<PAGE> 1
[COVER-COLLAGE]
AIM STRATEGIC INCOME FUND, INC.
[AIM LOGO
APPEARS HERE] SEMIANNUAL REPORT JUNE 30, 1996
<PAGE> 2
AIM STRATEGIC INCOME FUND, INC.
For shareholders who seek high current income consistent with stability of
principal. The Fund invests primarily in convertible securities and employs
short-selling to enhance income and hedge against market risk.
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o AIM Strategic Income Fund, Inc. performance figures are historical and
reflect reinvestment of all distributions and changes in 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 The Fund's portfolio composition is subject to change and there is no
assurance the Fund will continue to hold any particular security.
o Past performance cannot guarantee comparable future results.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o Government securities, such as U.S. Treasury bills, notes, and bonds,
offer a high degree of safety and are guaranteed as to the timely payment
of principal and interest if held to maturity. Fund shares are not insured
and their value and yield will vary with market conditions.
o Barron's Best-Grade Corporate Bond index is an unmanaged composite of the
performance of 10 high-grade corporate bonds. Barron's Interim-Grade
Corporate Bond index is an unmanaged composite of the performance of 10
medium-grade corporate bonds.
o Higher-yielding, lower-rated corporate bonds are commonly known as "junk
bonds." These bonds have a greater risk of price fluctuation and loss of
principal and income than U.S. government securities, such as U.S.
Treasury bonds and bills, which offer a government guarantee as to the
repayment of principal and interest if held to maturity.
o An investment cannot be made in any index listed. Unless otherwise
indicated, index results include reinvested dividends and do not reflect
sales charges.
MUTUAL FUNDS, ANNUITIES, AND OTHER INVESTMENTS ARE NOT INSURED BY THE FDIC OR
ANY OTHER GOVERNMENT AGENCY; ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR
GUARANTEED BY, ANY BANK OR ANY AFFILIATE; AND ARE SUBJECT TO INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
This report may be distributed only to current shareholders or to
persons who have received a current prospectus of the Fund.
<PAGE> 3
The Chairman's Letter
- -----------------
. . . the best
action to take is
to stay fo-
cused--not on
the market, but
on your own
long-term goals.
- -----------------
Dear Fellow Shareholder:
[PHOTO OF During periods of market volatility, I am reminded of a
Charles T. Bauer, story. When asked what the market was going to do, J.P.
Chairman of Morgan reportedly replied, "It will fluctuate." Fixed-income
the Board of investors can certainly agree with that statement: Bond
the Fund markets have undergone major shifts in momentum at least
APPEARS HERE] twice in the first six months of 1996 as investors worried
first about the possibility of recession and then about
rising inflation.
Those of you who are long-time investors, and those
who are brand-new shareholders in The AIM Family of Funds--Registered
Trademark--, should recognize that periods of falling prices in both the stock
and bond markets are inevitable. Indeed, we can learn important lessons about
investing in periods of market uncertainty.
In our experience, we have observed that the best action to take is to
stay focused--not on the market, but on your own long-term goals.
The market can change from day to day. Those who try to "time" the market, over
time, tend to be less successful than those who continue to follow a
disciplined investment strategy.
Short-term volatility in financial markets may tempt some investors to
liquidate stock and bond investments, regardless of their personal financial
objectives. Remember that time is the best medicine for uncertain markets. The
market's performance in recent months has been driven by concerns about the
possibility of an overheated economy and rising inflation. However, the latest
economic data suggest conditions that prompted 1995's strong market
performance should continue: corporate earnings are healthy and economic
growth is moderate, without significant inflation.
You may cushion the effects of changing markets and reduce your risk
exposure in any one type of security by diversification--spreading your assets
across several kinds of investments. Prudent investors maintain a balanced
portfolio of stock and bond investments, with due consideration for their
personal financial objectives, risk tolerance, and investment time horizon.
There is one constant you can count on, regardless of changing markets--
AIM's commitment to you, our shareholders. At AIM, we take our responsibility
to you very seriously in managing a well-conceived and significantly
diversified menu of mutual funds. AIM investment management teams provide a
blend of skills, education, experience, and maturity that produces a balanced,
thoughtful approach to decision-making and quality investment products.
Consistent performance, coupled with outstanding customer service and a highly
professional staff, has helped AIM build relationships with 3 million
shareholders over the past 20 years.
Thank you for continuing to rely on AIM Strategic Income Fund. If you
have any questions or comments about this report, please call Client Services
at 800-959-4246 during normal business hours.
Respectfully submitted,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
<PAGE> 4
The Managers' Overview
MARKET VOLATILITY CHALLENGES
INVESTORS IN 1996
A roundtable discussion with the fund management team for AIM Strategic Income
Fund, Inc. about the six-month reporting period ended June 30, 1996. AIM High
Yield Fund welcomes the shareholders of AIM Strategic Income Fund, Inc., which
was merged into AIM High Yield Fund effective July 29, 1996. AIM High Yield
Fund is an open-end fund that seeks a high level of current income by investing
primarily in high-yielding, lower-rated corporate bonds.
- --------------------------------------------------------------------------------
Q. HOW DID AIM STRATEGIC INCOME FUND, INC. PERFORM DURING THE LAST SIX
MONTHS?
A. It was a difficult period for stock and bond investors. Total return for
the Fund was 5.47% for the reporting period, based on reinvestment of all
distributions and changes in net asset value. The Fund provided
attractive annualized net portfolio income of 5.17%, which tracked the
5.15% yield posted by the 90-day U.S. Treasury bill as of June 30, 1996.
The Fund's net asset value per share increased to $9.92 from $9.70.
Market value per share increased to $9.69 from $8.38, largely due to the
anticipated merger of the Fund's assets into AIM High Yield Fund. As a
closed-end fund, AIM Strategic Income Fund, Inc. had a limited number of
shares that traded on the American Stock Exchange under the symbol AST.
Q. WHAT WERE CONDITIONS LIKE IN FINANCIAL MARKETS?
A. Uncertainty dominated financial markets as investors became increasingly
concerned about the possibility of rising inflation. The rate of growth
of the gross domestic product shot up to 2.0% in the first quarter of
1996, and growth in the second quarter had been predicted at 3.5% to 5%.
The foremost concern was that the Federal Reserve Board would nudge
interest rates higher to slow economic growth and forestall inflation, and
that drove most bond yields higher--and prices lower--during most of the
reporting period. In addition, stock investors anticipated that corporate
profit growth would fall below 1995's robust pace, particularly if rising
market interest rates began to erode profit margins.
Q. HOW WERE THE MARKETS BY THE END OF THE REPORTING PERIOD?
A. We saw more stability in stock markets as reports began to indicate that
the U.S. economy had grown with surprising strength, but with little
evidence of inflation. Stocks resumed a halting advance toward record
levels, and market leadership was broadly divided across selected sectors
including cyclical consumer, energy, industrial, and technology.
Fixed-income investors seemed less certain that inflation would be
contained, and that continued to fuel bond market volatility through the
end of the reporting period.
Q. HOW WAS THE FUND POSITIONED AS OF JUNE 30?
A. The Fund maintained its principal focus on convertible securities,
primarily in domestic convertible bonds and convertible preferred stock.
Convertible securities tend to participate in the appreciation of the
underlying common stocks while providing a higher level of current income.
Convertible securities
2
<PAGE> 5
also tend to decline less in falling markets than the underlying common stocks.
On June 30, 1996, the Fund had approximately 67% of its assets in domestic
convertible bonds, and about 9% in international convertible bonds. Convertible
preferred stock, at 17%, comprised the largest concentration of the Fund's
equity holdings. The Fund's remaining assets were invested in cash and
cash-equivalent securities.
The Fund was broadly invested across more than 20 industries. Among the
Fund's top holdings were securities in the health care sector, particularly
medical patient service companies. Also featured were selected technology
companies engaged in computer networking and computer peripherals.
Q. WHAT CAN YOU TELL US ABOUT HIGH-YIELD BONDS, THE FOCUS OF AIM HIGH YIELD
FUND?
A. The most significant influence on the performance of high-yield bonds is
the general level of economic activity. When economic growth is
accelerating, as was indicated during the reporting period, investors in
high-yield bonds tend to behave differently from investors in high-grade
bonds. Investors in high-grade bonds tend to regard higher economic growth
as inflationary, and that can exert downward pressure on the value of the
bonds.
Investors in high-yield bonds welcome a lively economy. Healthy
economic growth tends to improve the earnings capacity of the bond-issuing
companies and ease credit concerns for lower-quality debt issuers. As a
result, high-yield bonds tend to track the performance of stocks more
closely than high-grade bonds in this type of economic environment. During
the six months covered by this report, high-yield bonds were the
top-performing domestic fixed-income sector, according to The Wall Street
Journal.
Q. WHAT IS YOUR MARKET OUTLOOK?
A. We anticipate continued volatility in fixed-income markets for months to
come. The specter of possible inflation continues to concern investors,
despite mounting evidence that the U.S. economy is growing reasonably and
that inflationary pressures remain modest. In its July meeting, the Fed
elected to leave monetary policy unchanged; the outlook for the rest of
1996 is less certain.
Reports of accelerating economic growth during the first half of
1996, and possibly in the third quarter as well, have prompted some
analysts to predict the Fed will raise short-term interest rates in the
coming months. Others have suggested that market interest rates that have
been rising for most of the year may have forestalled any inflation
threat, precluding the necessity for Fed intervention. The Fed expects
economic growth will slow during the second half of the year, and that
would lessen the likelihood that monetary policy would be tightened.
- ----------------------
The Fed expects
economic growth
will slow
during the second half
of the year,
and that would lessen
the likelihood
that monetary policy
would be tightened.
- ----------------------
=============================================
PORTFOLIO COMPOSITION
AS OF 6/30/96
=============================================
TOP 10 INDUSTRIES
1. Omnicare, Inc.
2. Healthsouth Rehabilitation Corp.
3. Thermo Electron Corp.
4. Hospitality Franchise Systems, Inc.
5. Genesis Health Ventures, Inc.
6. Aspect Telecommunications Corp.
7. MFS Communications Co., Inc.
8. EMC Corp.
9. Pogo Producing Co.
10. 3Com Corp.
=============================================
Keep in mind, the Fund's portfolio composition is subject to change and there
is no guarantee the Fund will continue to hold any particular security
mentioned in this report.
3
<PAGE> 6
Financials
SCHEDULE OF INVESTMENTS
June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MARKET VALUE
<S> <C> <C>
CONVERTIBLE BONDS AND NOTES-75.53%(a)
AIRLINES-0.99%
$ 500,000 Alaska Air Group Inc., Conv. Sub. Deb., ($322,501) 6.50%,
06/15/05 $ 685,000
- ------------------------------------------------------------------------------------------
BANKING-0.81%
500,000 Banco de Galicia y Buenos Aires S.A., Conv. Sub. Deb.,
($255,344)
7.00%, 08/01/00 557,500
- ------------------------------------------------------------------------------------------
BEVERAGES (ALCOHOLIC)-2.70%
3,000,000 J Seagram & Sons, Inc., Liquid Yield Option Notes,
($2,060,738)
4.45%, 03/05/06(b) 1,867,635
- ------------------------------------------------------------------------------------------
COMPUTER NETWORKING-9.64%
1,000,000 Aspect Telecommunications Corp., Conv. Sub. Deb., ($777,501)
5.00%, 10/15/03(c) (acquired 07/18/95-07/20/95; cost
$1,234,672) 2,550,000
- ------------------------------------------------------------------------------------------
1,300,000 Bay Networks, Inc., Conv. Sub. Deb., ($1,065,249) 5.25%,
05/15/03(c)
(acquired 10/03/95-11/15/95; cost $1,408,250) 1,176,500
- ------------------------------------------------------------------------------------------
1,000,000 Network Equipment Technologies, Inc., Conv. Deb., ($522,901)
7.25%, 05/15/14 917,300
- ------------------------------------------------------------------------------------------
1,300,000 3Com Corp., Conv. Sub. Notes, ($898,625) 10.25%, 11/01/01(c)
(acquired 11/08/94-01/04/95; cost $1,314,250) 2,028,000
- ------------------------------------------------------------------------------------------
6,671,800
- ------------------------------------------------------------------------------------------
COMPUTER PERIPHERALS-7.34%
2,000,000 EMC Corp., Conv. Deb., ($1,220,142) 4.25%, 01/01/01 2,150,000
- ------------------------------------------------------------------------------------------
1,000,000 Sanmina Corp., Conv. Sub. Notes, ($637,159) 5.50%,
08/15/02(c)
(acquired 08/10/95; cost $1,000,000) 1,150,000
- ------------------------------------------------------------------------------------------
1,500,000 Storage Technology Corp., Conv. Sub. Deb., ($775,500) 8.00%,
05/31/15 1,779,375
- ------------------------------------------------------------------------------------------
5,079,375
- ------------------------------------------------------------------------------------------
ELECTRONIC COMPONENTS/MISCELLANEOUS-2.98%
1,000,000 Dovatron International, Conv. Sub. Notes, ($637,500) 6.00%,
10/15/02(c)
(acquired 10/05/95-10/10/95; cost $998,750) 980,000
- ------------------------------------------------------------------------------------------
500,000 Telxon Corp., Conv. Sub. Notes, ($275,001) 5.75%, 01/01/03(c)
(acquired 12/07/95; cost $513,125) 382,500
- ------------------------------------------------------------------------------------------
700,000 Varlen Corp., Conv. Sub. Deb., ($437,342) 6.50%, 06/01/03 700,000
- ------------------------------------------------------------------------------------------
2,062,500
- ------------------------------------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-0.99%
500,000 AAMES Financial Corp., Conv. Sub. Deb., ($336,135) 5.50%,
03/15/06(c)
(acquired 02/16/96; cost $505,000) 687,500
- ------------------------------------------------------------------------------------------
HOTELS/MOTELS-6.74%
750,000 Hospitality Franchise Systems, Inc., Conv. Sr. Notes,
($671,434) 4.50%, 10/01/99 2,887,500
- ------------------------------------------------------------------------------------------
1,200,000 Prime Hospitality Corp., Conv. Sub. Notes, ($756,001) 7.00%,
04/15/02 1,776,000
- ------------------------------------------------------------------------------------------
4,663,500
- ------------------------------------------------------------------------------------------
MACHINERY-4.35%
1,500,000 Thermo Electron Corp., Conv. Deb., ($1,102,502) 5.00%,
04/15/01(c)
(acquired 04/07/94; cost $1,508,000) 3,007,500
- ------------------------------------------------------------------------------------------
MEDICAL (INSTRUMENTS/PRODUCTS)-5.32%
1,000,000 Omnicare, Inc., Conv. Sub. Notes, ($886,463) 5.75%, 10/01/03 3,680,000
- ------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE> 7
Financials
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MARKET VALUE
<S> <C> <C>
MEDICAL (PATIENT SERVICES)-16.89%
$ 1,000,000 American Medical Response, Inc., Conv. Sub. Notes, ($528,502)
5.25%, 02/01/01(c) (acquired 01/03/96; cost $1,004,375) $ 1,095,000
- ------------------------------------------------------------------------------------------
1,750,000 Beverly Enterprises, Inc., Conv. Sub. Deb., ($1,153,057)
5.50%, 08/01/18 1,776,250
- ------------------------------------------------------------------------------------------
1,300,000 Genesis Health Ventures, Inc., Conv. Sr. Sub. Deb.,
($1,064,833)
6.00%, 11/30/03 2,729,692
- ------------------------------------------------------------------------------------------
1,700,000 Healthsouth Rehabilitation Corp., Conv. Sub. Deb.,
($1,335,689) 5.00%, 04/01/01 3,296,640
- ------------------------------------------------------------------------------------------
500,000 Multicare Companies, Inc., Conv. Sub. Deb., ($260,001) 7.00%,
03/15/03(c) (acquired 03/09/95; cost $500,000) 619,900
- ------------------------------------------------------------------------------------------
1,000,000 Phycor, Inc., Conv. Sub. Deb., ($435,000) 4.50%, 02/15/03 1,140,000
- ------------------------------------------------------------------------------------------
1,000,000 Tenet Healthcare Corp., Conv. Sub. Notes, ($578,251) 6.00%,
12/01/05 1,030,000
- ------------------------------------------------------------------------------------------
11,687,482
- ------------------------------------------------------------------------------------------
METALS-2.72%
1,500,000 Inco Ltd. Sub. Deb., ($1,200,002) 5.75%, 07/01/04 1,882,500
- ------------------------------------------------------------------------------------------
OFFICE AUTOMATION-2.57%
1,500,000 Danka Business Systems PLC, Yankee Conv. Sub. Notes,
($1,135,874)
6.75%, 04/01/02 1,779,375
- ------------------------------------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION)-3.07%
1,200,000 Pogo Producing Co., Conv. Sub. Notes, ($976,273) 5.50%,
03/15/04 2,127,000
- ------------------------------------------------------------------------------------------
OIL EQUIPMENT & SUPPLIES-1.89%
1,000,000 Pride Petroleum Services, Inc., Conv. Sub. Deb., ($306,250)
6.25%, 02/15/06 1,305,000
- ------------------------------------------------------------------------------------------
POLLUTION CONTROL-1.96%
1,000,000 U.S. Filter Corp., Conv. Sub. Notes, ($563,751)
6.00%, 09/15/05(c)(acquired 02/07/96; cost $1,197,500) 1,355,000
- ------------------------------------------------------------------------------------------
RESTAURANTS-0.91%
500,000 Starbucks Corp., Conv. Sub. Deb., 4.25%, 11/01/02 625,000
- ------------------------------------------------------------------------------------------
RETAIL (STORES)-1.55%
1,000,000 Staples, Inc., Conv. Notes, ($527,997) 4.50%, 10/01/00(c)
(acquired 09/12/95; cost $1,000,000) 1,075,000
- ------------------------------------------------------------------------------------------
TELECOMMUNICATIONS-2.11%
1,000,000 World Communications Corp. ($532,981) 5.00%, 08/15/03 1,460,807
- ------------------------------------------------------------------------------------------
Total Convertible Bonds and Notes 52,259,474
- ------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
CONVERTIBLE PREFERRED STOCKS-17.38%(a)
COMPUTER MINI/PCS-2.07%
30,000 Wang Laboratories, Inc., $3.25 Series B Conv. Pfd.(c) (13,281
shares)
(acquired 02/21/96-02/22/96; cost $1,516,000) 1,432,500
- -------------------------------------------------------------------------------------------
FINANCE (ASSET MANAGEMENT)-2.80%
20,000 SCI Finance LLC, $3.125 Series A Conv. Pfd. (13,120 shares) 1,932,500
- -------------------------------------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-2.15%
20,000 Penncorp Financial Group, $3.375 Conv. Pfd. (10,848 shares) 1,487,500
- -------------------------------------------------------------------------------------------
MACHINERY-1.71%
10,000 Case Corp., $4.50 Series A Conv. Pfd. (8,376 shares) 1,185,000
- -------------------------------------------------------------------------------------------
</TABLE>
5
<PAGE> 8
Financials
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
OIL & GAS (DRILLING)-2.35%
25,000 Reading & Bates Corp., $1.625 Conv. Pfd. (19,318 shares) $ 1,628,125
- ------------------------------------------------------------------------------------------
OIL & GAS (SERVICES)-1.12%
30,000 Enron Corp., $1.359 Conv. Pfd. (19,362 shares) 776,250
- ------------------------------------------------------------------------------------------
TELECOMMUNICATIONS-3.21%
35,000 MFS Communications Co., Inc., $2.68 Conv. Pfd. (25,620
shares) 2,222,500
- ------------------------------------------------------------------------------------------
TELEPHONE-1.97%
25,000 Philippine Long Distance Co., $3.50 Series III Conv. Pfd.
(14,595 shares) 1,362,500
- ------------------------------------------------------------------------------------------
Total Convertible Preferred Stocks 12,026,875
- ------------------------------------------------------------------------------------------
COMMON STOCKS-0.48%
BUSINESS SERVICES-0.25%
5,801 Olsten Corp. 170,426
- ------------------------------------------------------------------------------------------
MEDICAL (PATIENT SERVICES)-0.19%
1,347 Chiron Corp.(d) 132,006
- ------------------------------------------------------------------------------------------
TELECOMMUNICATIONS-0.04%
701 MFS Communications Co., Inc.(d) 26,375
- ------------------------------------------------------------------------------------------
Total Common Stocks 328,807
- ------------------------------------------------------------------------------------------
Total Investment Securities, excluding repurchase agreements 64,615,156
- ------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
REPURCHASE AGREEMENTS-10.50%(e)
$ 268,072 Daiwa Securities America, Inc., 5.50%, 07/01/96(f) 268,072
- ------------------------------------------------------------------------------------------
7,000,000 Goldman Sachs & Co., Inc., 4.75%, 07/01/96(g) 7,000,000
- ------------------------------------------------------------------------------------------
Total Repurchase Agreements 7,268,072
- ------------------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES-103.89% 71,883,228
- ------------------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-(3.89)% (2,688,769)
- ------------------------------------------------------------------------------------------
NET ASSETS-100.00% $69,194,459
==========================================================================================
</TABLE>
(a) Amount in parentheses represents principal amount or number of shares
deposited in escrow with custodian as collateral for securities sold short.
(b) Zero-coupon bond traded at discount. The interest rate shown represents
the rate of original issue discount.
(c) Restricted Securities may be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined
in accordance with procedures established by the Board of Directors. The
aggregate market value of these securities at 06/30/96 was $17,539,400
which represents 25.33% of net assets.
(d) Non-income producing security.
(e) 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.
(f) Joint repurchase agreement entered into 06/28/96 with a maturing value of
$270,069,404. Collateralized by $258,303,000 U.S. Treasury obligations,
7.875% due 11/15/07.
(g) Joint repurchase agreement entered into 06/28/96 with a maturing value of
$770,304,792. Collateralized by $716,792,000 U.S. Treasury obligations,
0.00% to 11.625% due 10/03/96 to 11/15/04.
Abbreviations:
Conv. - Convertible
Deb. - Debenture
Pfd. - Preferred
Sr. - Senior
Sub. - Subordinated
See Notes to Financial Statements.
6
<PAGE> 9
Financials
SECURITIES SOLD SHORT
June 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
COMMON SHARES
(OR
EQUIVALENT SHARES MARKET
IN ESCROW) SOLD SHORT SECURITIES SOLD SHORT VALUE
<S> <C> <C> <C>
12,000 12,000 AAMES Financial Corp. $ 430,500
- -------------------------------------------------------------------------------------------------------
15,000 15,000 Alaska Air Group Inc. 410,625
- -------------------------------------------------------------------------------------------------------
14,000 14,000 American Medical Response, Inc. 493,500
- -------------------------------------------------------------------------------------------------------
40,000 40,000 Aspect Telecommunications Corp. 1,980,000
- -------------------------------------------------------------------------------------------------------
10,000 10,000 Banco De Galicia Y Buenos Aires S.A. 258,750
- -------------------------------------------------------------------------------------------------------
25,000 25,000 Bay Networks, Inc. 643,750
- -------------------------------------------------------------------------------------------------------
86,500 86,500 Beverly Enterprises, Inc. 1,038,000
- -------------------------------------------------------------------------------------------------------
19,002 19,000 Case Corp. 912,000
- -------------------------------------------------------------------------------------------------------
39,000 39,000 Danka Business Systems PLC 1,140,750
- -------------------------------------------------------------------------------------------------------
17,000 17,000 DII Group, Inc. 433,500
- -------------------------------------------------------------------------------------------------------
61,500 61,500 EMC Corp. 1,145,438
- -------------------------------------------------------------------------------------------------------
16,001 16,000 Enron Corp. 446,000
- -------------------------------------------------------------------------------------------------------
70,503 70,500 Genesis Health Ventures, Inc. 2,211,937
- -------------------------------------------------------------------------------------------------------
71,000 71,000 Healthsouth Rehabilitation Corp. 2,556,000
- -------------------------------------------------------------------------------------------------------
37,000 37,000 Hospitality Franchise Systems, Inc. 2,590,000
- -------------------------------------------------------------------------------------------------------
40,000 40,000 Inco Ltd. 1,290,000
- -------------------------------------------------------------------------------------------------------
42,001 42,000 MFS Communications Co., Inc. 1,580,250
- -------------------------------------------------------------------------------------------------------
15,000 15,000 Multicare Companies, Inc. 285,000
- -------------------------------------------------------------------------------------------------------
16,600 16,600 Network Equipment Technologies, Inc. 352,750
- -------------------------------------------------------------------------------------------------------
122,800 122,800 Omnicare, Inc. 3,254,200
- -------------------------------------------------------------------------------------------------------
24,000 24,000 Penncorp Financial Group 762,000
- -------------------------------------------------------------------------------------------------------
12,501 12,500 Philippine Long Distance Co. 726,562
- -------------------------------------------------------------------------------------------------------
11,250 11,250 Phycor, Inc. 427,500
- -------------------------------------------------------------------------------------------------------
44,000 44,000 Pogo Producing Co. 1,677,500
- -------------------------------------------------------------------------------------------------------
25,000 25,000 Pride Petroleum Services, Inc. 356,250
- -------------------------------------------------------------------------------------------------------
63,000 63,000 Prime Hospitality Corp. 1,039,500
- -------------------------------------------------------------------------------------------------------
56,003 56,000 Reading & Bates Corp. 1,239,000
- -------------------------------------------------------------------------------------------------------
22,600 22,600 Sanmina Corp. 610,200
- -------------------------------------------------------------------------------------------------------
38,000 38,000 J Seagrams & Sons, Inc. 1,277,750
- -------------------------------------------------------------------------------------------------------
21,802 21,800 Service Corp. International 1,253,500
- -------------------------------------------------------------------------------------------------------
24,000 24,000 Staples, Inc. 468,000
- -------------------------------------------------------------------------------------------------------
22,000 22,000 Storage Technology Corp. 841,500
- -------------------------------------------------------------------------------------------------------
10,000 10,000 Telxon Corp. 117,500
- -------------------------------------------------------------------------------------------------------
52,501 52,500 Thermo Electron Corp. 2,185,313
- -------------------------------------------------------------------------------------------------------
26,000 26,000 3Com Corp. 1,189,500
- -------------------------------------------------------------------------------------------------------
20,500 20,500 U.S. Filter Corp. 712,375
- -------------------------------------------------------------------------------------------------------
19,360 19,360 Varlen Corp. 406,560
- -------------------------------------------------------------------------------------------------------
15,000 15,000 Vencor Inc. 457,500
- -------------------------------------------------------------------------------------------------------
25,000 25,000 Wang Laboratories Inc. 471,875
- -------------------------------------------------------------------------------------------------------
14,000 14,000 Worldcom Inc. 775,250
=======================================================================================================
$40,448,085
=======================================================================================================
</TABLE>
As indicated in the Schedule of Investments, securities which are convertible
into at least the number of shares sold short have been deposited in escrow with
the custodian.
See Notes to Financial Statements.
7
<PAGE> 10
Financials
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1996
(Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investment securities, at market value (cost $54,323,415) $ 71,883,228
- -----------------------------------------------------------------------------------------
Cash 9,267,956
- -----------------------------------------------------------------------------------------
Receivables for:
Investments sold short 28,017,586
- -----------------------------------------------------------------------------------------
Interest and dividends 577,256
- -----------------------------------------------------------------------------------------
Other assets 9,501
- -----------------------------------------------------------------------------------------
Total assets 109,755,527
- -----------------------------------------------------------------------------------------
LIABILITIES:
Payable for dividends on short sales 4,850
- -----------------------------------------------------------------------------------------
Market value of securities sold short (proceeds from sales $28,017,586) 40,448,085
- -----------------------------------------------------------------------------------------
Accrued advisory fees 45,712
- -----------------------------------------------------------------------------------------
Accrued accounting service fees 4,439
- -----------------------------------------------------------------------------------------
Accrued professional fees 24,677
- -----------------------------------------------------------------------------------------
Accrued operating expenses 33,305
- -----------------------------------------------------------------------------------------
Total liabilities 40,561,068
- -----------------------------------------------------------------------------------------
Net assets applicable to shares outstanding $ 69,194,459
=========================================================================================
CAPITAL STOCK, $.001 PAR VALUE PER SHARE:
Authorized 200,000,000
- -----------------------------------------------------------------------------------------
Outstanding 6,976,644
=========================================================================================
Net asset value per share $ 9.92
=========================================================================================
</TABLE>
See Notes to Financial Statements.
8
<PAGE> 11
Financials
STATEMENT OF OPERATIONS
For the six months ended June 30, 1996
(Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 2,017,882
- ----------------------------------------------------------------------------------------
Dividends 247,325
- ----------------------------------------------------------------------------------------
Total investment income 2,265,207
- ----------------------------------------------------------------------------------------
EXPENSES:
Advisory fees 272,944
- ----------------------------------------------------------------------------------------
Custodian fees 11,279
- ----------------------------------------------------------------------------------------
Transfer agent fees 10,430
- ----------------------------------------------------------------------------------------
Accounting service fees 26,174
- ----------------------------------------------------------------------------------------
Professional fees 91,747
- ----------------------------------------------------------------------------------------
Directors' fees and expenses 1,585
- ----------------------------------------------------------------------------------------
Dividends on short sales (net of $1,392 foreign withholding tax) 51,411
- ----------------------------------------------------------------------------------------
Other 30,772
- ----------------------------------------------------------------------------------------
Total expenses 496,342
- ----------------------------------------------------------------------------------------
Net investment income 1,768,865
- ----------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES:
Net realized gain on sales of investment securities 1,972,792
- ----------------------------------------------------------------------------------------
Net realized gain (loss) on securities sold short (241,987)
- ----------------------------------------------------------------------------------------
Net realized gain on investment securities 1,730,805
- ----------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 21,959
- ----------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 3,521,629
========================================================================================
</TABLE>
See Notes to Financial Statements.
9
<PAGE> 12
Financials
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1996 and the year ended December 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
----------- -------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,768,865 $ 3,959,303
- ------------------------------------------------------------------------------------------
Net realized gain (loss) from sales of investment
securities 1,730,805 (569,701)
- ------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities 21,959 4,434,483
- ------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 3,521,629 7,824,085
- ------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income (1,988,134) (4,185,673)
- ------------------------------------------------------------------------------------------
Net increase in net assets 1,533,495 3,638,412
- ------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 67,660,964 64,022,552
- ------------------------------------------------------------------------------------------
End of period $69,194,459 $67,660,964
==========================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $64,411,350 $64,411,350
- ------------------------------------------------------------------------------------------
Undistributed net investment income (77,828) 141,441
- ------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) on sales of
investment securities (268,377) (1,999,182)
- ------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 5,129,314 5,107,355
- ------------------------------------------------------------------------------------------
$69,194,459 $67,660,964
==========================================================================================
</TABLE>
See Notes to Financial Statements.
10
<PAGE> 13
Financials
NOTES TO FINANCIAL STATEMENTS
June 30, 1996
(Unaudited)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Strategic Income Fund, Inc. (the "Fund") is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as a diversified, closed-end
management investment company. The Fund was incorporated under the laws of the
State of Maryland on December 22, 1988 and commenced trading on the American
Stock Exchange on March 23, 1989 under the symbol "AST". The Fund's investment
objective is to seek high current income consistent with stability of principal.
The Fund will seek to achieve its objective primarily by pursuing a strategy of
investing in convertible securities and by employing short selling to enhance
income and hedge against market risk. 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 the significant accounting
policies followed by the Fund in the preparation of its financial statements.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. Security Valuations - Investments in securities, including options and
securities sold short (but excluding convertible bonds), that are traded on a
national securities exchange or on the NASDAQ National Market System are
valued at market using the last reported sales price. Exchange listed
convertible bonds are valued based at the mean between the closing bid and
asked prices obtained from a broker-dealer. Securities traded in the
over-the-counter market and listed securities for which no sales were
reported are valued at the mean of the most recently quoted bid and asked
prices. When market quotations are not readily available from the above
sources for the Fund's debt securities, such securities are valued based upon
appraisals received from a pricing service using a computerized matrix
system, or based upon appraisals derived from information concerning the
securities or similar securities received from recognized dealers in those
securities. Securities for which market quotations are not readily available
or are questionable are valued at fair value as determined in good faith by
or under the supervision of the Fund's officers in accordance with methods
which are specifically authorized by the Board of Directors of the Fund.
Short-term obligations with maturities of 60 days or less are valued at
amortized cost which approximates market value.
B. 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, dividend expense on
short sales and distributions to shareholders are recorded on the ex-dividend
date.
C. Accounting for Securities Sold Short - When the Fund sells common stock
short, an amount equal to the proceeds of the sale is recorded as an asset.
This asset is offset by a liability (representing the borrowed security)
recorded on the books of the Fund at the market value of the common stock
determined each day in accordance with the procedures for security valuations
discussed in "A" above. The Fund's risk is that the value of the security
will increase rather than decline and thus an unrealized loss will be
recorded. When the Fund closes out a short position by delivering the stock
sold short, the Fund will realize a gain or loss and the liability related to
such short position will be eliminated. The Fund will attempt to hedge
against market risk by entering into short sales of securities that it
currently owns or has the right to acquire through the conversion or exchange
of other securities that it owns. Such short sales may protect the Fund
against the risk of losses in the value of its portfolio securities because
any unrealized losses with respect to such securities may be wholly or
partially offset by a corresponding gain in the short position. However, any
potential gains in such portfolio securities may be wholly or partially
offset by a corresponding loss in the short position. The Fund will attempt
to enhance income by entering into arrangements with the broker-dealers,
through which securities are sold short, to receive income with respect to
the proceeds of short sales during the period the Fund's short positions
remain open. During the six months ended June 30, 1996, the Fund accrued
$768,889 of interest income with respect to such arrangements.
D. Bond Premiums and Discounts - It is the policy of the Fund not to amortize
market premiums and discounts on bonds for financial reporting purposes.
Original issue discounts are amortized to interest income over the life of
the security.
E. Federal Income Taxes - The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income taxes
is recorded in the financial statements. The Fund has a capital loss
carryforward of $1,281,552 (which may be carried forward to offset future
taxable capital gains, if any) which expires, if not previously utilized,
through the year 2001. The Fund cannot distribute capital gains to
shareholders until the tax loss carryforwards have been utilized.
11
<PAGE> 14
Financials
NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Fund has entered into an investment advisory agreement with A I M Advisors,
Inc. ("AIM"). Under the terms of the investment advisory agreement, the Fund
will pay AIM a fee, calculated and paid monthly, in an amount equal to an
annualized rate of 0.80% of the Fund's average weekly net assets.
The Fund, pursuant to its investment advisory agreement with AIM, has agreed
to reimburse AIM for certain costs incurred in providing accounting services to
the Fund. During the six months ended June 30, 1996, the Fund reimbursed AIM
$26,174 for such services.
Certain officers and directors of the Fund are officers of AIM.
Rule 144A Securities
At its February 1996 meeting, the Board of Directors of the Fund clarified the
investment policies of the Fund regarding investments in securities that are
subject to restrictions on resale because they have not been registered under
the Securities Act of 1933 (the "1933 Act"). These securities are sometimes
referred to as private placements. Although securities which may be resold only
to "qualified institutional buyers" in accordance with the provisions of Rule
144A under the 1933 Act are unregistered securities, the Fund may purchase Rule
144A securities without regard to the limitation on investments in illiquid
securities, provided that a determination is made that such securities have a
readily available trading market. AIM will determine the liquidity of Rule 144A
securities under the supervision of the Fund's Board of Directors, and will
consider whether securities purchased under Rule 144A are illiquid and thus
subject to the Fund's restriction of investing no more than 33-1/3 of its assets
in illiquid securities. Determination of whether a Rule 144A security is liquid
or not is a question of fact. In making this determination AIM will consider the
trading markets for the specific security taking into account the unregistered
nature of a Rule 144A security. In addition, AIM will consider the (i) frequency
of trades and quotes, (ii) number of dealers and potential purchasers, (iii)
dealer undertakings to make a market, and (iv) nature of the security and or
market place trades (for example, the time needed to dispose of the security,
the method of soliciting offers and the mechanics of transfer). The liquidity of
Rule 144A securities will also be monitored by AIM and if it is determined that
a Rule 144A security is no longer liquid as a result of changed conditions, the
Fund's holdings of illiquid securities will be reviewed to determine what, if
any, action is required to assure that the Fund does not invest more than 33-1/3
of its assets in illiquid securities. Investing in Rule 144A securities could
have the effect of increasing the amount of the Fund's investments in illiquid
securities if qualified institutional buyers are unwilling to purchase such
securities.
NOTE 3 - DIVIDENDS AND SUBSEQUENT EVENT
On May 30, 1996, the Board of Directors of the Fund declared a dividend of $.045
per share of net investment income payable June 21, 1996 to shareholders of
record on June 14, 1996.
The Dividend Reinvestment plan of the Fund was terminated effective July 25,
1996.
NOTE 4 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold during the six months ended June 30, 1996, was $20,343,516
and $27,777,664, respectively.
The amount of unrealized appreciation (depreciation) of investments on a tax
basis as of June 30, 1996 is as follow:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of:
Investment securities $18,332,793
- ----------------------------------------------------------------------------------------------------------------
Securities sold short 922,032
- ----------------------------------------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of:
Investment securities (881,913)
- ----------------------------------------------------------------------------------------------------------------
Securities sold short (13,352,531)
- ----------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities $ 5,020,381
================================================================================================================
</TABLE>
Cost of investment securities for tax purposes is $54,432,348. Proceeds from
securities sold short for tax purposes is $28,017,586.
NOTE 5 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued for each director who is
not an "interested person" of the Fund. The Fund may invest directors' fees, if
so elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
12
<PAGE> 15
Financials
NOTE 6 - QUARTERLY DATA
The following is a summary of quarterly results of operations for the six months
ended June 30, 1996.
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------
3/31/96 6/30/96
---------- --------
<S> <C> <C>
Net realized and unrealized gain on investments $1,580,624 $172,140
- -------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments per share 0.23 0.02
- -------------------------------------------------------------------------------------------------------------
Net investment income 876,420 892,445
- -------------------------------------------------------------------------------------------------------------
Net investment income per share 0.13 0.13
=============================================================================================================
</TABLE>
NOTE 7 - FINANCIAL HIGHLIGHTS
Shown below are the condensed financial highlights for a share outstanding
during the six months ended June 30, 1996, each of the years in the six-year
period ended December 31, 1995 and the period March 23, 1989 (date operations
commenced) through December 31, 1989.
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, ----------------------------------------------
1996 1995 1994 1993 1992
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 9.70 $ 9.18 $ 9.76 $ 9.29 $ 9.15
- ---------------------------------------------------------- ------- ------- ------- ------- -------
Income from investment operations:
Net investment income 0.26 0.57 0.51 0.50 0.60
- ---------------------------------------------------------- ------- ------- ------- ------- -------
Net gains (losses) on investment securities (both
realized and unrealized) 0.25 0.55 (0.52) 0.51 0.32
- ---------------------------------------------------------- ------- ------- ------- ------- -------
Total from investment operations 0.51 1.12 (0.01) 1.01 0.92
- ---------------------------------------------------------- ------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income (0.29) (0.60) (0.46) (0.50) (0.60)
- ---------------------------------------------------------- ------- ------- ------- ------- -------
Distributions from net realized capital gains -- -- (0.11) (0.04) (0.18)
- ---------------------------------------------------------- ------- ------- ------- ------- -------
Total distributions (0.29) (0.60) (0.57) (0.54) (0.78)
- ---------------------------------------------------------- ------- ------- ------- ------- -------
Net asset value, end of period $ 9.92 $ 9.70 $ 9.18 $ 9.76 $ 9.29
========================================================== ======= ======= ======= ======= =======
Per share market value, end of period $ 9.69 $ 8.38 $ 8.00 $ 9.00 $ 9.13
========================================================== ======= ======= ======= ======= =======
Total investment return, based on market value(a) 19.22% 12.46% (4.94)% 4.47% 17.03%
========================================================== ======= ======= ======= ======= =======
Total investment return, based on net asset value(b) 5.47% 13.51% 0.59% 11.34% 10.62%
========================================================== ======= ======= ======= ======= =======
Net assets, end of period (000s omitted) $69,194 $67,661 $64,023 $68,066 $64,700
========================================================== ======= ======= ======= ======= =======
Significant ratios for the period:
Investment income 6.62%(d) 7.30% 6.80% 6.68% 8.16%
- ---------------------------------------------------------- ------- ------- ------- ------- -------
Operating expenses (1.30)(d) (1.12) (1.15) (1.16) (1.15)
- ---------------------------------------------------------- ------- ------- ------- ------- -------
Dividends on short sales (0.15)(d) (0.20) (0.27) (0.34) (0.51)
- ---------------------------------------------------------- ------- ------- ------- ------- -------
Tax expense -- -- -- (0.01) --
- ---------------------------------------------------------- ------- ------- ------- ------- -------
Net investment income 5.17%(d) 5.98% 5.38% 5.17% 6.50%
========================================================== ======= ======= ======= ======= =======
Portfolio turnover rate 30.46% 99.97% 89.96% 117.45% 89.70%
========================================================== ======= ======= ======= ======= =======
<CAPTION>
DECEMBER 31,
---------------------------------
1991 1990 1989
------- ------- -------
<S> <C> <C> <C>
Net asset value, beginning of period $ 8.64 $ 9.12 $ 9.23
- ---------------------------------------------------------- ------- ------- -------
Income from investment operations:
Net investment income 0.80 0.98 0.77
- ---------------------------------------------------------- ------- ------- -------
Net gains (losses) on investment securities (both
realized and unrealized) 0.56 (0.44) (0.11)
- ---------------------------------------------------------- ------- ------- -------
Total from investment operations 1.36 0.54 0.66
- ---------------------------------------------------------- ------- ------- -------
Less distributions:
Dividends from net investment income (0.80) (0.98) (0.77)
- ---------------------------------------------------------- ------- ------- -------
Distributions from net realized capital gains (0.05) (0.04) --
- ---------------------------------------------------------- ------- ------- -------
Total distributions (0.85) (1.02) (0.77)
- ---------------------------------------------------------- ------- ------- -------
Net asset value, end of period $ 9.15 $ 8.64 $ 9.12
========================================================== ======= ======= =======
Per share market value, end of period $ 8.50 $ 7.88 $ 9.75
========================================================== ======= ======= =======
Total investment return, based on market value(a) 19.05% (9.04)% 5.78%
========================================================== ======= ======= =======
Total investment return, based on net asset value(b) 16.89% 6.62% 7.20%
========================================================== ======= ======= =======
Net assets, end of period (000s omitted) $63,068 $59,585 $62,141
========================================================== ======= ======= =======
Significant ratios for the period:
Investment income 10.64% 12.54% 12.26%(c)
- ---------------------------------------------------------- ------- ------- -------
Operating expenses (1.17) (1.16)(e) (0.97)(c)(e)
- ---------------------------------------------------------- ------- ------- -------
Dividends on short sales (0.40) (0.40) (0.43)(c)
- ---------------------------------------------------------- ------- ------- -------
Tax expense (0.03) (0.02) --
- ---------------------------------------------------------- ------- ------- -------
Net investment income 9.04% 10.96%(e) 10.86%(c)(e)
========================================================== ======= ======= =======
Portfolio turnover rate 89.40% 91.73% 161.82%
========================================================== ======= ======= =======
</TABLE>
(a) Assumes shares purchased at market value at the beginning of the year,
dividends reinvested at market value on payable date, and all shares sold at
market value at the end of the period.
(b) Assumes shares purchased at net asset value at the beginning of the year,
dividends reinvested at market value and all shares sold at net asset value
at the end of the period.
(c) Annualized.
(d) Annualized and based on average weekly net assets of $68,789,568.
(e) After partial waiver of advisory and administrative fees.
NOTE 8 - SUBSEQUENT EVENT
On July 19, 1996, the shareholders approved an Agreement and Plan of
Reorganization providing for the transfer of the assets and liabilities of the
Fund to AIM High Yield Fund (High Yield), a series of AIM Funds Group, a
Delaware business trust having the same advisor (AIM) as the Fund. On July 29,
1996, shareholders of the Fund will receive Class A shares of High Yield in a
tax-free transaction in exchange for their shares having an aggregate net asset
value equal to the net asset value of their holdings in the Fund.
NOTE 9 - FINAL DIVIDEND
On July 26, 1996, the Board of Directors of the Fund declared a final dividend
of $.016 per share of net investment income payable July 31, 1996 to
shareholders of record on July 26, 1996.
13
<PAGE> 16
Trustees
& Officers
<TABLE>
<S> <C> <C>
TRUSTEES OFFICERS OFFICE OF THE FUND
CHARLES T. BAUER CHARLES T. BAUER 11 Greenway Plaza
Chairman and Chief Executive Officer Chairman Suite 1919
A I M Management Group Inc. Houston, TX 77046
ROBERT H. GRAHAM
BRUCE L. CROCKETT President
Formerly Director, President, and INVESTMENT ADVISOR
Chief Executive Officer JOHN J. ARTHUR
COMSAT Corporation Senior Vice President A I M Advisors, Inc.
and Treasurer 11 Greenway Plaza
OWEN DALY II Suite 1919
Director GARY T. CRUM Houston, TX 77046
Cortland Trust Inc. Senior Vice President
TRANSFER AGENT
CARL FRISCHLING SCOTT G. LUCAS
Partner Senior Vice President A I M Fund Services, Inc.
Kramer, Levin, Naftalis & Frankel P.O. Box 4739
CAROL F. RELIHAN Houston, TX 77210-4739
ROBERT H. GRAHAM Senior Vice President and
President and Chief Secretary CUSTODIAN
Operating Officer
A I M Management Group Inc. ROBERT G. ALLEY State Street Bank & Trust Company
Vice President 225 Franklin Street
JOHN F. KROEGER Boston, MA 02110
Formerly, Consultant STUART W. COCO
Wendell & Stockel Vice President COUNSEL TO THE FUND
Associates, Inc.
MELVILLE B. COX Ballard Spahr
LEWIS F. PENNOCK Vice President Andrews & Ingersoll
Attorney 1735 Market Street
KAREN DUNN KELLEY Philadelphia, PA 19103
IAN W. ROBINSON Vice President
Consultant; Formerly Executive COUNSEL TO THE TRUSTEES
Vice President and JONATHAN C. SCHOOLAR
Chief Financial Officer Vice President Kramer, Levin, Naftalis & Frankel
Bell Atlantic Management 919 Third Avenue
Services, Inc. DANA R. SUTTON New York, NY 10022
Vice President
LOUIS S. SKLAR and Assistant Treasurer DISTRIBUTOR
Executive Vice President
Hines Interests P. MICHELLE GRACE A I M Distributors, Inc.
Limited Partnership Assistant Secretary 11 Greenway Plaza
Suite 1919
DAVID L. KITE Houston, TX 77046
Assistant Secretary
NANCY L. MARTIN
Assistant Secretary
OFELIA M. MAYO
Assistant Secretary
KATHLEEN J. PFLUEGER
Assistant Secretary
SAMUEL D. SIRKO
Assistant Secretary
STEPHEN I. WINER
Assistant Secretary
MARY J. BENSON
Assistant Treasurer
</TABLE>
<PAGE> 17
<TABLE>
<S> <C>
[PHOTO OF 11 GREENWAY PLAZA] THE AIM FAMILY OF FUNDS--Registered Trademark--
AGGRESSIVE GROWTH
AIM Aggressive Growth Fund*
AIm Capital Development Fund
AIM Constellation Fund
AIM Global Aggressive Growth Fund
GROWTH
AIM Blue Chip Fund
AIM Global Growth Fund
AIM Growth Fund
AIM International Equity Fund
AIM Value Fund
AIM Weingarten Fund
GROWTH AND INCOME
AIM Balanced Fund
AIM Charter Fund
INCOME AND GROWTH
AIM Global Utilities Fund
HIGH CURRENT INCOME
AIM High Yield Fund
CURRENT INCOME
AIM Global Income Fund
AIM Income Fund
CURRENT TAX-FREE INCOME
AIM Municipal Bond Fund
AIM Tax-Exempt Bond Fund of CT
AIM Tax-Free Intermediate Shares
CURRENT INCOME AND HIGH DEGREE
OF SAFETY
AIM Intermediate Government Fund**
HIGH DEGREE OF SAFETY AND
CURRENT INCOME
AIM Limited Maturity Treasury Shares
STABILITY, LIQUIDITY, AND
CURRENT INCOME
AIM Money Market Fund
STABILITY, LIQUIDITY, AND
CURRENT TAX-FREE INCOME
AIM Tax-Exempt Cash Fund
AIM Management Group has provided leadership
in the mutual fund industry since 1976 and
currently manages approximately $55 billion *AIM Aggressive Growth Fund was closed to new
in assets for more than 3 million shareholders, investors on July 18, 1995. **On September 25,
including individual investors, corporate clients, 1995, AIM Government Securities Fund became
and financial institutions. The AIM Family of AIM Intermediate Government Fund. For more
Funds--Registered Trademark-- is distributed complete information about any AIM Fund(s),
nationwide, and AIM today ranks among the including sales charges and expenses, ask
nation's top 15 mutual fund companies in assets your financial consultant or securities
under management, according to Lipper dealer for a free prospectus(es). Please
Analytical Services, Inc. read the prospectus(es) carefully before
you invest or send money.
[AIM LOGO APPEARS HERE]
----------------
A I M Distributors, Inc. BULK RATE
11 Greenway Plaza, Suite 1919 U.S. POSTAGE
Houston, TX 77046 PAID
HOUSTON, TX
Permit No. 1919
---------------
</TABLE>
