<PAGE> 1
[FRONT COVER PHOTO OF CERTIFICATES & DESK ACCESSORIES APPEARS HERE]
AIM INCOME FUND
[AIM LOGO
APPEARS HERE] SEMIANNUAL REPORT JUNE 30, 1996
<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 PORTFOLIO DATA THROUGHOUT THIS REPORT:
o AIM Income Fund's performance figures are historical and reflect
reinvestment of all distributions and changes in net asset value.
Unless otherwise indicated, the Fund's performance is computed at net
asset value without a sales charge.
o When sales charges are included in performance figures, Class A share
performance reflects the maximum 4.75% sales charge, and Class B share
performance reflects the applicable contingent deferred sales charge
(CDSC) for the period involved. The CDSC on Class B shares declines
from 5% beginning at the time of purchase 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 due to differences in sales charge
structure and Fund expenses.
o During the six months ended 6/30/96, the Fund paid distributions for
Class A and Class B shares of $0.30 and $0.267 per share, respectively.
o The 30-day yield is calculated on the basis of a formula defined by the
SEC. The formula is based on the portfolio's potential earnings from
dividends, interest, yield-to-maturity or yield-to-call of the bonds in
the portfolio, net of all expenses and expressed on an annualized
basis.
o The Fund's investment return and principal value will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than
their original cost.
o The Fund's portfolio composition is subject to change and there is no
assurance the Fund will continue to hold any particular security.
o Past performance cannot guarantee comparable future results.
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, notes, and bonds,
offer a high degree of safety and are guaranteed as to the timely
payment of principal and interest if held to maturity. Fund shares are
not insured and their value and yield will vary with market conditions.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o The Lehman Brothers Aggregate Bond Index is an unmanaged index
generally representative of intermediate- and long-term government and
investment-grade corporate debt securities. The Lehman Brothers
Corporate Long-Term Index is an unmanaged index generally
representative of long-term investment-grade corporate debt securities.
o An investment cannot be made in any index listed. Unless otherwise
indicated, index results include reinvested dividends and do not
reflect sales charges.
MUTUAL FUNDS, ANNUITIES, AND OTHER INVESTMENTS ARE NOT INSURED BY THE FDIC OR
ANY OTHER GOVERNMENT AGENCY; ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR
GUARANTEED BY, ANY BANK OR ANY AFFILIATE; AND ARE SUBJECT TO INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
This report may be distributed only to current shareholders or to persons
who have received a current prospectus of the Fund.
<PAGE> 3
The Chairman's Letter
Dear Fellow Shareholder:
During periods of market volatility, I am reminded of a
story. When asked what the market was going to do, J.P.
[PHOTO OF Morgan reportedly replied, "It will fluctuate." Fixed-income
Charles T. Bauer investors can certainly agree with that statement: Bond
Chairman of markets have undergone major shifts in momentum at least
the Board of twice in the first six months of 1996 as investors worried
the Fund first about the possibility of recession and then about
APPEARS HERE] rising inflation.
Those of you who are long-time investors, and those who
are brand-new shareholders in The AIM Family of
Funds--Registered Trademark--, should recognize that periods of falling prices
in both the stock and bond markets are inevitable. Indeed, we can learn
important lessons about investing in periods of market uncertainty.
In our experience, we have observed that the best action to take is to stay
focused--not on the market, but on your own long-term goals. The market can
change from day to day. Those who try to "time" the market, over time, tend to
be less successful than those who continue to follow a disciplined investment
strategy.
Short-term volatility in financial markets may tempt some investors to
liquidate stock and bond investments, regardless of their personal financial
objectives. Remember that time is the best medicine for uncertain markets. The
market's performance in recent months has been driven by concerns about
the possibility of an overheated economy and rising inflation. However, the
latest economic data suggest conditions that prompted 1995's strong market
performance should continue: Corporate earnings are healthy and economic growth
is moderate, without significant inflation.
You may cushion the effects of changing markets and reduce your risk
exposure in any one type of security by diversification--spreading your assets
across several kinds of investments. Prudent investors maintain a balanced
portfolio of stock and bond investments, with due consideration for their
personal financial objectives, risk tolerance, and investment time horizon.
There is one constant you can count on, regardless of changing markets--
AIM's commitment to you, our shareholders. At AIM, we take our responsibility
to you very seriously in managing a well-conceived and significantly
diversified menu of mutual funds. AIM investment management teams provide a
blend of skills, education, experience, and maturity that produces a balanced,
thoughtful approach to decision-making and quality investment products.
Consistent performance, coupled with outstanding customer service and a highly
professional staff, has helped AIM build relationships with 3 million
shareholders over the past 20 years.
Thank you for continuing to rely on AIM Income Fund. If you have any
questions or comments about this report, please call Client Services at
800-959-4246 during normal business hours. For automated account information 24
hours a day, call the AIM Investor Line toll-free at 800-246-5463.
Respectfully submitted,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
----------------------
...the best action
to take
is to stay focused--
not on the market,
but on
your own
long-term goals.
----------------------
<PAGE> 4
The Manager's Overview
PORTFOLIO DIVERSIFICATION A KEY
INVESTMENT STRATEGY
A roundtable discussion with the Fund management team for AIM Income Fund about
the six-month reporting period ended June 30, 1996.
- --------------------------------------------------------------------------------
Q: HOW DID AIM INCOME FUND PERFORM DURING THE SIX MONTHS ENDED JUNE 30?
A: The Fund continued to produce very attractive income for shareholders.
As June ended, the Fund's 30-day SEC yield was 6.69% for Class A shares
and 6.23% for Class B Shares. This compares quite favorably with the
6.11% yield of two-year U.S. Treasury notes and the 6.71% yield on
five-year U.S. Treasury notes.
However, the six-month period covered by this report was a difficult
one in the bond markets. Interest rates began to rise, which depressed
the entire bond market by putting pressure on the value of outstanding
bonds. The Fund's total return, which takes account of both yield and
changes in the market value of the underlying securities, was -0.46%
for Class A shares and -0.88% for Class B shares for the six-month
reporting period.
This is consistent with bond market performance in general. During
the reporting period, total return for the Lehman Brothers Aggregate
Bond Index was -1.21%. While the Fund was able to produce very
attractive income, total return suffered from rising interest rates.
Q: WHY DID INTEREST RATES BEGIN TO RISE?
A: Investors began to worry about inflation as economic growth became more
vigorous.
The U.S. economy had slowed to a feeble annual growth rate of 0.5%
during the fourth quarter of 1995. That began to turn around early this
year. The rate of growth improved to 2.0% during the first quarter of
1996. During the second-quarter of 1996, the economy grew at an
annualized 4.2% rate, first reports on growth showed.
Bond markets feared that this faster economic growth would bring
higher inflation in its wake, so bond investors demanded higher
interest rates on their investments. For instance, a 10-year U.S.
Treasury note was yielding 5.57% at the start of the year. By the end
of June, that yield was up to 6.71%.
Q: WHAT CHANGES WERE MADE IN THE FUND'S PORTFOLIO IN RESPONSE TO THIS
TURNAROUND IN THE INTEREST RATE ENVIRONMENT?
A: We modified the proportions of the three fixed-income sectors in which
the Fund invests.
The Fund invests in high-grade domestic bonds, some government but
mostly corporate; high-yield bonds, sometimes called junk bonds; and
foreign bonds--bonds not denominated in U.S. dollars. As interest rates
rose, we took advantage by investing in securities offering more
attractive yields.
Q: WHY DOES THE FUND INVEST IN THREE DIFFERENT SECTORS?
A: It's a diversification strategy. Different types of bonds behave
differently from one another. Over the long term, we believe holding
all three types may lower volatility and enhance returns compared with
what we could expect from holding only one type of security.
Q: WHAT AFFECTS THE HIGH-GRADE DOMESTIC BOND SECTOR OF THE FUND'S
PORTFOLIO?
A: The strongest influence on high-grade domestic bonds is the general
level of interest rates, which is largely determined by the general
level of economic activity. A rapidly
-----------------------
As interest rates rose,
we took advantage
by investing
in securities
offering more
attractive yields.
-----------------------
2
<PAGE> 5
growing economy triggers concern about inflation. This is why bond
markets often react so adversely to good news about the economy, a
reaction that may seem paradoxical to some. Investors in high-grade
bonds demand higher yields to protect them from inflation's negative
impact on their income. This, in turn, exerts downward pressure on the
value of outstanding bonds.
Because interest rates were rising during much of the six-month
reporting period, we reduced the proportion of high-grade domestic
bonds from 71% to 63%.
Q: HOW DO HIGH-YIELD BONDS REACT TO ACCELERATING ECONOMIC GROWTH?
A: A lively economy may improve the credit situation of a company issuing
high-yield bonds, so investors in high-yield bonds have fewer concerns
about a bond's quality. Therefore, they may settle for lower yields,
which increases the value of these bonds.
In an improving economy, U.S. high-yield bonds performed well during
the six months covered by this report, and Fund managers increased the
proportion of high-yield bonds in the portfolio from 29% to 31%.
Q: WHAT DO FOREIGN BONDS CONTRIBUTE TO THIS MIX?
A: Foreign bonds-those not denominated in U.S. dollars-actually have two
components of return: the foreign bond itself and the currency in which
it is denominated. These bonds respond to changes in their local
economies just as domestic bonds respond to changes in the U.S.
economy. In addition, yields and values change as the value of the U.S.
dollar changes in relation to the currency in which the bond is
denominated. All this increases the Fund's diversification.
Most foreign bond markets performed well in local currency terms
during the reporting period. Several European governments have been
trying to reduce budget deficits to comply with European Monetary Union
requirements. We took advantage of this by holding Swedish, French,
Danish, and German securities. When currency depreciation detracted
from the U.S. dollar returns of these particular markets, we hedged
some of the Fund's currency exposure to mitigate the effects.
The Fund also benefited from exposure to such markets as Australia,
where the currency strengthened relative to the U.S. dollar. Non-dollar
holdings represented approximately 27% of the portfolio at the close of
the reporting period, up from 21% six months earlier.
Q: WHEN YOU TALK ABOUT THE PORTFOLIO'S FOREIGN BONDS, ARE YOU TALKING
ABOUT SO-CALLED "EMERGING MARKETS?"
A: No. We hold very few securities of governments of, or firms located in,
nations that are just starting to adopt or develop free markets.
This is a conservatively managed fund, and we think emerging market
debt is too volatile given the Fund's investment objectives. Our primary
investment goal is current income, but we pursue that goal while
exercising reasonable concern for preservation of principal. So we have
adopted a relatively conservative stance. This stance can work against
the Fund when emerging markets are performing well, as they did the
first part of this year. But we believe our caution will dampen
volatility in the long run and offer shareholders the potential of
steadier returns.
continued on page 4
=====================================================
FACTORS INFLUENCING BONDS VARY
=====================================================
TYPE OF BOND INFLUENCING FACTORS
- ------------ -------------------
High-grade domestic Level of interest rates
High-yield domestic Level of economic activity
Foreign (Non U.S.$) - Interest rates &
economic activity in
local economy
- Currency fluctuations
in relation to U.S. dollar
=====================================================
=====================================================
AVERAGE ANNUAL TOTAL RETURNS
=====================================================
For periods ended 6/30/96,
Including sales charges.
CLASS A SHARES
10 Years 7.89%
5 Years 8.48
1 Year 3.14*
CLASS B SHARES
Inception (9/1/93) 2.29%
1 Year 2.34*
*8.28% and 7.34% are one-year returns excluding
sales charges for A and B shares, respectively.
Past performance is no guarantee of comparable
future results.
=====================================================
3
<PAGE> 6
Q: WHAT IS THE OUTLOOK FOR THE FUND IN THE COMING MONTHS?
A: As the reporting period closed, there was a consensus that the U.S.
economy could expect steady growth and that inflation would remain
under control. Therefore, at its July meeting, the Federal Reserve
chose to leave short-term interest rates unchanged. This is a favorable
environment for high-grade domestic bonds. The outlook for high-yield
bonds is a bit more cautious because some second-quarter earnings
reports were not as robust as desired. Nevertheless, high-yield bonds
should benefit from a steady economy.
Overseas, such developed countries as Germany and Britain were
lowering interest rates during the reporting period because of
sluggishness in their respective economies. In Japan, despite a report
of remarkable economic growth during the first quarter of this year,
interest rates remained at unusually low levels as that country tried
to pull itself out of a prolonged recession. Foreign markets will
continue to provide opportunities for Fund diversification.
==================================================
PORTFOLIO COMPOSITION
AS OF 6/30/96.
Foreign(Non-U.S. $) 27%
Domestic 73%
TOP 5 HOLDINGS
As of 6/30/96
ISSUER COUPON MATURITY
1. Coca-Cola
Enterprises Inc. 7.24% 06/2020
2. Time Warner, Inc. 9.15% 02/2023
3. News America
Holdings 9.25% 02/2013
4. Province of Manitoba 7.75% 07/2016
5. General Motors Corp. 8.80% 03/2021
Please keep in mind that the Fund's portfolio is
subject to change and there is no assurance the
Fund will continue to hold any particular security
in any particular country.
===================================================
COUNTRIES REPRESENTED IN THE PORTFOLIO
AS OF 6/30/96
===================================================
Canada
Germany
Denmark
Sweden
Japan
Australia
Italy
Switzerland
France
Great Britain
United States
4
<PAGE> 7
For Consideration
ASSET ALLOCATION HELPS
YOU COPE WITH CHANGING MARKETS
Every mutual fund investor would like to invest in a market that only goes up--a
tide that floats all ships. The truth is, markets also decline. But market
changes do not affect all investments the same way. Some investments may
benefit from a market trend when others do not.
Market changes are not the only factors an investor must manage. There are a
number of important considerations with every investment including investment
risk, and investment risk takes many forms:
o MARKET RISK. The prices of some investments will fluctuate according to
changes in the market.
o INTEREST RATE RISK. The value of some investments, such as fixed-income
securities, will rise and fall as interest rates change.
o REINVESTMENT RISK. When interest rates fall, investors face the
possibility that investment income cannot be reinvested at higher rates
previously available.
o INFLATION RISK. Inflation can cause the value of some investments to
erode as the cost of living increases.
o CURRENCY RATE RISK. Investments valued in U.S. dollars will rise and
fall according to the dollar's value against other world currencies.
To manage these changing conditions, investors have learned to diversify
their assets across a wide variety of investments. For most investors, mutual
funds offer convenient and affordable methods to diversify their assets. For as
little as $500, an investor has access to a portfolio of hundreds of
professionally selected securities.
When you invest in more than one fund, you increase the level of
diversification. You also gain another important benefit. Since mutual funds are
managed according to specific investment objectives, such as growth or income,
you can invest in mutual funds with different investment objectives to create a
personalized investment plan which suits your unique financial objectives. This
investment strategy is called asset allocation.
Mutual fund investors tend to seek growth, or current income, or some
combination of both. Generally, investors who choose to assume more investment
risk get the potential for a higher return. With asset allocation, you can
fine-tune your investment plan to be more conservative, or more aggressive,
depending on your personal financial goals and risk tolerance.
Your financial consultant can assist you in developing an asset allocation
strategy and selecting the appropriate investments to help you meet your
long-term investment goals.
-------------------
Some investments
may benefit
from a
market trend
when others do not.
-------------------
5
<PAGE> 8
Financials
SCHEDULE OF INVESTMENTS
June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
MATURITY AMOUNT(a) VALUE
<S> <C> <C> <C>
U.S. DOLLAR DENOMINATED NON-CONVERTIBLE BONDS
& NOTES-63.57%
ADVERTISING/BROADCASTING-4.75%
Echostar Satellite Broadcasting, Sr. Disc.
Notes, 13.125%,
(acquired 05/29/96; cost $1,996,875)(b)(c) 03/15/04 $ 3,000,000 $ 1,852,500
- ------------------------------------------------------------------------------------------------
SFX Broadcasting Sr. Sub. Notes, 10.75%
(acquired 05/29/96; cost $1,002,500)(b) 05/15/06 1,000,000 992,500
- ------------------------------------------------------------------------------------------------
Time Warner Inc.,
Deb., 9.15% 02/01/23 8,500,000 8,788,490
- ------------------------------------------------------------------------------------------------
Deb., 6.85% 01/15/26 4,300,000 4,118,841
- ------------------------------------------------------------------------------------------------
15,752,331
- ------------------------------------------------------------------------------------------------
AIRLINES-2.64%
Airplanes Pass Through Trust, Sub. Bonds,
10.875% 03/15/19 2,200,000 2,293,500
- ------------------------------------------------------------------------------------------------
Delta Air Lines, Equipment Trust
Certificates, 10.50% 04/30/16 5,000,000 5,940,600
- ------------------------------------------------------------------------------------------------
Greenwich Air Services, Sr. Notes, 10.50% 06/01/06 530,000 524,700
- ------------------------------------------------------------------------------------------------
8,758,800
- ------------------------------------------------------------------------------------------------
AUTOMOBILE (MANUFACTURERS)-2.26%
General Motors Corp., Deb., 8.80% 03/01/21 6,700,000 7,508,623
- ------------------------------------------------------------------------------------------------
BANKING-1.65%
First Union Bancorp, Sub. Deb., 7.50% 04/15/35 5,300,000 5,475,112
- ------------------------------------------------------------------------------------------------
BEVERAGES-3.94%
Coca Cola Enterprises, Notes, 7.24%(c) 06/20/20 74,000,000 13,061,740
- ------------------------------------------------------------------------------------------------
CABLE TELEVISION-4.12%
CAI Wireless Systems Inc., Sr. Notes, 12.25% 09/15/02 990,000 1,034,550
- ------------------------------------------------------------------------------------------------
Comcast UK Cable, Yankee Deb., 11.20%(c) 11/15/07 5,000,000 2,887,500
- ------------------------------------------------------------------------------------------------
Fundy Cable Ltd., Yankee Bonds, 11.00% 11/15/05 410,000 414,100
- ------------------------------------------------------------------------------------------------
Marcus Cable Operating Co., Sr. Disc. Notes,
13.50%(c) 08/01/04 1,690,000 1,208,350
- ------------------------------------------------------------------------------------------------
Rifkin Acquisition Partners LP, Sr. Sub.
Notes, 11.125% 01/15/06 630,000 615,825
- ------------------------------------------------------------------------------------------------
Telewest PLC, Yankee Sr. Disc. Deb.,
11.00%(c) 10/01/07 1,100,000 649,000
- ------------------------------------------------------------------------------------------------
United International Holdings, Sr. Disc.
Notes, 12.99%(d) 11/15/99 2,000,000 1,320,000
- ------------------------------------------------------------------------------------------------
Viacom, Inc., Sr. Notes, 7.75% 06/01/05 3,650,000 3,558,823
- ------------------------------------------------------------------------------------------------
Videotron Ltd., Yankee Sr. Sub. Notes,
10.625% 02/15/05 1,000,000 1,045,000
- ------------------------------------------------------------------------------------------------
Wireless One Inc., Units, 13.00%(e) 10/15/03 890,000 921,150
- ------------------------------------------------------------------------------------------------
13,654,298
- ------------------------------------------------------------------------------------------------
CHEMICALS-0.80%
BPC Holding Corp., Sr. Notes, 12.50%,
(acquired 06/12/96; cost $1,000,000)(b) 06/15/06 1,000,000 1,012,500
- ------------------------------------------------------------------------------------------------
Crain Industries, Sr. Sub. Notes, 13.50% 08/15/05 1,070,000 1,139,550
- ------------------------------------------------------------------------------------------------
Laroche Industries, Sr. Sub. Notes, 13.00% 08/15/04 500,000 530,000
- ------------------------------------------------------------------------------------------------
2,682,050
- ------------------------------------------------------------------------------------------------
CONSUMER NON-DURABLES-0.31%
Hines Horticulture, Inc., Sr. Sub. Notes,
11.75% 10/15/05 1,000,000 1,040,000
- ------------------------------------------------------------------------------------------------
CONTAINERS-1.18%
Ivex Packaging, Sr. Sub. Notes, 12.50% 12/15/02 1,500,000 1,578,750
- ------------------------------------------------------------------------------------------------
Owens-Illinois Inc., Sr. Sub. Notes, 10.00% 08/01/02 1,000,000 1,007,500
- ------------------------------------------------------------------------------------------------
Riverwood International, Sr. Sub. Notes,
10.875% 04/01/08 1,360,000 1,339,600
- ------------------------------------------------------------------------------------------------
3,925,850
- ------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE> 9
Financials
<TABLE>
<CAPTION>
PRINCIPAL MARKET
MATURITY AMOUNT(a) VALUE
<S> <C> <C> <C>
FINANCE (CONSUMER CREDIT)-3.79%
Associates Corp., Deb., 7.95% 02/15/10 $ 6,000,000 $ 6,350,460
- ------------------------------------------------------------------------------------------------
GMAC, Notes, 9.00% 10/15/02 3,425,000 3,734,620
- ------------------------------------------------------------------------------------------------
Sea Containers, Sr. Sub. Deb., 12.50% 12/01/04 1,825,000 2,044,000
- ------------------------------------------------------------------------------------------------
Torchmark Corp., Deb., 8.625% 03/01/17 400,000 407,808
- ------------------------------------------------------------------------------------------------
12,536,888
- ------------------------------------------------------------------------------------------------
FOOD/PROCESSING-0.98%
American Rice Inc., Sec. Notes, 13.00% 07/31/02 1,830,000 1,656,150
- ------------------------------------------------------------------------------------------------
Pilgrim's Pride Corp., Sr. Sub. Notes,
10.875% 08/01/03 1,380,000 1,304,100
- ------------------------------------------------------------------------------------------------
Ralston Purina Co., Deb., 7.875% 06/15/25 300,000 296,202
- ------------------------------------------------------------------------------------------------
3,256,452
- ------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT-2.32%
Province of Manitoba, Yankee Bonds, 7.75% 07/17/16 7,500,000 7,684,800
- ------------------------------------------------------------------------------------------------
GAMING-1.44%
Aztar Corp., Sr. Sub. Notes, 11.00% 10/01/02 690,000 717,600
- ------------------------------------------------------------------------------------------------
Coast Hotel & Casino, First Mortgage Notes,
13.00%
(acquired 01/23/96; cost $1,126,566)(b) 12/15/02 1,160,000 1,258,600
- ------------------------------------------------------------------------------------------------
Showboat, Inc., First Mortgage Notes, 9.25% 05/01/08 2,000,000 2,020,000
- ------------------------------------------------------------------------------------------------
Trump Atlantic City, First Mortgage Notes,
11.25% 05/01/06 760,000 763,800
- ------------------------------------------------------------------------------------------------
4,760,000
- ------------------------------------------------------------------------------------------------
HOME BUILDING-0.22%
Continental Homes Holdings Corp., Sr. Notes,
10.00% 04/15/06 745,000 715,200
- ------------------------------------------------------------------------------------------------
HOTELS/MOTELS - 1.53%
ITT Corp. (New), Deb., 7.375% 11/15/15 3,350,000 3,149,502
- ------------------------------------------------------------------------------------------------
John Q. Hammons Hotels Inc., Gtd. First
Mortgage Notes, 9.75% 10/01/05 2,000,000 1,935,000
- ------------------------------------------------------------------------------------------------
5,084,502
- ------------------------------------------------------------------------------------------------
INSURANCE (LIFE & HEALTH) - 0.71%
American Life Holding Co., Sr. Sub. Notes,
11.25% 09/15/04 1,300,000 1,371,500
- ------------------------------------------------------------------------------------------------
Americo Life Inc., Sr. Sub. Notes, 9.25% 06/01/05 1,000,000 945,000
- ------------------------------------------------------------------------------------------------
2,316,500
- ------------------------------------------------------------------------------------------------
LEISURE & RECREATION-0.71%
Cobblestone Golf Group, Sr. Notes, 11.50%,
(acquired 05/29/96; cost $1,000,000)(b) 06/01/03 1,000,000 1,012,500
- ------------------------------------------------------------------------------------------------
Icon Health & Fitness Inc., Sr. Sub. Notes,
13.00% 07/15/02 1,200,000 1,341,000
- ------------------------------------------------------------------------------------------------
2,353,500
- ------------------------------------------------------------------------------------------------
MACHINERY (HEAVY)-2.37%
Caterpillar Inc., Deb., 9.375% 08/15/11 5,000,000 5,842,400
- ------------------------------------------------------------------------------------------------
Fairfield Manufacturing, Sr. Sub. Notes,
11.375% 07/01/01 1,000,000 1,020,000
- ------------------------------------------------------------------------------------------------
Primeco Inc., Sr. Sub. Notes, 12.75% 03/01/05 940,000 977,600
- ------------------------------------------------------------------------------------------------
7,840,000
- ------------------------------------------------------------------------------------------------
MACHINERY (MISCELLANEOUS)-1.11%
AM General Corp., Sr. Notes, 12.875% 05/01/02 1,500,000 1,548,750
- ------------------------------------------------------------------------------------------------
Interlake Corp., Sr. Notes, 12.00% 11/15/01 1,000,000 1,050,000
- ------------------------------------------------------------------------------------------------
MVE Inc., Sr. Sec. Notes, 12.50% 02/15/02 1,000,000 1,072,500
- ------------------------------------------------------------------------------------------------
3,671,250
- ------------------------------------------------------------------------------------------------
MEDICAL (INSTRUMENT/PRODUCTS)-0.48%
Dade International Inc., Sr. Sub. Notes,
11.125%,
(acquired 04/30/96; cost $530,000)(b) 05/01/06 530,000 552,525
- ------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 10
Financials
<TABLE>
<CAPTION>
PRINCIPAL MARKET
MATURITY AMOUNT(a) VALUE
<S> <C> <C> <C>
MEDICAL (INSTRUMENT/PRODUCTS)-(continued)
Graphic Controls Corp., Sr. Sub. Notes,
12.00% 09/15/05 $ 980,000 $ 1,043,700
- ------------------------------------------------------------------------------------------------
1,596,225
- ------------------------------------------------------------------------------------------------
MEDICAL (PATIENT SERVICES)-0.35%
Dynacare Inc., Yankee Sr. Notes, 10.75% 01/15/06 1,140,000 1,147,125
- ------------------------------------------------------------------------------------------------
METALS (MISCELLANEOUS)-0.72%
Rio Algom Ltd., Yankee Deb., 7.05% 11/01/05 2,500,000 2,383,500
- ------------------------------------------------------------------------------------------------
NATURAL GAS PIPELINE-3.18%
Ferrellgas Partners LP, Sr. Notes, 9.375%,
(acquired 04/23/96; cost $2,100,000)(b) 06/15/06 2,100,000 2,042,250
- ------------------------------------------------------------------------------------------------
Talisman Energy Inc., Yankee Deb., 7.125% 06/01/07 3,750,000 3,641,250
- ------------------------------------------------------------------------------------------------
Transco Energy, Deb., 9.875 06/15/20 4,000,000 4,839,720
- ------------------------------------------------------------------------------------------------
10,523,220
- ------------------------------------------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION)-3.71%
Anadarko Petroleum, Deb., 7.25% 03/15/25 5,000,000 5,114,450
- ------------------------------------------------------------------------------------------------
Benton Oil & Gas, Sr. Notes, 11.625%,
(acquired 04/29/96, cost $630,000)(b) 05/01/03 630,000 652,050
- ------------------------------------------------------------------------------------------------
HS Resources Inc., Sr. Sub. Notes, 9.875% 12/01/03 1,190,000 1,163,225
- ------------------------------------------------------------------------------------------------
Petroleum Heat & Power Co. Inc., Sub. Deb.,
12.25% 02/01/05 890,000 970,100
- ------------------------------------------------------------------------------------------------
Sun Company, Deb., 9.00% 11/01/24 4,000,000 4,402,280
- ------------------------------------------------------------------------------------------------
12,302,105
- ------------------------------------------------------------------------------------------------
OIL & GAS (INTEGRATED)-0.15%
Wainoco Oil Corp., Sr. Sub. Notes, 12.00% 08/01/02 500,000 500,000
- ------------------------------------------------------------------------------------------------
OIL & GAS (SERVICES)-0.13%
Falcon Drilling Co. Inc., Sr. Notes, 9.75% 01/15/01 410,000 418,200
- ------------------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS-0.79%
Pacific Lumber Co., Sr. Notes, 10.50% 03/01/03 600,000 582,000
- ------------------------------------------------------------------------------------------------
Rapp International Finance, Gtd. Yankee Sec.
Notes, 11.50% 12/15/00 970,000 994,250
- ------------------------------------------------------------------------------------------------
Repap New Brunswick, Yankee Bonds, 10.625% 04/15/05 1,110,000 1,043,400
- ------------------------------------------------------------------------------------------------
2,619,650
- ------------------------------------------------------------------------------------------------
POLLUTION CONTROL-0.32%
Norcal Waste Systems, Sr. Notes, 12.75%,
(acquired 05/29/96; cost $1,050,000)(b) 11/15/05 1,000,000 1,060,000
- ------------------------------------------------------------------------------------------------
PUBLISHING-2.33%
News America Holdings, Gtd. Sr. Deb., 9.25% 02/01/13 7,100,000 7,716,919
- ------------------------------------------------------------------------------------------------
RAILROADS-0.45%
Johnstown American Industries Inc., Sr. Sub.
Notes, 11.75% 08/15/05 1,550,000 1,468,625
- ------------------------------------------------------------------------------------------------
REAL ESTATE-0.23%
Finova Capital Corp., Notes, 7.40% 05/06/06 750,000 745,868
- ------------------------------------------------------------------------------------------------
RETAIL (FOOD & DRUG)-1.78%
Great Atlantic & Pacific, Yankee Bonds,
7.78%,
(acquired 10/18/95; cost $3,900,000)(b) 11/01/00 3,900,000 3,759,366
- ------------------------------------------------------------------------------------------------
Penn Traffic Co., Sr. Notes, 11.50% 04/15/06 1,210,000 1,137,400
- ------------------------------------------------------------------------------------------------
Ralph's Grocery Co., Gtd. Sr. Notes, 10.45% 06/15/04 1,000,000 980,000
- ------------------------------------------------------------------------------------------------
5,876,766
- ------------------------------------------------------------------------------------------------
RETAIL (STORES)-1.33%
Samsonite Corp., Sr. Sub. Notes, 11.125% 07/15/05 900,000 913,500
- ------------------------------------------------------------------------------------------------
Specialty Retailers, Inc.,
Notes, 10.00% 08/15/00 340,000 351,900
- ------------------------------------------------------------------------------------------------
Sr. Sub. Notes, 11.00% 08/15/03 2,000,000 2,080,000
- ------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE> 11
Financials
<TABLE>
<CAPTION>
PRINCIPAL MARKET
MATURITY AMOUNT(a) VALUE
<S> <C> <C> <C>
RETAIL (STORES)-(continued)
United Stationer Supply, Sr. Sub. Notes,
12.75% 05/01/05 $ 1,000,000 $ 1,076,250
- ------------------------------------------------------------------------------------------------
4,421,650
- ------------------------------------------------------------------------------------------------
SCHOOLS-0.31%
Herff Jones Inc., Sr. Sub. Notes, 11.00% 08/15/05 1,000,000 1,032,500
- ------------------------------------------------------------------------------------------------
STEEL-1.39%
Bayou Steel Corp., First Mortgage Notes,
10.25% 03/01/01 1,100,000 1,036,750
- ------------------------------------------------------------------------------------------------
GS Technologies, Sr. Notes, 12.00% 09/01/04 1,000,000 1,021,875
- ------------------------------------------------------------------------------------------------
Gulf States Steel Corp., First Mortgage
Notes, 13.50% 04/15/03 1,650,000 1,505,625
- ------------------------------------------------------------------------------------------------
Oregon Steel Mills, First Mortgage Notes,
11.00% 06/15/03 1,000,000 1,030,000
- ------------------------------------------------------------------------------------------------
4,594,250
- ------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS-3.32%
A+ Network Inc., Sr. Sub. Notes, 11.875% 11/01/05 930,000 955,575
- ------------------------------------------------------------------------------------------------
Clearnet Communications, Yankee Units,
14.75%(c)(f) 12/15/05 1,780,000 1,076,900
- ------------------------------------------------------------------------------------------------
Pronet Inc.,
Sr. Sub. Notes, 11.875% 06/15/05 1,000,000 980,000
- ------------------------------------------------------------------------------------------------
Sr. Sub. Notes, 10.875% 09/15/06 1,000,000 972,500
- ------------------------------------------------------------------------------------------------
Southwestern Bell Telephone Co., Deb., 7.375% 05/01/12 250,000 241,335
- ------------------------------------------------------------------------------------------------
TCI Communications Inc., Sr. Notes, 8.75% 08/01/15 6,000,000 5,897,280
- ------------------------------------------------------------------------------------------------
Teleport Communications, Sr. Disc. Notes,
11.125%(c) 07/01/07 1,500,000 877,500
- ------------------------------------------------------------------------------------------------
11,001,090
- ------------------------------------------------------------------------------------------------
TEXTILES-0.42%
Consoltex Group, Sr. Sub. Notes, 11.00% 10/01/03 1,510,000 1,377,876
- ------------------------------------------------------------------------------------------------
TRANSPORTATION (MISCELLANEOUS)-1.08%
Gearbulk Holdings, Ltd., Sr. Notes, 11.25% 12/01/04 1,000,000 1,040,000
- ------------------------------------------------------------------------------------------------
Stena AB, Yankee Sr. Notes, 10.50% 12/15/05 1,500,000 1,496,250
- ------------------------------------------------------------------------------------------------
Trans Ocean Container, Sr. Sub. Notes, 12.25% 07/01/04 1,000,000 1,030,000
- ------------------------------------------------------------------------------------------------
3,566,250
- ------------------------------------------------------------------------------------------------
UTILITIES-4.27%
AES Corp, Sr. Sub. Notes, 10.25% 07/15/06 1,000,000 1,005,625
- ------------------------------------------------------------------------------------------------
Alabama Power Co., First Mortgage Notes,
7.75% 02/01/23 300,000 289,974
- ------------------------------------------------------------------------------------------------
El Paso Electric Co.,
First Mortgage Notes, 8.90% 02/01/06 2,500,000 2,456,250
- ------------------------------------------------------------------------------------------------
First Mortgage Notes, 9.40% 05/01/11 4,000,000 3,960,000
- ------------------------------------------------------------------------------------------------
Indiana-Michigan Power Co., Sec. Lease
Obligation Bonds, 9.82% 12/07/22 4,970,304 5,770,126
- ------------------------------------------------------------------------------------------------
Midwest Power, General Refunding Mortgage
Notes, 8.125% 02/01/23 300,000 295,764
- ------------------------------------------------------------------------------------------------
Southern Cal Edison, First Ref. Mortgage
Notes, 8.875% 05/01/23 357,000 371,484
- ------------------------------------------------------------------------------------------------
14,149,223
- ------------------------------------------------------------------------------------------------
Total U.S. Dollar Denominated
Non-Convertible Bonds & Notes 210,578,938
- ------------------------------------------------------------------------------------------------
U.S. DOLLAR DENOMINATED CONVERTIBLE BONDS &
NOTES-1.86%
ADVERTISING/BROADCASTING-0.53%
Tele Communications International, Conv. Sub.
Deb., 4.50% 02/15/06 2,000,000 1,740,000
- ------------------------------------------------------------------------------------------------
AIRLINES-0.72%
Continental Airlines Inc., Conv. Sr. Sub.
Notes, 6.75%,
(acquired; 02/27/96; cost $1,999,275)(b) 04/15/06 2,000,000 2,395,000
- ------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 12
Financials
<TABLE>
<CAPTION>
PRINCIPAL MARKET
MATURITY AMOUNT(a) VALUE
<S> <C> <C> <C>
COMPUTER NETWORKING-0.38%
3COM Corp., Conv. Sub. Notes, 10.25%,
(acquired 11/08/94; cost $800,000)(b) 11/01/01 $ 800,000 $ 1,248,000
- ------------------------------------------------------------------------------------------------
MEDICAL (PATIENT SERVICES)-0.23%
Healthsource Inc., Conv. Sub. Notes, 5.00%,
(acquired 03/01/96; cost $1,000,000)(b) 03/01/03 1,000,000 770,800
- ------------------------------------------------------------------------------------------------
Total U.S. Dollar Denominated
Convertible Bonds & Notes 6,153,800
- ------------------------------------------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED NON-CONVERTIBLE
BONDS & NOTES(g)-10.79%
CANADA-6.14%
Bell Canada (Telecommunications), Deb.,
10.875% 10/11/04 CAD 3,000,000 2,542,079
- ------------------------------------------------------------------------------------------------
Canadian Oil Debco Inc. (Oil & Gas), Deb.,
11.00% 10/31/00 4,495,000 3,689,040
- ------------------------------------------------------------------------------------------------
Ontario Province (Utilities), Sr. Unsub.
Deb., 8.00% 03/11/03 5,350,000 4,030,820
- ------------------------------------------------------------------------------------------------
Rogers Cablesystem, Inc. (Cable Television),
Sr. Second Priority Deb. 9.65% 01/15/14 1,750,000 1,121,548
- ------------------------------------------------------------------------------------------------
Teleglobe Canada Inc. (Telecommunications),
Deb., 8.35% 06/20/03 5,000,000 3,765,473
- ------------------------------------------------------------------------------------------------
Trans-Canada Pipelines (Oil & Gas), Notes,
8.55% 02/01/06 3,000,000 2,258,295
- ------------------------------------------------------------------------------------------------
Transalta Utilities Corp. (Utilities), Deb.,
8.35% 12/15/03 3,850,000 2,923,947
- ------------------------------------------------------------------------------------------------
20,331,202
- ------------------------------------------------------------------------------------------------
GERMANY-2.43%
International Bank for Reconstruction &
Development
(Supranational Organization), Unsub. Global
Bonds, 7.125% 04/12/05 DEM 8,800,000 5,993,317
- ------------------------------------------------------------------------------------------------
LKB Global (Banking), Gtd. Notes, 6.00% 01/25/06 3,300,000 2,068,224
- ------------------------------------------------------------------------------------------------
8,061,541
- ------------------------------------------------------------------------------------------------
ITALY-0.30%
KFW International Finance Inc.
(Finance-Consumer Credit),
Gtd. Notes, 11.625% 11/27/98 ITL 1,430,000,000 1,000,884
- ------------------------------------------------------------------------------------------------
JAPAN-1.92%
Sony Corp. (Electronic
Components/Miscellaneous), Bonds, 1.40% 09/30/03 JPY 30,000,000 366,753
- ------------------------------------------------------------------------------------------------
Toyota Motor Corp.
(Automobile-Manufacturers), Deb., 1.20% 01/28/98 455,000,000 5,978,466
- ------------------------------------------------------------------------------------------------
6,345,219
- ------------------------------------------------------------------------------------------------
Total Non-U.S. Dollar Denominated
Non-Convertible Bonds & Notes 35,738,846
- ------------------------------------------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED CONVERTIBLE BONDS
& NOTES(g)-4.32%
JAPAN-2.18%
Jusco Co. Ltd. (Consumer Non-Durables), Conv.
Deb., 1.20% 02/20/01 JPY 220,000,000 3,465,003
- ------------------------------------------------------------------------------------------------
Sony Corp. (Electronic
Components/Miscellaneous), Conv. Bonds,
0.15% 03/30/01 370,000,000 3,772,230
- ------------------------------------------------------------------------------------------------
7,237,233
- ------------------------------------------------------------------------------------------------
SWITZERLAND-0.55%
Yamada Denki Co. Ltd. (Retail-Stores), Conv.
Notes, 0.25% 03/31/00 CHF 1,700,000 1,811,910
- ------------------------------------------------------------------------------------------------
UNITED KINGDOM-1.59%
Lasmo PLC (Oil Equipment & Supplies), Conv.
Deb., 7.75% 10/04/05 BPS 3,700,000 5,272,169
- ------------------------------------------------------------------------------------------------
Total Non-U.S. Dollar Denominated
Convertible Bonds & Notes 14,321,312
- ------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE> 13
Financials
<TABLE>
<CAPTION>
PRINCIPAL MARKET
MATURITY AMOUNT(a) VALUE
<S> <C> <C> <C>
NON-U.S. DOLLAR DENOMINATED GOVERNMENT BONDS
& NOTES(g)-11.63%
AUSTRALIA-2.18%
Australian Government, Gtd. Deb., 12.50% 09/15/97 AUD 8,750,000 $ 7,238,124
- ------------------------------------------------------------------------------------------------
CANADA-2.55%
New Brunswick (Province of), Deb., 8.94% 01/15/05 CAD 3,500,000 2,625,704
- ------------------------------------------------------------------------------------------------
Ontario Province, STRIP, 8.18%(c) 01/10/45 410,000,000 5,825,826
- ------------------------------------------------------------------------------------------------
8,451,530
- ------------------------------------------------------------------------------------------------
DENMARK-0.83%
Kingdom of Denmark, Deb., 8.00% 11/15/01 DKK 15,000,000 2,736,793
- ------------------------------------------------------------------------------------------------
FRANCE-0.90%
French Treasury Bill, Notes, 5.75%, 11/12/98 FRF 15,000,000 2,982,007
- ------------------------------------------------------------------------------------------------
GERMANY-4.19%
Bundesrepublik Deutschland,
Deb., 6.00% 09/15/03 DEM 7,000,000 4,560,933
- ------------------------------------------------------------------------------------------------
Deb., 6.75% 07/15/04 5,250,000 3,534,126
- ------------------------------------------------------------------------------------------------
Deb., 6.875% 05/12/05 8,600,000 5,802,526
- ------------------------------------------------------------------------------------------------
13,897,585
- ------------------------------------------------------------------------------------------------
SWEDEN-0.98%
Swedish Government, Bonds, 10.25% 05/05/03 SEK 19,000,000 3,229,952
- ------------------------------------------------------------------------------------------------
Total Non-U.S. Dollar Denominated
Government Bonds & Notes 38,535,991
- ------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION> MARKET
SHARES VALUE
<S> <C> <C>
CONVERTIBLE PREFERRED STOCKS-2.26%
ADVERTISING/BROADCASTING-0.18%
Time Warner Inc., 10.25% Series K Conv. Pfd.
(acquired 04/03/96; cost $600,000)(b) 600 579,750
- ------------------------------------------------------------------------------------------------
ELECTRIC POWER-0.65%
Citizens Utilities Trust, $2.50 Conv. Pfd. 45,000 2,171,250
- ------------------------------------------------------------------------------------------------
INSURANCE (LIFE & HEALTH)-0.82%
Conseco Inc., $4.28 Conv. Pfd. 35,000 2,712,500
- ------------------------------------------------------------------------------------------------
RETAIL (STORES)-0.61%
Kmart Financing, $3.875 Conv. Pfd. 37,000 2,007,250
- ------------------------------------------------------------------------------------------------
Total Convertible Preferred Stocks 7,470,750
- ------------------------------------------------------------------------------------------------
COMMON STOCKS-0.29%
UTILITIES-0.29%
National Power PLC-ADR 24,300 592,313
- ------------------------------------------------------------------------------------------------
Powergen PLC-ADR 17,300 358,975
- ------------------------------------------------------------------------------------------------
Total Common Stocks 951,288
- ------------------------------------------------------------------------------------------------
WARRANTS-0.02%
CABLE TELEVISION-0.01%
Wireless One Inc.-Wt., expiring 10/19/00(h) 2,670 21,360
- ------------------------------------------------------------------------------------------------
LEISURE & RECREATION-0.01%
IHF Holdings-Wt., expiring 11/14/99(h) 1,200 48,000
- ------------------------------------------------------------------------------------------------
STEEL-0.00%
Gulf States Steel Corp.-Wt., expiring
04/15/03(h) 1,650 8,250
- ------------------------------------------------------------------------------------------------
Total Warrants 77,610
- ------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE> 14
Financials
<TABLE>
<CAPTION>
PRINCIPAL MARKET
MATURITY AMOUNT VALUE
<S> <C> <C> <C>
U.S. GOVERNMENT AGENCY SECURITIES-0.53%
Federal Home Loan Mortgage Corp.
Medium term notes, 7.90% 04/27/05 $ 500,000 $ 502,115
- ------------------------------------------------------------------------------------------------
Medium term notes, 7.13% 09/15/05 900,000 873,567
- ------------------------------------------------------------------------------------------------
Medium term notes, 7.23% 09/30/05 400,000 389,560
- ------------------------------------------------------------------------------------------------
Total U.S. Government Agency Securities 1,765,242
- ------------------------------------------------------------------------------------------------
U.S. TREASURY SECURITIES-0.60%
U.S. Treasury Notes, 6.00% 05/31/98 2,000,000 1,996,600
- ------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS(i)-2.44%
Daiwa Securities America, Inc. 5.50%(j) 07/01/96 77,944 77,944
- ------------------------------------------------------------------------------------------------
Goldman Sachs & Co., 4.75%(k) 07/01/96 8,000,000 8,000,000
- ------------------------------------------------------------------------------------------------
Total Repurchase Agreements 8,077,944
- ------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS-98.31% 325,668,321
- ------------------------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-1.69% 5,602,957
- ------------------------------------------------------------------------------------------------
NET ASSETS-100.00% $331,271,278
================================================================================================
</TABLE>
Notes to Schedule of Investments:
<TABLE>
<S> <C>
(a) Principal amount is in U.S. Dollars, except as indicated by note (g).
(b) Restricted security. May be resold to qualified institutional buyers in accordance
with the 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 June 30, 1996 was $19,188,341 which represented 5.79% of net assets.
(c) Zero coupon bond issued at a discount. The interest rate shown represents the rate
of original issue discount.
(d) Discounted bond at purchase. Interest rate represents coupon rate at which the
bond will accrue at a specified future date.
(e) Issued as a unit. This unit also includes 2,670 warrants to purchase one share of
common stock at $11.55 per share.
(f) Issued as a unit. This unit also includes 5,874 warrants to purchase shares of
common stock.
(g) Foreign denominated security. Par value and coupon are denominated in currency of
country indicated.
(h) Non-income producing security acquired as part of a unit with or in exchange for
other securities.
(i) Collateral on repurchase agreements, including the Fund's pro-rata interest in
joint repurchase agreements, is taken into possession by the Fund upon entering
into the repurchase agreement. The collateral is marked to market daily to ensure
its market value as being 102% of the sales price of the repurchase agreement. The
investments in some repurchase agreements are through participation in joint
accounts with other mutual funds, private accounts and certain non-registered
investment companies managed by the investment advisor or its affiliates.
(j) Joint repurchase agreement entered into 06/28/96 with a maturing value of
$270,069,404. Collateralized by $258,303,000 U.S. Treasury obligations, 7.875% due
11/15/07.
(k) Joint repurchase agreement entered into 06/28/96 with a maturing value of
$770,304,792. Collateralized by $716,792,000 U.S. Treasury obligations, 0% to
11.625% due 10/03/96 to 11/15/04.
Abbreviations:
AUD - Australian Dollar Disc. - Discounted Sec. - Secured
BPS - British Pound DKK - Danish Krone SEK - Swedish Krona
Sterling FRF - French Franc Sr. - Senior
CAD - Canadian Dollar Gtd. - Guaranteed Sub. - Subordinated
CHF - Swiss Franc ITL - Italian Lire Unsec. - Unsecured
Conv. - Convertible JPY - Japanese Yen Unsub. - Unsubordinated
Deb. - Debentures Ref. - Refunding Wt. - Warrant
DEM - German Deutschemark
</TABLE>
See Notes to Financial Statements.
12
<PAGE> 15
Financials
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996
(Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $325,184,150) $325,668,321
- ---------------------------------------------------------------------------------------
Foreign currencies, at market value (cost $1,410,703) 1,412,182
- ---------------------------------------------------------------------------------------
Receivables for:
Forward contracts 400,956
- ---------------------------------------------------------------------------------------
Fund shares sold 1,395,467
- ---------------------------------------------------------------------------------------
Interest 6,830,563
- ---------------------------------------------------------------------------------------
Investment for deferred compensation plan 62,049
- ---------------------------------------------------------------------------------------
Other assets 77,991
- ---------------------------------------------------------------------------------------
Total assets 335,847,529
- ---------------------------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 3,284,971
- ---------------------------------------------------------------------------------------
Fund shares reacquired 270,127
- ---------------------------------------------------------------------------------------
Dividends to shareholders 522,479
- ---------------------------------------------------------------------------------------
Deferred compensation plan 62,049
- ---------------------------------------------------------------------------------------
Accrued advisory fees 122,865
- ---------------------------------------------------------------------------------------
Accrued distribution fees 218,133
- ---------------------------------------------------------------------------------------
Accrued administrative service fees 4,485
- ---------------------------------------------------------------------------------------
Accrued transfer agent fees 27,653
- ---------------------------------------------------------------------------------------
Accrued trustees' fees 1,925
- ---------------------------------------------------------------------------------------
Accrued operating expenses 61,564
- ---------------------------------------------------------------------------------------
Total liabilities 4,576,251
- ---------------------------------------------------------------------------------------
Net assets applicable to shares outstanding $331,271,278
=======================================================================================
NET ASSETS:
Class A $265,755,625
=======================================================================================
Class B $ 65,515,653
=======================================================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE
Class A 33,962,290
=======================================================================================
Class B 8,386,664
=======================================================================================
CLASS A:
Net asset value and redemption price per share $ 7.83
=======================================================================================
Offering price per share:
(Net asset value of $7.83 divided by 95.25%) $ 8.22
=======================================================================================
CLASS B:
Net asset value and offering price per share $ 7.81
=======================================================================================
</TABLE>
See Notes to Financial Statements.
13
<PAGE> 16
Financials
STATEMENT OF OPERATIONS
For the six months ended June 30, 1996
(Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 12,366,178
- -----------------------------------------------------------------------------------------
Dividends 119,114
- -----------------------------------------------------------------------------------------
Total investment income 12,485,292
- -----------------------------------------------------------------------------------------
EXPENSES:
Advisory fees 709,092
- -----------------------------------------------------------------------------------------
Custodian fees 31,370
- -----------------------------------------------------------------------------------------
Distribution fees -- Class A 312,819
- -----------------------------------------------------------------------------------------
Distribution fees -- Class B 273,510
- -----------------------------------------------------------------------------------------
Trustees' fees 4,052
- -----------------------------------------------------------------------------------------
Transfer agent fees -- Class A 147,466
- -----------------------------------------------------------------------------------------
Transfer agent fees -- Class B 52,375
- -----------------------------------------------------------------------------------------
Administrative service fees 30,186
- -----------------------------------------------------------------------------------------
Other 182,722
- -----------------------------------------------------------------------------------------
Total expenses 1,743,592
- -----------------------------------------------------------------------------------------
Net investment income 10,741,700
- -----------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES,
FOREIGN CURRENCIES AND FORWARD CONTRACT TRANSACTIONS:
Net realized gain (loss) from:
Investment securities (1,430,873)
- -----------------------------------------------------------------------------------------
Foreign currencies (138,432)
- -----------------------------------------------------------------------------------------
Forward contracts 778,170
- -----------------------------------------------------------------------------------------
(791,135)
- -----------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of:
Investment securities (11,607,951)
- -----------------------------------------------------------------------------------------
Foreign currencies (46,695)
- -----------------------------------------------------------------------------------------
Forward contracts 295,927
- -----------------------------------------------------------------------------------------
(11,358,719)
- -----------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) from investment securities,
foreign currencies and forward contract transactions (12,149,854)
- -----------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ (1,408,154)
=========================================================================================
</TABLE>
See Notes to Financial Statements.
14
<PAGE> 17
Financials
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1996 and year ended December 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
<S> <C> <C>
OPERATIONS:
Net investment income $ 10,741,700 $ 18,156,289
- ---------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies
and forward contract transactions (791,135) 9,871,598
- ---------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities, foreign currencies and forward contract
transactions (11,358,719) 21,434,843
- ---------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations (1,408,154) 49,462,730
- ---------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (9,005,557) (16,600,806)
- ---------------------------------------------------------------------------------------------
Class B (1,736,143) (1,555,483)
- ---------------------------------------------------------------------------------------------
Distributions in excess of net investment income:
Class A (575,867) (889,987)
- ---------------------------------------------------------------------------------------------
Class B (125,876) (95,903)
- ---------------------------------------------------------------------------------------------
Share transactions-net:
Class A 25,153,471 22,105,318
- ---------------------------------------------------------------------------------------------
Class B 23,385,708 29,160,108
- ---------------------------------------------------------------------------------------------
Net increase in net assets 35,687,582 81,585,977
- ---------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 295,583,696 213,997,719
- ---------------------------------------------------------------------------------------------
End of period $331,271,278 $295,583,696
=============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $338,811,478 $290,272,299
- ---------------------------------------------------------------------------------------------
Undistributed net investment income 145,074 846,817
- ---------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from sales of
investment securities, foreign currencies and forward
contract transactions (8,590,341) (7,799,206)
- ---------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies and forward contract transactions 905,067 12,263,786
- ---------------------------------------------------------------------------------------------
$331,271,278 $295,583,696
=============================================================================================
</TABLE>
See Notes to Financial Statements.
15
<PAGE> 18
Financials
NOTES TO FINANCIAL STATEMENTS
June 30, 1996
(Unaudited)
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, as well as corporate bonds and U.S. Government
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
16
<PAGE> 19
Financials
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (continued)
securities and income items denominated in foreign currencies are translated
into U.S. dollar amounts on the respective dates of such transactions.
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 June 30, 1996 were as follows:
<TABLE>
<CAPTION>
Contract to
Settlement -------------------------------- Unrealized
Date Deliver Receive Value Appreciation
--------- ---------------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
07/18/96 DEM 7,500,000 $ 4,990,186 $ 4,938,413 $ 51,773
07/25/96 DEM 24,500,000 16,215,844 16,138,817 77,027
09/17/96 JPY 546,000,000 5,265,189 4,993,033 272,156
----------- ----------- --------
$26,471,219 $26,070,263 $400,956
=========== =========== ========
</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.
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 six months ended June 30, 1996, AIM
was reimbursed $30,186 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. During the six months ended June 30, 1996, the
Fund paid AFS $146,824 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
17
<PAGE> 20
Financials
NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES (continued)
promotional and other sales related costs and provides periodic payments to
selected dealers and financial institutions who furnish continuing personal
shareholder services to their customers who purchase and own Class A shares of
the Fund. The Fund, pursuant to the Class B Plan, pays AIM Distributors
compensation at an annual rate of 1.00% of the average daily net assets
attributable to the Class B shares. Of this amount, the Fund may pay a service
fee of 0.25% of the average daily net assets of the Class B shares to selected
dealers and financial institutions who furnish continuing personal shareholder
services to their customers who purchase and own Class B shares of the Fund. Any
amounts not paid as a service fee under such Plans would constitute an
asset-based sales charge. 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 six months ended June 30, 1996, the Class A
shares and the Class B shares paid AIM Distributors $312,819 and $273,510,
respectively, as compensation under the Plans.
AIM Distributors received commissions of $159,708 from sales of the Class A
shares of the Fund during the six months ended June 30, 1996. Such commissions
are not an expense of the Fund. They are deducted from, and are not included in,
the proceeds from sales of Class A shares. During the six months ended June 30,
1996, AIM Distributors received $31,592 in contingent deferred sales charges
imposed on redemptions of Fund shares. Certain officers and trustees of the
Trust are officers and directors of AIM, AIM Distributors and AFS.
During the six months ended June 30, 1996 the Fund paid legal fees of $1,559
for services rendered by Kramer, Levin, Naftalis & Frankel as counsel to the
Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3 - 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 syndicate administered
by The Chase Manhattan Bank d/b/a Chemical Bank. Interest on borrowings under
the line of credit is payable on maturity or prepayment date. During the six
months ended June 30, 1996, 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.
Effective July 19, 1996, the Fund may borrow up to the lesser of
i) $325,000,000 or ii) the limits set by its prospectus for borrowings,
under the line of credit administered by The Chase Manhattan Bank d/b/a/
Chemical Bank. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first serve basis.
NOTE 5 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the six months ended June 30, 1996 was
$199,954,904 and $158,852,510, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
on a tax basis as of June 30, 1996 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $ 8,770,087
- ------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (8,285,916)
- ------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities $ 484,171
====================================================================================
</TABLE>
Investments have the same cost for tax and financial statement purposes.
18
<PAGE> 21
Financials
NOTE 6 - SHARE INFORMATION
Changes in shares outstanding during the six months ended June 30, 1996 and year
ended December 31, 1995 were as follows:
<TABLE>
<CAPTION>
JUNE 30, 1996 DECEMBER 31, 1995
---------------------- ----------------------
SHARES VALUE SHARES VALUE
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Sold:
Class A 6,312,740 $ 49,988,572 7,497,108 $ 58,558,530
- ------------------------------------------------------------------------------------- ------------------------
Class B 4,766,416 37,625,122 4,199,186 32,900,136
- ------------------------------------------------------------------------------------- ------------------------
Issued as reinvestment of dividends:
Class A 991,184 7,804,426 1,859,312 14,431,705
- ------------------------------------------------------------------------------------- ------------------------
Class B 155,398 1,220,291 131,455 1,024,904
- ------------------------------------------------------------------------------------- ------------------------
Reacquired:
Class A (4,113,375) (32,639,527) (6,603,107) (50,884,917)
- ------------------------------------------------------------------------------------- ------------------------
Class B (1,969,504) (15,459,705) (611,547) (4,764,932)
- ------------------------------------------------------------------------------------- ------------------------
6,142,859 $ 48,539,179 6,472,407 $ 51,265,426
===================================================================================== ========================
</TABLE>
NOTE 7 - FINANCIAL HIGHLIGHTS
Shown below are the condensed financial highlights for a Class A share
outstanding during the six months ended June 30, 1996 each of the years in the
nine-year period ended December 31, 1995 and for a Class B share outstanding
during the six months ended June 30, 1996, 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,
JUNE 30, -----------------------------------------------------------------------------
CLASS A: 1996 1995 1994 1993 1992(a) 1991 1990
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 8.17 $ 7.20 $ 8.45 $ 8.03 $ 8.07 $ 7.41 $ 7.80
- ----------------------------------- -------- -------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.28 0.58 0.58 0.60 0.60 0.61 0.65
- ----------------------------------- -------- -------- -------- -------- -------- -------- --------
Net gains (losses) on securities
(both realized and unrealized) (0.32) 1.00 (1.22) 0.61 (0.03) 0.66 (0.39)
- ----------------------------------- -------- -------- -------- -------- -------- -------- --------
Total from investment operations (0.04) 1.58 (0.64) 1.21 0.57 1.27 0.26
- ----------------------------------- -------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment
income (0.30) (0.61) (0.49) (0.60) (0.61) (0.61) (0.65)
- ----------------------------------- -------- -------- -------- -------- -------- -------- --------
Distributions from net realized
capital gains -- -- (0.01) (0.19) -- -- --
- ----------------------------------- -------- -------- -------- -------- -------- -------- --------
Distributions from capital -- -- (0.11) -- -- -- --
- ----------------------------------- -------- -------- -------- -------- -------- -------- --------
Total distributions (0.30) (0.61) (0.61) (0.79) (0.61) (0.61) (0.65)
- ----------------------------------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of period $ 7.83 $ 8.17 $ 7.20 $ 8.45 $ 8.03 $ 8.07 $ 7.41
=================================== ======== ======== ======== ======== ======== ======== ========
Total return(b) (0.46)% 22.77% (7.65)% 15.38% 7.42% 18.00% 3.65%
=================================== ======== ======== ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $265,756 $251,280 $201,677 $244,168 $218,848 $231,798 $215,987
=================================== ======== ======== ======== ======== ======== ======== ========
Ratio of expenses to average net
assets 0.96%(c) 0.98% 0.98% 0.98% 0.99%(d) 1.00%(d) 1.00%
=================================== ======== ======== ======== ======== ======== ======== ========
Ratio of net investment income to
average net assets 7.21%(c) 7.52% 7.53% 7.01% 7.54%(d) 7.97%(d) 8.73%(d)
=================================== ======== ======== ======== ======== ======== ======== ========
Portfolio turnover rate 53% 227% 185% 99% 82% 67% 106%
=================================== ======== ======== ======== ======== ======== ======== ========
<CAPTION>
December 31,
-----------------------------------
CLASS A: 1989 1988 1987
-------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of
period $ 7.53 $ 7.55 $ 8.20
- ---------------------------------- -------- -------- --------
Income from investment operations:
Net investment income 0.66 0.68 0.67
- ---------------------------------- -------- -------- --------
Net gains (losses) on securities
(both realized and unrealized) 0.32 (0.02) (0.63)
- ---------------------------------- -------- -------- --------
Total from investment operations 0.98 0.66 0.04
- ---------------------------------- -------- -------- --------
Less distributions:
Dividends from net investment
income (0.71) (0.68) (0.69)
- ----------------------------------- -------- -------- --------
Distributions from net realized
capital gains -- -- --
- ----------------------------------- -------- -------- --------
Distributions from capital -- -- --
- ----------------------------------- -------- -------- --------
Total distributions (0.71) (0.68) (0.69)
- ----------------------------------- -------- -------- --------
Net asset value, end of period $ 7.80 $ 7.53 $ 7.55
=================================== ======== ======== ========
Total return(b) 13.56% 9.01% 0.56%
=================================== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $229,222 $218,946 $237,466
=================================== ======== ======== ========
Ratio of expenses to average net
assets 0.96% 0.95% 0.84%
=================================== ======== ======== ========
Ratio of net investment income to
average net assets 8.56% 8.81% 8.64%
=================================== ======== ======== ========
Portfolio turnover rate 222% 361% 195%
=================================== ======== ======== ========
</TABLE>
(a) The Fund changed investment advisors on June 30, 1992.
(b) Does not deduct sales charges and for periods of less than one year, is not
annualized.
(c) Ratios are annualized and based on average net assets of $252,329,096.
(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.
19
<PAGE> 22
Financials
NOTE 7 - FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, ---------------------------------
CLASS B: 1996 1995 1994 1993
-------- -------- ------- ------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.15 $ 7.18 $ 8.43 $ 8.95
- ------------------------------------------------------------------------------ ------- ------- ------- ------
Income from investment operations:
Net investment income 0.24 0.53 0.52 0.19
- ------------------------------------------------------------------------------ ------- ------- ------- ------
Net gains (losses) on securities (both realized and unrealized) (0.31) 0.98 (1.23) (0.34)
- ------------------------------------------------------------------------------ ------- ------- ------- ------
Total from investment operations (0.07) 1.51 (0.71) (0.15)
- ------------------------------------------------------------------------------ ------- ------- ------- ------
Less distributions:
Dividends from net investment income (0.27) (0.54) (0.42) (0.18)
- ------------------------------------------------------------------------------ ------- ------- ------- ------
Distributions from net realized capital gains -- -- (0.01) (0.19)
- ------------------------------------------------------------------------------ ------- ------- ------- ------
Distributions from capital -- -- (0.11) --
- ------------------------------------------------------------------------------ ------- ------- ------- ------
Total distributions (0.27) (0.54) (0.54) (0.37)
- ------------------------------------------------------------------------------ ------- ------- ------- ------
Net asset value, end of period $ 7.81 $ 8.15 $ 7.18 $ 8.43
============================================================================== ======= ======= ======= ======
Total return(a) (0.88)% 21.72% (8.46)% (0.75)%
============================================================================== ======= ======= ======= ======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $65,516 $44,304 $12,321 $3,602
============================================================================== ======= ======= ======= ======
Ratio of expenses to average net assets 1.77%(b) 1.79% 1.83%(c) 1.75%(c)
============================================================================== ======= ======= ======= ======
Ratio of net investment income to average net assets 6.40%(b) 6.71% 6.69%(c) 6.24%(c)
============================================================================== ======= ======= ======= ======
Portfolio turnover rate 53% 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 annualized and based on average net assets of $55,155,326.
(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.
20
<PAGE> 23
Trustees &
Officers
<TABLE>
<S> <C> <C>
TRUSTEES OFFICERS OFFICE OF THE FUND
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
Formerly 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
Scott G. Lucas
Carl Frischling Senior Vice President A I M Fund Services, Inc.
Partner P.O. Box 4739
Kramer, Levin, Naftalis & Frankel Carol F. Relihan Houston, TX 77210-4739
Senior Vice President and Secretary
Robert H. Graham CUSTODIAN
President and Chief Operating Officer Robert G. Alley
A I M Management Group Inc. Vice President State Street Bank & Trust Company
225 Franklin Street
John F. Kroeger Stuart W. Coco Boston, MA 02110
Formerly Consultant Vice President
Wendell & Stockel Associates, Inc. COUNSEL TO THE FUND
Melville B. Cox
Lewis F. Pennock Vice President Ballard Spahr
Attorney Andrews & Ingersoll
Karen Dunn Kelley 1735 Market Street
Ian W. Robinson Vice President Philadelphia, PA 19103
Consultant; Formerly Executive
Vice President and Jonathan C. Schoolar COUNSEL TO THE TRUSTEES
Chief Financial Officer Vice President
Bell Atlantic Management Kramer, Levin, Naftalis & Frankel
Services, Inc. Dana R. Sutton 919 Third Avenue
Vice President and Assistant Treasurer New York, NY 10022
Louis S. Sklar
Executive Vice President P. Michelle Grace DISTRIBUTOR
Hines Interests Assistant Secretary
Limited Partnership A I M Distributors, Inc.
David L. Kite 11 Greenway Plaza
Assistant Secretary Suite 1919
Houston, TX 77046
Nancy L. Martin
Assistant Secretary
Ofelia M. Mayo
Assistant Secretary
Kathleen J. Pflueger
Assistant Secretary
Samuel D. Sirko
Assistant Secretary
Stephen I. Winer
Assistant Secretary
Mary J. Benson
Assistant Treasurer
</TABLE>
<PAGE> 24
<TABLE>
<S> <C>
[PHOTO OF GREENWAY PLAZA THE AIM FAMILY OF FUNDS--Registered Trademark--
APPEARS HERE]
AGGRESSIVE GROWTH
AIM Aggressive Growth Fund*
AIM Capital Development Fund
AIM Constellation Fund
AIM Global Aggressive Growth Fund
GROWTH
AIM Blue Chip Fund
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 Management Group has provided *AIM Aggressive Growth Fund was
leadership in the mutual fund closed to new investors on July 18,
industry since 1976 and currently 1995. **On September 25, 1995, AIM
manages approximately $55 billion in Government Securities Fund became AIM
assets for more than 3 million Intermediate Government Fund. For
shareholders, including individual more complete information about any
investors, corporate clients, and AIM Fund(s), including sales charges
financial institutions. The AIM and expenses, ask your financial
Family of Funds --Registered consultant or securities dealer for a
Trademark-- is distributed nationwide, free prospectus(es). Please read the
and AIM today ranks among the nation's prospectus(es) carefully before you
top 15 mutual fund companies in invest or send money.
assets under management, according
to Lipper Analytical Services, Inc.
-------------------
BULK RATE
[AIM LOGO APPEARS HERE] U.S. POSTAGE
PAID
A I M Distributors, Inc. HOUSTON, TX
11 Greenway Plaza, Suite 1919 Permit No. 1919
Houston, TX 77046 -------------------
</TABLE>
