------------
Transfer agent fees -- Class B 39,720
- ----------------------------------------------------------------------------------------
Administrative service fees 82,185
- ----------------------------------------------------------------------------------------
Other 171,661
- ----------------------------------------------------------------------------------------
Total expenses 2,598,937
- ----------------------------------------------------------------------------------------
Net investment income 18,156,289
- ----------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES, FOREIGN
CURRENCIES AND FORWARD CONTRACT TRANSACTIONS:
Net realized gain (loss) from:
Investment securities 8,393,768
- ----------------------------------------------------------------------------------------
Foreign currencies 1,752,428
- ----------------------------------------------------------------------------------------
Forward contracts (274,598)
- ----------------------------------------------------------------------------------------
9,871,598
- ----------------------------------------------------------------------------------------
Unrealized appreciation of:
Investment securities 21,219,140
- ----------------------------------------------------------------------------------------
Foreign currencies 75,365
- ----------------------------------------------------------------------------------------
Forward contracts 140,338
- ----------------------------------------------------------------------------------------
21,434,843
- ----------------------------------------------------------------------------------------
Net realized and unrealized gain from investment securities, foreign
currencies and forward contract transactions 31,306,441
- ----------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $49,462,730
========================================================================================
</TABLE>
See Notes to Financial Statements.
13
<PAGE> 16
Financials
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
OPERATIONS:
Net investment income $ 18,156,289 $ 17,083,355
- ---------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies and forward contract transactions 9,871,598 (18,454,102)
- ---------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities, foreign currencies and forward contract
transactions 21,434,843 (18,072,358)
- ---------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 49,462,730 (19,443,105)
- ---------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (16,600,806) (14,029,228)
- ---------------------------------------------------------------------------------------------
Class B (1,555,483) (478,570)
- ---------------------------------------------------------------------------------------------
Distributions in excess of net investment income:
Class A (889,987) --
- ---------------------------------------------------------------------------------------------
Class B (95,903) --
- ---------------------------------------------------------------------------------------------
Distributions to shareholders from capital:
Class A -- (3,123,648)
- ---------------------------------------------------------------------------------------------
Class B -- (122,674)
- ---------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on
investment securities:
Class A -- (360,558)
- ---------------------------------------------------------------------------------------------
Class B -- (20,562)
- ---------------------------------------------------------------------------------------------
Share transactions-net:
Class A 22,105,318 (6,155,618)
- ---------------------------------------------------------------------------------------------
Class B 29,160,108 9,961,208
- ---------------------------------------------------------------------------------------------
Net increase (decrease) in net assets 81,585,977 (33,772,755)
- ---------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 213,997,719 247,770,474
- ---------------------------------------------------------------------------------------------
End of period $295,583,696 $213,997,719
=============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $290,272,299 $239,006,873
- ---------------------------------------------------------------------------------------------
Undistributed net investment income 846,817 (60,059)
- ---------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from sales of
investment securities, foreign currencies and forward
contract transactions (7,799,206) (15,778,038)
- ---------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities, foreign currencies and forward contract
transactions 12,263,786 (9,171,057)
- ---------------------------------------------------------------------------------------------
$295,583,696 $213,997,719
=============================================================================================
</TABLE>
See Notes to Financial Statements.
14
<PAGE> 17
Financials
NOTES TO FINANCIAL STATEMENTS
December 31, 1995
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Income 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 two different classes of shares: the Class A shares and the
Class B shares. Class A shares are sold with a front-end sales charge. Class B
shares are sold with a contingent deferred sales charge. Matters affecting each
portfolio or class will be voted on exclusively by the shareholders of such
portfolio or class. The assets, liabilities and operations of each portfolio are
accounted for separately. The Fund's investment objective is to seek to achieve
a high level of current income consistent with reasonable concern for safety of
principal by investing primarily in fixed rate corporate debt and U.S.
Government obligations. Information presented in these financial statements
pertains only to the Fund.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements. 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.
A. Security Valuations - Non-convertible bonds and notes 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 institution-size trading
in similar groups of securities, developments related to special securities,
yield, quality, coupon rate, maturity, type of issue, individual trading
characteristics and other market data. Investment securities for which prices
are not provided by the pricing service and which are listed or traded on an
exchange (except convertible bonds) are valued at the last sales price on the
exchange where the security is principally traded or, lacking any sales on a
particular day, at the mean between the closing bid and asked prices on that
day unless the Board of Trustees, or persons designated by the Board of
Trustees, determines that the over-the-counter quotations more closely
reflect the current market value of the security. Exchange listed convertible
bonds are valued based at the mean between the closing bid and asked prices
obtained from a broker-dealer. Securities traded in the over-the-counter
market, except (i) securities priced by the pricing service, (ii) securities
for which representative exchange prices are available, and (iii) securities
reported in the NASDAQ National Market System, are valued at the mean between
representative last bid and asked prices obtained from an electronic
quotation reporting system, if such prices are available, or from established
market makers. Each security reported in the NASDAQ National Market System is
valued at the last sales price on the valuation date or absent a last sales
price, at the mean of the closing bid and asked prices. 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. Generally, trading
in foreign securities is substantially completed each day at various times
prior to the close of the New York Stock Exchange. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the New York Stock Exchange.
Occasionally, events affecting the values of such securities and such
exchange rates may occur between the times at which they are determined and
the close of the New York Stock Exchange which will not be reflected in the
computation of the Fund's net asset value. If events materially affecting the
value of such securities occur during such period, then these securities will
be valued at their fair value as determined in good faith by or under the
supervision of the Board of Trustees.
B. Foreign Currency Translations - Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollar
amounts at date of valuation. Purchases and sales of portfolio securities and
income items denominated in foreign currencies are translated into U.S.
dollar amounts on the respective dates of such transactions.
15
<PAGE> 18
Financials
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (continued)
C. Foreign Currency Contracts - A forward currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a forward contract to attempt to minimize the
risk to the Fund from adverse changes in the relationship between currencies.
The Fund may also enter into a forward contract for the purchase or sale of a
security denominated in a foreign currency in order to "lock-in" the U.S.
dollar price of that security. The Fund could be exposed to risk if
counterparties to the contracts are unable to meet the terms of their
contracts or if the value of the foreign currency changes unfavorably.
Outstanding contracts at December 31, 1995 were as follows:
<TABLE>
<CAPTION>
Contract to
Settlement ----------------------------- Unrealized
Date Receive Deliver Appreciation
--------- -------------- ---------- ------------
<S> <C> <C> <C>
01/25/96 DEM 7,800,000 $5,443,019 $ 105,029
</TABLE>
D. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income is recorded on the
ex-dividend date. Dividends to shareholders are declared daily and are paid
monthly. On December 31, 1995 $1,892,766 was reclassified from undistributed
net realized gain to undistributed net investment income as a result of
permanent book/tax differences due to the differing book/tax treatment for
foreign currency gains incurred by the Fund. Net assets of the Fund were
unaffected by the reclassification discussed above.
E. 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 $7,557,727 (which may be carried forward to offset future
taxable capital gains, if any) which expires, if not previously utilized,
through the year 2003. The Fund cannot distribute capital gains to
shareholders until the tax loss carryforwards have been utilized.
F. Expenses - Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to both
classes, e.g. advisory fees, are allocated between them.
NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays AIM an advisory fee at an annual rate of 0.50% of the
first $200 million of the Fund's average daily net assets, plus 0.40% of the
Fund's average daily net assets in excess of $200 million to and including $500
million, plus 0.35% of the Fund's average daily net assets in excess of $500
million to and including $1 billion, plus 0.30% of the Fund's average daily net
assets in excess of $1 billion. This agreement requires AIM to reduce its fees
or, if necessary, make payments to the Fund to the extent required to satisfy
any expense limitations imposed by the securities laws or regulations thereunder
of any state in which the Fund's shares are qualified for sale.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to reimburse AIM for certain administrative costs incurred in
providing accounting services to the Fund. During the year ended December 31,
1995, AIM was reimbursed $82,185 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. During the year ended December 31, 1995, the
Fund paid AFS $193,500 for such services.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A shares and the Class B shares of the Fund. The Trust has adopted Plans
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A
shares (the "Class A Plan") and with respect to the Fund's Class B shares (the
"Class B Plan") (collectively, the "Plans"). The Fund, pursuant to the Class A
Plan, pays AIM Distributors compensation at an annual rate of 0.25% of the
average daily net assets attributable to the Class A shares. The Class A Plan is
designed to compensate AIM Distributors for certain promotional and other sales
related costs and which provides periodic payments to selected dealers and
financial
16
<PAGE> 19
Financials
NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES (continued)
institutions who furnish continuing personal shareholder services to their
customers who purchase and own Class A shares of the Fund. The Fund, pursuant to
the Class B Plan, pays AIM Distributors compensation at an annual rate of 1.00%
of the average daily net assets attributable to the Class B shares. Of this
amount, the Fund may pay a service fee of 0.25% of the average daily net assets
of the Class B shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
Class B shares of the Fund. Any amounts not paid as a service fee under such
Plans would constitute an asset-based sales charge. AIM Distributors may, from
time to time, assign, transfer or pledge to one or more assignees, its rights to
all or a portion of (a) compensation received by AIM Distributors from the Fund
pursuant to the Class B Plan (but not AIM Distributors' duties and obligations
pursuant to the Class B Plan) and (b) any contingent deferred sales charges
payable to AIM Distributors related to the Class B shares. 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 year ended December 31, 1995, the
Class A shares and the Class B shares paid AIM Distributors $550,802 and
$237,414, respectively, as compensation under the Plans.
AIM Distributors received commissions of $154,679 from sales of the Class A
shares of the Fund during the year ended December 31, 1995. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended December 31, 1995,
AIM Distributors received $48,320 in contingent deferred sales charges imposed
on redemptions of Fund shares. Certain officers and trustees of the Trust are
officers and directors of AIM, AIM Distributors and AFS.
During the year ended December 31, 1995 the Fund paid legal fees of $3,278
for services rendered by Kramer, Levin, Naftalis, Nessen, Kamin & Frankel as
counsel to the Board of Trustees. A member of that firm is a trustee of the
Trust.
NOTE 3 - TRUSTEES' FEES
Trustees' fees represent remuneration paid or accrued to each trustee who is not
an "interested person" of AIM. The Trust may invest trustees' fees, if so
elected by a trustee, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4 - BANK BORROWINGS
The Fund has a $4,000,000 committed line of credit with a financial institution
syndicate with Chemical Bank of New York as the administrative agent. Interest
on borrowings under the line of credit is payable on maturity or prepayment
date. During the period July 20, 1995 (effective date of line of credit
agreement) through December 31, 1995, the Fund did not borrow under the line of
credit agreement. The Fund is charged a commitment fee, payable quarterly, at
the rate of 1/10 of 1% per annum on the unused balance of the Fund's committed
line.
NOTE 5 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended December 31, 1995 was
$596,557,985 and $526,613,903, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
on a tax basis as of December 31, 1995 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $14,468,630
- ------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (2,376,507)
- ------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities $12,092,123
====================================================================================
</TABLE>
Investments have the same cost for tax and financial statement purposes.
17
<PAGE> 20
Financials
NOTE 6 - SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 1995 and 1994
were as follows:
<TABLE>
<CAPTION>
1995 1994
---------------------- ----------------------
SHARES VALUE SHARES VALUE
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Sold:
Class A 7,497,108 $58,558,530 4,265,341 $33,272,800
- ----------------------------------------------------------------------------------- ----------------------
Class B 4,199,186 32,900,136 1,696,358 13,014,930
- ----------------------------------------------------------------------------------- ----------------------
Issued as reinvestment of dividends:
Class A 1,859,312 14,431,705 1,895,928 14,388,718
- ----------------------------------------------------------------------------------- ----------------------
Class B 131,455 1,024,904 54,029 403,397
- ----------------------------------------------------------------------------------- ----------------------
Reacquired:
Class A (6,603,107) (50,884,917) (7,025,819) (53,817,136)
- ----------------------------------------------------------------------------------- ----------------------
Class B (611,547) (4,764,932) (462,198) (3,457,119)
- ----------------------------------------------------------------------------------- ----------------------
6,472,407 $51,265,426 423,639 $ 3,805,590
=================================================================================== ======================
</TABLE>
NOTE 7 - FINANCIAL HIGHLIGHTS
Shown below are the condensed financial highlights for a Class A share
outstanding for each of the years in the ten-year period ended December 31, 1995
and for a Class B share outstanding for each of the years in the two-year period
ended December 31, 1995, and the period September 7, 1993 (date sales commenced)
through December 31, 1993.
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------------------------------------------
CLASS A: 1995 1994 1993 1992(a) 1991 1990 1989
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 7.20 $ 8.45 $ 8.03 $ 8.07 $ 7.41 $ 7.80 $ 7.53
- --------------------------------- -------- -------- -------- -------- -------- -------- --------
Income from investment
operations:
Net investment income 0.58 0.58 0.60 0.60 0.61 0.65 0.66
- --------------------------------- -------- -------- -------- -------- -------- -------- --------
Net gains (losses) on securities
(both realized and unrealized) 1.00 (1.22) 0.61 (0.03) 0.66 (0.39) 0.32
- --------------------------------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations 1.58 (0.64) 1.21 0.57 1.27 0.26 0.98
- --------------------------------- -------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment
income (0.61) (0.49) (0.60) (0.61) (0.61) (0.65) (0.71)
- --------------------------------- -------- -------- -------- -------- -------- -------- --------
Distributions from net realized
capital gains -- (0.01) (0.19) -- -- -- --
- --------------------------------- -------- -------- -------- -------- -------- -------- --------
Distributions from capital -- (0.11) -- -- -- -- --
- --------------------------------- -------- -------- -------- -------- -------- -------- --------
Total distributions (0.61) (0.61) (0.79) (0.61) (0.61) (0.65) (0.71)
- --------------------------------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of period $ 8.17 $ 7.20 $ 8.45 $ 8.03 $ 8.07 $ 7.41 $ 7.80
================================= ======== ======== ======== ======== ======== ======== ========
Total return(b) 22.77% (7.65)% 15.38% 7.42% 18.00% 3.65% 13.56%
================================= ======== ======== ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $251,280 $201,677 $244,168 $218,848 $231,798 $215,987 $229,222
================================= ======== ======== ======== ======== ======== ======== ========
Ratio of expenses to average net
assets 0.98%(c) 0.98% 0.98% 0.99%(d) 1.00%(d) 1.00% 0.96%
================================= ======== ======== ======== ======== ======== ======== ========
Ratio of net investment income to
average net assets 7.52%(c) 7.53% 7.01% 7.54%(d) 7.97%(d) 8.73% 8.56%
================================= ======== ======== ======== ======== ======== ======== ========
Portfolio turnover rate 227% 185% 99% 82% 67% 106% 222%
================================= ======== ======== ======== ======== ======== ======== ========
<CAPTION>
CLASS A: 1988 1987 1986
-------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of
period $ 7.55 $ 8.20 $ 7.53
- --------------------------------- -------- -------- --------
Income from investment
operations:
Net investment income 0.68 0.67 0.71
- --------------------------------- -------- -------- --------
Net gains (losses) on securities
(both realized and unrealized) (0.02) (0.63) 0.60
- --------------------------------- -------- -------- --------
Total from investment
operations 0.66 0.04 1.31
- --------------------------------- -------- -------- --------
Less distributions:
Dividends from net investment
income (0.68) (0.69) (0.64)
- --------------------------------- -------- -------- --------
Distributions from net realized
capital gains -- -- --
- --------------------------------- -------- -------- --------
Distributions from capital -- -- --
- --------------------------------- -------- -------- --------
Total distributions (0.68) (0.69) (0.64)
- --------------------------------- -------- -------- --------
Net asset value, end of period $ 7.53 $ 7.55 $ 8.20
================================= ======== ======== ========
Total return(b) 9.01% 0.56% 18.04%
================================= ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $218,946 $237,466 $273,121
================================= ======== ======== ========
Ratio of expenses to average net
assets 0.95% 0.84% 0.82%
================================= ======== ======== ========
Ratio of net investment income to
average net assets 8.81% 8.64% 8.93%
================================= ======== ======== ========
Portfolio turnover rate 361% 195% 85%
================================= ======== ======== ========
</TABLE>
(a) The Fund changed investment advisors on June 30, 1992.
(b) Does not deduct sales charges.
(c) Ratios are based on average net assets of $220,320,889.
(d) After waiver of advisory fees and expense reimbursements. Ratios of expenses
to average net assets prior to waiver of advisory fees and expense
reimbursements were 1.00% and 1.03% for 1992-1991, respectively. Ratios of
net investment income to average net assets prior to waiver of advisory fees
and expense reimbursements were 7.53% and 7.94% for 1992-1991, respectively.
18
<PAGE> 21
Financials
NOTE 7 - FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------
CLASS B: 1995 1994 1993
-------- ------- ------
<S> <C> <C> <C>
Net asset value, beginning of period $ 7.18 $ 8.43 $ 8.95
- ------------------------------------------------------------------------------------------- -------- ------- ------
Income from investment operations:
Net investment income 0.53 0.52 0.19
- ------------------------------------------------------------------------------------------- -------- ------- ------
Net gains (losses) on securities (both realized and unrealized) 0.98 (1.23) (0.34)
- ------------------------------------------------------------------------------------------- -------- ------- ------
Total from investment operations 1.51 (0.71) (0.15)
- ------------------------------------------------------------------------------------------- -------- ------- ------
Less distributions:
Dividends from net investment income (0.54) (0.42) (0.18)
- ------------------------------------------------------------------------------------------- -------- ------- ------
Distributions from net realized capital gains -- (0.01) (0.19)
- ------------------------------------------------------------------------------------------- -------- ------- ------
Distributions from capital -- (0.11) --
- ------------------------------------------------------------------------------------------- -------- ------- ------
Total distributions (0.54) (0.54) (0.37)
- ------------------------------------------------------------------------------------------- -------- ------- ------
Net asset value, end of period $ 8.15 $ 7.18 $ 8.43
=========================================================================================== ======== ======= ======
Total return(a) 21.72% (8.46)% (0.75)%
=========================================================================================== ======== ======= ======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $44,304 $12,321 $3,602
=========================================================================================== ======== ======= ======
Ratio of expenses to average net assets 1.79%(b) 1.83%(c) 1.75%(c)
=========================================================================================== ======== ======= ======
Ratio of net investment income to average net assets 6.71%(b) 6.69%(c) 6.24%(c)
=========================================================================================== ======== ======= ======
Portfolio turnover rate 227 % 185% 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 $23,741,406.
(c) After expense reimbursements. Ratios of expenses to average net assets prior
to expense reimbursements were 2.04% and 2.50% (annualized) for 1994 and
1993, respectively. Ratios of net investment income to average net assets
prior to expense reimbursements were 6.48% and 5.49% (annualized) for 1994
and 1993, respectively.
19
<PAGE> 22
INDEPENDENT AUDITORS' REPORT
To the Board of Trustees and Shareholders of
AIM Income Fund:
We have audited the accompanying statement of assets and liabilities of AIM
Income Fund (a portfolio of AIM Funds Group), including the schedule of
investments, as of December 31, 1995, and the related statement of operations
for the year then ended, the statement of changes in 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 three-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, 1995, by correspondence with the custodian. 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
Income Fund as of December 31, 1995, 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
three-year period then ended, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Houston, Texas
February 7, 1996
20
<PAGE> 23
Trustees & Officers
<TABLE>
<CAPTION>
BOARD OF TRUSTEES OFFICERS OFFICE OF THE FUND
<S> <C> <C>
Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
Chairman and Chief Executive Officer Chairman Suite 1919
A I M Management Group Inc. Houston, TX 77046
Robert H. Graham
Bruce L. Crockett President INVESTMENT ADVISOR
Director, President, and
Chief Executive Officer John J. Arthur A I M Advisors, Inc.
COMSAT Corporation Senior Vice President and Treasurer 11 Greenway Plaza
Suite 1919
Owen Daly II Gary T. Crum Houston, TX 77046
Director Senior Vice President
Cortland Trust Inc. TRANSFER AGENT
Carol F. Relihan
Carl Frischling Vice President and Secretary A I M Fund Services, Inc.
Partner P.O. Box 4739
Kramer, Levin, Naftalis, Nessen, Dana R. Sutton Houston, TX 77210-4739
Kamin & Frankel Vice President and Assistant Treasurer
CUSTODIAN
Robert H. Graham Robert G. Alley
President and Chief Operating Officer Vice President State Street Bank & Trust Co.
A I M Management Group Inc. 225 Franklin Street
Stuart W. Coco Boston, MA 02110
John F. Kroeger Vice President
Formerly, Consultant COUNSEL TO THE FUND
Wendell & Stockel Associates, Inc. Melville B. Cox
Vice President Ballard Spahr
Lewis F. Pennock Andrews & Ingersoll
Attorney Karen Dunn Kelley 1735 Market Street
Vice President Philadelphia, PA 19103
Ian W. Robinson
Consultant; Former Executive Jonathan C. Schoolar COUNSEL TO THE TRUSTEES
Vice President and Vice President
Chief Financial Officer Kramer, Levin, Naftalis,
Bell Atlantic Management David L. Kite Nessen, Kamin & Frankel
Services, Inc. Assistant Secretary 919 Third Avenue
New York, NY 10022
Louis S. Sklar P. Michele Grace
Executive Vice President Assistant Secretary DISTRIBUTOR
Hines Interests
Limited Partnership Nancy L. Martin A I M Distributors, Inc.
Assistant Secretary 11 Greenway Plaza
Suite 1919
Ofelia M. Mayo Houston, TX 77046
Assistant Secretary
AUDITORS
Kathleen J. Pflueger
Assistant Secretary KPMG Peat Marwick LLP
700 Louisiana
Samuel D. Sirko NationsBank Bldg.
Assistant Secretary Houston, TX 77002
Stephen I. Winer
Assistant Secretary
Mary J. Benson
Assistant Treasurer
</TABLE>
REQUIRED FEDERAL INCOME TAX INFORMATION
AIM Income Fund Class A and Class B shares paid ordinary dividends in the
amounts of $0.613 and $0.542 per share, respectively, to shareholders
during the Fund's tax year ended December 31, 1995.
REQUIRED STATE INCOME TAX INFORMATION
Of the total income dividends paid, 9.08% for both Class A and Class B
shares was derived from U.S. Treasury obligation.
<PAGE> 24
<TABLE>
<CAPTION>
[PHOTO OF 11 GREENWAY PLAZA] THE AIM FAMILY OF FUNDS(R)
<S> <C>
AGGRESSIVE GROWTH
AIM Aggressive Growth Fund*
AIM Constellation Fund
AIM Global Aggressive Growth Fund
GROWTH
AIM Global Growth Fund
AIM Growth Fund
AIM International Equity Fund
AIM Value Fund
AIM Weingarten Fund
GROWTH AND INCOME
AIM Balanced Fund
AIM Charter Fund
INCOME AND GROWTH
AIM Global Utilities Fund**
HIGH CURRENT INCOME
AIM High Yield Fund
CURRENT INCOME
AIM Global Income Fund
AIM Income Fund
CURRENT TAX-FREE INCOME
AIM Municipal Bond Fund
AIM Tax-Exempt Bond Fund of CT
AIM Tax-Free Intermediate Shares
CURRENT INCOME AND HIGH DEGREE
OF SAFETY
AIM Intermediate Government Fund***
HIGH DEGREE OF SAFETY AND
CURRENT INCOME
AIM Limited Maturity Treasury Shares
STABILITY, LIQUIDITY, AND
CURRENT INCOME
AIM Money Market Fund
STABILITY, LIQUIDITY, AND
CURRENT TAX-FREE INCOME
AIM Tax-Exempt Cash Fund
*AIM Aggressive Growth Fund was closed
to new investors on July 18, 1995.
**On May 1, 1995, AIM Utilities Fund
broadened its investment strategy to
permit up to 80% of its total assets
AIM Management Group has provided leadership to be invested in foreign securities,
in the mutual fund industry since 1976 and and was renamed AIM Global Utilities
currently manages approximately $42 billion Fund. ***On September 25, 1995, AIM
in assets for more than 2 million shareholders, Government Securities Fund was renamed
including individual investors, corporate clients, AIM Intermediate Government Fund. For
and financial institutions. The AIM Family of more complete information about any
Funds(R) is distributed nationwide, and AIM AIM Fund(s), including sales charges
today ranks among the nation's top 20 mutual and expenses, ask your financial
fund companies in assets under management, consultant or securities dealer for
according to Lipper Analytical Services, Inc. a free prospectus(es). Please read the
prospectus(es) carefully before you
invest or send money.
[AIM LOGO APPEARS HERE] ---------------
BULK RATE
A I M Distributors, Inc. U.S. POSTAGE
11 Greenway Plaza, Suite 1919 PAID
Houston, TX 77046 HOUSTON, TX
Permit No. 1919
---------------
</TABLE>
