<PAGE> 1
AIM INCOME FUND
[AIM LOGO APPEARS HERE] SEMIANNUAL REPORT JUNE 30, 1997
<PAGE> 2
[COVER PHOTO APPEARS HERE]
----------------------------------------------------
AIM INCOME FUND
For shareholders who seek
a high level of current income consistent with
a reasonable concern for
safety of principal
by investing in a portfolio
consisting primarily of
fixed-rate corporate debt and
U.S. government obligations.
----------------------------------------------------
ABOUT FUND PERFORMANCE AND DATA THROUGHOUT THIS REPORT:
o AIM Income Fund's performance figures are historical and reflect all
distributions and changes in net asset value. Unless otherwise indicated,
the Fund's performance is computed without a sales charge.
o When sales charges are included in performance figures, Class A share
performance reflects the maximum 4.75% sales charge, and Class B share
performance reflects the applicable contingent deferred sales charge (CDSC)
for the period involved. The CDSC 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 differing fees and expenses.
o The Fund's average annual total returns on Class A shares were 7.55%,
8.01%, and 8.73% for the one-, five-, and 10-year periods ended 6/30/97,
including sales charges. For Class B shares, average annual total returns
were 7.07% for the one-year period ended 6/30/97 and 4.84% from inception
(9/7/93) to the end of the reporting period, including sales charges.
o The 30-day yield is calculated on the basis of a formula defined by the
SEC. The formula is based on the portfolio's potential earnings from
dividends, interest, yield-to-maturity or yield-to-call of the bonds in the
portfolio, net of all expenses and expressed on an annualized basis.
o The Fund's annualized distribution rate reflects the Fund's most recent
monthly dividend distribution multiplied by 12 and divided by the most
recent month-end net asset value.
o The Fund's investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
o 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 Past performance cannot guarantee comparable future results.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o The unmanaged Lipper General Bond Fund Index represents an average of the
performance of the 10 largest general bond funds tracked by Lipper
Analytical Services, Inc., an independent mutual fund performance monitor.
o The Lehman Brothers Aggregate Bond Index is an unmanaged index generally
regarded as representative of intermediate- and long-term government and
investment-grade corporate debt securities.
o An investment cannot be made in any index listed. Unless otherwise
indicated, index results include reinvested interest 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:
As 1997 came to its midway point, the market environment
[PHOTO OF was ideal for fixed-income investments. The course was not
Charles T. smooth; indeed, bond markets fluctuated widely during the
Bauer first six months of the year amid concerns over vigorous
Chairman of economic growth and rising interest rates. Only after
the Board of subsequent reports indicated that economic growth had
THE FUND moderated and that inflation was still absent did bond
APPEARS HERE] markets recover.
On the following pages, your Fund's portfolio management
team offers a complete discussion of recent market activity
and how the Fund was affected. They also discuss the Fund's
portfolio strategy, why they believe the portfolio is well-
positioned for attractive current income and total return,
and why they are confident that the reasons for investing in
the Fund remain as compelling as ever. These discussions are offered to help
you better understand the relative performance of your Fund.
The point we want to emphasize most is that market volatility has become
the norm rather than the exception. Those of you who are long-time investors,
and those who are new shareholders in The AIM Family of Funds--Registered
Trademark--, should recognize that periods of falling prices in both stock and
bond markets are inevitable. Indeed, we can learn important lessons about
investing in periods of market uncertainty.
That's why it's a good idea to reassess your financial goals periodically
with your financial consultant. Managing your investments in changing markets
can be challenging. But your financial consultant knows a few time-tested
investment strategies that can help. Diversification, for example, can help you
cushion the effects of volatility and reduce your risk exposure in any one type
of security. 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.
It's also important to maintain realistic expectations about investing.
Short-term volatility in financial markets may tempt some investors to
liquidate investments regardless of their personal financial objectives.
Remember that time is the best medicine for uncertain markets. The market's
performance early in the year was driven by concerns about the possibility of
rising inflation. Yet, no evidence of inflation has materialized.
AIM/INVESCO MERGER FINALIZED
We are pleased to announce that the merger of A I M Management Group Inc. and
INVESCO PLC was concluded on February 28, 1997. AIM is now part of one of the
world's largest independent investment management groups with approximately
$177 billion in assets under management. The combined company, AMVESCAP PLC,
has the financial strength necessary to meet your needs in an increasingly
competitive financial services environment, both in the United States and
worldwide.
We appreciate the trust you have placed in us and we look forward to our
continued close association. If you have any questions or comments about this
report, we invite you to call Client Services at 800-959-4246 during normal
business hours. For automated account information 24 hours a day, call the AIM
Investor Line at 800-246-5463. We also invite you to visit AIM's Internet Web
site at www.aimfunds.com.
Sincerely,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
-------------------------------------
It is important
to maintain realistic expectations
about investment performance.
-------------------------------------
<PAGE> 4
The Managers' Overview
LATE RALLY BOOSTS BOND MARKET
A roundtable discussion with the Fund management team for AIM Income Fund for
the six-month period ended June 30, 1997.
- --------------------------------------------------------------------------------
Q. IT WAS A TUMULTUOUS PERIOD FOR FIXED-INCOME INVESTMENTS. HOW DID AIM INCOME
FUND PERFORM?
A. In spite of volatility in the bond market, the Fund continued to provide a
high level of current income. As of June 30, 1997, the Fund's 30-day
distribution rate at net asset value was 6.70% for Class A shares and 5.84%
for Class B shares. The Fund's 30-day yield at maximum offering price was
6.21% for Class A shares and 5.57% for Class B shares.
During the six-month period ended June 30, 1997, the Fund posted a total
return of 3.52% and 2.98% for Class A and Class B shares, respectively. By
comparison, the total return of the Lehman Brothers Aggregate Bond Index was
3.09%.
For the year ended June 30, 1997, the Fund's total return was an
impressive 12.92% for Class A shares and 12.07% for Class B shares. That
easily beat the 8.15% total return of the Lehman Brothers Aggregate Bond
Index and the 10.15% total return of the Lipper General Bond Fund Index.
Q. WHAT TOUCHED OFF THE VOLATILITY IN THE DOMESTIC INVESTMENT-GRADE BOND MARKET?
A. Concern over interest rates dominated the investment-grade bond market and
that created volatility. Rapid economic expansion in the first quarter of
1997--the gross domestic product (GDP) grew at a blistering 4.9%
pace--raised concerns that the Federal Reserve Board (the Fed) would tighten
monetary policy to forestall inflation. Bond prices were already
falling--and yields rising--when the Fed raised interest rates on March 25,
1997.
The decline continued until the end of April when mounting evidence that
economic growth was slowing, combined with improved prospects for a balanced
federal budget, ignited a bond-market rally that persisted through the end
of the reporting period.
The rally saw bonds recoup most of their earlier losses as reflected in
the yield on the 10-year U.S. Treasury note which ranged from a low of 6.26%
in February to a high of 6.97% in April before ending the period at 6.50%.
Q. WHAT ABOUT HIGH-YIELD BONDS?
A. High-yield bonds were the top-performing segment of the portfolio. Unlike
investment-grade bonds, high-yield bonds usually benefit from healthy
economic expansion. Improving business conditions and cash flows can have a
positive impact on the credit situation of many corporate borrowers. Except
for a decline from mid-March to mid-April, corresponding roughly to the
downturn in the U.S. stock market, high-yield bonds performed well
throughout most of the period because of healthy economic growth.
Q. HOW DID FOREIGN BONDS PERFORM?
A. In local currency terms, most of the foreign markets where the Fund invests
performed well during the reporting period. The Fund benefited from exposure
to such markets as the United Kingdom, where the pound appreciated against
the U.S. dollar, as well as Canada, Australia, and New Zealand.
In Europe, the solid performance can be attributed mainly to the efforts
of the various governments to reduce budget deficits and outstanding
indebtedness to
--------------------------------
In spite of volatility
in the bond market,
the Fund continued to provide
a high level
of current income.
--------------------------------
PORTFOLIO COMPOSITION
As of 6/30/97, based on total net assets
<TABLE>
<CAPTION>
===============================================================================
TOP FIVE HOLDING COUPON MATURITY %
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Coca-Cola Enterprises Inc. 7.24% 06/2000 3.53%
2. Time Warner, Inc. 9.15 02/2023 2.40
3. Province of Manitoba (Canada) 7.75 07/2016 2.01
4. News America Holdings, Inc. 9.25 02/2013 2.01
5. J. Sainsbury (C.I.) Ltd. 8.50 11/2005 1.98
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.
===============================================================================
</TABLE>
See important Fund & index disclosures inside front cover.
2
<PAGE> 5
AIM INCOME FUND DIVERSIFIES THROUGH 3-LEGGED INVESTMENT APPROACH
As of 6/30/97, based on total assets
45% Investment-Grade Bonds
30% High Yield Bonds
25% Foreign Bonds
The Fund holds securities in three bond-market segments: investment-grade
bonds, high-yield securities, and foreign bonds. These three asset classes tend
to perform differently because the factors that influence them vary. Holding
all three types of bonds diversifies the investment risk associated with any
one class, and that may lower the Fund's volatility and enhance its potential
return.
===============================================================================
FACTORS INFLUENCING BONDS VARY
TYPE OF BOND INFLUENCING FACTORS
Investment-grade o Level of interest rates
High-yield domestic o Level of economic activity
Foreign (Non U.S.$) o Interest rates & economic activity in local economy
o Currency fluctuations in relation to U.S. dollar
===============================================================================
comply with the standards for admission to the European Monetary Union,
scheduled to become a reality in 1999. The Fund took advantage of these
efforts by holding Swedish and Italian securities. However, the U.S. dollar
appreciated against most major currencies and that adversely affected
returns translated back to U.S. dollars. The Fund mitigated the effect of a
rising dollar by selectively hedging some of its currency exposure.
Q. HOW WAS THE FUND STRUCTURED AT THE END OF THE REPORTING PERIOD?
A. There were 159 holdings in the Fund as of June 30, 1997. The weighted
average maturity of the portfolio was 12.6 years and its duration was 6.99
years. The Fund had an average portfolio quality rating of BBB as measured
by Standard & Poor's Corporation (S&P) and Moody's Investors Service
(Moody's), two widely known credit rating agencies. These ratings are
historical and are based on analysis of the credit quality of the individual
securities in the Fund's portfolio.
Q. WHAT IS YOUR MARKET OUTLOOK?
A. In the U.S., conditions appear to be favorable for the bond market. Economic
growth is slowing to a moderate pace, inflation continues to be low, and
progress is being made toward a balanced budget agreement that could include
tax cuts for investors. Moreover, the Federal Reserve Board has indicated
that further tightening of monetary policy may be unnecessary for the rest
of the year.
We continue to be optimistic about foreign bonds. European central banks
in particular seem to be committed to maintaining a moderate growth
environment, and governments around the globe continue to target lower
fiscal spending and government debt levels. That should help contain
interest rates and continue the favorable environment for bonds.
In view of these changing economic developments, the Fund remains
committed to maintaining exposure in the three key bond-market
sectors--investment-grade bonds, foreign bonds,and high-yield bonds--to
reduce volatility and enhance opportunities for attractive returns.
-------------------------------
... mounting evidence that
economic growth was slowing,
combined with
improved prospects
for a balanced federal budget,
ignited a bond-market rally
that persisted
through the end
of the reporting period.
-------------------------------
See important Fund & index disclosures inside front cover.
3
<PAGE> 6
SCHEDULE OF INVESTMENTS
June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
U.S. DOLLAR DENOMINATED NON-CONVERTIBLE BONDS &
NOTES-66.65%
ADVERTISING/BROADCASTING-5.09%
EchoStar Communications Corp.,
Sr. Gtd. Disc. Notes,
12.875%, 06/01/04(b) $ 1,575,000 $ 1,330,875
- ---------------------------------------------------------------
EchoStar DBS Corp., Sr. Sec.
Gtd. Notes, 12.50%, 07/01/02
(Acquired 06/20/97; Cost
$2,340,000)(c) 2,340,000 2,328,300
- ---------------------------------------------------------------
SFX Broadcasting, Inc., Series
B Sr. Sub. Notes, 10.75%,
05/15/06 1,000,000 1,095,000
- ---------------------------------------------------------------
Time Warner, Inc.,
Deb., 9.15%, 02/01/23 8,500,000 9,403,975
- ---------------------------------------------------------------
Unsec. Deb., 6.85%, 01/15/26 4,300,000 4,252,786
- ---------------------------------------------------------------
United International Holdings,
Inc., Sr. Sec. Disc. Notes,
12.78%, 11/15/99(d) 2,000,000 1,555,000
- ---------------------------------------------------------------
19,965,936
- ---------------------------------------------------------------
AIRLINES-2.94%
Airplanes Pass Through Trust,
Sub. Bonds, 10.875%,
03/15/19 1,810,000 2,100,740
- ---------------------------------------------------------------
Delta Air Lines, Inc.,
Deb., 9.00%, 05/15/16 500,000 561,875
- ---------------------------------------------------------------
Equipment Trust
Certificates, 10.50%,
04/30/16 5,000,000 6,187,150
- ---------------------------------------------------------------
United Air Lines, Inc., Pass
Through Certificates, 9.56%,
10/19/18 2,325,000 2,672,890
- ---------------------------------------------------------------
11,522,655
- ---------------------------------------------------------------
AUTOMOBILE
(MANUFACTURERS)-1.95%
General Motors Corp., Deb.,
8.80%, 03/01/21 6,700,000 7,636,660
- ---------------------------------------------------------------
AUTOMOBILE/TRUCK PARTS & TIRES-0.17%
CSK Auto Inc., Sr. Sub. Notes,
11.00%, 11/01/06
(Acquired 10/23/96; Cost $650,000)(c) 650,000 682,500
- ---------------------------------------------------------------
BANKING-3.29%
Bankers Trust New York Corp.,
Gtd. Notes, 7.875%, 02/25/27 3,000,000 2,907,420
- ---------------------------------------------------------------
First Union Bancorp, Sub.
Deb., 7.50%, 04/15/35 5,300,000 5,465,148
- ---------------------------------------------------------------
HSBC Americas Inc., Sub.
Notes, 7.00%, 11/01/06 2,000,000 1,969,460
- ---------------------------------------------------------------
Sovereign Bancorp, Inc., Sub.
Notes, 8.00%, 03/15/03 2,500,000 2,560,575
- ---------------------------------------------------------------
12,902,603
- ---------------------------------------------------------------
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
BEVERAGES (SOFT DRINKS)-3.53%
Coca-Cola Enterprises, Inc.,
Putable Notes, 7.24%,
06/20/20(d) $ 74,000,000 $ 13,820,240
- ---------------------------------------------------------------
CABLE TELEVISION-2.18%
Fundy Cable Ltd. (Canada), Sr.
Yankee Sec. Second Priority
Notes, 11.00%, 11/15/05 410,000 444,850
- ---------------------------------------------------------------
Kabelmedia Holdings GmbH
(Germany), Sr. Yankee Unsec.
Disc. Notes, 13.625%,
08/01/06(b) 1,400,000 850,500
- ---------------------------------------------------------------
Marcus Cable Operating Co.,
Sr. Disc. Notes, 13.50%,
08/01/04(b) 1,690,000 1,468,188
- ---------------------------------------------------------------
Rifkin Acquisition Partners
L.L.P., Sr. Sub. Notes,
11.125%, 01/15/06 630,000 672,525
- ---------------------------------------------------------------
TeleWest Communications PLC
(United Kingdom), Sr. Yankee
Disc. Deb., 11.00%,
10/01/07(b) 1,100,000 803,000
- ---------------------------------------------------------------
Viacom, Inc., Sr. Notes,
7.75%, 06/01/05 3,650,000 3,661,826
- ---------------------------------------------------------------
Wireless One, Inc., Sr. Notes,
13.00%, 10/15/03 1,000,000 640,000
- ---------------------------------------------------------------
8,540,889
- ---------------------------------------------------------------
CHEMICALS-1.27%
BPC Holding Corp., Series B
Sr. Notes, 12.50%, 06/15/06 1,000,000 1,095,000
- ---------------------------------------------------------------
Crain Industries, Inc., Sr.
Sub. Notes, 13.50%, 08/15/05 1,070,000 1,225,150
- ---------------------------------------------------------------
LaRoche Industries, Inc., Sr.
Sub. Notes, 13.00%, 08/15/04 1,000,000 1,105,000
- ---------------------------------------------------------------
Sterling Chemicals, Inc., Sr.
Unsec. Sub. Notes, 11.75%,
08/15/06 1,420,000 1,540,700
- ---------------------------------------------------------------
4,965,850
- ---------------------------------------------------------------
CONSUMER NON-DURABLES-0.27%
Hines Horticulture, Inc.,
Series B Sr. Gtd. Sub.
Notes, 11.75%, 10/15/05 1,000,000 1,062,500
- ---------------------------------------------------------------
CONTAINERS-0.95%
Ivex Packaging Corp., Sr. Sub.
Notes, 12.50%, 12/15/02 1,500,000 1,623,750
- ---------------------------------------------------------------
MVE Inc., Sr. Sec. Notes,
12.50%, 02/15/02 1,000,000 1,025,000
- ---------------------------------------------------------------
Owens-Illinois, Inc., Sr. Sub.
Notes, 10.00%, 08/01/02 1,000,000 1,055,000
- ---------------------------------------------------------------
3,703,750
- ---------------------------------------------------------------
ELECTRIC POWER-4.08%
AES China Generating Co.
(Bermuda), Sr. Yankee Unsec.
Notes, 10.125%, 12/15/06 220,000 233,750
- ---------------------------------------------------------------
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
ELECTRIC POWER-(CONTINUED)
El Paso Electric Co., Series D
Sec. 1st Mortgage Bonds,
8.90%, 02/01/06 $ 2,500,000 $ 2,682,925
- ---------------------------------------------------------------
Series E Sec. 1st Mortgage
Bonds, 9.40%, 05/01/11 4,600,000 5,092,154
- ---------------------------------------------------------------
Indiana Michigan Power, Sec.
Lease Obligation Bonds,
9.82%, 12/07/22 4,969,574 5,948,730
- ---------------------------------------------------------------
Panda Global Energy Co.
(China), Sr. Yankee Sec.
Notes, 12.50%, 04/15/04
(Acquired 04/11/97; Cost
$1,934,291)(c) 2,070,000 2,018,250
- ---------------------------------------------------------------
15,975,809
- ---------------------------------------------------------------
ELECTRONIC COMPONENTS/MISCELLANEOUS-0.60%
Electronic Retailing Systems
International, Inc., Sr.
Disc. Notes, 13.25%,
02/01/04
(Acquired 01/21/97; Cost
$2,464,153)(b)(c) 3,630,000 2,368,575
- ---------------------------------------------------------------
ENERGY (ALTERNATE
SOURCES)-1.22%
AES Corp., Sr. Sub. Notes,
10.25%, 07/15/06 1,000,000 1,100,000
- ---------------------------------------------------------------
Gulf Canada Resources, Ltd.
(Canada), Sr. Yankee Unsec.
Notes, 8.35%, 08/01/06 3,450,000 3,661,313
- ---------------------------------------------------------------
4,761,313
- ---------------------------------------------------------------
ENGINEERING &
CONSTRUCTION-0.56%
MMI Products Inc., Sr. Sub.
Notes, 11.25%, 04/15/07
(Acquired 04/11/97; Cost
$2,070,000)(c) 2,070,000 2,204,550
- ---------------------------------------------------------------
FINANCE (CONSUMER
CREDIT)-2.02%
Associates Corp. of North
America, Series B Sr. Deb.,
7.95%, 02/15/10 6,000,000 6,418,500
- ---------------------------------------------------------------
Commercial Credit Co., Putable
Notes, 7.875%, 02/01/25 1,400,000 1,493,996
- ---------------------------------------------------------------
7,912,496
- ---------------------------------------------------------------
FINANCE (LEASING
COMPANIES)-0.53%
Sea Containers, Ltd.
(Bermuda), Series B Sr.
Yankee Sub. Deb., 12.50%,
12/01/04 1,825,000 2,062,250
- ---------------------------------------------------------------
FOOD/PROCESSING-1.32%
Chiquita Brands International,
Inc.,
Sr. Unsec. Notes, 10.25%,
11/01/06 860,000 915,900
- ---------------------------------------------------------------
Del Monte Corp., Sr. Sub.
Notes, 12.25%, 04/15/07
(Acquired 04/15/97; Cost
$2,036,320)(c) 2,080,000 2,267,200
- ---------------------------------------------------------------
International Home Foods,
Inc., Sr. Gtd. Sub. Notes,
10.375%, 11/01/06 520,000 536,900
- ---------------------------------------------------------------
Pilgrim's Pride Corp., Sr.
Sub. Notes, 10.875%,
08/01/03 1,380,000 1,435,200
- ---------------------------------------------------------------
5,155,200
- ---------------------------------------------------------------
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
FOREIGN GOVERNMENT SECURITIES-2.01%
Province of Manitoba (Canada),
Yankee Bonds, 7.75%,
07/17/16 $ 7,500,000 $ 7,874,325
- ---------------------------------------------------------------
GAMING-1.04%
Coast Hotels & Casinos Inc.,
Series B Sec. First Mortgage
Gtd. Notes, 13.00%, 12/15/02 1,160,000 1,296,300
- ---------------------------------------------------------------
Showboat, Inc., First Mortgage
Notes, 9.25%, 05/01/08 2,000,000 2,065,000
- ---------------------------------------------------------------
Trump Atlantic City
Associates, Sec. 1st
Mortgage Gtd. Notes, 11.25%,
05/01/06 720,000 703,800
- ---------------------------------------------------------------
4,065,100
- ---------------------------------------------------------------
GAS DISTRIBUTION-0.55%
Ferrellgas Partners, Series B
Sr. Sec. Gtd. Notes, 9.375%,
06/15/06 2,100,000 2,173,500
- ---------------------------------------------------------------
HOME BUILDING-0.20%
Continental Homes Holdings
Corp., Sr. Unsec. Gtd.
Notes, 10.00%, 04/15/06 745,000 776,663
- ---------------------------------------------------------------
HOTELS/MOTELS-1.33%
ITT Corp., Unsec. Gtd. Deb.,
7.375%, 11/15/15 3,350,000 3,109,437
- ---------------------------------------------------------------
John Q. Hammons Hotels Inc.,
Sec. 1st Mortgage Notes,
9.75%, 10/01/05 2,000,000 2,090,000
- ---------------------------------------------------------------
5,199,437
- ---------------------------------------------------------------
INSURANCE (LIFE & HEALTH)-1.36%
Americo Life Inc., Sr. Sub.
Notes, 9.25%, 06/01/05 1,000,000 1,025,000
- ---------------------------------------------------------------
Torchmark Corp., Notes,
7.875%, 05/15/23 4,350,000 4,289,448
- ---------------------------------------------------------------
5,314,448
- ---------------------------------------------------------------
INSURANCE (MULTI-LINE PROPERTY)-1.28%
USF&G Corp., Gtd. Bonds,
8.47%, 01/10/27 5,000,000 5,032,000
- ---------------------------------------------------------------
LEISURE & RECREATION-0.62%
Cobblestone Golf Group Inc.,
Series B Sr. Notes, 11.50%,
06/01/03 1,000,000 1,055,000
- ---------------------------------------------------------------
Icon Health & Fitness, Series
B Sr. Sub. Notes, 13.00%,
07/15/02 1,200,000 1,356,000
- ---------------------------------------------------------------
2,411,000
- ---------------------------------------------------------------
MACHINERY (HEAVY)-1.99%
Caterpillar Inc., Deb.,
9.375%, 08/15/11 5,000,000 5,988,550
- ---------------------------------------------------------------
Fairfield Manufacturing Co.,
Inc.,
Sr. Sub. Notes, 11.375%,
07/01/01 1,000,000 1,070,000
- ---------------------------------------------------------------
PrimeCo Inc., Sr. Sub. Notes,
12.75%, 03/01/05 627,000 746,130
- ---------------------------------------------------------------
7,804,680
- ---------------------------------------------------------------
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
MACHINERY
(MISCELLANEOUS)-0.28%
Interlake Corp., Sr. Notes,
12.00%, 11/15/01 $ 1,000,000 $ 1,115,000
- ---------------------------------------------------------------
MEDICAL (PATIENT
SERVICES)-1.33%
Dynacare Inc. (Canada), Sr.
Yankee Notes, 10.75%,
01/15/06 1,140,000 1,191,300
- ---------------------------------------------------------------
Tenet Healthcare Corp., Sr.
Notes, 8.00%, 01/15/05 4,000,000 4,040,000
- ---------------------------------------------------------------
5,231,300
- ---------------------------------------------------------------
MEDICAL
INSTRUMENTS/PRODUCTS-0.57%
Dade International Inc.,
Series B Sr. Sub. Notes,
11.125%, 05/01/06 1,000,000 1,120,000
- ---------------------------------------------------------------
Graphic Controls Corp., Series
A Sr. Sub. Notes, 12.00%,
09/15/05 980,000 1,097,600
- ---------------------------------------------------------------
2,217,600
- ---------------------------------------------------------------
METALS-0.89%
GS Industries, Inc., Sr. Gtd.
Notes, 12.00%, 09/01/04 1,000,000 1,080,000
- ---------------------------------------------------------------
Rio Algom Ltd. (Canada),
Yankee Unsec. Deb., 7.05%,
11/01/05 2,500,000 2,420,425
- ---------------------------------------------------------------
3,500,425
- ---------------------------------------------------------------
NATURAL GAS PIPELINE-1.58%
Transco Energy Co., Deb.,
9.875%, 06/15/20 5,000,000 6,196,950
- ---------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION)-2.94%
Abraxas Petroleum Corp.,
Series B Sr. Notes, 11.50%,
11/01/04 1,130,000 1,234,525
- ---------------------------------------------------------------
Anadarko Petroleum Corp.,
Deb., 7.25%, 03/15/25 5,395,000 5,502,414
- ---------------------------------------------------------------
Mariner Energy, Inc., Series B
Sr. Sub. Notes, 10.50%,
08/01/06 1,040,000 1,094,600
- ---------------------------------------------------------------
Talisman Energy, Inc.
(Canada), Yankee Deb.,
7.125%, 06/01/07 3,750,000 3,686,438
- ---------------------------------------------------------------
11,517,977
- ---------------------------------------------------------------
OIL & GAS (INTEGRATED)-0.77%
Husky Oil Ltd. (Canada), Sr.
Yankee Notes, 7.125%,
11/15/06 2,000,000 1,991,440
- ---------------------------------------------------------------
Wainoco Oil Corp., Sr. Notes,
12.00%, 08/01/02 1,000,000 1,032,500
- ---------------------------------------------------------------
3,023,940
- ---------------------------------------------------------------
OIL & GAS (SERVICES)-0.11%
Sun Co., Inc., Deb., 9.00%,
11/01/24 4,000,000 4,536,080
- ---------------------------------------------------------------
OIL & GAS (SPECIALTY)-0.51%
Nova Chemicals Ltd. (Canada),
Yankee Deb., 7.00%, 08/15/26 2,000,000 2,004,920
- ---------------------------------------------------------------
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
OIL EQUIPMENT & SUPPLIES-1.16%
Falcon Drilling Co., Inc.,
Series B Sr. Notes, 9.75%,
01/15/01 $ 410,000 $ 426,400
- ---------------------------------------------------------------
PAPER & FOREST PRODUCTS-0.54%
RAPP International Finance
(Indonesia), Gtd. Yankee
Sec. Notes, 11.50%, 12/15/00 970,000 994,250
- ---------------------------------------------------------------
United Stationer Supply, Sr.
Sub. Notes, 12.75%, 05/01/05 1,000,000 1,141,250
- ---------------------------------------------------------------
2,135,500
- ---------------------------------------------------------------
POLLUTION CONTROL-1.08%
Allied Waste Industries, Inc.,
Sr. Disc. Notes, 11.30%,
06/01/07
(Acquired 05/01/97; Cost
$2,831,595)(b)(c) 4,930,000 3,118,225
- ---------------------------------------------------------------
Norcal Waste Systems Inc.,
Series B Sr. Gtd. Notes,
13.00%, 11/15/05 1,000,000 1,132,500
- ---------------------------------------------------------------
4,250,725
- ---------------------------------------------------------------
PUBLISHING-2.01%
News America Holdings, Inc.,
Sr. Gtd. Deb., 9.25%,
02/01/13 7,100,000 7,871,130
- ---------------------------------------------------------------
RAILROADS-0.71%
Norfolk Southern Corp.,
Putable Bonds, 7.05%,
05/01/37 2,750,000 2,800,188
- ---------------------------------------------------------------
REAL ESTATE-0.19%
Finova Capital Corp., Unsec.
Notes, 7.40%, 05/06/06 750,000 759,345
- ---------------------------------------------------------------
RETAIL (FOOD & DRUG)-1.02%
Great Atlantic & Pacific Tea
Co., Inc. (Canada), Yankee
Gtd. Notes, 7.78%, 11/01/00
(Acquired 10/18/95; Cost
$3,900,000)(c) 3,900,000 3,997,032
- ---------------------------------------------------------------
SCHOOLS-0.47%
Commemorative Brands, Sr. Sub.
Notes, 11.00%, 01/15/07 705,000 742,013
- ---------------------------------------------------------------
Herff Jones Inc., Sr. Sub.
Notes, 11.00%, 08/15/05 1,000,000 1,085,000
- ---------------------------------------------------------------
1,827,013
- ---------------------------------------------------------------
SEMICONDUCTORS-0.31%
Advanced Micro Devices, Inc.,
Sr. Sec. Notes, 11.00%,
08/01/03 1,100,000 1,229,250
- ---------------------------------------------------------------
STEEL-0.82%
AK Steel Corp., Sr. Notes,
9.125%, 12/15/06 1,500,000 1,543,125
- ---------------------------------------------------------------
Gulf States Steel Corp., 1st
Mortgage Notes, 13.50%,
04/15/03 1,650,000 1,666,500
- ---------------------------------------------------------------
3,209,625
- ---------------------------------------------------------------
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
TELECOMMUNICATIONS-5.54%
Clearnet Communications Inc.
(Canada),
Sr. Yankee Unsec. Disc.
Notes, 14.75%, 12/15/05(b) $ 920,000 $ 614,100
- ---------------------------------------------------------------
Dial Call Communications, Sr.
Disc. Notes, 12.25%,
04/15/04(b) 1,130,000 933,663
- ---------------------------------------------------------------
ICG Holdings, Inc., Sr. Disc.
Notes, 11.625%, 03/15/07
(Acquired 03/06/97; Cost
$1,884,631)(b)(c) 3,320,000 2,012,850
- ---------------------------------------------------------------
MCI Communications Corp.,
Putable Sr. Unsec. Deb.,
7.125%, 06/15/27 2,750,000 2,852,603
- ---------------------------------------------------------------
Nextel Communications, Inc.,
Sr. Disc. Notes, 11.50%,
09/01/03(b) 1,840,000 1,610,000
- ---------------------------------------------------------------
Orion Network Systems, Inc.,
Units, 11.25%, 01/15/07(e) 3,400,000 3,570,000
- ---------------------------------------------------------------
PriCellular Wireless Corp.,
Sr. Notes, 10.75%, 11/01/04 1,425,000 1,482,000
- ---------------------------------------------------------------
ProNet, Inc., Sr. Sub. Notes,
11.875%, 06/15/05 1,000,000 982,500
- ---------------------------------------------------------------
Sygnet Wireless Inc., Sr.
Unsec. Notes, 11.50%,
10/01/06 1,320,000 1,326,600
- ---------------------------------------------------------------
TCI Communications Inc., Deb.,
8.75%, 08/01/15 6,000,000 6,321,240
- ---------------------------------------------------------------
21,705,556
- ---------------------------------------------------------------
TELEPHONE-0.19%
PhoneTel Technologies, Inc.,
Sr. Unsec. Gtd. Notes,
12.00%, 12/15/06 740,000 752,950
- ---------------------------------------------------------------
TRANSPORTATION-1.28%
Gearbulk Holding Ltd., Sr.
Notes, 11.25%, 12/01/04 1,000,000 1,110,000
- ---------------------------------------------------------------
Stena A.B. (Sweden), Sr.
Yankee Unsec. Notes, 10.50%,
12/15/05 1,500,000 1,646,250
- ---------------------------------------------------------------
Travelcenters of America, Sr.
Sub. Notes, 10.25%, 04/01/07
(Acquired 03/24/97-04/07/97; Cost
$2,168,600)(c) 2,180,000 2,245,400
- ---------------------------------------------------------------
5,001,650
- ---------------------------------------------------------------
Total U.S. Dollar
Denominated Non-
Convertible Bonds &
Notes 261,205,485
- ---------------------------------------------------------------
U.S. DOLLAR DENOMINATED CONVERTIBLE BONDS &
NOTES-2.17%
BUSINESS SERVICES-0.27%
CUC International, Inc., Conv.
Sub. Notes, 3.00%, 02/15/02
(Acquired 02/05/97; Cost
$1,000,000)(c) 1,000,000 1,058,610
- ---------------------------------------------------------------
COMPUTER PERIPHERALS-0.28%
EMC Corp., Conv. Sub. Notes,
3.25%, 03/15/02 (Acquired
03/06/97; Cost
$1,000,000)(c) 1,000,000 1,101,320
- ---------------------------------------------------------------
OFFICE AUTOMATION-0.25%
Xerox Credit Corp., Series E
Notes, 2.875%, 07/01/02 1,000,000 1,003,750
- ---------------------------------------------------------------
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
POLLUTION CONTROL-0.33%
U.S. Filter Corp., Conv. Sub.
Notes, 6.00%, 09/15/05 $ 800,000 $ 1,263,308
- ---------------------------------------------------------------
TRANSPORTATION-1.04%
Laidlaw, Inc. (Canada), Yankee
Unsec. Conv. Deb., 6.00%,
01/15/99 (Acquired
08/19/96-08/23/96; Cost
$3,955,000)(c) 3,000,000 4,096,260
- ---------------------------------------------------------------
Total U.S. Dollar
Denominated Convertible
Bonds & Notes 8,523,248
- ---------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED NON-CONVERTIBLE
BONDS & NOTES(f)-6.55%
CANADA-4.54%
Bank of Montreal (Banking),
Sub. Deb., 7.92%, 07/31/12 CAD 4,000,000 3,159,274
- ---------------------------------------------------------------
Bell Canada
(Telecommuncations), Unsec.
Deb., 10.875, 10/11/04 3,000,000 2,699,989
- ---------------------------------------------------------------
NAV Canada (Transportation),
Bonds, 7.40%, 06/01/27 2,500,000 1,870,741
- ---------------------------------------------------------------
Rogers Cablesystems (Cable
Television), Sr. Sec. Second
Priority Deb., 9.65%,
01/15/14 1,750,000 1,269,829
- ---------------------------------------------------------------
Telegobe Canada, Inc.
(Telecommunications), Unsec.
Deb., 8.35%, 06/20/03 5,000,000 3,985,083
- ---------------------------------------------------------------
Trans-Canada Pipelines (Oil &
Gas),
Series Q Deb., 10.625%,
10/20/09 1,750,000 1,643,969
- ---------------------------------------------------------------
Unsec. Notes, 8.55%,
02/01/06 3,000,000 2,441,537
- ---------------------------------------------------------------
Westcoast Energy, Inc.
(Electric Power), Deb.,
6.45%, 12/18/06
(Acquired 12/03/96; Cost $739,169)(c)1,000,000 713,350
- ---------------------------------------------------------------
17,783,772
- ---------------------------------------------------------------
GERMANY-1.16%
Daimler-Benz
A.G.(Finance-Consumer
Credit), Gtd. Unsub.
Eurobonds, 4.50%, 07/05/03 DEM 3,040,000 2,621,065
- ---------------------------------------------------------------
LKB Global (Banking), Gtd.
Notes, 6.00%, 01/25/06 3,300,000 1,934,098
- ---------------------------------------------------------------
4,555,163
- ---------------------------------------------------------------
UNITED KINGDOM-0.85%
Sutton Bridge Financing Ltd.
(Finance-Consumer Credit),
Gtd. Bonds, 8.625%, 06/30/22
(Acquired 05/29/97; Cost
$3,260,377)(c) GBP 2,000,000 3,316,031
- ---------------------------------------------------------------
Total Non-U.S. Dollar
Denominated
Non-Convertible Bonds &
Notes 25,654,966
- ---------------------------------------------------------------
</TABLE>
7
<PAGE> 10
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
NON-U.S. DOLLAR DENOMINATED CONVERTIBLE BONDS &
NOTES(F)-8.71%
JAPAN-5.18%
JUSCO Co. (Consumer
Non-Durables), Conv. Bonds,
1.20%, 02/20/01 JPY 220,000,000 $ 3,439,155
- ---------------------------------------------------------------
Matsushita Electric Industrial
Co. Ltd.
(Electronic Components/Miscellaneous),
Conv. Bonds, 1.30%, 03/29/02 250,000,000 3,108,096
- ---------------------------------------------------------------
Sony Corp. (Electronic
Components/Miscellaneous),
Conv. Deb., 1.40%, 03/31/05 465,000,000 5,192,811
- ---------------------------------------------------------------
Toyota Motor Corp.
(Automobile-Manufacturers),
Conv. Bonds, 1.20%, 01/28/98 455,000,000 6,817,855
- ---------------------------------------------------------------
Yamada Denki Co. Ltd.
(Retail-Stores), Unsec.
Conv. Notes, 0.25%, 03/31/00 1,700,000 1,740,753
- ---------------------------------------------------------------
20,298,670
- ---------------------------------------------------------------
UNITED KINGDOM-3.53%
J. Sainsbury (C.I.) Ltd.
(Finance-Asset Management),
Conv. Gtd. Bonds, 8.50%,
11/19/05 GBP 3,900,000 7,777,372
- ---------------------------------------------------------------
LASMO PLC (Oil Equipment &
Supplies), Conv. Bonds,
7.75%, 10/04/05 3,700,000 6,069,190
- ---------------------------------------------------------------
13,846,562
- ---------------------------------------------------------------
Total Non-U.S. Dollar
Denominated Convertible
Bonds & Notes 34,145,232
- ---------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED GOVERNMENT BONDS &
NOTES(f)-9.80%
AUSTRALIA-1.16%
Queensland Treasury Corp.,
Gtd. Bonds, 6.50%, 06/14/05 AUD 6,250,000 4,562,911
- ---------------------------------------------------------------
CANADA-1.08%
Ontario Province, Sr. Unsec.
Unsub. Global Bonds, 8.00%,
03/11/03 CAD 5,350,000 4,244,629
- ---------------------------------------------------------------
GERMANY-0.57%
Bundesrepublik Deutschland,
Bonds, 6.875%, 05/12/05 DEM 3,600,000 2,246,362
- ---------------------------------------------------------------
NEW ZEALAND-1.27%
New Zealand Government,
Bonds, 10.00%, 03/15/02 NZD 6,500,000 4,979,157
- ---------------------------------------------------------------
SWEDEN-2.06%
Swedish Government,
Bonds, 10.25%, 05/05/03 SEK 19,000,000 2,959,854
- ---------------------------------------------------------------
Bonds, 6.00%, 02/09/05 20,000,000 2,527,567
- ---------------------------------------------------------------
Bonds, 6.50%, 10/25/06 20,000,000 2,569,194
- ---------------------------------------------------------------
8,056,615
- ---------------------------------------------------------------
UNITED KINGDOM-3.66%
Federal National Mortgage
Association, Sr. Unsec.
Notes, 6.875%, 06/07/02 GBP 2,400,000 3,945,364
- ---------------------------------------------------------------
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
UNITED KINGDOM-(CONTINUED)
United Kingdom Treasury,
Bonds, 8.00%, 12/07/00 GBP 1,500,000 $ 2,572,016
- ---------------------------------------------------------------
Gtd. Notes, 7.00%, 11/06/01 1,500,000 2,494,205
- ---------------------------------------------------------------
Bonds, 7.50%, 12/07/06 3,100,000 5,297,147
- ---------------------------------------------------------------
14,308,732
- ---------------------------------------------------------------
Total Non-U.S. Dollar
Denominated Government
Bonds & Notes 38,398,406
- ---------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS-2.77%
<CAPTION>
SHARES
<S> <C> <C>
AEROSPACE/DEFENSE-0.26%
Loral Space &
Communications-$3.00 Conv.
Pfd. (Acquired 11/01/96;
Cost $1,000,000)(c) 20,000 1,002,160
- ---------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES-0.40%
Microsoft Corp.-Series
A-$2.196 Conv. Pfd. 18,000 1,566,000
- ---------------------------------------------------------------
ELECTRIC POWER-0.24%
Citizens Utilities Co.-$2.50
Conv. Pfd. 21,100 923,125
- ---------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-0.59%
SunAmerica, Inc.-$3.188 Conv.
Pfd. 53,350 2,327,394
- ---------------------------------------------------------------
OIL & GAS (REFINING/MARKETING)-0.28%
Tosco Financing Trust-$2.875
Conv. Pfd. (Acquired
12/10/96-12/11/96; Cost
$1,006,950)(c) 20,000 1,111,000
- ---------------------------------------------------------------
RETAIL (STORES)-0.52%
Kmart Financing-$3.875 Conv. Pfd. 37,000 2,030,374
- ---------------------------------------------------------------
TELECOMMUNICATIONS-0.48%
Qualcomm Financial
Trust-$2.875 Conv.
Pfd. (Acquired 02/19/97; Cost
$2,000,000)(c) 40,000 1,900,000
- ---------------------------------------------------------------
Total Convertible
Preferred Stocks 10,860,053
- ---------------------------------------------------------------
COMMON STOCKS-0.43%
ELECTRIC POWER-0.43%
National Power PLC-ADR 24,300 855,056
- ---------------------------------------------------------------
PowerGen PLC-ADR 17,300 839,050
- ---------------------------------------------------------------
Total Common Stocks 1,694,106
- ---------------------------------------------------------------
WARRANTS-0.07%
CABLE TELEVISION-0.00%
Wireless One, Inc., expiring
10/19/00(g) 2,670 --
- ---------------------------------------------------------------
CONTAINERS-0.01%
MVE Inc., expiring 02/15/02(g) 1,000 30,000
- ---------------------------------------------------------------
ELECTRONIC COMPONENTS/MISCELLANEOUS-0.04%
Electronic Retailing Systems,
expiring 01/24/98(g) 3,630 146,108
- ---------------------------------------------------------------
</TABLE>
8
<PAGE> 11
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
LEISURE & RECREATION-0.01%
IHF Capital Inc., expiring
11/14/99
(Acquired 11/04/94-12/07/94; Cost
$0)(c)(g) 1,200 $ 60,000
- ---------------------------------------------------------------
STEEL-0.00%
Gulf States Steel Corp.,
expiring 04/15/03(g) 1,650 7,425
- ---------------------------------------------------------------
TELECOMMUNICATIONS-0.01%
Clearnet Communications Inc.,
expiring 09/15/05(g) 5,874 29,369
- ---------------------------------------------------------------
Total Warrants 272,902
- ---------------------------------------------------------------
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
U.S. TREASURY SECURITIES-1.12%
U.S. Treasury Bonds, 6.625%,
02/15/27 $ 4,500,000 $ 4,404,465
- ---------------------------------------------------------------
U.S. GOVERNMENT AGENCY
SECURITIES-0.51%
Federal National Mortgage
Association, Notes, 7.25%,
06/20/02 2,900,000 1,992,478
- ---------------------------------------------------------------
REPURCHASE AGREEMENT(h)-0.14%
UBS Securities, Inc., 6.10%,
07/01/97(i) 535,624 535,624
- ---------------------------------------------------------------
TOTAL INVESTMENTS-98.92% 387,686,965
- ---------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-1.08% 4,189,580
- ---------------------------------------------------------------
NET ASSETS-100.00% $391,876,545
===============================================================
</TABLE>
Abbreviations:
ADR - American Depository Receipt
AUD - Australian Dollar
CAD - Canadian Dollar
CHF - Swiss Franc
Conv. - Convertible
Deb. - Debentures
DEM - German Deutschemark
Disc. - Discounted
GBP - British Pound Sterling
Gtd. - Guaranteed
Pfd. - Preferred
JPY - Japanese Yen
NZD - New Zealand Dollar
Sec. - Secured
SEK - Swedish Krona
Sr. - Senior
Sub. - Subordinated
Unsec. - Unsecured
Unsub. - Unsubordinated
Notes to Schedule of Investments:
(a) Principal amount is in U.S. Dollars, except as indicated by note (f).
(b) Discounted bond at purchase. Interest rate represents coupon rate at which
the bond will accrue at a specified future date.
(c) Restricted securities. 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 06/30/97 was $37,601,613 which
represented 9.60% of the Fund's net assets.
(d) Zero coupon bond issued at a discount. The interest rate shown represents
the rate of original issue discount.
(e) Issued as a unit. Each unit also includes 1 Sr. Note plus warrants to
purchase 0.8444 shares of common stock per warrant.
(f) Foreign denominated security. Par value and coupon are denominated in
currency of country indicated.
(g) Non-income producing security acquired as part of a unit with or in exchange
for other securities.
(h) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(i) Joint repurchase agreement entered into 06/30/97 with a maturing value of
$300,050,833. Collateralized by $320,816,334 U.S. Government obligations, 0%
to 13.25% due 07/14/97 to 04/01/27 with an aggregate market value at
06/30/97 of $306,003,435.
See Notes to Financial Statements.
9
<PAGE> 12
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$374,268,951) $387,686,965
- ---------------------------------------------------------
Foreign currencies, at value (cost
$2,857,447) 2,859,165
- ---------------------------------------------------------
Receivables for:
Fund shares sold 904,803
- ---------------------------------------------------------
Interest 7,025,527
- ---------------------------------------------------------
Investment for deferred compensation plan 63,490
- ---------------------------------------------------------
Other assets 252,931
- ---------------------------------------------------------
Total assets 398,792,881
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 3,859,165
- ---------------------------------------------------------
Forward currency contracts 292,771
- ---------------------------------------------------------
Fund shares reacquired 1,098,844
- ---------------------------------------------------------
Dividends to shareholders 546,498
- ---------------------------------------------------------
Deferred compensation plan 63,490
- ---------------------------------------------------------
Accrued advisory fees 144,558
- ---------------------------------------------------------
Accrued distribution fees 282,567
- ---------------------------------------------------------
Accrued administrative service fees 7,323
- ---------------------------------------------------------
Accrued transfer agent fees 48,662
- ---------------------------------------------------------
Accrued trustees' fees 1,920
- ---------------------------------------------------------
Accrued operating expenses 570,538
- ---------------------------------------------------------
Total liabilities 6,916,336
- ---------------------------------------------------------
Net assets applicable to shares outstanding $391,876,545
=========================================================
NET ASSETS:
Class A $293,345,966
=========================================================
Class B $ 98,530,579
=========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE
Class A 35,607,813
=========================================================
Class B 11,985,922
=========================================================
CLASS A:
Net asset value and redemption price per
share $ 8.24
=========================================================
Offering price per share:
(Net asset value of $8.24 divided by
95.25%) $ 8.65
=========================================================
CLASS B:
Net asset value and offering price per
share $ 8.22
=========================================================
</TABLE>
STATEMENT OF OPERATIONS
For The Six Months Ended June 30, 1997
(Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 13,901,714
- ---------------------------------------------------------
Dividends (net of $9,396 foreign
withholding tax) 412,349
- ---------------------------------------------------------
Total investment income 14,314,063
- ---------------------------------------------------------
EXPENSES:
Advisory fees 842,970
- ---------------------------------------------------------
Custodian fees 45,338
- ---------------------------------------------------------
Distribution fees -- Class A 353,058
- ---------------------------------------------------------
Distribution fees -- Class B 447,248
- ---------------------------------------------------------
Trustees' fees 4,304
- ---------------------------------------------------------
Transfer agent fees -- Class A 176,479
- ---------------------------------------------------------
Transfer agent fees -- Class B 83,332
- ---------------------------------------------------------
Administrative service fees 43,690
- ---------------------------------------------------------
Other 91,811
- ---------------------------------------------------------
Total expenses 2,088,230
- ---------------------------------------------------------
Less: Expenses paid indirectly (7,362)
- ---------------------------------------------------------
Net expenses 2,080,868
=========================================================
Net investment income 12,233,195
=========================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES, FOREIGN CURRENCIES, FORWARD CURRENCY
CONTRACTS AND FUTURES CONTRACTS
Net realized gain (loss) from:
Investment securities 3,962,899
- ---------------------------------------------------------
Foreign currencies (1,739,521)
- ---------------------------------------------------------
Forward currency contracts 3,322,365
- ---------------------------------------------------------
Futures contracts (1,794,375)
- ---------------------------------------------------------
3,751,368
- ---------------------------------------------------------
Unrealized appreciation (depreciation) of:
Investment securities (2,190,872)
- ---------------------------------------------------------
Foreign currencies (17,693)
- ---------------------------------------------------------
Forward currency contracts (1,194,381)
- ---------------------------------------------------------
(3,402,946)
- ---------------------------------------------------------
Net gain from investment securities,
foreign currencies, forward currency
contracts and futures contracts 348,422
=========================================================
Net increase in net assets resulting from
operations $ 12,581,617
=========================================================
</TABLE>
See Notes to Financial Statements.
10
<PAGE> 13
STATEMENT OF CHANGES IN NET ASSETS
For The Six Months Ended June 30, 1997 And The Year Ended December 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
<S> <C> <C>
OPERATIONS:
Net investment income $ 12,233,195 $ 22,816,117
- --------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies, forward currency contracts and futures
transactions 3,751,368 2,116,227
- --------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities, foreign currencies and forward currency
contracts (3,402,946) 4,238,364
- --------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 12,581,617 29,170,708
- --------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (9,855,187) (19,414,227)
- --------------------------------------------------------------------------------------------
Class B (2,751,876) (4,277,769)
- --------------------------------------------------------------------------------------------
Share transactions-net:
Class A 7,269,519 31,245,815
- --------------------------------------------------------------------------------------------
Class B 13,106,078 39,218,171
- --------------------------------------------------------------------------------------------
Net increase in net assets 20,350,151 75,942,698
- --------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 371,526,394 295,583,696
- --------------------------------------------------------------------------------------------
End of period $391,876,545 $371,526,394
============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $381,111,882 $360,736,285
- --------------------------------------------------------------------------------------------
Undistributed net investment income (340,739) 33,129
- --------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from sales of
investment securities, foreign currencies, forward
currency contracts and futures transactions (1,993,802) (5,745,170)
- --------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies and forward currency contracts 13,099,204 16,502,150
- --------------------------------------------------------------------------------------------
$391,876,545 $371,526,394
============================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
June 30, 1997
(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 -- Debt obligations 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
11
<PAGE> 14
pricing service and which are listed or traded on an exchange 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. 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
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, 1997 were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Contract to Unrealized
Settlement ----------------------------- Appreciation
Date Deliver Receive Value (Depreciation)
- -------------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
07/31/97 CHF 1,460,000 $ 1,007,870 $ 1,003,999 $ 3,871
09/10/97 CHF 1,000,000 696,864 690,928 5,936
08/20/97 DEM 11,200,000 6,654,783 6,446,225 208,558
09/19/97 NZD 2,800,000 1,926,400 1,903,870 22,530
07/14/97 JPY 114,500,000 913,406 998,975 (85,569)
08/06/97 JPY 630,000,000 5,080,645 5,496,735 (416,090)
09/05/97 JPY 660,000,000 5,750,131 5,758,724 (8,593)
07/29/97 SEK 54,500,000 7,030,444 7,053,858 (23,414)
- -------------------------------------------------------------------------------------
$29,060,543 $29,353,314 $(292,771)
======================================================================================
</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. It is the policy of the Fund to declare daily dividends
from net investment income. Such dividends are paid monthly. Distributions
from net realized capital gains, if any, are recorded on ex-dividend date and
are paid annually subject to restrictions noted in section "E" below.
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 $4,771,102 (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. It is
estimated that the Fund will incur a return of capital for tax purposes
during its year ended December 31, 1997.
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
12
<PAGE> 15
$500 million to and including $1 billion, plus 0.30% of the Fund's average daily
net assets in excess of $1 billion.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to reimburse AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the six months ended June 30, 1997, AIM
was reimbursed $43,690 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, 1997, the
Fund paid AFS $165,873 for such services.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A shares and the Class B shares of the Fund. The Trust has adopted Plans
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A
shares (the "Class A Plan") and with respect to the Fund's Class B shares (the
"Class B Plan")(collectively, the "Plans"). The Fund, pursuant to the Class A
Plan, pays AIM Distributors compensation at an annual rate of 0.25% of the
average daily net assets attributable to the Class A shares. The Class A Plan is
designed to compensate AIM Distributors for certain promotional and other sales
related costs and 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, 1997,
the Class A shares and the Class B shares paid AIM Distributors $353,058 and
$447,248, respectively, as compensation under the Plans.
AIM Distributors received commissions of $97,792 from sales of the Class A
shares of the Fund during the six months ended June 30, 1997. 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,
1997, AIM Distributors received $26,382 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, 1997, the Fund paid legal fees of $3,247
for services rendered by Kramer, Levin, Naftalis & Frankel as counsel to the
Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3-INDIRECT EXPENSES
AIM has directed certain portfolio trades to brokers who paid a portion of the
Fund's expenses related to pricing services used by the Fund. For the six months
ended June 30, 1997 the Fund's expenses were reduced by $195 and the Fund
received reductions in transfer agency fees from AFS (an affiliate of AIM) and
reductions in custodian fees of $2,441 and $4,726, respectively, under expense
offset arrangements. The effect of the above arrangements resulted in a
reduction of the Fund's total expenses of $7,362 during the six months ended
June 30, 1997.
NOTE 4-TRUSTEES' FEES
Trustees' fees represent remuneration paid or accrued to each trustee who is not
an "interested person" of AIM. The Trust may invest trustees' fees, if so
elected by a trustee, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 5-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $500,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
Prior to an amendment of the line of credit on July 15, 1997, the Fund was
limited to borrowing up to the lesser of (i) $325,000,000 or (ii) the limits set
by its prospectus for borrowings. During the six months ended June 30, 1997, the
Fund did not borrow under the line of credit agreement. The funds which are
parties to the line of credit are charged a commitment fee of 0.05% on the
unused balance of the committed line. The commitment fee is allocated among such
funds based on their respective average net assets for the period.
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the six months ended June 30, 1997 was
$131,900,826 and $104,013,866, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
on a tax basis as of June 30, 1997 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $18,601,442
- -----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (5,183,428)
- -----------------------------------------------------------
Net unrealized appreciation of investment
securities $13,418,014
===========================================================
</TABLE>
Investments have the same cost for tax and financial
statement purposes.
13
<PAGE> 16
NOTE 7-SHARE INFORMATION
Changes in shares outstanding during the six months ended June 30, 1997 and the
year ended December 31, 1996 were as follows:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
----------------------- -----------------------
SHARES VALUE SHARES VALUE
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Sold:
Class A 4,499,263 $36,665,543 10,956,910 $87,131,342
- --------------------------------------------------------- ---------- ----------- ---------- -----------
Class B 2,716,354 22,087,010 7,662,222 60,657,835
- --------------------------------------------------------- ---------- ----------- ---------- -----------
Issued as reinvestment of dividends:
Class A 984,827 8,014,080 1,985,876 15,762,291
- --------------------------------------------------------- ---------- ----------- ---------- -----------
Class B 229,956 1,867,968 357,055 2,833,327
- --------------------------------------------------------- ---------- ----------- ---------- -----------
Reacquired:
Class A (4,593,731) (37,410,104) (8,997,073) (71,647,818)
- --------------------------------------------------------- ---------- ----------- ---------- -----------
Class B (1,334,770) (10,848,900) (3,079,249) (24,272,991)
- --------------------------------------------------------- ---------- ----------- ---------- -----------
2,501,899 $20,375,597 8,885,741 $70,463,986
========================================================= ========== =========== ========== ===========
</TABLE>
NOTE 8-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a Class A share outstanding during
the six months ended June 30, 1997 and each of the years in the nine-year period
ended December 31, 1996 and for a Class B share outstanding during the six
months ended June 30, 1997, each of the years in the three-year period ended
December 31, 1996 and the period September 7, 1993 (date sales commenced)
through December 31, 1993.
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, ----------------------------------------------------
1997 1996 1995 1994 1993 1992(a)
CLASS A: -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.24 $ 8.17 $ 7.20 $ 8.45 $ 8.03 $ 8.07
- -------------------------------------------------- -------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.27 0.57 0.58 0.58 0.60 0.60
- -------------------------------------------------- -------- -------- -------- -------- -------- --------
Net gains (losses) on securities (both realized
and unrealized) 0.01 0.09 1.00 (1.22) 0.61 (0.03)
- -------------------------------------------------- -------- -------- -------- -------- -------- --------
Total from investment operations 0.28 0.66 1.58 (0.64) 1.21 0.57
- -------------------------------------------------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.28) (0.59) (0.61) (0.49) (0.60) (0.61)
- -------------------------------------------------- -------- -------- -------- -------- -------- --------
Distributions from net realized capital gains -- -- -- (0.01) (0.19) --
- -------------------------------------------------- -------- -------- -------- -------- -------- --------
Return of capital -- -- -- (0.11) -- --
- -------------------------------------------------- -------- -------- -------- -------- -------- --------
Total distributions (0.28) (0.59) (0.61) (0.61) (0.79) (0.61)
- -------------------------------------------------- -------- -------- -------- -------- -------- --------
Net asset value, end of period $ 8.24 $ 8.24 $ 8.17 $ 7.20 $ 8.45 $ 8.03
================================================== ======== ======== ======== ======== ======== ========
Total return(b) 3.52% 8.58% 22.77% (7.65)% 15.38% 7.42%
================================================== ======== ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $293,346 $286,183 $251,280 $201,677 $244,168 $218,848
================================================== ======== ======== ======== ======== ======== ========
Ratio of expenses to average net assets 0.93%(c)(d) 0.98% 0.98% 0.98% 0.98% 0.99%(e)
================================================== ======== ======== ======== ======== ======== ========
Ratio of net investment income to average net
assets 6.80%(c) 7.13% 7.52% 7.53% 7.01% 7.54%(f)
================================================== ======== ======== ======== ======== ======== ========
Portfolio turnover rate 29% 80% 227% 185% 99% 82%
================================================== ======== ======== ======== ======== ======== ========
<CAPTION>
DECEMBER 31,
-------------------------------------------
1991 1990 1989 1988
CLASS A: -------- -------- -------- --------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 7.41 $ 7.80 $ 7.53 $ 7.55
- -------------------------------------------------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.61 0.65 0.66 0.68
- -------------------------------------------------- -------- -------- -------- --------
Net gains (losses) on securities (both realized
and unrealized) 0.66 (0.39) 0.32 (0.02)
- -------------------------------------------------- -------- -------- -------- --------
Total from investment operations 1.27 0.26 0.98 0.66
- -------------------------------------------------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.61) (0.65) (0.71) (0.68)
- -------------------------------------------------- -------- -------- -------- --------
Distributions from net realized capital gains -- -- -- --
- -------------------------------------------------- -------- -------- -------- --------
Return of capital -- -- -- --
- -------------------------------------------------- -------- -------- -------- --------
Total distributions (0.61) (0.65) (0.71) (0.68)
- -------------------------------------------------- -------- -------- -------- --------
Net asset value, end of period $ 8.07 $ 7.41 $ 7.80 $ 7.53
================================================== ======== ======== ======== ========
Total return(b) 18.00% 3.65% 13.56% 9.01%
================================================== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $231,798 $215,987 $229,222 $218,946
================================================== ======== ======== ======== ========
Ratio of expenses to average net assets 1.00%(e) 1.00% 0.96% 0.95%
================================================== ======== ======== ======== ========
Ratio of net investment income to average net
assets 7.97%(f) 8.73% 8.56% 8.81%
================================================== ======== ======== ======== ========
Portfolio turnover rate 67% 106% 222% 361%
================================================== ======== ======== ======== ========
</TABLE>
(a) The Fund changed investment advisors on June 30, 1992.
(b) Does not deduct sales charges and is not annualized for periods less than
one year.
(c) Ratios are annualized and based on average net assets of $284,786,847.
(d) Includes indirectly paid expenses. Excluding indirectly paid expenses, the
ratio of expenses to average daily net assets would have been the same.
(e) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.00% and 1.03% for 1992 and 1991, respectively.
(f) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 7.53% and 7.94% for 1992 and 1991, respectively.
14
<PAGE> 17
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, ---------------------------------------------
1997 1996 1995 1994 1993
CLASS B: -------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.23 $ 8.15 $ 7.18 $ 8.43 $ 8.95
- ------------------------------------------------------------ ------- ------- ------- ------- ------
Income from investment operations:
Net investment income 0.24 0.50 0.53 0.52 0.19
- ------------------------------------------------------------ ------- ------- ------- ------- ------
Net gains (losses) on securities (both realized and
unrealized) -- 0.11 0.98 (1.23) (0.34)
- ------------------------------------------------------------ ------- ------- ------- ------- ------
Total from investment operations 0.24 0.61 1.51 (0.71) (0.15)
- ------------------------------------------------------------ ------- ------- ------- ------- ------
Less distributions:
Dividends from net investment income (0.25) (0.53) (0.54) (0.42) (0.18)
- ------------------------------------------------------------ ------- ------- ------- ------- ------
Distributions from net realized capital gains -- -- -- (0.01) (0.19)
- ------------------------------------------------------------ ------- ------- ------- ------- ------
Return of capital -- -- -- (0.11) --
- ------------------------------------------------------------ ------- ------- ------- ------- ------
Total distributions (0.25) (0.53) (0.54) (0.54) (0.37)
- ------------------------------------------------------------ ------- ------- ------- ------- ------
Net asset value, end of period $ 8.22 $ 8.23 $ 8.15 $ 7.18 $ 8.43
============================================================ ======= ======= ======= ======= ======
Total return(a) 2.98% 7.87% 21.72% (8.46)% (0.75)%
============================================================ ======= ======= ======= ======= ======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $98,531 $85,343 $44,304 $12,321 $3,602
============================================================ ======= ======= ======= ======= ======
Ratio of expenses to average net assets 1.75%(b)(c) 1.80% 1.79% 1.83%(d) 1.75%(d)(f)
============================================================ ======= ======= ======= ======= ======
Ratio of net investment income to average net assets 5.97%(b) 6.30% 6.71% 6.69%(e) 6.24%(e)(f)
============================================================ ======= ======= ======= ======= ======
Portfolio turnover rate 29% 80% 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 $90,190,973.
(c) Includes indirectly paid expenses. Excluding indirectly paid expenses, the
ratio of expenses to average net assets would have been the same.
(d) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
2.04% and 2.50% (annualized) for 1994 and 1993, respectively.
(e) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 6.48% and 5.49% (annualized) for 1994 and 1993,
respectively.
(f) Annualized.
15
<PAGE> 18
SUPPLEMENTAL PROXY INFORMATION -- SHAREHOLDER MEETING
- --------------------------------------------------------------------------------
The Annual Meeting of Shareholders of the Trust was held on February 7, 1997.
The meeting was held for the following purposes:
(1) To elect trustees as follows: Charles T. Bauer, Bruce L. Crockett, Owen Daly
II, Carl Frischling, Robert H. Graham, John F. Kroeger, Lewis F. Pennock,
Ian W. Robinson, and Louis S. Sklar.
(2) To approve a new Investment Advisory Agreement between the Trust and AIM.
(3) To approve the elimination of the fundamental investment policy prohibiting
or restricting investments in other investment companies and/or the
amendment of certain related fundamental investment policies.
(4) Ratification of KPMG Peat Marwick LLP as independent accountants for the
Trust's fiscal year ending December 31, 1997.
The following votes were cast with respect to each item:
<TABLE>
<CAPTION>
Votes
Trustee/Matter Votes For Against Abstentions
-------------- ----------- --------- -----------
<S> <C> <C> <C> <C>
(1) Charles T. Bauer............................................ 773,545,353 0 34,024,196
Bruce L. Crockett........................................... 774,171,487 0 33,398,062
Owen Daly II................................................ 773,623,278 0 33,946,271
Carl Frischling............................................. 773,502,641 0 33,666,908
Robert H. Graham............................................ 774,181,971 0 33,387,578
John F. Kroeger............................................. 773,713,539 0 33,856,010
Lewis F. Pennock............................................ 773,903,304 0 33,666,245
Ian W. Robinson............................................. 773,753,378 0 33,816,171
Louis S. Sklar.............................................. 773,993,581 0 33,575,968
(2) Approval of new Investment Advisory Agreement............... 25,942,168 703,147 1,096,870
(3) Elimination of policy restricting investments in other
investment companies (for AIM Income Fund only)............. 21,495,735 1,100,501 1,265,130
(4) KPMG Peat Marwick LLP....................................... 763,580,956 7,014,082 36,974,511
</TABLE>
16
<PAGE> 19
Trustees & Officers
<TABLE>
<S> <C>
BOARD OF TRUSTEES OFFICERS OFFICE OF THE FUND
Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
Chairman Chairman Suite 100
A I M Management Group Inc. Houston, TX 77046
Robert H. Graham
Bruce L. Crockett President INVESTMENT ADVISOR
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 100
Owen Daly II Carol F. Relihan Houston, TX 77046
Director Senior Vice President
Cortland Trust Inc. and Secretary TRANSFER AGENT
Jack Fields Gary T. Crum A I M Fund Services, Inc.
Formerly Member of the Senior Vice President P.O. Box 4739
U.S. House of Representatives Houston, TX 77210-4739
Scott G. Lucas
Carl Frischling Senior Vice President CUSTODIAN
Partner
Kramer, Levin, Naftalis & Frankel Dana R. Sutton State Street Bank & Trust Company
Vice President and Assistant Treasurer 225 Franklin Street
Robert H. Graham Boston, MA 02110
President and Chief Executive Officer Robert G. Alley
A I M Management Group Inc. Vice President COUNSEL TO THE FUND
John F. Kroeger Stuart W. Coco Ballard Spahr
Formerly Consultant Vice President Andrews & Ingersoll
Wendell & Stockel Associates, Inc. 1735 Market Street
Melville B. Cox Philadelphia, PA 19103
Lewis F. Pennock Vice President
Attorney COUNSEL TO THE TRUSTEES
Karen Dunn Kelley
Ian W. Robinson Vice President Kramer, Levin, Naftalis & Frankel
Consultant; Formerly Executive 919 Third Avenue
Vice President and Jonathan C. Schoolar New York, NY 10022
Chief Financial Officer Vice President
Bell Atlantic Management DISTRIBUTOR
Services, Inc. P. Michelle Grace
Assistant Secretary A I M Distributors, Inc.
Louis S. Sklar 11 Greenway Plaza
Executive Vice President David L. Kite Suite 100
Hines Interests Assistant Secretary Houston, TX 77046
Limited Partnership
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> 20
<TABLE>
<S> <C>
THE AIM FAMILY OF FUNDS--Registered Trademark--
AGGRESSIVE GROWTH
AIM Aggressive Growth Fund*
AIM Capital Development Fund
AIM Constellation Fund
AIM Global Aggressive Growth Fund
GROWTH OF CAPITAL
AIM Advisor International Value Fund
[PHOTO OF AIM Blue Chip Fund
11 GREENWAY PLAZA AIM Global Growth Fund
APPEARS HERE] AIM Growth Fund
AIM International Equity Fund
AIM Value Fund
AIM Weingarten Fund
GROWTH AND INCOME OR INCOME WITH CAPITAL GROWTH
AIM Advisor Flex Fund
AIM Advisor Large Cap Value Fund
AIM Advisor MultiFlex Fund
AIM Advisor Real Estate Fund
AIM Balanced Fund
AIM Charter Fund
AIM Global Utilities Fund
HIGH CURRENT INCOME OR CURRENT INCOME
AIM High Yield Fund
AIM Global Income Fund
AIM Income Fund
CURRENT TAX-FREE INCOME
AIM Municipal Bond Fund
AIM Tax-Exempt Bond Fund of Connecticut
AIM Tax-Free Intermediate Shares
CURRENT INCOME AND HIGH DEGREE OF SAFETY
AIM Intermediate Government Fund
AIM Limited Maturity Treasury Shares
AIM Money Market Fund
AIM Tax-Exempt Cash Fund
A I M Management Group Inc. has provided leadership in the *AIM Aggressive Growth Fund was closed to new investors on
mutual fund industry since 1976 and managed approximately June 5, 1997. For more complete information about any AIM
$72 billion in assets for more than 3.5 million shareholders, Fund(s), including sales charges and expenses, ask your
including individual investors, corporate clients, and financial financial consultant or securities dealer for a free
institutions as of June 30, 1997. The AIM Family of prospectus(es). Please read the prospectus(es) carefully
Funds--Registered Trademark-- is distributed nationwide, and before you invest or send money.
AIM today ranks among the nation's top 15 mutual fund
companies in assets under management, according to Lipper INVEST WITH DISCIPLINE-SM-
Analytical Services, Inc.
[AIM LOGO APPEARS HERE] -----------------
BULK RATE
A I M Distributors, Inc. U.S. POSTAGE
11 Greenway Plaza, Suite 100 PAID
Houston, TX 77046 HOUSTON, TX
Permit No. 1919
-----------------
</TABLE>
