<PAGE> 1
(COVER PHOTO)
AIM INCOME FUND
[AIM LOGO APPEARS HERE] ANNUAL REPORT DECEMBER 31, 1997
<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.
-----------------------------------------
(COVER PHOTO)
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 and Class C
share performance reflects the applicable contingent deferred sales charge
(CDSC) for the period involved. The CDSC on Class B shares declines from 5%
beginning at the time of purchase to 0% at the beginning of the seventh
year. The CDSC on Class C shares is 1% for the first year after purchase.
The performance of the Fund's Class B and C shares will differ from that of
Class A shares due to differing fees and expenses.
o Because the Class C shares have been offered for less than one year (since
8/4/97), all total return figures for Class C shares reflect cumulative
total return which has not been annualized.
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 Dow Jones Industrial Average (DJIA) is a price-weighted average of 30
actively traded primarily industrial stocks.
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:
1997 proved an eventful year in securities markets. The Dow
[PHOTO OF Jones Industrial Average reached its all-time high--and also
Charles T. had its largest one-day point drop ever, though not its
Bauer, largest percentage drop. Volatility was unabated, and we
Chairman of experienced the first 10% stock market correction in the
the Board of U.S. since 1991.
THE FUND Never dull and occasionally unsettling, 1997 was also a
APPEARS HERE] very good year for many investments. For an unprecedented
third year in a row, domestic equities rose more than 20%.
Late in the year, in the uncertainty brought on by events in
Asia, bond markets, especially the U.S. Treasury market,
fulfilled their usual role as relative safe havens, and a
bull market in bonds took hold. Overseas, though Asian
markets plummeted, Europe thrived.
Market expectations performed an about-face during the
year. Worry about the inflationary potential of vigorous
economic growth became concern about the potential negative impact of Asia's
financial crisis. At fiscal year end, there was no consensus about how serious
or widespread this impact would be.
An interview with your Fund's managers appears on the following pages. They
discuss their investment strategies, how your Fund performed in this context,
and their outlook for the future.
In uncertain times like these, your financial consultant remains your best
source for information on market trends and for advice on how to invest
strategically rather than emotionally. We encourage you to visit your financial
consultant regularly to make sure your chosen investments still suit your goals,
risk tolerance, and time horizon.
INVESTOR EDUCATION EVENTS
In addition to professional guidance, every investor needs fundamental
information about the saving and investing choices offered by the marketplace.
AIM has always championed investor education, convinced a more knowledgeable
shareholder is a better customer. A great deal of investment information will be
available during two upcoming events, and we hope our shareholders will
participate in and learn from them to the greatest extent possible.
First, from March 29 through April 4, the Securities and Exchange Commission
(SEC) will sponsor Saving and Investing Education Week. As the SEC points out,
financial markets are more stable when investors are confident in them, and
knowledge is a major confidence builder. The week's theme is "Get the facts.
It's your money. It's your future." The aim is to inform citizens about the
saving and investment possibilities available and to build understanding about
how one's financial needs and goals change throughout one's life. The week's
awareness and education events will culminate with a national investors town
meeting at satellite-linked locations across the nation. You can find out more
from the SEC's Web site at www.sec.gov.
The second event concerns citizens' financial planning for retirement, a
subject of growing urgency as the population ages and the solvency of the Social
Security system is increasingly debatable. In July, the first National Summit on
Retirement Savings will be held at the White House. Under the auspices of the
Department of Labor, working through public-private partnership, the summit's
goal is to advance the public's knowledge of retirement savings through
development of a broad-based education program and to develop recommendations
for public/private action to promote private retirement savings among American
workers.
Look for further information on both of these investor education events in
the national and local press.
We are pleased to send you this report on your Fund. Please contact our
Client Services department at 800-959-4246 if you have questions or comments.
Automated information about your account is available 24 hours a day on the AIM
Investor Line, 800-246-5463. Account information and much more can be found on
our Web site, www.aimfunds.com.
Sincerely,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
--------------------------------------------------
In uncertain times like these,
your financial consultant
remains your best source
for information on market trends
and for advice on
how to invest strategically
rather than emotionally.
--------------------------------------------------
<PAGE> 4
The Managers' Overview
FUND POSTS INDEX-BEATING RETURNS
A roundtable discussion with the Fund management team for AIM Income Fund for
the year ended December 31, 1997.
- --------------------------------------------------------------------------------
Q. It was generally a good year for bonds. How did AIM Income Fund perform?
A. Your Fund's diversified investment strategy enabled it to post above-average
returns in comparison to bond funds in its category. For the year ended
December 31, 1997, average annual total return for Class A and Class B
shares was 11.92% and 10.89%, respectively, besting the 9.65% total return
for the Lehman Brothers Aggregate Bond Index and the 9.02% total return for
the Lipper General Bond Fund Index. Class C shares produced a cumulative
total return of 4.96% from their inception on August 4, 1997, through
December 31, 1997.
The Fund's performance was particularly strong in the second half of
the year. At the middle of the reporting period, the Fund had posted a
six-month total return of 3.52% and 2.98% for Class A and Class B shares,
respectively. During the second half of the year, however, the Fund's total
return was 8.12% for Class A shares and 7.68% for Class B shares.
Your Fund continued to provide a high level of current income. As of
December 31, 1997, the Fund's 30-day distribution rate at net asset value
was 6.44% for Class A shares, 5.61% for Class B shares, and 5.62% for Class
C shares. The Fund's 30-day SEC yield at maximum offering price was 6.04%
for Class A shares, and 5.54% for Class B and Class C shares.
During the year covered by this report, net assets in the Fund grew
from $371 million to $469 million.
--------------------------------------------------
Your Fund's diversified
investment strategy enabled it
to post above-average returns
in comparison to bond funds
in its category.
--------------------------------------------------
================================================================================
ONE-YEAR RETURNS
As of 12/31/97, based on total net assets
- --------------------------------------------------------------------------------
AIM Income Fund A Shares 11.92%
AIM Income Fund B Shares 10.89%
Lehman Brothers Aggregate Index 9.65%
Lipper General Bond Fund Index 9.02%
================================================================================
================================================================================
MORNINGSTAR RATINGS
CLASS A SHARES AND CLASS B SHARES*
As of 12/31/97
- --------------------------------------------------------------------------------
Funds in Taxable
Fixed Income
Period Rating Category
Overall **** N/A
10 years *** 323
5 years **** 771
3 years **** 1,371
================================================================================
*Ratings for Class B shares are applicable for overall and three-year periods
only. Class B shares commenced sales 9/7/93. Class C shares commenced sales
8/4/97 and do not qualify for Morningstar ratings. Morningstar proprietary
ratings reflect risk-adjusted performance through 12/31/97. The ratings are
subject to change every month. Ratings are calculated from a fund's three-,
five, and 10-year returns (with fee adjustments) in excess of 90-day Treasury
bill returns, and a risk factor that reflects fund performance below 90-day
T-bill returns. The top 10% of funds in a rating category receive five stars,
the next 22.5% receive four stars, the middle 33% receive three stars, the next
22.5% receive two stars, and the bottom 10% receive one star.
================================================================================
Q. How did you manage the Fund?
A. We continued to use a three-pronged approach to investing. That is, we
invested in the three major sectors of the bond-market: domestic
investment-grade bonds, high-yield securities, and foreign bonds. These
three types of bonds tend to react differently to economic and market
trends. Diversifying the portfolio in this manner can reduce the risk
associated with investing in one class of bonds. Moreover, it can also
enhance total return as it allows the Fund to take advantage of a rally in
more than one segment of the bond market.
During the year, we increased the Fund's holdings in domestic
investment-grade bonds, which fared better than foreign bonds. At the end of
the reporting period, the Fund's total assets were divided as follows:
domestic investment-grade bonds, 36.26%; high-yield bonds, 24.11%; foreign
bonds, 32.03%; convertible preferred stock, 3.32%; common stocks and
warrants, 0.48%; and cash/cash equivalents, 3.80%.
Q. What was behind the strong performance of domestic investment-grade bonds?
A. The low-inflation, falling interest-rate environment in the U.S. in 1997
provided nearly an ideal climate for domestic investment-grade bonds. For
the 12-month period ended December 31, consumer prices rose just 1.7%, the
smallest increase in 11 years. After raising interest rates in March, the
Federal Reserve Board (the Fed) left monetary policy unchanged for the
remainder of 1997. Borrowing costs actually declined as the year progressed
as it became increasingly evident that inflation was not a serious threat.
Domestic investment-grade bonds were also given a boost by the
agreement to balance the federal budget in the summer and the turmoil that
hit world stock markets in the fall. Investors began shifting more assets
into bonds after global stock
See important fund and index disclosures inside front cover.
2
<PAGE> 5
PORTFOLIO COMPOSITION
As of 12/31/97, based on total assets
<TABLE>
<CAPTION>
=================================================================================================================
TOP FIVE BOND HOLDINGS TYPE OF HOLDINGS
- -----------------------------------------------------------------------------------------------------------------
COUPON MATURITY %
<S> <C> <C> <C> <C> <C>
1. Coca-Cola Enterprises, Inc. 7.24% 06/2020 3.57% CONVERTIBLE PREFERRED STOCKS 3.32%
2. Time Warner, Inc. 9.15 02/2023 2.24 COMMON STOCKS & WARRANTS 0.48%
3. United Kingdom Treasury 7.25 03/1998 1.96 CASH/CASH EQUIVALENTS 3.80%
4. Province of Manitoba (Canada) 7.75 07/2016 1.83 DOMESTIC INVESTMENT-GRADE BONDS 36.26%
5. News America Holdings, Inc. 9.25 02/2013 1.80 HIGH-YIELD BONDS 24.11%
FOREIGN BONDS 32.03%
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>
markets plunged in October and continued to be volatile for the remainder
of the year. Corporate issues that we found particularly attractive included
cable and media company bonds.
Q. Economic growth was strong in 1997. How did this affect high-yield bonds?
A. High-yield bonds were the top-performing segment of the portfolio primarily
because of the robust economy in 1997. While healthy economic growth can
lead to inflation, which is usually detrimental to most types of bonds,
inflation was minimal last year. Moreover, because business conditions and
cash flows were favorable in 1997, corporate issuers of high-yield bonds
were generally in better financial health which produced credit-quality
upgrades.
Within the high-yield sector, the bonds of telecommunications companies
were among the top-performers.
Q. It was a difficult year for foreign bonds. What were some of the factors
affecting their performance?
A. The main factor was the strength of the U.S. dollar relative to other major
currencies, which diminished returns for U.S. investors in foreign bonds.
The Fund mitigated the effect of a strong dollar by selectively hedging some
of its currency exposure.
Still, there were some bright spots for foreign bond investors. Markets
we found particularly attractive included the United Kingdom, Canada, and
Sweden. In the U.K., for example, the bond market benefited from a healthy
domestic economy and the relative strength of the pound.
Q. How did the currency devaluations in Southeast Asia and the subsequent stock
market tumble of October 1997 affect bonds?
A. When global stock markets plunged on October 27, domestic investment-grade
bonds, particularly U.S. Treasury securities, were among the chief
beneficiaries. The yield on the benchmark 30-year U.S. Treasury bond, which
was as high as 7.17% in April, ended the year at 5.92% as the prices of
government issues appreciated in response to worldwide stock-market
volatility. Domestic investment-grade corporate and high-yield bonds
initially experienced some weakness when world stock markets plunged, but
rebounded as confidence recovered.
Among foreign bonds, the most adversely affected class was Asian
emerging market debt. This was of little consequence for the Fund because it
invests primarily in developed markets and had little exposure in Asia at
the end of the year.
Q. How was the Fund positioned at the end of the reporting period?
A. There were 167 holdings in the Fund as of December 31, 1997. The weighted
average maturity of the portfolio was 12.68 years and its duration was 7.18
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, Inc.
(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. We continue to be optimistic about domestic investment-grade and high-yield
bonds. In the U.S., the economy is growing at a healthy pace but without
significant inflation. If such conditions persist, the Fed will likely leave
short-term interest rates unchanged. Moreover, the continuing problems in
Asia could slow economic growth and add fuel to the strong rally in the
domestic investment-grade bond market.
Foreign bonds should benefit from the low inflation environment, the
corporate restructurings, and the government cost-cutting measures taking
place in most of the developed countries where we invest. The strength of
the U.S. dollar relative to other major currencies, however, could continue
to affect returns for U.S. investors in foreign bonds.
1997 was one of the more volatile years in recent history in the
financial markets, and that trend could persist over the coming months. In
such an environment, investors would be well advised to focus on their
long-term financial goals rather than on transitory fluctuations in the
markets.
See important fund and index disclosures inside front cover.
3
<PAGE> 6
Long-Term Performance
AIM Income Fund vs. Benchmark Index
The chart below compares the Fund's Class A shares to a benchmark index. It is
intended to give you a general idea of how your Fund performed compared to the
bond market over the period 12/31/87-12/31/97. It is important to understand the
difference between your Fund and an index. Your Fund's total return is shown
with a sales charge and includes Fund expenses and management fees. An index
measures the performance of a hypothetical portfolio, in this case the Lehman
Brothers Aggregate Bond Index. Unlike your Fund, an index is not managed;
therefore, there are no sales charges, expenses or fees. You cannot invest in an
index. But if you could buy all the securities that make up a particular index,
you would incur expenses that would affect the return on your investment.
GROWTH OF A $10,000 INVESTMENT
12/31/87 - 12/31/97
(In thousands)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AIM INCOME FUND, LEHMAN BROTHERS
CLASS A SHARES AGGREGATE BOND INDEX
$24,495 $24,057
- --------------------------------------------------------------------------------
<S> <C> <C>
12/87 $09,521 $10,000
12/88 10,379 10,789
12/89 11,786 12,209
12/90 12,216 13,461
12/91 14,416 15,614
12/92 15,485 16,771
12/93 17,866 18,406
12/94 16,500 17,869
12/95 20,258 21,170
12/96 21,995 21,935
12/97 24,495 24,057
================================================================================
</TABLE>
================================================================================
AVERAGE ANNUAL TOTAL RETURNS
As of 12/31/97, including sales charges
CLASS A SHARES
1 Year 6.62%*
5 Years 8.65
10 Years 9.41
*11.92% excluding sales charge
CLASS B SHARES
1 Year 5.89%**
Inception (9/7/93) 6.31
**10.89% excluding CDSC
CLASS C SHARES
Inception (8/4/97) 3.96%***
***Total return provided is cumulative total return that has not been
annualized.
================================================================================
Source: Towers Data Systems HYPO--Registered Trademark--. The performance of
the Fund's Class B and Class C shares will differ from that of Class A shares
due to differing fees and expenses. Your Fund's total return includes sales
charges, expenses, and management fees. For Fund performance calculations and
descriptions of indexes cited on this page, please refer to the inside front
cover.
4
<PAGE> 7
For Consideration
THE ROTH IRA: THE POWER TO KEEP MORE
Contribute After-Tax Dollars Now . . . So You Can Get Federally Tax-Free Savings
Later
A new and potentially more powerful type of IRA--the Roth IRA--became available
on January 1, 1998. What makes it more powerful? The Roth IRA gives you the
opportunity to keep more of what you earn.
Are you eligible to open a Roth IRA? The answer is yes if you or your spouse
has earned income for the tax year for which you want to make the contribution,
and your adjusted gross income is below $110,000 if you are a single tax filer,
$160,000 if you file jointly.
TWO KEY ROTH IRA BENEFITS:
TAX-FREE AND PENALTY-FREE WITHDRAWALS
o Of earnings after five years. Earnings on your Roth IRA are federally
tax-free if your Roth IRA account has been open for five years and you are
at least 59 1/2 years old, or in the case of death or disability. You may
also use up to $10,000 of your earnings to buy a first home (after five
years).
o Of contributions at any time. For instance, if you make annual contributions
of $2,000 for the next three years, you may take out up to $6,000 and use
that money for any purpose.
HOW YOU MIGHT PUT BOTH BENEFITS TO WORK FOR YOU
Here's an example of how you may take full advantage of a Roth IRA. You are 39
1/2 years old. You contribute $2,000 after-tax annually in your Roth IRA every
year for 20 years, earning an average annual return of 10%. After 20 years, your
account has grown to $126,005. Now at age 59 1/2 you can begin taking
withdrawals and pay no federal income tax or penalty on any of your $126,005. Or
you can keep your money invested and take it out whenever you need it.
THE ROTH IRA: TO CONVERT OR NOT TO CONVERT
Can you convert your Traditional IRA to a Roth IRA? The answer is yes if you
meet these requirements:
You must pay taxes on the amount you convert. If you convert in 1998, you
can spread your tax payments over the next four years. This four-year allowance
will not be available after December 31, 1998.
You cannot convert to a Roth IRA if you are married and file your tax return
separately, or if your annual gross income is over $100,000.
SOME ROTH IRA CONVERSION GUIDELINES
If you can check most of these boxes, converting your Traditional IRA to a Roth
IRA may make sense for you.
[ ] You have assets outside your retirement savings with which you can easily
afford to pay the taxes due when you convert.
[ ] You have 10 years or more before you retire. The longer you invest
tax-free, the more you benefit.
[ ] Your tax rate will probably be higher in retirement than it is now. If so,
you'll pay less taxes now to convert than you would pay at retirement if you
withdrew from a traditional IRA.
[ ] You plan to convert in 1998. On January 1, 1999, the ability to spread tax
payments over four years disappears.
[ ] You want to keep making contributions after age 70 1/2 and may wish to
pass your IRA assets on to your heirs after your death.
ROTH IRA
(Graphic)
CALCULATOR & ANALYZER
The Roth IRA Analyzer & Calculator at AIM's Internet Web site--
www.aimfunds.com-- can help you determine your IRA eligibility status and
whether it makes sense for you to convert an existing IRA into a Roth IRA.
MAKE YOUR IRA CONVERSION DECISION A TRULY INFORMED ONE
Talk to your financial consultant, who knows your specific needs and goals. You
may also wish to talk with a tax adviser.
This discussion does not constitute tax advice. Your tax adviser can provide
guidance concerning your particular situation.
5
<PAGE> 8
SCHEDULE OF INVESTMENTS
December 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
U.S. DOLLAR DENOMINATED NON-CONVERTIBLE
BONDS & NOTES-70.07%
AGRICULTURAL PRODUCTS-0.24%
Hines Horticulture, Inc.,
Series B Sr. Gtd. Sub. Notes,
11.75%, 10/15/05 $ 1,000,000 $ 1,105,000
- -----------------------------------------------------------
AIRLINES-2.54%
Airplanes Pass Through Trust,
Sub. Bonds, 10.875%, 03/15/19 1,810,000 2,037,390
- -----------------------------------------------------------
Delta Air Lines, Inc.,
Deb., 9.00%, 05/15/16 500,000 591,205
- -----------------------------------------------------------
Equipment Trust Cert., 10.50%
04/30/16 5,000,000 6,430,900
- -----------------------------------------------------------
United Air Lines, Inc., Pass
Through Certificates, 9.56%,
10/19/18 2,325,000 2,859,145
- -----------------------------------------------------------
11,918,640
- -----------------------------------------------------------
AUTOMOBILES-1.75%
General Motors Corp., Deb.,
8.80%, 03/01/21 6,700,000 8,225,657
- -----------------------------------------------------------
BANKS (MAJOR REGIONAL)-1.29%
First Union Bancorp, Sub. Deb.,
7.50%, 04/15/35 5,300,000 6,054,879
- -----------------------------------------------------------
BANKS (MONEY CENTER)-0.66%
Bankers Trust New York Corp.,
Gtd. Notes, 7.875%, 02/25/27 3,000,000 3,092,895
- -----------------------------------------------------------
BANKS (REGIONAL)-1.34%
HSBC Americas Inc., Sub. Notes,
7.00%, 11/01/06 1,000,000 1,020,520
- -----------------------------------------------------------
Mercantile Bancorp Inc., Unsec.
Sub. Notes, 7.30%, 06/15/07 5,000,000 5,264,650
- -----------------------------------------------------------
6,285,170
- -----------------------------------------------------------
BEVERAGES (NON-ALCOHOLIC)-3.57%
Coca-Cola Enterprises, Inc.,
Putable Notes, 7.24%,
06/20/20(b) 74,000,000 16,763,220
- -----------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE)-3.91%
Diamond Cable Communications
PLC (United Kingdom), Sr.
Yankee Disc. Notes, 11.75%,
12/15/05(c) 4,000,000 3,110,000
- -----------------------------------------------------------
EchoStar DBS Corp., Sr. Gtd.
Notes, 12.50%, 07/01/02 2,340,000 2,550,600
- -----------------------------------------------------------
Kabelmedia Holdings GmbH,
(Germany) Sr. Yankee Unsec.
Disc. Notes, 13.625%,
08/01/06(c) 1,400,000 1,029,000
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
BROADCASTING (TELEVISION, RADIO & CABLE)-(CONTINUED)
Rifkin Acquisition Partners
L.L.P., Sr. Sub. Notes,
11.125%, 01/15/06 $ 630,000 $ 699,300
- -----------------------------------------------------------
TCI Communications Inc., Deb.,
8.75%, 08/01/15 6,000,000 6,969,960
- -----------------------------------------------------------
TeleWest Communications PLC
(United Kingdom), Sr. Yankee
Disc. Deb., 11.00%,
10/01/07(c) 3,000,000 2,347,500
- -----------------------------------------------------------
United International Holdings,
Inc., Sr. Sec. Disc. Notes,
12.78%, 11/15/99(b) 2,000,000 1,650,000
- -----------------------------------------------------------
18,356,360
- -----------------------------------------------------------
CHEMICALS-1.51%
Nova Chemicals Ltd. (Canada),
Yankee Deb., 7.00%, 08/15/26 2,000,000 2,055,800
- -----------------------------------------------------------
Solutia Inc., Bonds, 6.72%,
10/15/37 3,500,000 3,561,355
- -----------------------------------------------------------
Sterling Chemicals, Inc., Sr.
Unsec. Sub. Notes, 11.75%,
08/15/06 1,420,000 1,455,500
- -----------------------------------------------------------
7,072,655
- -----------------------------------------------------------
CHEMICALS (SPECIALTY)-0.26%
Crain Industries, Inc., Sr.
Sub. Notes, 13.50%, 08/15/05 1,070,000 1,225,150
- -----------------------------------------------------------
COMMUNICATIONS EQUIPMENT-0.56%
Dialog Corp. PLC (United
Kingdom), Sr. Sub. Notes,
11.00%, 11/15/07
(Acquired 11/10/97; Cost
$1,500,000)(d) 1,500,000 1,563,750
- -----------------------------------------------------------
ProNet, Inc., Sr. Sub. Notes,
11.875%, 06/15/05 1,000,000 1,082,500
- -----------------------------------------------------------
2,646,250
- -----------------------------------------------------------
CONSUMER (JEWELRY, NOVELTIES & GIFTS)-0.22%
Commemorative Brands, Sr. Sub.
Notes, 11.00%, 01/15/07 1,000,000 1,007,500
- -----------------------------------------------------------
CONSUMER FINANCE-0.34%
Commercial Credit Co., Putable
Notes, 7.875%, 02/01/25 1,400,000 1,612,352
- -----------------------------------------------------------
CONTAINERS & PACKAGING (PAPER)-0.45%
BPC Holding Corp., Series B Sr.
Notes, 12.50%, 06/15/06 1,000,000 1,095,000
- -----------------------------------------------------------
MVE Inc., Sr. Sec. Notes,
12.50%, 02/15/02 1,000,000 1,002,500
- -----------------------------------------------------------
2,097,500
- -----------------------------------------------------------
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
DISTRIBUTORS (FOOD & HEALTH)-0.39%
AmeriServ Food Co., Gtd. Sr.
Sub. Notes, 10.125%, 07/15/07 $ 1,750,000 $ 1,846,250
- -----------------------------------------------------------
ELECTRIC COMPANIES-2.58%
El Paso Electric Co.,
Series D Sec. 1st Mortgage
Bonds, 8.90%, 02/01/06 2,500,000 2,767,875
- -----------------------------------------------------------
Series E Sec. 1st Mortgage
Bonds, 9.40%, 05/01/11 4,600,000 5,201,680
- -----------------------------------------------------------
Western Resources Inc., Sr.
Notes, 7.125%, 08/01/09 4,000,000 4,119,360
- -----------------------------------------------------------
12,088,915
- -----------------------------------------------------------
ELECTRICAL EQUIPMENT-0.52%
Electronic Retailing Systems
International, Inc., Sr.
Disc. Notes, 13.25%,
02/01/04(c) 3,630,000 2,432,100
- -----------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS)-0.25%
Advanced Micro Devices, Inc.,
Sr. Sec. Notes, 11.00%,
08/01/03 1,100,000 1,181,125
- -----------------------------------------------------------
ENTERTAINMENT-4.34%
Ascent Entertainment Group, Sr.
Disc. Notes, 11.875%,
12/15/04 (Acquired
12/17/97-12/18/97; Cost
$1,699,385)(c)(d) 3,000,000 1,755,000
- -----------------------------------------------------------
Time Warner, Inc.,
Deb., 9.15%, 02/01/23 8,500,000 10,493,250
- -----------------------------------------------------------
Unsec. Deb., 6.85%, 01/15/26 4,300,000 4,359,555
- -----------------------------------------------------------
Viacom, Inc., Sr. Notes, 7.75%,
06/01/05 3,650,000 3,751,142
- -----------------------------------------------------------
20,358,947
- -----------------------------------------------------------
FINANCIAL (DIVERSIFIED)-2.04%
Associates Corp. of North
America, Series B Sr. Deb.,
7.95%, 02/15/10 6,000,000 6,713,400
- -----------------------------------------------------------
U.S. West Capital Funding Inc.,
Gtd. Notes, 6.95%, 01/15/37 2,750,000 2,843,142
- -----------------------------------------------------------
9,556,542
- -----------------------------------------------------------
FOODS-3.06%
ConAgra Inc., Sr. Unsec. Notes,
7.125%, 10/01/26 6,100,000 6,500,404
- -----------------------------------------------------------
Del Monte Corp./Foods Co., Sr.
Unsec. Sub. Notes, 12.25%,
04/15/07 2,080,000 2,360,800
- -----------------------------------------------------------
Grand Metro Investment, Gtd.
Bonds, 7.45%, 04/15/35 5,000,000 5,484,650
- -----------------------------------------------------------
14,345,854
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
GAMING, LOTTERY & PARIMUTUEL COMPANIES-1.28%
Coast Hotels & Casinos Inc.,
Series B Sec. 1st Mortgage
Gtd. Notes, 13.00%, 12/15/02 $ 1,160,000 $ 1,316,600
- -----------------------------------------------------------
Showboat, Inc., 1st Mortgage
Notes, 9.25%, 05/01/08 2,000,000 2,170,000
- -----------------------------------------------------------
Venetian Casino Resort LLC,
Mortgage Notes, 12.25%,
11/15/04 (Acquired 11/06/97;
Cost $2,500,000)(d) 2,500,000 2,515,625
- -----------------------------------------------------------
6,002,225
- -----------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT)-0.87%
Tenet Healthcare Corp., Sr.
Notes, 8.00%, 01/15/05 4,000,000 4,080,000
- -----------------------------------------------------------
HEALTH CARE (LONG TERM CARE)-0.69%
Paragon Health Network, Inc.,
Sr. Sub Notes, 10.50%,
11/01/07 (Acquired 10/30/97;
Cost $2,118,851)(c)(d) 3,500,000 2,178,750
- -----------------------------------------------------------
Sun Healthcare Group, Inc., Sr.
Sub. Notes, 9.50%, 07/01/07
(Acquired 10/20/97; Cost
$1,036,250)(d) 1,000,000 1,035,000
- -----------------------------------------------------------
3,213,750
- -----------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-0.24%
Dade International Inc., Series
B Sr. Sub. Notes, 11.125%,
05/01/06 1,000,000 1,110,000
- -----------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES)-0.26%
Dynacare Inc. (Canada), Sr.
Yankee Notes, 10.75%,
01/15/06 1,140,000 1,205,550
- -----------------------------------------------------------
HOMEBUILDING-0.17%
Continental Homes Holdings
Corp., Sr. Unsec. Gtd. Notes,
10.00%, 04/15/06 745,000 804,600
- -----------------------------------------------------------
HOUSEHOLD PRODUCTS (NON-DURABLES)-0.41%
Zeta Consumer Products, Sr.
Notes, 11.25%, 11/30/07
(Acquired 11/20/97; Cost
$1,900,000)(d) 1,900,000 1,942,750
- -----------------------------------------------------------
INSURANCE (LIFE/HEALTH)-1.22%
Americo Life Inc., Sr. Sub.
Notes, 9.25%, 06/01/05 1,000,000 1,027,500
- -----------------------------------------------------------
Torchmark Corp., Notes, 7.875%,
05/15/23 4,350,000 4,686,429
- -----------------------------------------------------------
5,713,929
- -----------------------------------------------------------
</TABLE>
7
<PAGE> 10
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
INSURANCE (PROPERTY-CASUALTY)-1.59%
Terra Nova Holdings, Co.
(United Kingdom), Yankee Gtd.
Notes, 7.20%, 08/15/07 $ 2,000,000 $ 2,068,400
- -----------------------------------------------------------
USF&G Corp., Gtd. Bonds, 8.47%,
01/10/27 5,000,000 5,385,800
- -----------------------------------------------------------
7,454,200
- -----------------------------------------------------------
IRON & STEEL-0.59%
GS Industries, Inc., Sr. Gtd.
Notes, 12.00%, 09/01/04 1,000,000 1,098,750
- -----------------------------------------------------------
Gulf States Steel Corp., 1st
Mortgage Notes, 13.50%,
04/15/03 1,650,000 1,674,750
- -----------------------------------------------------------
2,773,500
- -----------------------------------------------------------
LODGING-HOTELS-2.26%
Hilton Hotels Corp., Notes,
7.20%, 12/15/09 5,000,000 5,040,500
- -----------------------------------------------------------
ITT Corp., Unsec. Gtd. Deb.,
7.375%, 11/15/15 3,350,000 3,442,293
- -----------------------------------------------------------
John Q. Hammons Hotels Inc.,
Sec. 1st Mortgage Notes,
9.75%, 10/01/05 2,000,000 2,130,000
- -----------------------------------------------------------
10,612,793
- -----------------------------------------------------------
MACHINERY (DIVERSIFIED)-1.95%
Caterpillar Inc., Deb., 9.375%,
08/15/11 5,000,000 6,326,150
- -----------------------------------------------------------
Elgin National Industries, Sr.
Notes, 11.00%, 11/01/07
(Acquired 11/03/97; Cost
$1,690,000)(d) 1,690,000 1,761,825
- -----------------------------------------------------------
Fairfield Manufacturing Co.,
Inc., Sr. Sub. Notes,
11.375%, 07/01/01 1,000,000 1,060,000
- -----------------------------------------------------------
9,147,975
- -----------------------------------------------------------
MANUFACTURING (SPECIALIZED)-0.48%
MMI Products Inc., Sr. Unsec.
Sub. Notes, 11.25%, 04/15/07 2,070,000 2,266,650
- -----------------------------------------------------------
METALS MINING-0.76%
Rio Algom Ltd. (Canada), Yankee
Unsec. Deb., 7.05%, 11/01/05 3,500,000 3,569,405
- -----------------------------------------------------------
NATURAL GAS-1.02%
Enron Corp., Notes, 6.75%,
08/01/09 2,500,000 2,530,175
- -----------------------------------------------------------
Ferrellgas Partners, Series B
Sr. Sec. Gtd. Notes, 9.375%,
06/15/06 2,100,000 2,236,500
- -----------------------------------------------------------
4,766,675
- -----------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES-0.29%
United Stationer Supply, Sr.
Sub. Notes, 12.75%, 05/01/05 1,170,000 1,336,725
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
OIL (INTERNATIONAL INTEGRATED)-1.62%
Gulf Canada Resources, Ltd.
(Canada), Sr. Yankee Unsec.
Notes, 8.35%, 08/01/06 $ 5,100,000 $ 5,558,082
- -----------------------------------------------------------
Husky Oil Ltd. (Canada), Sr.
Yankee Notes, 7.125%,
11/15/06 2,000,000 2,054,840
- -----------------------------------------------------------
7,612,922
- -----------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT)-0.09%
Falcon Drilling Co., Inc.,
Series B Sr. Notes, 9.75%,
01/15/01 410,000 431,525
- -----------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION)-3.34%
Abraxas Petroleum Corp., Series
B Sr. Notes, 11.50%, 11/01/04 900,000 990,000
- -----------------------------------------------------------
Anadarko Petroleum Corp., Deb.,
7.25%, 03/15/25 5,395,000 5,758,569
- -----------------------------------------------------------
Centaur Mining & Exploration,
Ltd., Co. (Australia), Sr.
Gtd. Notes, 11.00%, 12/01/07
(Acquired 11/24/97; Cost
$2,500,000)(d) 2,500,000 2,525,000
- -----------------------------------------------------------
Southwest Royalties, Inc., Sr.
Gtd. Notes, 10.50%, 10/15/04
(Acquired 10/08/97; Cost
$2,550,849)(d) 2,540,000 2,527,300
- -----------------------------------------------------------
Talisman Energy, Inc. (Canada),
Yankee Deb., 7.125%, 06/01/07 3,750,000 3,872,850
- -----------------------------------------------------------
15,673,719
- -----------------------------------------------------------
OIL & GAS (REFINING & MARKETING)-1.05%
Sun Co., Inc., Deb., 9.00%,
11/01/24 4,000,000 4,922,240
- -----------------------------------------------------------
PAPER & FOREST PRODUCTS-0.47%
Pindo Deli Pulp & Paper, Gtd.
Notes, 10.75%, 10/01/07
(Acquired 10/14/97-10/16/97;
Cost $2,557,481)(d) 2,540,000 2,197,100
- -----------------------------------------------------------
POWER PRODUCERS (INDEPENDENT)-1.95%
AES Corp., Sr. Sub. Notes,
10.25%, 07/15/06 1,000,000 1,087,500
- -----------------------------------------------------------
Indiana Michigan Power, Sec.
Lease Obligation Bonds,
9.82%, 12/07/22 4,969,574 6,502,738
- -----------------------------------------------------------
Panda Global Energy Co.
(China), Sr. Yankee Sec. Gtd.
Notes, 12.50%, 04/15/04 1,720,000 1,573,800
- -----------------------------------------------------------
9,164,038
- -----------------------------------------------------------
</TABLE>
8
<PAGE> 11
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
PUBLISHING (NEWSPAPERS)-2.02%
News America Holdings, Inc.,
Sr. Gtd. Deb., 9.25%,
02/01/13 $ 7,100,000 $ 8,446,941
- -----------------------------------------------------------
Sr. Gtd. Putable Bonds,
7.43%, 10/01/26 1,000,000 1,048,270
- -----------------------------------------------------------
9,495,211
- -----------------------------------------------------------
RAILROADS-0.62%
Norfolk Southern Corp., Putable
Bonds, 7.05%, 05/01/37 2,750,000 2,915,028
- -----------------------------------------------------------
RETAIL (FOOD CHAINS)-0.86%
Great Atlantic & Pacific Tea
Co., Inc. (Canada), Yankee
Gtd. Notes, 7.78%, 11/01/00
(Acquired 10/18/95; Cost
$3,900,000)(d) 3,900,000 4,028,330
- -----------------------------------------------------------
RETAIL (GENERAL MERCHANDISE)-0.43%
Big 5 Corp., Senior Notes,
10.88%, 11/15/07 (Acquired
11/07/97-11/24/97; Cost
$1,990,110)(d) 2,000,000 2,000,000
- -----------------------------------------------------------
RETAIL (SPECIALTY)-0.60%
CSK Auto Inc., Sr. Gtd. Sub.
Deb., 11.00%, 11/01/06 650,000 718,250
- -----------------------------------------------------------
Icon Health & Fitness, Series B
Sr. Sub. Notes, 13.00%,
07/15/02 1,200,000 1,347,000
- -----------------------------------------------------------
Wilson's-The Leather Experts,
Inc., Sr. Notes, 11.25%,
08/15/04 (Acquired 08/14/97;
Cost $760,000)(d) 760,000 752,400
- -----------------------------------------------------------
2,817,650
- -----------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-0.24%
J Crew Operating Corp., Sr.
Sub. Notes, 10.375%, 10/15/07
(Acquired 10/14/97; Cost
$1,255,000)(d) 1,255,000 1,116,950
- -----------------------------------------------------------
SAVINGS & LOAN COMPANIES-0.56%
Sovereign Bancorp, Inc., Sub.
Notes, 8.00%, 03/15/03 2,500,000 2,634,300
- -----------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-1.04%
Laidlaw Inc. (Canada), Yankee
Deb., 6.72%, 10/01/27 2,000,000 2,031,700
- -----------------------------------------------------------
Pegasus Shipping Hellas, Co.
(Bermuda), Gtd. Sr. Mortgage
Notes, 11.875%, 11/15/04
(Acquired 11/19/97; Cost
$2,753,956)(d) 2,850,000 2,835,750
- -----------------------------------------------------------
4,867,450
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
SHIPPING-1.58%
Gearbulk Holding Ltd., Sr.
Notes, 11.25%, 12/01/04 $ 1,000,000 $ 1,102,500
- -----------------------------------------------------------
Hutchison Whampoa Ltd. (Cayman
Islands), Series D Sr. Gtd.
Unsec. Unsub. Deb., 6.988%,
08/01/37 (Acquired 12/15/97;
Cost $4,689,900)(d) 5,000,000 4,672,200
- -----------------------------------------------------------
Stena A.B.(Sweden), Sr. Yankee
Unsec. Notes, 10.50%,
12/15/05 1,500,000 1,638,750
- -----------------------------------------------------------
7,413,450
- -----------------------------------------------------------
SOVEREIGN DEBT-2.59%
Province of Manitoba (Canada),
Yankee Bonds, 7.75%, 07/17/16 7,500,000 8,585,250
- -----------------------------------------------------------
Province of Quebec (Canada),
Yankee Deb., 6.29% 03/06/26 3,500,000 3,574,025
- -----------------------------------------------------------
12,159,275
- -----------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-2.28%
Clearnet Communications
Inc.(Canada), Sr. Yankee
Unsec. Disc. Notes, 14.75%,
12/15/05(c) 920,000 737,150
- -----------------------------------------------------------
Nextel Communications, Sr.
Disc. Notes, 9.75%, 10/31/07
(Acquired 10/22/97-10/23/97;
Cost $3,061,031)(c)(d) 5,000,000 3,100,000
- -----------------------------------------------------------
Orion Network Systems, Inc.,
Sr. Notes, 11.25%,
01/15/07(e) 3,400,000 3,867,500
- -----------------------------------------------------------
Pricellular Wireless Corp., Sr.
Notes, 10.75%, 11/01/04 1,425,000 1,556,812
- -----------------------------------------------------------
Sygnet Wireless Inc., Sr.
Unsec. Notes, 11.50%,
10/01/06 1,320,000 1,432,200
- -----------------------------------------------------------
10,693,662
- -----------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-1.11%
Esprit Telecom Group PLC
(United Kingdom), Sr. Yankee
Notes, 11.50%, 12/15/07 1,500,000 1,552,500
- -----------------------------------------------------------
MCI Communications Corp.,
Putable Sr. Unsec. Deb.,
7.125%, 06/15/27 2,750,000 2,877,985
- -----------------------------------------------------------
PhoneTel Technologies, Inc.,
Sr. Unsec. Gtd. Notes,
12.00%, 12/15/06 740,000 771,450
- -----------------------------------------------------------
5,201,935
- -----------------------------------------------------------
TELEPHONE-0.24%
Hermes Europe Railtel BV
(Netherlands), Sr. Yankee
Notes, 11.50%, 08/15/07
(Acquired 08/14/97; Cost
$1,006,125)(d) 990,000 1,103,850
- -----------------------------------------------------------
</TABLE>
9
<PAGE> 12
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
TRUCKERS-0.49%
Travelcenters of America Inc.,
Sr. Gtd. Unsec. Sub. Deb.,
10.25%, 04/01/07 $ 2,180,000 $ 2,299,900
- -----------------------------------------------------------
WASTE MANAGEMENT-0.99%
Allied Waste Industries, Inc.,
Sr. Disc. Notes, 11.30%,
06/01/07 (Acquired 05/01/97;
Cost $2,931,642)(c)(d) 4,930,000 3,487,975
- -----------------------------------------------------------
Norcal Waste Systems Inc.,
Series B Sr. Gtd. Notes,
13.50%, 11/15/05 1,000,000 1,155,000
- -----------------------------------------------------------
4,642,975
- -----------------------------------------------------------
Total U.S. Dollar Denominated
Non-Convertible Bonds & Notes 328,665,198
- -----------------------------------------------------------
U.S. DOLLAR DENOMINATED CONVERTIBLE
BONDS & NOTES-1.28%
COMPUTERS (PERIPHERALS)-0.29%
EMC Corp., Conv. Sub. Notes,
3.25%, 03/15/02 (Acquired
03/06/97; Cost $1,000,000)(d) 1,000,000 1,349,750
- -----------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES)-0.43%
Omnicare, Inc., Sub. Deb.,
5.00%, 12/01/07 (Acquired
12/04/97; Cost $2,000,000)(d) 2,000,000 2,030,000
- -----------------------------------------------------------
MANUFACTURING (SPECIALIZED)-0.29%
U.S. Filter Corp., Conv. Sub.
Notes, 6.00%, 09/15/05 800,000 1,373,528
- -----------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-0.27%
CUC International, Inc., Conv.
Sub. Notes, 3.00%, 02/15/02
(Acquired 02/05/97; Cost
$1,000,000)(d) 1,000,000 1,255,940
- -----------------------------------------------------------
Total U.S. Dollar
Denominated Convertible
Bonds & Notes 6,009,218
- -----------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED
NON-CONVERTIBLE BONDS & NOTES(f)-6.58%
CANADA-4.92%
Bank of Montreal (Banks-Money Center),
Sub. Deb., 7.92%, 07/31/12 CAD
4,000,000 3,154,459
- -----------------------------------------------------------
Bell Canada (Telephone), Unsec.
Deb., 10.875, 10/11/04 3,000,000 2,647,885
- -----------------------------------------------------------
Bell Mobility Cellular Inc.
(Telecommunications-Cellular/Wireless),
Deb., 6.55%, 06/02/08 2,250,000 1,584,959
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
CANADA-(CONTINUED)
Clearnet Communications Inc.
(Telecommunications-Cellular/Wireless),
Sr. Disc. Notes, 11.75%,
08/13/07(c) $ 8,200,000 $ 3,643,679
- -----------------------------------------------------------
Microcell Telecommunications
(Telecommunications-Cellular/Wireless),
Sr. Disc. Notes, 11.125%,
10/15/07 (Acquired 10/08/97;
Cost $1,517,301)(c)(d) 3,500,000 1,359,295
- -----------------------------------------------------------
NAV Canada (Services-Commercial
& Consumer), Bonds, 7.40%,
06/01/27 2,500,000 1,996,606
- -----------------------------------------------------------
Teleglobe Canada, Inc.
(Telephone), Unsec. Deb.,
8.35%, 06/20/03 5,000,000 3,882,859
- -----------------------------------------------------------
Trans-Canada Pipelines (Natural
Gas), Series Q Deb., 10.625%,
10/20/09 1,750,000 1,665,834
- -----------------------------------------------------------
Unsec. Notes, 8.55%, 02/01/06 3,000,000 2,430,209
- -----------------------------------------------------------
Westcoast Energy, Inc.
(Oil & Gas-Exploration &
Production), Deb., 6.45%, 12/18/06
(Acquired 12/03/96; Cost
$739,252)(d) 1,000,000 717,540
- -----------------------------------------------------------
23,083,325
- -----------------------------------------------------------
GERMANY-0.41%
LKB Global (Financial-Diversified),
Gtd. Notes, 6.00%, 01/25/06
DEM 3,300,000 1,901,306
- -----------------------------------------------------------
NEW ZEALAND-0.49%
International Bank for Reconstruction &
Development (Banks-Money Center),
Sr. Notes, 6.77%, 08/20/07(b)
NZD 8,000,000 2,309,547
- -----------------------------------------------------------
UNITED KINGDOM-0.76%
Sutton Bridge Financial
Ltd. (Financial-Diversified), Gtd.
Eurobonds,
8.625%, 06/30/22 (Acquired 05/29/97;
Cost $3,260,479)(d)
GBP 2,000,000 3,551,582
- -----------------------------------------------------------
Total Non-U.S. Dollar Denominated
Non-Convertible Bonds & Notes 30,845,760
- -----------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED
CONVERTIBLE BONDS & NOTES(f)-5.10%
GERMANY-1.07%
Daimler-Benz A.G. (Automobiles), Conv. Gtd.
Unsub. Eurobonds, 4.125%, 07/05/03
DEM 6,440,000 $ 5,011,673
- -----------------------------------------------------------
JAPAN-3.05%
Matsushita Electric Industrial Co. Ltd.
(Electrical Equipment), Conv. Bonds,
1.30%, 03/29/02
JPY 250,000,000 2,378,992
- -----------------------------------------------------------
Sony Corp. (Electrical
Equipment),
Conv. Deb., 1.40%, 03/31/05 465,000,000 5,288,543
- -----------------------------------------------------------
</TABLE>
10
<PAGE> 13
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
JAPAN-(CONTINUED)
Toyota Motor Corp.
(Automobiles),
Conv. Bonds, 1.20%, 01/28/98 $455,000,000 $ 6,655,816
- -----------------------------------------------------------
14,323,351
- -----------------------------------------------------------
SWITZERLAND-0.24%
Yamada Denki Co. Ltd.
(Retail-Computers & Electronics),
Unsec. Conv. Notes, 0.25%, 03/31/00
CHF 1,700,000 1,116,661
- -----------------------------------------------------------
UNITED KINGDOM-0.74%
British Airport Authority PLC (Airlines),
Conv. Bonds,
5.75%, 03/29/06
GBP 2,000,000 3,465,359
- -----------------------------------------------------------
Total Non-U.S. Dollar Denominated
Convertible Bonds & Notes 23,917,044
- -----------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED
GOVERNMENT BONDS & NOTES-9.84%(f)
CANADA-0.88%
Ontario Province, Sr. Unsec. Unsub. Global
Bonds, 8.00%, 03/11/03
CAD 5,350,000 4,148,183
- -----------------------------------------------------------
ITALY-0.51%
Republic of Italy, Conv. Eurobonds,
6.50%, 06/28/01
ITL 3,050,000,000 2,381,466
- -----------------------------------------------------------
NEW ZEALAND-1.69%
Federal National Mortgage Association,
Notes, 7.25%, 06/20/02
NZD 2,900,000 1,647,547
- -----------------------------------------------------------
New Zealand Government,
Bonds, 10.00%, 03/15/02 6,500,000 4,134,626
- -----------------------------------------------------------
Bonds, 8.00%, 04/15/04 3,500,000 2,119,266
- -----------------------------------------------------------
7,901,439
- -----------------------------------------------------------
SWEDEN-1.71%
Swedish Government,
Bonds, 10.25%, 05/05/03
SEK 19,000,000 2,884,973
- -----------------------------------------------------------
Bonds, 6.00%, 02/09/05 20,000,000 2,540,750
- -----------------------------------------------------------
Bonds, 6.50%, 10/25/06 20,000,000 2,611,720
- -----------------------------------------------------------
8,037,443
- -----------------------------------------------------------
UNITED KINGDOM-5.05%
Federal National Mortgage Association, Sr.
Unsec. Notes, 6.875%, 06/07/02
GBP 2,400,000 3,953,662
- -----------------------------------------------------------
United Kingdom Treasury,
Bonds, 8.00%, 12/07/00 1,500,000 2,548,985
- -----------------------------------------------------------
Bonds, 7.50%, 12/07/06
GBP 3,100,000 5,483,492
- -----------------------------------------------------------
Gtd. Notes, 7.25%, 03/30/98 5,600,000 9,201,483
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
UNITED KINGDOM-(CONTINUED)
Gtd. Notes, 7.00%, 11/06/01 $ 1,500,000 $ 2,492,397
- -----------------------------------------------------------
23,680,019
- -----------------------------------------------------------
Total Non-U.S. Dollar Denominated
Government Bonds & Notes 46,148,550
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
DOMESTIC COMMON STOCK-0.03%
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-0.03%
Nextel Communications, Inc.(g) 4,601 $ 119,626
- --------------------------------------------------------------
DOMESTIC CONVERTIBLE PREFERRED STOCKS-3.33%
BANKS (REGIONAL)-0.68%
Westpac Banking Corp. STRYPES
Trust-$3.135 Conv. Pfd. 95,000 3,182,500
- --------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-0.26%
Loral Space & Communications-$3.00
Conv. Pfd. (Acquired 11/01/96;
Cost $1,000,000)(d) 20,000 1,226,820
- --------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES)-0.35%
Microsoft Corp., Series A-$2.196
Conv. Pfd. 18,000 1,617,750
- --------------------------------------------------------------
ELECTRIC COMPANIES-0.27%
Houston Industries Inc.-$3.22 Conv.
Pfd. 22,000 1,255,375
- --------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-0.53%
SunAmerica, Inc.-$3.188 Conv. Pfd. 53,350 2,484,109
- --------------------------------------------------------------
FOODS-0.34%
Ralston Purina Co.-$4.34 Conv. Pfd. 23,000 1,601,375
- --------------------------------------------------------------
HEALTH CARE (MANAGED CARE)-0.42%
Medpartners Inc.-$1.44 Conv. Pfd. 90,000 1,980,000
- --------------------------------------------------------------
OIL & GAS (REFINING & MARKETING)-0.27%
Tosco Financing Trust-$2.875 Conv.
Pfd. (Acquired 12/10/96-12/11/96;
Cost $1,006,950)(d) 20,000 1,281,500
- --------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT)-0.21%
Citizens Utilities Co.-$2.50 Conv.
Pfd. 21,100 1,007,525
- --------------------------------------------------------------
Total Domestic Convertible Preferred Stocks 15,636,954
- --------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY INTERESTS-0.40%
ELECTRIC COMPANIES-0.40%
National Power PLC-ADR (United
Kingdom) 24,300 962,888
- --------------------------------------------------------------
PowerGen PLC-ADR (United Kingdom) 17,300 919,062
- --------------------------------------------------------------
Total Foreign Stocks & Other Equity
Interests 1,881,950
- --------------------------------------------------------------
WARRANTS-0.06%
BROADCASTING (TELEVISION, RADIO & CABLE)-0.00%
Wireless One, Inc., expiring
10/19/00(h) 2,670 0
- --------------------------------------------------------------
</TABLE>
11
<PAGE> 14
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRICAL EQUIPMENT-0.02%
Electronic Retailing Systems,
expiring 01/24/98(h) 3,630 $ 72,600
- --------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)-0.01%
MVE Inc., expiring 02/15/02(h) 1,000 30,000
- --------------------------------------------------------------
METAL FABRICATORS-0.00%
Gulf States Steel Corp., expiring
04/15/03(h) 1,650 7,425
- --------------------------------------------------------------
PERSONAL CARE-0.01%
IHF Capital Inc., expiring
11/14/99(h) (Acquired
11/04/94-12/07/94; cost $0)(d)(h) 1,200 60,600
- --------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-0.02%
Clearnet Communications Inc.
(Canada), expiring 09/15/05(h) 5,874 55,803
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-(CONTINUED)
Orion Network Systems, Inc.,
expiring 01/15/07(h) 3,400 $ 47,600
- --------------------------------------------------------------
103,403
- --------------------------------------------------------------
Total Warrants 274,028
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (a)
<S> <C> <C>
REPURCHASE AGREEMENT(i)-1.11%
Smith Barney, Inc., 6.75%,
01/02/98(j) $ 5,213,923 5,213,923
- --------------------------------------------------------------
TOTAL INVESTMENTS-97.80% 458,712,251
- --------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-2.20% 10,317,580
- --------------------------------------------------------------
NET ASSETS-100.00% $469,029,831
- --------------------------------------------------------------
</TABLE>
Abbreviations:
ADR - American Depositary Receipts
CAD - Canadian Dollar
Cert. - Certificates
CHF - Swiss Franc
Conv. - Convertible
Deb. - Debentures
DEM - German Deutschemark
Disc. - Discounted
GBP - British Pound
Gtd. - Guaranteed
ITL - Italian Lira
Pfd. - Preferred
PRIDES - Preferred Redemption Increase Dividend Equity Security
JPY - Japanese Yen
NZD - New Zealand Dollar
Sec. - Secured
SEK - Swedish Krona
STRYPES - Structured Yield Product Exchangeable for Stock
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) Zero coupon bond issued at a discount. The interest rate shown represents
the rate of original issue discount.
(c) Discounted bond at purchase. The interest rate represents the coupon rate at
which the bond will accrue at a specified future date.
(d) 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 12/31/97 was $55,932,582 which
represented 11.93% of the Fund's net assets.
(e) Issued as a unit. Each unit also includes 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.
(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 12/31/97 with a maturing value of
$400,150,000. Collateralized by $395,097,000 U.S. Government obligations, 0%
to 13.875%, due 01/07/98 to 12/15/43 with an aggregate market value at
12/31/97 of $408,000,323.
See Notes to Financial Statements.
12
<PAGE> 15
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$435,939,899) $458,712,251
- ---------------------------------------------------------
Foreign currencies, at value (cost
$301,698) 301,263
- ---------------------------------------------------------
Receivables for:
Forward currency contracts 2,502,706
- ---------------------------------------------------------
Fund shares sold 1,863,627
- ---------------------------------------------------------
Interest and dividends 7,868,466
- ---------------------------------------------------------
Investment for deferred compensation plan 72,139
- ---------------------------------------------------------
Other assets 107,800
- ---------------------------------------------------------
Total assets 471,428,252
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Fund shares reacquired 1,064,087
- ---------------------------------------------------------
Dividends to shareholders 584,641
- ---------------------------------------------------------
Deferred compensation plan 72,139
- ---------------------------------------------------------
Accrued advisory fees 172,603
- ---------------------------------------------------------
Accrued distribution fees 342,659
- ---------------------------------------------------------
Accrued administrative service fees 6,104
- ---------------------------------------------------------
Accrued transfer agent fees 60,223
- ---------------------------------------------------------
Accrued trustees' fees 3,760
- ---------------------------------------------------------
Accrued operating expenses 92,205
- ---------------------------------------------------------
Total liabilities 2,398,421
- ---------------------------------------------------------
Net assets applicable to shares outstanding $469,029,831
=========================================================
NET ASSETS:
Class A $340,607,691
=========================================================
Class B $125,870,516
=========================================================
Class C $ 2,551,624
=========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE
Class A 39,748,143
- ---------------------------------------------------------
Class B 14,719,515
- ---------------------------------------------------------
Class C 298,700
- ---------------------------------------------------------
CLASS A:
Net asset value and redemption price per
share $ 8.57
- ---------------------------------------------------------
Offering price per share:
(Net asset value of $8.57
divided by 95.25%) $ 9.00
- ---------------------------------------------------------
CLASS B:
Net asset value and offering price per
share $ 8.55
- ---------------------------------------------------------
CLASS C:
Net asset value and offering price per
share $ 8.54
- ---------------------------------------------------------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 29,179,932
- ---------------------------------------------------------
Dividends (net of $24,339 foreign
withholding tax) 807,572
- ---------------------------------------------------------
Total investment income 29,987,504
- ---------------------------------------------------------
EXPENSES:
Advisory fees 1,801,746
- ---------------------------------------------------------
Administrative service fees 81,464
- ---------------------------------------------------------
Custodian fees 90,793
- ---------------------------------------------------------
Trustees' fees 11,852
- ---------------------------------------------------------
Distribution fees -- Class A 749,562
- ---------------------------------------------------------
Distribution fees -- Class B 1,003,075
- ---------------------------------------------------------
Distribution fees -- Class C 3,040
- ---------------------------------------------------------
Transfer agent fees -- Class A 419,508
- ---------------------------------------------------------
Transfer agent fees -- Class B 145,173
- ---------------------------------------------------------
Transfer agent fees -- Class C 440
- ---------------------------------------------------------
Other 209,214
- ---------------------------------------------------------
Total expenses 4,515,867
- ---------------------------------------------------------
Less: Expenses paid indirectly (11,734)
- ---------------------------------------------------------
Net expenses 4,504,133
- ---------------------------------------------------------
Net investment income 25,483,371
- ---------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES, FOREIGN CURRENCY TRANSACTIONS, FORWARD
CURRENCY CONTRACTS AND FUTURES CONTRACTS:
Net realized gain (loss) from:
Investment securities 10,189,229
- ---------------------------------------------------------
Foreign currency transactions (1,785,693)
- ---------------------------------------------------------
Forward currency contracts 4,303,382
- ---------------------------------------------------------
Futures contracts (1,794,375)
- ---------------------------------------------------------
10,912,543
- ---------------------------------------------------------
Net unrealized appreciation (depreciation)
of:
Investment securities 7,163,467
- ---------------------------------------------------------
Foreign currency transactions (27,949)
- ---------------------------------------------------------
Forward currency contracts 1,601,096
- ---------------------------------------------------------
8,736,614
- ---------------------------------------------------------
Net gain from investment securities,
foreign currency transactions, forward
currency contracts and futures
contracts 19,649,157
- ---------------------------------------------------------
Net increase in net assets resulting from
operations $ 45,132,528
- ---------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
13
<PAGE> 16
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 25,483,371 $ 22,816,117
- --------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currency transactions, forward currency contracts and
futures contracts 10,912,543 2,116,227
- --------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities,
foreign currency transactions and forward currency
contracts 8,736,614 4,238,364
- --------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 45,132,528 29,170,708
- --------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (18,740,017) (19,414,227)
- --------------------------------------------------------------------------------------------
Class B (5,379,787) (4,277,769)
- --------------------------------------------------------------------------------------------
Class C (8,381) --
- --------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A (3,481,635) --
- --------------------------------------------------------------------------------------------
Class B (1,280,178) --
- --------------------------------------------------------------------------------------------
Class C (19,105) --
- --------------------------------------------------------------------------------------------
Share transactions-net:
Class A 42,455,896 31,245,815
- --------------------------------------------------------------------------------------------
Class B 36,284,875 39,218,171
- --------------------------------------------------------------------------------------------
Class C 2,539,241
- --------------------------------------------------------------------------------------------
Net increase in net assets 97,503,437 75,942,698
- --------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 371,526,394 295,583,696
============================================================================================
End of period $469,029,831 $371,526,394
- --------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Shares of beneficial interest $441,939,444 $360,736,285
- --------------------------------------------------------------------------------------------
Undistributed net investment income (57,239) 33,129
- --------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from sales of
investment securities, foreign currency transactions,
forward currency contracts and futures contracts 1,908,862 (5,745,170)
- --------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currency transactions and forward currency contracts 25,238,764 16,502,150
- --------------------------------------------------------------------------------------------
$469,029,831 $371,526,394
============================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
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 three different classes of shares: the Class A shares, Class B
shares and the Class C shares. The new Class C shares commenced sales on August
4, 1997. Class A shares are sold with a front-end sales charge. The Class B and
Class C shares are sold with a contingent deferred sales charge. Matters
affecting each portfolio or class will be voted on exclusively by the
shareholders of such portfolio or class. The assets, liabilities and operations
of each portfolio are accounted for separately. Information presented in these
financial statements pertains only to the Fund. 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.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies followed by the Fund
in the preparation of its financial statements.
14
<PAGE> 17
A. Security Valuations-Debt obligations (including convertible bonds) are
valued on the basis of prices provided by an independent pricing service.
Prices provided by the pricing service may be determined without exclusive
reliance on quoted prices, and may reflect appropriate factors such as
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. 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 foreign 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 foreign currency 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 foreign currency contract
for the purchase or sale of a security denominated in a foreign currency in
order to "lock-in" the U.S. dollar price of that security. The Fund could be
exposed to risk if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably. Outstanding contracts at December 31, 1997 were as follows:
<TABLE>
<CAPTION>
Contract to
Settlement ------------------------------- Unrealized
Date Deliver Receive Value Appreciation
---------- ------------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
3/10/98 CHF 1,630,000 $1,131,866 $1,124,266 $ 7,600
2/20/98 DEM 8,000,000 4,674,536 4,460,092 214,444
3/2/98 DEM 3,700,000 2,133,672 2,063,917 69,755
1/30/98 GBP 4,300,000 7,182,720 7,090,928 91,792
2/27/98 GBP 7,150,000 11,947,150 11,831,436 115,714
3/31/98 GBP 5,600,000 9,314,200 9,309,535 4,665
1/14/98 JPY 114,500,000 958,159 876,943 81,216
1/20/98 JPY 300,000,000 2,509,410 2,297,687 211,723
2/6/98 JPY 669,000,000 5,565,724 5,123,968 441,756
3/5/98 JPY 718,000,000 5,660,675 5,499,476 161,199
2/18/98 NZD 14,200,000 8,846,600 8,256,202 590,398
3/19/98 NZD 3,500,000 2,037,000 2,036,462 538
1/29/98 SEK 61,000,000 8,201,129 7,689,223 511,906
----------- ----------- ----------
$70,162,841 $67,660,135 $2,502,706
=========== =========== ==========
</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. On
December 31, 1997, undistributed net investment income was decreased by
$1,445,554, undistributed net realized gain(loss) increased by $1,522,407 and
paid-in-capital decreased by $76,853 in order to comply with the requirements
of the American Institute of Certified Public Accountants Statement of
Position 93-2. Net assets of the Fund were unaffected by the
reclassifications discussed above.
E. Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
F. Expenses -- Distribution and transfer agency expenses directly attributable
to a class of shares are charged to that class' operations. All other
expenses which are attributable to more than one class are allocated among
the classes.
15
<PAGE> 18
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays AIM an advisory fee at an annual rate of 0.50% of the
first $200 million of the Fund's average daily net assets, plus 0.40% of the
Fund's average daily net assets in excess of $200 million to and including $500
million, plus 0.35% of the Fund's average daily net assets in excess of $500
million to and including $1 billion, plus 0.30% of the Fund's average daily net
assets in excess of $1 billion.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to reimburse AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the year ended December 31, 1997, AIM
was reimbursed $81,464 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. During the year ended December 31, 1997, the
Fund paid AFS $352,055 for such services.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B and Class C shares of the Fund. The Trust has adopted
distribution plans pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Class A shares and Class C shares (the "Class A and C Plan"), and the
Fund's Class B shares (the "Class B Plan") (collectively, the "Plans"). The
Fund, pursuant to the Class A and C Plan, pays AIM Distributors compensation at
an annual rate of 0.25% of the average daily net assets of the Class A shares
and 1.00% of the average daily net assets of Class C shares. The Fund pursuant
to the Class B Plan, pays AIM Distributors compensation at an annual rate of
1.00% of the average daily net assets attributable to the Class B shares. Of
these amounts, the Fund may pay a service fee of 0.25% of the average daily net
assets of the Class A, Class B or C shares to selected dealers and financial
institutions who furnish continuing personal shareholder services to their
customers who purchase and own the appropriate class of shares of the Fund. Any
amounts not paid as a service fee by the Class B or C shares under the Plans
would constitute an asset-based sales charge. The Plans also impose a cap on the
total sales charges, including asset-based sales charges that may be paid by the
respective classes. AIM Distributors may, from time to time, assign, transfer,
or pledge to one or more designees, its rights to all or a designated 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 received by AIM
Distributors related to the Class B shares. During the year ended December 31,
1997 for the Class A shares and Class B shares, and the period August 4, 1997
(date sales commenced) through December 31, 1997 for the Class C shares, the
Class A, Class B and Class C shares paid AIM Distributors $749,562, $1,003,075
and $3,040, respectively, as compensation under the Plans.
AIM Distributors received commissions of $203,261 from sales of the Class A
shares of the Fund during the year ended December 31, 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 year ended December 31, 1997,
AIM Distributors received $45,242 in contingent deferred sales charges imposed
on redemptions of Fund shares. Certain officers and trustees of the Trust are
officers and directors of AIM, AIM Distributors and AFS.
During the year ended December 31, 1997, the Fund paid legal fees of $5,159
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 which reduced the
Fund's expenses by $1,501 during the year ended December 31, 1997. Also during
the year ended December 31, 1997 the Fund received reductions in transfer agency
fees from AFS (an affiliate of AIM) and reductions in custodian fees of $4,486
and $5,747, respectively, under expense offset arrangements. The effect of the
above arrangements resulted in a reduction of the Fund's total expenses of
$11,734 during the year ended December 31, 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 year ended December
31, 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 year ended December 31, 1997 was
$288,736,048 and $211,539,995, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
on a tax basis as of December 31, 1997 was as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $28,297,995
- -----------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (5,525,643)
- -----------------------------------------------------------
Net unrealized appreciation of investment
securities $22,772,352
- -----------------------------------------------------------
Investments have the same cost for tax and financial
statement purposes.
</TABLE>
16
<PAGE> 19
NOTE 7-SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 1997 and 1996
were as follows:
<TABLE>
<CAPTION>
1997 1996
----------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Sold:
Class A 12,161,983 $101,688,372 10,956,910 $87,131,342
- ------------------------------------------------------------------------------------- -----------------------
Class B 6,428,479 53,514,758 7,662,222 60,657,835
- ------------------------------------------------------------------------------------- -----------------------
Class C* 309,134 2,628,227 -- --
- ------------------------------------------------------------------------------------- -----------------------
Issued as reinvestment of dividends:
Class A 1,967,802 16,363,229 1,985,876 15,762,291
- ------------------------------------------------------------------------------------- -----------------------
Class B 490,120 4,073,672 357,055 2,833,327
- ------------------------------------------------------------------------------------- -----------------------
Class C* 1,676 14,278 -- --
- ------------------------------------------------------------------------------------- -----------------------
Reacquired:
Class A (9,099,096) (75,595,705) (8,997,073) (71,647,818)
- ------------------------------------------------------------------------------------- -----------------------
Class B (2,573,466) (21,303,555) (3,079,249) (24,272,991)
- ------------------------------------------------------------------------------------- -----------------------
Class C* (12,110) (103,264) -- --
- ------------------------------------------------------------------------------------- -----------------------
9,674,522 $81,280,012 8,885,741 $70,463,986
===================================================================================== =======================
</TABLE>
* Class C shares commenced sales on August 4, 1997.
NOTE 8-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A outstanding
during each of the years in the five-year period ended December 31, 1997, for a
share of Class B outstanding during each of the years in the four-year period
ended December 31, 1997 and the period September 7, 1993 (date sales commenced)
through December 31, 1993 and for a share of Class C outstanding during the
period August 4, 1997 (date sales commenced) through December 31, 1997.
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.24 $ 8.17 $ 7.20 $ 8.45 $ 8.03
- ------------------------------------------------------ -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.55 0.57 0.58 0.58 0.60
- ------------------------------------------------------ -------- -------- -------- -------- --------
Net gains (losses) on securities (both realized and
unrealized) 0.39 0.09 1.00 (1.22) 0.61
- ------------------------------------------------------ -------- -------- -------- -------- --------
Total from investment operations 0.94 0.66 1.58 (0.64) 1.21
- ------------------------------------------------------ -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.52) (0.59) (0.61) (0.49) (0.60)
- ------------------------------------------------------ -------- -------- -------- -------- --------
Distributions from net realized gains (0.09) -- -- (0.01) (0.19)
- ------------------------------------------------------ -------- -------- -------- -------- --------
Return of capital -- -- -- (0.11) --
- ------------------------------------------------------ -------- -------- -------- -------- --------
Total distributions (0.61) (0.59) (0.61) (0.61) (0.79)
- ------------------------------------------------------ -------- -------- -------- -------- --------
Net asset value, end of period $ 8.57 $ 8.24 $ 8.17 $ 7.20 $ 8.45
- ------------------------------------------------------ -------- -------- -------- -------- --------
Total return(a) 11.92% 8.58% 22.77% (7.65)% 15.38%
- ------------------------------------------------------ -------- -------- -------- -------- --------
Ratios/supplemental data:
Net assets, end of period (000s omitted) $340,608 $286,183 $251,280 $201,677 $244,168
- ------------------------------------------------------ -------- -------- -------- -------- --------
Ratio of expenses to average net assets 0.94%(b)(c) 0.98% 0.98% 0.98% 0.98%
- ------------------------------------------------------ -------- -------- -------- -------- --------
Ratio of net investment income to average net assets 6.55%(b) 7.13% 7.52% 7.53% 7.01%
- ------------------------------------------------------ -------- -------- -------- -------- --------
Portfolio turnover rate 54% 80% 227% 185% 99%
- ------------------------------------------------------ -------- -------- -------- -------- --------
</TABLE>
(a) Does not deduct sales charges.
(b) Ratios are based on average net assets of $299,824,848.
(c) Includes indirectly paid expenses. Excluding indirectly paid expenses, the
ratio of expenses to average net assets would have remained the same.
17
<PAGE> 20
<TABLE>
<CAPTION>
CLASS B CLASS C
----------------------------------------------------- -------
1997 1996 1995 1994 1993 1997
-------- ------- ------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.23 $ 8.15 $ 7.18 $ 8.43 $ 8.95 $ 8.38
- ------------------------------------------------------- -------- ------- ------- ------- ------ -------
Income from investment operations:
Net investment income 0.48 0.50 0.53 0.52 0.19 0.19
- ------------------------------------------------------- -------- ------- ------- ------- ------ -------
Net gains (losses) on securities (both realized and
unrealized) 0.38 0.11 0.98 (1.23) (0.34) 0.22
- ------------------------------------------------------- -------- ------- ------- ------- ------ -------
Total from investment operations 0.86 0.61 1.51 (0.71) (0.15) 0.41
- ------------------------------------------------------- -------- ------- ------- ------- ------ -------
Less distributions:
Dividends from net investment income (0.45) (0.53) (0.54) (0.42) (0.18) (0.16)
- ------------------------------------------------------- -------- ------- ------- ------- ------ -------
Distributions from net realized gains (0.09) -- -- (0.01) (0.19) (0.09)
- ------------------------------------------------------- -------- ------- ------- ------- ------ -------
Return of capital -- -- -- (0.11) -- --
- ------------------------------------------------------- -------- ------- ------- ------- ------ -------
Total distributions (0.54) (0.53) (0.54) (0.54) (0.37) (0.25)
- ------------------------------------------------------- -------- ------- ------- ------- ------ -------
Net asset value, end of period $ 8.55 $ 8.23 $ 8.15 $ 7.18 $ 8.43 $ 8.54
======================================================= ======== ======= ======= ======= ====== =======
Total return(a) 10.89% 7.87% 21.72% (8.46)% (0.75)% 4.96%
======================================================= ======== ======= ======= ======= ====== =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $125,871 $85,343 $44,304 $12,321 $3,602 $ 2,552
======================================================= ======== ======= ======= ======= ====== =======
Ratio of expenses to average net assets 1.69%(b)(c) 1.80% 1.79% 1.83%(d) 1.75%(d)(e) 1.69%(b)(c)(e)
======================================================= ====== ======= ======= ======= ====== =======
Ratio of net investment income to average net assets 5.80%(b) 6.30% 6.71% 6.69%(f) 6.24%(e)(f) 5.80%(b)(e)
======================================================= ====== ======= ======= ======= ====== =======
Portfolio turnover rate 54% 80% 227% 185% 99% 54%
======================================================= ====== ======= ====== ======= ====== =======
</TABLE>
(a) Does not deduct contingent deferred sales charges and are not annualized for
periods less than one year.
(b) Ratios are based on average net assets of $100,307,548 and $739,696,
respectively, for Class B and Class C.
(c) Includes indirectly paid expenses. Excluding indirectly paid expenses, the
ratio of expenses to average net assets would have been 1.68% for Class B
and Class C.
(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) Annualized.
(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 6.48% and 5.49% (annualized) for 1994 and 1993,
respectively.
18
<PAGE> 21
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of
AIM Income Fund:
We have audited the accompanying statement of assets and
liabilities of AIM Income Fund (a portfolio of AIM Funds
Group), including the schedule of investments, as of
December 31, 1997, and the related statement of
operations for the year then ended, the statement of
changes in net assets for each of the years in the
two-year period then ended, and the financial highlights
for each of the years or periods in the five-year period
then ended. These financial statements and financial
highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion
on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures
included confirmation of securities owned as of December
31, 1997, by correspondence with the custodian. An audit
also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial presentation. We believe
that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all
material respects, the financial position of AIM Income
Fund as of December 31, 1997, the results of its
operations for the year then ended, the changes in its
net assets for each of the years in the two-year period
then ended, and the financial highlights for each of the
years or periods in the five-year period then ended, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Houston, Texas
February 6, 1998
19
<PAGE> 22
Directors & Officers
<TABLE>
<S> <C>
BOARD OF DIRECTORS 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
Director
Ace Limited; John J. Arthur A I M Advisors, Inc.
Formerly Director, President, and Chief Senior Vice President and Treasurer 11 Greenway Plaza
Executive Officer Suite 100
COMSAT Corporation Carol F. Relihan Houston, TX 77046
Senior Vice President and Secretary
Owen Daly II TRANSFER AGENT
Director Gary T. Crum
Cortland Trust Inc. Senior Vice President A I M Fund Services, Inc.
P.O. Box 4739
Jack Fields Dana R. Sutton Houston, TX 77210-4739
Chief Executive Officer Vice President and Assistant Treasurer
Texana Global, Inc.; CUSTODIAN
Formerly Member of the Robert G. Alley
U.S. House of Representatives Vice President State Street Bank and Trust Company
225 Franklin Street
Carl Frischling Stuart W. Coco Boston, MA 02110
Partner Vice President
Kramer, Levin, Naftalis & Frankel COUNSEL TO THE FUND
Melville B. Cox
Robert H. Graham Vice President Ballard Spahr
President and Chief Executive Officer Andrews & Ingersoll
A I M Management Group Inc. Karen Dunn Kelly 1735 Market Street
Vice President Philadelphia, PA 19103
John F. Kroeger
Formerly Consultant Jonathan C. Schoolar COUNSEL TO THE TRUSTEES
Wendell & Stockel Associates, Inc. Vice President
Kramer, Levin, Naftalis & Frankel
Lewis F. Pennock P. Michelle Grace 919 Third Avenue
Attorney Assistant Secretary New York, NY 10022
Ian W. Robinson Nancy L. Martin DISTRIBUTOR
Consultant; Formerly Executive Assistant Secretary
Vice President and A I M Distributors, Inc.
Chief Financial Officer Ofelia M. Mayo 11 Greenway Plaza
Bell Atlantic Management Assistant Secretary Suite 100
Services, Inc. Houston, TX 77046
Kathleen J. Pflueger
Louis S. Sklar Assistant Secretary AUDITORS
Executive Vice President
Hines Interests Samuel D. Sirko KPMG Peat Marwick LLP
Limited Partnership Assistant Secretary 700 Louisiana
Houston, TX 77002
Stephen I. Winer
Assistant Secretary
Mary J. Benson
Assistant Treasurer
</TABLE>
REQUIRED FEDERAL INCOME TAX INFORMATION
AIM Income Fund Class A, Class B, and Class C shares paid ordinary dividends in
the amount of $0.558, $0.489, and $0.196 per share, respectively, to
shareholders during its tax year ended December 31, 1997. Of this amount, 2.40%
is eligible for the dividends received deduction for corporations. The Fund
also distributed long-term capital gains of $0.055 per share of Class A, Class
B, and Class C shares during the Fund's tax year ended December 31, 1997. Of
this amount, 61.21% is 20% rate gain.
STATE INCOME TAX INFORMATION
Of ordinary dividends paid, 0.76% for Class A, Class B, and Class C shares was
derived from U.S. Treasury obligations.
<PAGE> 23
HOW AIM MAKES INVESTING
EASY FOR YOU
o LOW INITIAL INVESTMENT. You can get your investment program started for as
little as $500. Subsequent investments can be made for only $50.
o AUTOMATIC REINVESTMENT OF DIVIDENDS AND/OR CAPITAL GAINS. Distributions may
be received in cash or reinvested in the Fund free of charge. Over time, the
power of compounding can significantly increase the value of your assets.
o AUTOMATIC INVESTMENT PLAN. You many build your investment by regularly
purchasing additional shares. Pre-authorized checks for $50 or more can be
drafted monthly from your personal checking account.
o EASY ACCESS TO YOUR MONEY. Your shares may be redeemed at net asset value
any day the New York Stock Exchange is open. The price of shares sold may be
more or less than their original cost, depending on market conditions.
o SYSTEMATIC WITHDRAWAL PLAN. You may elect to receive checks of at least $50
monthly or quarterly through a systematic withdrawal plan.
o EXCHANGE PRIVILEGE. As your goals change, you may exchange all or part of
your assets for those of other funds within the same share class of The AIM
Family of Funds--Registered Trademark--. The exchange privilege may be
modified or discontinued for any of the AIM funds.
o RETIREMENT PLANS. You may purchase shares of the fund for your Individual
Retirement Account (IRA) or any other type of retirement plan, and earn
tax-deferred dollars for your retirement.
o TOLL-FREE ACCESS. Current shareholders can call our AIM investor Line at
800-246-5463 for 24-hour a-day account information. Or, of course, you may
contact your financial consultant for assistance.
o WWW.AIMFUNDS.COM. As a current shareholder, you can check account balances
24-hours-a-day over the Internet. State-of-the-art encryption lets you send
us questions that include confidential information without the fear of
eavesdropping, tampering, or forgery.
--------------------------------------
Current shareholders
can call our
AIM Investor Line at
800-246-5463
for 24-hour-a-day
account information.
--------------------------------------
<PAGE> 24
<TABLE>
<S> <C>
THE AIM FAMILY OF FUNDS--Registered Trademark--
AGGRESSIVE GROWTH
AIM Aggressive Growth Fund*
AIM Asian Growth Fund
AIM Capital Development Fund
AIM Constellation Fund
AIM European Development 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 High Income Municipal Fund
AIM Municipal Bond Fund
AIM Tax-Exempt Bond Fund of Connecticut
AIM Tax-Free Intermediate Fund
CURRENT INCOME AND HIGH DEGREE OF SAFETY
AIM Intermediate Government Fund
AIM Limited Maturity Treasury Fund
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
$83 billion in assets for more than 3.7 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 December 31, 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.
</TABLE>
