<PAGE> 1
[COVER PHOTO APPEARS HERE]
AIM GLOBAL INCOME FUND
[AIM LOGO APPEARS HERE] SEMIANNUAL REPORT APRIL 30, 1996
<PAGE> 2
AIM GLOBAL INCOME FUND
For shareholders who seek a high level of income. The Fund invests in a
portfolio of debt securities issued by U.S. and foreign governments and
corporations.
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o AIM Global Income Fund's performance figures are historical and
reflect reinvestment of all distributions and changes in net asset
value. Unless otherwise indicated, the Fund's performance is computed
without a sales charge.
o When sales charges are included in performance figures, Class A share
performance reflects the maximum 4.75% sales charge, and Class B share
performance reflects the applicable contingent deferred sales charge
(CDSC) for the period involved. The CDSC on Class B shares declines
from 5% beginning at the time of purchase to 0% at the beginning of
the seventh year. The performance of the Fund's Class B shares will
differ from that of Class A shares due to differences in sales charge
structure and Fund expenses.
o Six-month performance includes reinvested distributions for Class A
and Class B shares of $0.55 and $0.52 per share, respectively.
o The Fund's investment return and principal value will fluctuate so
that an investor's shares, when redeemed, may be worth more or less
than their original cost.
o The Fund's portfolio composition is subject to change and there is no
assurance the Fund will continue to hold any specific security in any
particular country.
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 Lehman Brothers Government Bond Index is an unmanaged composite
generally representative of intermediate- and long-term U.S. Treasury
and U.S. government agency securities.
o The Salomon Brothers World Government Bond Index is an unmanaged
composite of long-term foreign government debt securities.
o An investment cannot be made in any index listed. Unless otherwise
indicated, index results include reinvested dividends and do not
reflect sales charges.
AVERAGE ANNUAL TOTAL RETURNS
As of March 31, 1996
(the most recent calendar quarter)
Class A Shares
Inception (9/15/94) 12.62%
1 Year 12.52
Class B Shares
Inception (9/15/94) 12.03%
1 Year 12.09
This report may be distributed only to current shareholders
or to persons who have received a current prospectus of the Fund.
<PAGE> 3
A Message from
the Chairman
- -------------------------------
At $3 trillion in assets,
the industry
has grown
1,500 times over the
past 50 years.
If we are to sustain
that growth,
we must have
the public's confidence.
- -------------------------------
Dear Shareholder:
"Past performance cannot guarantee comparable
[PHOTO OF future results."
Charles T. Bauer,
Chairman of As a mutual fund investor, you've seen this disclaimer on
the Board of every piece of mail you've ever received about your fund.
the Fund You've seen it so often that you probably don't even
APPEARS HERE] think about it or question what it means. But you should.
That sentence about past performance is true now more
than ever. These days it bluntly means: "Don't expect
the 25% to 35% returns you received last year." Don't automatically expect the
15% to 20% returns of the past decade, either. History shows that the average
annual return is about 9% to 10%. If you're investing in mutual funds with
expectations of double-digit returns every year, you will be disappointed.
Maybe not today, but sometime in the future.
What is a realistic expectation for 1996? In this uncertain market, it is
easier to discuss what is unrealistic. Last year's performance was an
anomaly--the equivalent of euphoria. To expect a repeat is unrealistic.
I realize I am sounding a warning bell during the mutual fund industry's
best year ever. Investors like you poured $99 billion into stock mutual funds
during the first four months of 1996--the highest inflows on record. At $3
trillion in assets, the industry has grown 1,500 times over the past 50 years.
If we are to sustain that growth, we must have the public's confidence. Our
industry has a long-standing reputation for honesty and integrity. To maintain
that reputation as our assets swell into the trillions, we must make sure that
we don't promise anything we can't produce.
The industry's concern about investors' expectations goes beyond stamping
all our advertising with a standard disclaimer about performance. Mutual fund
leaders recently met for a conference in New York, and foremost on our minds
was educating investors about market volatility.
A whole generation of investors has seen nothing but a bull market, which
started in 1982. Except for the 1987 market crash, they've enjoyed a heady
rise. They may expect the same throughout this decade. I've been in the mutual
fund industry for more than 25 years, and I have seen a 5% to 10% market
correction about every five years. The last major correction was in 1990. If
history is any kind of teacher, we are overdue.
The challenge for investors is not to panic when the market takes a
downturn. We have another saying in the industry: "Focus on time, not timing."
Over time, the stock market has proven to be the only investment that
consistently beats inflation. But investing in it takes a long-term view.
Market timing--trying to play the market and "rescue" your money in a
downturn--has proven to be an inefficient strategy for most investors.
The challenge for the mutual fund industry is to keep your trust during a
bear market. The industry has survived and thrived because of its built-in
integrity: By law, we must operate in the best interests of our shareholders.
The mutual fund industry is among the most regulated in the country. The
Investment Company Act of 1940, which governs our industry, protects
shareholders against self-dealing, conflicts of interest, misappropriation of
funds, and other fraudulent activities.
The industry also polices itself. At AIM we have an exhaustive code of
ethics that governs each of our 1,150 employees.
(continued)
<PAGE> 4
A Message from
the Chairman
On a very basic level, it boils down to this: We are dealing with your
money, and if we lose your trust, we lose our business.
We are vulnerable to even the hint of impropriety. That's why the mutual
fund industry is set up to avoid even the perception of self-dealing. Fund
managers succeed to the extent that they attract and keep investors. If they
lose your faith, managers ultimately will fail.
Mutual funds are highly liquid investments. Any time you choose, you can
pull out of a fund and receive a redemption price reflective of the market that
day. If you become dissatisfied with a fund manager, it's easy to leave and go
elsewhere. With more than 7,000 funds available, it's a buyers' market.
The next time you read, "Past performance cannot guarantee comparable future
results," think about your own expectations as an investor. We cannot promise
you another year like 1995. But we can promise to manage your money with
honesty and integrity.
Respectfully submitted,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
On the following pages is a complete discussion of your Fund's performance and
investment strategy. If you have any questions or comments about this report,
please call our Client Services department at 800-959-4246 during normal
business hours. For automated account information 24 hours a day, call the AIM
Investor Line toll-free at 800-246-5463.
2
<PAGE> 5
Management's
Discussion & Analysis
THREE-WAY DIVERSIFICATION:
A HALLMARK OF AIM GLOBAL INCOME FUND
INTRODUCTION
1996 is emerging as one of the least predictable years on record, and investors
are wondering what the markets will do next. In the United States, the
possibility that reignited economic growth might trigger inflation pushed bond
prices lower and yields higher toward the end of the reporting period. At the
same time, several other advanced economies, faced with potential recession,
lowered interest rates.
AIM Global Income Fund performed well in this demanding environment.
Including reinvested dividends, total return at net asset value for the six
months ended April 30, 1996, was 2.67% for Class A shares and 2.40% for Class B
shares. By comparison, the Lehman Brothers Government Bond Index produced total
return of 0.03%, and the Salomon Brothers World Government Bond Index declined
0.13% during the same period. From the Fund's inception on September 15, 1994,
through the close of the period covered by this report, the Fund's average
annual total returns have been 12.05% and 11.46% for Class A and Class B
shares, respectively.
In less than two full years of operations, AIM Global Income Fund has
established itself, with assets nearly doubling during the reporting period
from approximately $14 million to approximately $27 million.
INTEREST RATES
The nominal interest rate on a bond can be thought of as comprising three
elements:
o a real interest rate, the actual cost of the money in current terms,
o an inflation component to protect the bond investor against decline in
the value of his or her earnings, and
o a credit component to protect the investor from the risk of default by
the bond issuer.
YOUR INVESTMENT PORTFOLIO
Your Fund pursues high returns and simultaneously strives to manage volatility
by remaining invested in three bond market segments: high-grade domestic bonds,
high-yield domestic bonds, and foreign bonds including some not denominated in
U.S. dollars. These three asset classes tend to behave differently because the
factors that influence them vary. Your Fund's diversified investment strategy
maintains exposure to all three market segments to balance and take advantage
of their different attributes.
HIGH-GRADE DOMESTIC BONDS. The most significant influence on the performance
of high-grade domestic bonds is the general level of interest rates, which is
largely determined by the general level of domestic economic activity.
Investors in high-grade bonds may demand a higher inflation component when
the economy accelerates because of fears that a stronger economy may lead to
higher inflation. This increase in interest rates exerts downward pressure on
the value of the bonds. The credit component of the interest rate on high-grade
bonds is very small because an investor does not demand much incremental yield
for a high-quality bond.
From November 1995 until January 1996, prices of high-grade U.S. bonds
continued the rally of 1995 because interest rates were declining. In January
1996, interest rates began rising again with the expectation of stronger
economic growth and, possibly, accelerating inflation. As
================================================================================
CURRENT YIELD AND DISTRIBUTION RATE
================================================================================
As of April 30, 1996
[BAR CHART]
AIM Global Income Fund
SEC Yield Distribution Rate
A Shares B Shares A Shares B Shares
5.96% 5.76% 7.16% 6.65%
The Fund's distribution rate is equal to the actual distributions from
investment income declared for the prior 30-day period, expressed as an annual
percentage. Distribution rates may include daily dividends and short-term
capital gains. The SEC yield is calculated on the basis of a 30-day period
according to the SEC formula, which is based on the portfolio's potential
earnings from dividends, interest, yield-to maturity or yield-to-call of its
holdings, net of all expenses and expressed on an annualized basis.
================================================================================
3
<PAGE> 6
Management's
Discussion & Analysis
1995 closed, the 10-year U.S. Treasury bond was yielding 5.57%. By the end
of April 1996, that yield had risen more than a percentage point to 6.68%. In
response to the pressure this put on the value of bonds, Fund management
significantly reduced holdings of U.S. government securities, from
approximately 34% of the portfolio to approximately 6%.
HIGH-YIELD BONDS. The general level of economic activity is the most
significant influence on the performance of these bonds.
A large part of the nominal interest rate on a high-yield bond is
attributable to credit concerns. Investors demand a relatively large
incremental yield over the real interest rate plus the inflation component
because the credit quality of a high-yield bond is lower.
When economic activity is high, investors in high-yield bonds behave
differently from investors in high-grade bonds. While investors in high-grade
bonds usually regard an accelerating economy with trepidation, investors in
high-yield bonds often welcome a stronger economy. A lively economy may improve
the credit situation of the bond-issuing company.
Thus, the credit component of the nominal interest rate of high-yield bonds
may decline as the economic outlook improves. As this lowers the yield on
high-yield bonds, these bonds may appreciate in value during a period when
high-grade bonds are depreciating in value.
U.S. high-yield bonds performed well during the six months covered by this
report, and Fund managers increased the proportion of the portfolio consisting
of high-yield bonds.
FOREIGN BONDS. These bonds actually have two components: the foreign bond
itself and the currency in which it is denominated. U.S.-dollar-based investors
view foreign market returns in U.S.-dollar terms.
Most markets respond to what is going on their own economies, and most
foreign bond markets performed well over the six-month reporting period in
local currency terms.
In Europe, much of this good performance stems from governments' efforts to
reduce budget deficits and outstanding indebtedness to comply with requirements
for the European Monetary Union. Your Fund took advantage of this by holding
Swedish, French, Danish, and German securities. Currency depreciation detracted
from the U.S. dollar returns of these particular markets, an effect mitigated
by hedging some of the Fund's currency exposure.
The Fund also benefitted from exposure to such markets as Australia, where
the currency strengthened relative to the U.S. dollar.
Non-dollar holdings represented approximately 35% of the portfolio at the
close of the reporting period, down somewhat from six months earlier. As noted
on the following page, very little of the portfolio consisted of emerging
market debt. Your Fund emphasizes securities of issuers in industrialized
countries with established securities markets.
OUTLOOK FOR THE FUTURE
As the reporting period closed, predictions concerning U.S. interest rates were
mixed. There was some consensus among market watchers that the U.S. economy
could expect steady, but not dramatic, growth and that inflation would remain
under control. This is a favorable environment for high-grade bonds. High-yield
bonds also should benefit from a steady economy.
Other developed countries, including Germany and Britain, were lowering
interest rates during the reporting period because of sluggishness in their
economies. In Japan, interest rates were at extraordinarily low levels as that
country struggled to emerge from a prolonged economic downturn. Foreign markets
will continue to provide opportunities for Fund diversification.
AIM Fund management generally shies away from making predictions concerning
future market trends. Securities for your Fund are selected through an ongoing
review process that evaluates the credit and structure of each potential
holding and how it would affect the portfolio overall. The Fund remains
committed to maintaining exposure to the three bond market sectors discussed
above. This strategy pursues lower volatility and enhanced returns over time
compared with the results to be expected with exposure to only one sector.
=======================================================
TOP FIVE HOLDINGS
=======================================================
As of April 30, 1996
Maturity Coupon
1. U.S. Treasury Notes 08/15/05 6.50%
2. Swedish Government 05/05/03 10.25
3. LKB Global 01/25/06 6.00
4. French Treasury Bill 11/12/98 5.75
5. Household Finance Co. 09/01/05 7.125
=======================================================
4
<PAGE> 7
Investor
Awareness
FUND HOLDINGS EMPHASIZE ESTABLISHED MARKETS
Compared to many other global income funds, your Fund holds very few securities
of governments or companies of emerging nations.
AIM Global Income Fund is a conservatively managed fund that emphasizes
securities issued in nations with established securities markets. Its
management deems emerging market debt too volatile for its investment goal of
current income and, secondarily, preservation of principal and capital
appreciation.
While this conservative stance works against the Fund when emerging markets
are performing well, AIM believes this approach may dampen volatility in the
long run and offer shareholders the potential of steadier returns.
======================================
PORTFOLIO COMPOSITION
======================================
As of April 30, 1996
[PIE GRAPH]
International (non U.S.$) 35%
Domestic (U.S.$) 65%
======================================
======================================
COUNTRIES REPRESENTED IN THE PORTFOLIO
======================================
As of April 30, 1996
[CHART WITH WORLD MAP]
Canada
United States
Germany
United Kingdom
France
Switzerland
Italy
Denmark
Sweden
Japan
New Zealand
Australia
======================================
5
<PAGE> 8
Financials
SCHEDULE OF INVESTMENTS
April 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
MATURITY AMOUNT(a) VALUE
<S> <C> <C> <C>
U.S. DOLLAR DENOMINATED NON-CONVERTIBLE BONDS
& NOTES-35.58%
ADVERTISING/BROADCASTING-1.53%
Sinclair Broadcast Group, Sr. Sub. Notes,
10.00% 09/30/05 $ 100,000 $ 97,375
- -----------------------------------------------------------------------------------------
Time Warner Inc.,
Deb., 6.85% 01/15/26 125,000 119,735
- -----------------------------------------------------------------------------------------
Notes, 8.18% 08/15/26 200,000 198,200
- -----------------------------------------------------------------------------------------
415,310
- -----------------------------------------------------------------------------------------
AIRLINES-1.03%
Airplanes Pass Through Trust, Sub. Bonds,
10.875% 03/15/19 200,000 209,000
- -----------------------------------------------------------------------------------------
Valujet Inc., Sr. Notes, 10.25%(b)
(acquired 04/11/96-04/12/96; cost $70,125) 04/15/01 70,000 70,525
- -----------------------------------------------------------------------------------------
279,525
- -----------------------------------------------------------------------------------------
AUTOMOBILE/TRUCK PARTS & TIRES-0.07%
Harvard Industries Inc., Sr. Notes, 11.125% 08/01/05 20,000 20,150
- -----------------------------------------------------------------------------------------
BANKING-1.64%
Royal Bank of Scotland, Yankee Bonds, 6.375% 02/01/11 500,000 446,595
- -----------------------------------------------------------------------------------------
BEVERAGES-1.92%
Coca Cola Enterprise, Notes, 7.24%(c) 06/20/20 3,113,000 522,642
- -----------------------------------------------------------------------------------------
CABLE TELEVISION-1.96%
Comcast UK Cable, Yankee Deb., 11.20%(d) 11/15/07 400,000 238,500
- -----------------------------------------------------------------------------------------
Fundy Cable Ltd., Yankee Bonds, 11.00% 11/15/05 30,000 30,450
- -----------------------------------------------------------------------------------------
Rifkin Acquisition Partners LP, Sr. Sub.
Notes, 11.125%(b) (acquired 01/26/96; cost
$40,000) 01/15/06 40,000 39,900
- -----------------------------------------------------------------------------------------
Viacom Inc., Sr. Notes, 7.75% 06/01/05 100,000 97,276
- -----------------------------------------------------------------------------------------
Videotron Holdings PLC, Sr. Disc. Notes,
11.125%(d) 07/01/04 100,000 74,000
- -----------------------------------------------------------------------------------------
Wireless One Inc., Units, 13.00%(e) 10/15/03 50,000 52,750
- -----------------------------------------------------------------------------------------
532,876
- -----------------------------------------------------------------------------------------
CHEMICALS-0.27%
Crain Industries, Sr. Sub. Notes, 13.50% 08/15/05 40,000 41,800
- -----------------------------------------------------------------------------------------
Laroche Industries, Sr. Sub. Notes, 13.00% 08/15/04 30,000 31,800
- -----------------------------------------------------------------------------------------
73,600
- -----------------------------------------------------------------------------------------
CONSUMER NON-DURABLES-0.39%
Hines Horticulture Inc., Sr. Sub. Notes,
11.75% 10/15/05 100,000 106,000
- -----------------------------------------------------------------------------------------
CONTAINERS-0.52%
Ivex Packaging, Sr. Sub. Notes, 12.50% 12/15/02 10,000 10,500
- -----------------------------------------------------------------------------------------
Owens-Illinois Inc., Sr. Sub. Notes, 10.50% 06/15/02 50,000 51,875
- -----------------------------------------------------------------------------------------
Riverwood International, Sr. Sub. Notes,
10.875% 04/01/08 80,000 79,700
- -----------------------------------------------------------------------------------------
142,075
- -----------------------------------------------------------------------------------------
</TABLE>
6
<PAGE> 9
Financials
<TABLE>
<CAPTION>
PRINCIPAL MARKET
MATURITY AMOUNT(a) VALUE
<S> <C> <C> <C>
ELECTRIC POWER-0.91%
El Paso Electric Co., First Mortgage Notes,
8.90% 02/01/06 $ 250,000 $ 246,875
- -----------------------------------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-2.94%
Associates Corp., Deb., 7.95% 02/15/10 100,000 105,578
- -----------------------------------------------------------------------------------------
Household Finance Co., Notes, 7.125% 09/01/05 700,000 693,609
- -----------------------------------------------------------------------------------------
799,187
- -----------------------------------------------------------------------------------------
FOOD/PROCESSING-0.30%
American Rice Inc., Sr. Notes, 13.00% 07/31/02 70,000 64,050
- -----------------------------------------------------------------------------------------
Pilgrim's Pride Corp., Sr. Sub. Notes, 10.875% 08/01/03 20,000 19,000
- -----------------------------------------------------------------------------------------
83,050
- -----------------------------------------------------------------------------------------
FOREIGN GOVERNMENT-1.13%
Province of Manitoba, Yankee Bonds, 7.75% 07/17/16 300,000 306,636
- -----------------------------------------------------------------------------------------
GAMING-1.04%
Aztar Corp., Sr. Sub. Notes, 11.00% 10/01/02 30,000 30,525
- -----------------------------------------------------------------------------------------
Coast Hotel & Casino, First Mortgage Notes,
13.00%(b) (acquired 01/23/96; cost $67,964) 12/15/02 70,000 74,025
- -----------------------------------------------------------------------------------------
Showboat, Inc., Sr. Sub. Notes, 13.00% 08/01/09 40,000 45,800
- -----------------------------------------------------------------------------------------
Trump Atlantic City, First Mortgage Notes,
11.25% 05/01/06 130,000 131,950
- -----------------------------------------------------------------------------------------
282,300
- -----------------------------------------------------------------------------------------
HOME BUILDING-0.36%
Continental Homes Holdings., Sr. Notes, 10.00% 04/15/06 100,000 98,000
- -----------------------------------------------------------------------------------------
HOTELS/MOTELS-0.88%
ITT Corp. (New), Deb., 7.375% 11/15/15 150,000 141,075
- -----------------------------------------------------------------------------------------
John Q. Hammons Hotels, Gtd. First Mortgage
Notes, 9.75% 10/01/05 100,000 98,500
- -----------------------------------------------------------------------------------------
239,575
- -----------------------------------------------------------------------------------------
INSURANCE (LIFE & HEALTH)-0.77%
American Life Holding Co., Sr. Sub. Notes,
11.25% 09/15/04 200,000 208,000
- -----------------------------------------------------------------------------------------
LEISURE & RECREATION-0.29%
Icon Health & Fitness, Sr. Sub. Notes, 13.00% 07/15/02 70,000 77,875
- -----------------------------------------------------------------------------------------
MACHINERY (HEAVY)-0.64%
Fairfield Manufacturing, Sr. Sub. Notes,
11.375% 07/01/01 50,000 51,000
- -----------------------------------------------------------------------------------------
Primeco Inc., Sr. Sub. Notes, 12.75% 03/01/05 120,000 124,200
- -----------------------------------------------------------------------------------------
175,200
- -----------------------------------------------------------------------------------------
MACHINERY (MISCELLANEOUS)-0.73%
AM General Corp., Sr. Notes, 12.875% 05/01/02 50,000 51,625
- -----------------------------------------------------------------------------------------
Interlake Corp., Sr. Notes, 12.00% 11/15/01 40,000 41,600
- -----------------------------------------------------------------------------------------
MVE Inc., Sr. Sec. Notes, 12.50% 02/15/02 100,000 106,250
- -----------------------------------------------------------------------------------------
199,475
- -----------------------------------------------------------------------------------------
MEDICAL (INSTRUMENTS/PRODUCTS)-0.27%
Graphic Controls Corp., Sr. Sub. Notes, 12.00% 09/15/05 70,000 74,375
- -----------------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 10
Financials
<TABLE>
<CAPTION>
PRINCIPAL MARKET
MATURITY AMOUNT(a) VALUE
<S> <C> <C> <C>
MEDICAL (PATIENT SERVICES)-0.66%
Dynacare Inc., Yankee Sr. Notes, 10.75% 01/15/06 $ 80,000 $ 79,900
- -----------------------------------------------------------------------------------------
Unilab Corp., Sr. Notes, 11.00% 04/01/06 100,000 98,500
- -----------------------------------------------------------------------------------------
178,400
- -----------------------------------------------------------------------------------------
METALS (MISCELLANEOUS)-0.46%
Rio Algom Ltd., Yankee Deb., 7.05% 11/01/05 130,000 123,988
- -----------------------------------------------------------------------------------------
NATURAL GAS PIPELINE-2.17%
Ferrellgas Partners LP, Sr. Notes, 9.375%(b)
(acquired 04/23/96; cost $300,000) 06/15/06 300,000 299,250
- -----------------------------------------------------------------------------------------
Plains Resources Inc., Sr. Sub. Notes,
10.25%(b)
(acquired 03/14/96; cost $49,693) 03/15/06 50,000 51,000
- -----------------------------------------------------------------------------------------
Talisman Energy Inc., Yankee Deb., 7.125% 06/01/07 250,000 240,843
- -----------------------------------------------------------------------------------------
591,093
- -----------------------------------------------------------------------------------------
OIL & GAS-1.65%
Benton Oil & Gas, Sr. Notes, 11.625% 04/01/03 50,000 51,000
- -----------------------------------------------------------------------------------------
HS Resources, Sr. Sub. Notes, 9.875% 12/01/03 60,000 58,200
- -----------------------------------------------------------------------------------------
Maxus Energy, Deb., 11.50% 11/15/15 170,000 175,950
- -----------------------------------------------------------------------------------------
Petroleum Heat & Power Co. Inc., Sub. Deb.,
12.25% 02/01/05 33,000 36,300
- -----------------------------------------------------------------------------------------
Wainoco Oil Corp., Sr. Sub. Notes, 12.00% 08/01/02 130,000 126,750
- -----------------------------------------------------------------------------------------
448,200
- -----------------------------------------------------------------------------------------
OIL EQUIPMENT & SUPPLIES-0.08%
Falcon Drilling Co. Inc., Sr. Notes, 9.75% 01/15/01 20,000 20,600
- -----------------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS-0.54%
Pacific Lumber Co., Sr. Notes, 10.50% 03/01/03 30,000 29,700
- -----------------------------------------------------------------------------------------
Rapp International Finance, Gtd. Yankee Sec.
Notes, 11.50% 12/15/00 50,000 49,000
- -----------------------------------------------------------------------------------------
Repap New Brunswick, Yankee Bonds, 10.625% 04/15/05 70,000 67,025
- -----------------------------------------------------------------------------------------
145,725
- -----------------------------------------------------------------------------------------
PUBLISHING-0.99%
News America Holdings, Gtd. Sr. Deb., 9.25% 02/01/13 250,000 270,018
- -----------------------------------------------------------------------------------------
RAILROADS-0.81%
Johnstown America Industries Inc., Sr. Sub.
Notes, 11.75% 08/15/05 80,000 74,400
- -----------------------------------------------------------------------------------------
Transtar Holdings L.P., Sr. Disc. Notes,
13.375%(d) 12/15/03 200,000 145,500
- -----------------------------------------------------------------------------------------
219,900
- -----------------------------------------------------------------------------------------
RETAIL (FOOD & DRUG)-1.44%
Carr-Gottstein Foods Co., Sr. Sub. Notes,
12.00% 11/15/05 100,000 102,000
- -----------------------------------------------------------------------------------------
Great Atlantic & Pacific, Yankee Bonds,
7.78%(b)
(acquired 09/21/95-01/02/96; cost $70,850) 11/01/00 100,000 97,175
- -----------------------------------------------------------------------------------------
Penn Traffic Co., Sr. Notes, 11.50% 04/15/06 110,000 112,750
- -----------------------------------------------------------------------------------------
Ralph's Grocery Co., Sr. Notes, 10.45% 06/15/04 80,000 78,200
- -----------------------------------------------------------------------------------------
390,125
- -----------------------------------------------------------------------------------------
</TABLE>
8
<PAGE> 11
Financials
<TABLE>
<CAPTION>
PRINCIPAL MARKET
MATURITY AMOUNT(a) VALUE
<S> <C> <C> <C>
RETAIL (STORES)-0.91%
Samsonite Corp., Sr. Sub. Notes, 11.125% 07/15/05 $ 40,000 $ 40,600
- -----------------------------------------------------------------------------------------
Specialty Retailers Inc., Sr. Sub. Notes,
11.00% 08/15/03 75,000 74,063
- -----------------------------------------------------------------------------------------
United Stationer Supply, Sr. Sub. Notes,
12.75% 05/01/05 120,000 132,450
- -----------------------------------------------------------------------------------------
247,113
- -----------------------------------------------------------------------------------------
SCHOOLS-0.20%
Herff Jones Inc., Sr. Sub. Notes, 11.00% 08/15/05 50,000 53,125
- -----------------------------------------------------------------------------------------
STEEL-0.95%
Bayou Steel Corp., First Mortgage Notes,
10.25% 03/01/01 145,000 127,600
- -----------------------------------------------------------------------------------------
GS Technologies Inc., Sr. Notes, 12.00% 09/01/04 75,000 77,344
- -----------------------------------------------------------------------------------------
Gulf States Steel, First Mortgage Notes,
13.50% 04/15/03 60,000 54,600
- -----------------------------------------------------------------------------------------
259,544
- -----------------------------------------------------------------------------------------
TELECOMMUNICATIONS-4.35%
A+ Network, Inc., Sr. Sub. Notes, 11.875% 11/01/05 50,000 50,375
- -----------------------------------------------------------------------------------------
Arch Communications Group, Sr. Disc. Notes,
10.875%(d) 03/15/08 200,000 112,500
- -----------------------------------------------------------------------------------------
CAI Wireless Systems Inc., Sr. Notes, 12.25% 09/15/02 50,000 52,125
- -----------------------------------------------------------------------------------------
Clearnet Communications, Yankee Units,
14.75%(d)(f) 12/15/05 100,000 62,000
- -----------------------------------------------------------------------------------------
Dictaphone Corp., Sr. Sub. Notes, 11.75% 08/01/05 50,000 49,750
- -----------------------------------------------------------------------------------------
Intermedia Communications, Sr. Notes, 13.50% 06/01/05 150,000 171,000
- -----------------------------------------------------------------------------------------
Pronet Inc., Sr. Sub. Notes, 11.875% 06/15/05 30,000 32,025
- -----------------------------------------------------------------------------------------
TCI Communications Inc., Notes, 8.00% 08/01/05 150,000 146,735
- -----------------------------------------------------------------------------------------
360 Communications Co., Sr. Notes, 7.50% 03/01/06 500,000 476,470
- -----------------------------------------------------------------------------------------
Telewest PLC, Yankee Bonds, 11.00%(d) 10/01/07 50,000 30,750
- -----------------------------------------------------------------------------------------
1,183,730
- -----------------------------------------------------------------------------------------
TEXTILES-0.10%
Consoltex Group, Sr. Sub. Notes, 11.00% 10/01/03 30,000 27,675
- -----------------------------------------------------------------------------------------
TRANSPORTATION (MISCELLANEOUS)-0.68%
Stena AB, Yankee Sr. Notes, 10.50% 12/15/05 80,000 80,400
- -----------------------------------------------------------------------------------------
Trans Ocean Container, Sr. Sub. Notes, 12.25% 07/01/04 100,000 103,500
- -----------------------------------------------------------------------------------------
183,900
- -----------------------------------------------------------------------------------------
Total U.S. Dollar Denominated
Non-Convertible Bonds & Notes 9,672,457
- -----------------------------------------------------------------------------------------
U.S. DOLLAR DENOMINATED CONVERTIBLE BONDS &
NOTES-4.18%
AIRLINES-2.04%
Continental Airlines, Conv. Sr. Sub. Notes,
6.75%(b)
(acquired 02/27/96; cost $499,825) 04/15/06 500,000 555,000
- -----------------------------------------------------------------------------------------
BANKING-2.14%
MBL International Finance Bermuda, Conv. Gtd.
Notes, 3.00% 11/30/02 500,000 581,250
- -----------------------------------------------------------------------------------------
Total U.S. Dollar Denominated Convertible
Bonds & Notes 1,136,250
- -----------------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 12
Financials
<TABLE>
<CAPTION>
PRINCIPAL MARKET
MATURITY AMOUNT(a) VALUE
<S> <C> <C> <C>
NON-U.S. DOLLAR DENOMINATED NON-CONVERTIBLE
BONDS & NOTES(g)-14.35%
CANADA-6.82%
Bell Canada (Telecommunications), Deb.,
10.875% 10/11/04 CAD 150,000 $ 126,423
- -----------------------------------------------------------------------------------------
Canadian Oil Debco Inc. (Oil & Gas), Deb.,
11.00% 10/31/00 250,000 205,564
- -----------------------------------------------------------------------------------------
Ford Motor Credit (Finance-Consumer Credit),
Mtn., 10.375% 09/17/96 125,000 93,606
- -----------------------------------------------------------------------------------------
Teleglobe Canada Inc. (Telephone), Deb., 8.35% 06/20/03 650,000 487,201
- -----------------------------------------------------------------------------------------
Transalta Utilities Corp. (Electric Power),
Deb., 8.35% 12/15/03 750,000 567,664
- -----------------------------------------------------------------------------------------
Trans-Canada Pipelines (Oil & Gas), Notes,
8.55% 02/01/06 500,000 374,146
- -----------------------------------------------------------------------------------------
1,854,604
- -----------------------------------------------------------------------------------------
FRANCE-0.56%
Credit Local de France (Finance-Consumer
Credit), Sr. Unsub. Deb., 6.00% 11/15/01 FRF 250,000 48,970
- -----------------------------------------------------------------------------------------
IBM International Finance N.V. (Computer
Mainframes), Sr. Unsub. Deb., 10.00% 08/29/97 500,000 104,204
- -----------------------------------------------------------------------------------------
153,174
- -----------------------------------------------------------------------------------------
GERMANY-4.47%
Ford Credit Europe PLC (Finance-Consumer
Credit), Deb., 6.00% 03/30/99 DEM 200,000 136,789
- -----------------------------------------------------------------------------------------
International Bank for Reconstruction &
Development (Supranational Organization),
Unsub. Global Bonds, 7.125% 04/12/05 475,000 325,308
- -----------------------------------------------------------------------------------------
LKB Global (Banking), Gtd. Notes, 6.00% 01/25/06 1,200,000 753,478
- -----------------------------------------------------------------------------------------
1,215,575
- -----------------------------------------------------------------------------------------
ITALY-0.18%
KFW International Finance (Finance-Consumer
Credit), Gtd. Notes, 11.625% 11/27/98 ITL 70,000,000 47,733
- -----------------------------------------------------------------------------------------
JAPAN-0.65%
Toyota Motor Corp. (Automobile-Manufacturers),
Deb., 1.20% 01/28/98 JPY 15,000,000 177,812
- -----------------------------------------------------------------------------------------
SWEDEN-0.39%
Credit Foncier de France (Finance-Consumer
Credit), Sr. Unsub. Deb., 6.50% 02/22/99 SEK 750,000 106,662
- -----------------------------------------------------------------------------------------
UNITED KINGDOM-1.28%
European Investment Bank (Supranational
Organization), Sr. Unsub. Deb., 6.00% 08/10/99 BPS 125,000 179,729
- -----------------------------------------------------------------------------------------
KFW International Finance (Finance-Consumer
Credit), Gtd. Notes, 10.625% 09/03/01 100,000 167,131
- -----------------------------------------------------------------------------------------
346,860
- -----------------------------------------------------------------------------------------
Total Non-U.S. Dollar Denominated
Non-Convertible Bonds & Notes 3,902,420
- -----------------------------------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED CONVERTIBLE BONDS
& NOTES(g)-3.43%
FRANCE-0.18%
Societe Generale (Banking), Conv. Deb., 3.50% 01/01/00 FRF 231,000 49,557
- -----------------------------------------------------------------------------------------
</TABLE>
10
<PAGE> 13
Financials
<TABLE>
<CAPTION>
PRINCIPAL MARKET
MATURITY AMOUNT(a) VALUE
<S> <C> <C> <C>
JAPAN-2.26%
Glaxo Holdings PLC (Medical-Drugs), Conv.
Deb., 4.30% 09/28/98 JPY 4,000,000 $ 39,195
- -----------------------------------------------------------------------------------------
Jusco Co. Ltd. (Consumer Non-Durables),
Conv. Deb., 1.20% 02/20/01 40,000,000 575,689
- -----------------------------------------------------------------------------------------
614,884
- -----------------------------------------------------------------------------------------
SWITZERLAND-0.99%
Yamada Denki Co. Ltd. (Retail-Stores), Conv.
Notes, 0.25% 03/31/00 CHF 300,000 267,598
- -----------------------------------------------------------------------------------------
Total Non-U.S. Dollar Denominated
Convertible Bonds & Notes 932,039
- -----------------------------------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED GOVERNMENT BONDS &
NOTES(g)-17.23%
AUSTRALIA-0.52%
Queensland Treasury Corp., Gtd. Notes, 8.875% 11/08/96 AUD 180,000 142,565
- -----------------------------------------------------------------------------------------
CANADA-4.44%
British Columbia (Province of), Deb., 9.00%(c) 06/21/04 CAD 150,000 57,814
- -----------------------------------------------------------------------------------------
British Columbia Municipal Finance Authority,
Deb., 7.75% 12/01/05 500,000 361,403
- -----------------------------------------------------------------------------------------
New Brunswick (Province of), Deb., 8.94% 01/15/05 150,000 113,367
- -----------------------------------------------------------------------------------------
Ontario Hydro Global, Sr. Unsec. Deb., 9.00% 06/24/02 600,000 473,984
- -----------------------------------------------------------------------------------------
Ontario Province STRIP 8.18%(c) 01/10/45 15,000,000 199,963
- -----------------------------------------------------------------------------------------
1,206,531
- -----------------------------------------------------------------------------------------
DENMARK-2.52%
Kingdom of Denmark, Deb., 8.00% 11/15/01 DKK 3,750,000 684,238
- -----------------------------------------------------------------------------------------
FRANCE-2.56%
French Treasury Bill, Notes, 5.75% 11/12/98 FRF 3,500,000 695,767
- -----------------------------------------------------------------------------------------
GERMANY-2.87%
Bundesrepublik Deutschland,
Deb., 6.75% 07/15/04 DEM 750,000 508,818
- -----------------------------------------------------------------------------------------
Deb., 6.875% 05/12/05 400,000 271,748
- -----------------------------------------------------------------------------------------
780,566
- -----------------------------------------------------------------------------------------
NEW ZEALAND-1.09%
New Zealand Government,
Gtd. Deb., 9.00% 11/15/96 NZD 305,000 209,073
- -----------------------------------------------------------------------------------------
Gtd. Deb., 10.00% 07/15/97 125,000 86,663
- -----------------------------------------------------------------------------------------
295,736
- -----------------------------------------------------------------------------------------
SWEDEN-3.05%
Swedish Government, Bonds, 10.25% 05/05/03 SEK 5,000,000 828,491
- -----------------------------------------------------------------------------------------
UNITED KINGDOM-0.18%
Ontario Province, Sr. Unsub. Notes, 6.875% 09/15/00 BPS 35,000 50,791
- -----------------------------------------------------------------------------------------
Total Non-U.S. Dollar Denominated
Government Bonds & Notes 4,684,685
- -----------------------------------------------------------------------------------------
</TABLE>
11
<PAGE> 14
Financials
<TABLE>
<CAPTION>
MARKET
MATURITY SHARES VALUE
<S> <C> <C> <C>
CONVERTIBLE PREFERRED STOCKS-2.39%
ADVERTISING/BROADCASTING-0.46%
Time Warner Inc., Series K Conv. Pfd.(b)
(acquired 04/03/96; cost $125,000) 125 $ 125,937
- ----------------------------------------------------------------------------------------
ELECTRIC POWER-0.87%
Citizens Utilities Trust, $2.50 Conv. Pfd. 5,000 235,000
- ----------------------------------------------------------------------------------------
INSURANCE (LIFE & HEALTH)-1.06%
Conseco Inc., $4.28 Conv. Pfd. 4,000 287,500
- ----------------------------------------------------------------------------------------
Total Convertible Preferred Stocks 648,437
- ----------------------------------------------------------------------------------------
WARRANTS-0.03%
CABLE TV-0.00%
Wireless One-Wt. expiring 10/15/97(h) 150 1,050
- ----------------------------------------------------------------------------------------
LEISURE & RECREATION-0.01%
IHF Holdings-Wt., expiring 11/14/99(h) 70 1,750
- ----------------------------------------------------------------------------------------
STEEL-0.00%
Gulf States Steel-Wt., expiring 04/15/03(h) 60 300
- ----------------------------------------------------------------------------------------
TELECOMMUNICATIONS-0.02%
Intermedia-Wt., expiring 06/01/98(h) 150 4,500
- ----------------------------------------------------------------------------------------
Total Warrants 7,600
- ----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C> <C>
U.S. TREASURY SECURITIES-6.17%
U.S. Treasury Notes, 6.50% 08/15/05 $ 1,200,000 1,184,052
- ----------------------------------------------------------------------------------------
U.S. Treasury Bonds, 6.875% 08/15/25 500,000 494,065
- ----------------------------------------------------------------------------------------
Total U.S. Treasury Securities 1,678,117
- ----------------------------------------------------------------------------------------
Total Investments
(excluding Repurchase Agreements) 22,662,005
- ----------------------------------------------------------------------------------------
REPURCHASE AGREEMENT(i)-13.64%
Daiwa Securities America Inc., 5.34%(j) 05/01/96 3,706,491 3,706,491
- ----------------------------------------------------------------------------------------
TOTAL INVESTMENTS-97.00% 26,368,496
- ----------------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES 3.00% 816,723
- ----------------------------------------------------------------------------------------
NET ASSETS-100.00% $27,185,219
========================================================================================
</TABLE>
ABBREVIATIONS:
<TABLE>
<S> <C> <C> <C>
AUD Australian Dollar ITL Italian Lire
BPS British Pound Sterling JPY Japanese Yen
CAD Canadian Dollar Mtn. Medium Term Note
CHF Swiss Franc NZD New Zealand Dollar
Conv. Convertible Sec. Secured
Deb. Debentures SEK Swedish Krona
DEM German Deutschemark Sr. Senior
Disc. Discounted Sub. Subordinated
DKK Danish Krone Unsec. Unsecured
FRF French Franc Unsub. Unsubordinated
Gtd. Guaranteed Wt. Warrant
</TABLE>
12
<PAGE> 15
Financials
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Principal amount is in U.S. Dollars, except as indicated by note (g).
(b) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined in
accordance with procedures established by the Board of Directors. The
aggregate market value of these securities at April 30, 1996 was $1,312,812
which represented 4.83% of the Fund's net assets.
(c) Zero coupon bond issued at a discount. The interest rate shown represents
the rate of original issue discount.
(d) Discounted bond at purchase. Interest rate represents coupon rate at which
the bond will accrue at a specified future date.
(e) Issued as a unit. This unit consists of $1,000,000 Sr. Notes plus 3 warrants
to purchase one share of stock at $11.55 per share.
(f) Issued as a unit. This unit consists of ten $1,000,000 Sr. Disc. Notes plus
33 warrants to purchase shares of common stock.
(g) Foreign denominated security. Par value and coupon are denominated in
currency of country indicated.
(h) Non-income producing security acquired as part of a unit with or in exchange
for other securities.
(i) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(j) Joint repurchase agreement entered into 04/30/96 with a maturing value of
$767,124,680. Collateralized by $737,151,000 U.S. Treasury obligations, 0%
to 11.25% due 05/15/96 to 02/15/21.
See Notes to Financial Statements.
13
<PAGE> 16
Financials
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1996
(Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $22,870,719) $ 22,662,005
- -----------------------------------------------------------------------------------------
Repurchase agreement (cost $3,706,491) 3,706,491
- -----------------------------------------------------------------------------------------
Foreign currencies, at market value (cost $43,610) 43,680
- -----------------------------------------------------------------------------------------
Receivables for:
Capital stock sold 324,873
- -----------------------------------------------------------------------------------------
Forward contracts 19,866
- -----------------------------------------------------------------------------------------
Dividends and interest 545,760
- -----------------------------------------------------------------------------------------
Other assets 19,143
- -----------------------------------------------------------------------------------------
Total assets 27,321,818
- -----------------------------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 50,000
- -----------------------------------------------------------------------------------------
Capital stock reacquired 16,455
- -----------------------------------------------------------------------------------------
Dividends 38,901
- -----------------------------------------------------------------------------------------
Accrued administrative service fees 7,556
- -----------------------------------------------------------------------------------------
Accrued distribution fees 15,468
- -----------------------------------------------------------------------------------------
Accrued transfer agent fees 5,167
- -----------------------------------------------------------------------------------------
Accrued operating expenses 3,052
- -----------------------------------------------------------------------------------------
Total liabilities 136,599
- -----------------------------------------------------------------------------------------
Net assets applicable to shares outstanding $ 27,185,219
=========================================================================================
NET ASSETS:
Class A $ 16,548,061
- -----------------------------------------------------------------------------------------
Class B $ 10,637,158
=========================================================================================
CAPITAL STOCK, $.001 PAR VALUE PER SHARE:
Class A:
Authorized 200,000,000
- -----------------------------------------------------------------------------------------
Outstanding 1,580,242
=========================================================================================
Class B:
Authorized 200,000,000
- -----------------------------------------------------------------------------------------
Outstanding 1,016,831
=========================================================================================
Class A:
Net asset value and redemption price per share $ 10.47
=========================================================================================
Offering price per share:
(Net asset value of $10.47 divided by 95.25%) $ 10.99
=========================================================================================
Class B:
Net asset value and offering price per share $ 10.46
=========================================================================================
</TABLE>
See Notes to Financial Statements.
14
<PAGE> 17
Financials
STATEMENT OF OPERATIONS
For the six months ended April 30, 1996
(Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 842,928
- ---------------------------------------------------------------------------------------
EXPENSES:
Advisory fees 68,935
- ---------------------------------------------------------------------------------------
Administrative service fees 37,079
- ---------------------------------------------------------------------------------------
Directors' fees 3,685
- ---------------------------------------------------------------------------------------
Distribution fees-Class A 31,824
- ---------------------------------------------------------------------------------------
Distribution fees-Class B 35,144
- ---------------------------------------------------------------------------------------
Custodian fees 6,689
- ---------------------------------------------------------------------------------------
Transfer agent fees-Class A 12,150
- ---------------------------------------------------------------------------------------
Transfer agent fees-Class B 10,627
- ---------------------------------------------------------------------------------------
Other 22,150
- ---------------------------------------------------------------------------------------
Total expenses 228,283
- ---------------------------------------------------------------------------------------
Less expenses assumed by advisor (87,235)
- ---------------------------------------------------------------------------------------
Net expenses 141,048
- ---------------------------------------------------------------------------------------
Net investment income 701,880
- ---------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES AND FOREIGN
CURRENCIES:
Net realized gain on sales of:
Investment securities 221,140
- ---------------------------------------------------------------------------------------
Foreign currencies 134,545
- ---------------------------------------------------------------------------------------
355,685
- ---------------------------------------------------------------------------------------
UNREALIZED APPRECIATION (DEPRECIATION) OF:
Investment securities (644,565)
- ---------------------------------------------------------------------------------------
Foreign currencies 16,551
- ---------------------------------------------------------------------------------------
(628,014)
- ---------------------------------------------------------------------------------------
Net gain (loss) on investment securities and foreign currencies (272,329)
- ---------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 429,551
=======================================================================================
</TABLE>
See Notes to Financial Statements.
15
<PAGE> 18
Financials
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended April 30, 1996 and the year ended October 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
1996 1995
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 701,880 $ 570,694
- --------------------------------------------------------------------------------------------
Net realized gain on sales of investment securities and
foreign currencies 355,685 263,982
- --------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities and foreign currencies (628,014) 430,541
- --------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 429,551 1,265,217
- --------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income:
Class A (512,454) (461,318)
- --------------------------------------------------------------------------------------------
Class B (260,032) (139,421)
- --------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on
investment securities:
Class A (122,866) --
- --------------------------------------------------------------------------------------------
Class B (57,565) --
- --------------------------------------------------------------------------------------------
Share transactions-net:
Class A 6,878,701 6,847,734
- --------------------------------------------------------------------------------------------
Class B 6,618,678 3,676,004
- --------------------------------------------------------------------------------------------
Net increase in net assets 12,974,013 11,188,216
- --------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 14,211,206 3,022,990
- --------------------------------------------------------------------------------------------
End of period $ 27,185,219 $ 14,211,206
- --------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $ 27,008,915 $ 13,511,536
- --------------------------------------------------------------------------------------------
Undistributed net investment income 15,029 85,635
- --------------------------------------------------------------------------------------------
Undistributed net realized gain on sales of investment
securities and foreign currencies 354,041 178,787
- --------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities and foreign currencies (192,766) 435,248
- --------------------------------------------------------------------------------------------
$ 27,185,219 $ 14,211,206
============================================================================================
</TABLE>
See Notes to Financial Statements.
16
<PAGE> 19
Financials
NOTES TO FINANCIAL STATEMENTS
April 30, 1996
(Unaudited)
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Global Income Fund (the "Fund") is an investment portfolio of AIM
International Funds, Inc. (the "Company"). The Company is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end management investment company consisting of four separate
series portfolios: AIM Global Income Fund, AIM Global Aggressive Growth Fund,
AIM Global Growth Fund and AIM International Equity Fund. The Fund currently
offers two different classes of shares: Class A shares and Class B shares. Class
A shares are sold with a front-end sales charge. Class B shares are sold with a
contingent deferred sales charge. Matters affecting each portfolio or class are
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 the financial statements pertains only to the Fund. The
Fund's investment objective is to provide high current income.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. Security Valuations-Non-convertible bonds and notes are valued on the basis
of prices provided by an independent pricing service. Prices provided by the
pricing service may be determined without exclusive reliance on quoted price,
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 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 Directors, or persons designated by the Board of Directors,
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 between the closing bid and asked
price. 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. 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 a
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 a Fund's net asset value. If events materially affecting
the value of such securities and exchange rates occur during such period,
then these securities and exchange rates will be valued at their fair value
as determined in good faith by or under the supervision of the Board of
Directors.
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
17
<PAGE> 20
Financials
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES-continued
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 April 30, 1996 were as follows:
<TABLE>
<CAPTION>
UNREALIZED
CONTRACT TO APPRECIATION
SETTLEMENT DATE DELIVER RECEIVE VALUE (DEPRECIATION)
------------------------ --------------- ----------- ---------- --------------
<S> <C> <C> <C> <C> <C>
05/14/96 JPY 18,000,000 $ 172,167 $ 170,293 $ (1,874)
07/18/96 DEM 1,000,000 656,425 665,358 8,933
07/25/96 DEM 700,000 459,717 462,994 3,277
07/25/96 DEM 1,200,000 788,086 794,702 6,616
08/01/96 JPY 30,000,000 286,829 289,743 2,914
---------- ---------- ----------
$2,363,224 $2,383,090 $ 19,866
========== ========== ==========
</TABLE>
D. Securities Transactions, Investment Income and Distributions-Securities
transactions are accounted for on a trade date basis. Realized gains or
losses 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 an accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.
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-Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to both
classes, e.g. advisory fees, are allocated between them.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The company 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 an advisory fee to AIM at the annual rate of 0.70% of
the first $1 billion of the Fund's average daily net assets, plus 0.65% of the
Fund's average daily net assets in excess of $1 billion. During the six months
ended April 30, 1996, AIM waived fees of $68,935 and assumed expenses of $10,300
and $8,000 for the Class A shares and Class B shares, respectively. Under the
terms of the master investment advisory agreement, AIM will, if necessary,
reduce its fee or make payments to the Fund to the extent necessary to satisfy
any expense limitations imposed by the securities laws or regulations thereunder
of any state in which the Fund's shares are qualified for sale.
The Fund, pursuant to a master administrative services agreement, has agreed
to pay AIM for administrative costs incurred in providing accounting services to
the Fund. During the six months ended April 30, 1996, AIM was reimbursed $40,289
for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
reimburse A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency
services to the Fund. During the six months ended April 30, 1996, the Fund paid
AFS $16,177 for such services.
The Company has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A shares and the Class B shares of the Fund. The Company has adopted
Distribution Plans pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Class A shares (the "Class A Plan") and with respect to the Fund's Class
B shares (the "Class B Plan") (collectively, the "Plans"). The Fund, pursuant to
the Class A Plan, will pay AIM Distributors an annual rate of 0.50% of the
average daily net assets attributable to the Class A shares. The Class A Plan is
designed to compensate AIM Distributors for certain promotional and other sales
related costs, of the total compensation payable, the Fund pays a service fee of
0.25% of the average daily net assets attributable to the Class A shares to
selected dealers or financial institutions who furnish continuing personal
shareholder services to their customers who purchase and own Class A shares of
the Fund. The Fund, pursuant to the Class B Plan, will pay AIM Distributors at
an annual rate of 1.00% of the average daily net assets attributable to the
Class B shares. Of this amount, the Fund may pay a service fee of 0.25% of the
average daily net assets of the Class B shares to selected dealers and financial
institutions who furnish continuing personal shareholder services to their
customers who purchase and own Class B shares of the Fund. Any amounts
18
<PAGE> 21
Financials
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES-continued
not paid as a service fee under such 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 six months ended April 30, 1996, the Class A
shares and the Class B shares paid AIM Distributors $31,824 and $35,144,
respectively, as compensation under the Plans.
AIM Distributors received commissions of $31,257 from the sales of the Class A
shares of the Fund during the six months ended April 30, 1996. Such commissions
are not an expense of the Fund. They are deducted from, and are not included in
the proceeds from sales of Class A shares. During the six months ended April 30,
1996, AIM Distributors received commissions of $1,078 in contingent deferred
sales charges imposed on redemptions of Fund shares. Certain officers and
directors of the Company are officers and directors of AIM, AFS and AIM
Distributors.
During the six months ended April 30, 1996, the Fund incurred legal fees of
$1,638 for services rendered by the law firm of Kramer, Levin, Naftalis, Nessen,
Kamin & Frankel as counsel to the Company's directors. A member of that firm is
a director of the Company.
NOTE 3-DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4-BANK BORROWINGS
The Fund may borrow $100,000 under a committed line of credit with Chemical Bank
of New York. Interest on borrowings under the line of credit is payable on
maturity or prepayment date. During the six months ended April 30, 1996, the
Fund did not borrow under the line of credit agreement. The Fund is charged an
administrative fee, payable quarterly, at the annual rate of $100.
NOTE 5-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the six months ended April 30, 1996 was
$18,448,280 and $10,027,214 respectively.
The amount of unrealized appreciation (depreciation) of investment securities
as of April 30, 1996, is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $ 484,966
- ----------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (693,680)
- ----------------------------------------------------------------------------------
Net unrealized (depreciation) of investment securities $(208,714)
==================================================================================
Investments have the same cost for tax and financial statement
purposes.
</TABLE>
19
<PAGE> 22
Financials
NOTE 6-CAPITAL STOCK
Changes in the Fund's capital stock outstanding during the six months ended
April 30, 1996 and the year ended October 31, 1995 were as follows:
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
------------------------ ------------------------
1996 1995
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Sold:
- ----------------------------------------------------------------------------------------------
Class A 722,465 $7,659,068 760,598 $7,840,532
- ----------------------------------------------------------------------------------------------
Class B 646,527 6,849,353 388,091 4,010,514
- ----------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 42,675 452,142 23,999 250,917
- ----------------------------------------------------------------------------------------------
Class B 25,185 265,554 11,879 124,099
- ----------------------------------------------------------------------------------------------
Reacquired:
Class A (116,356) (1,232,509) (118,603) (1,243,715)
- ----------------------------------------------------------------------------------------------
Class B (47,095) (496,229) (43,933) (458,609)
- ----------------------------------------------------------------------------------------------
1,273,401 $13,497,379 1,022,031 $10,523,738
==============================================================================================
</TABLE>
NOTE 7-FINANCIAL HIGHLIGHTS
Shown below are the condensed financial highlights for a Class A share and Class
B share outstanding during the six months ended April 30, 1996, the year ended
October 31, 1995 and the period September 15, 1994 (dates operations commenced)
through October 31, 1994:
<TABLE>
<CAPTION>
CLASS A CLASS B
------------------------------ -------------------------------
APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31,
---------- ----------------- ---------- ----------------
1996 1995 1994 1996 1995 1994
---------- ------- ------ ---------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $10.74 $10.02 $10.00 $10.73 $10.01 $10.00
- ------------------------------------------------------------------- ------------------------------
Income from investment
operations:
Net investment income 0.41 0.79 0.08 0.40 0.74 0.07
- ------------------------------------------------------------------- ------------------------------
Net gains (losses) on securities
(both realized and unrealized) (0.13) 0.75 0.01 (0.15) 0.75 0.01
- ------------------------------------------------------------------- ------------------------------
Total from investment
operations 0.28 1.54 0.09 0.25 1.49 0.08
- ------------------------------------------------------------------- ------------------------------
Less distributions:
Dividends from investment income (0.43) (0.82) (0.07) (0.40) (0.77) (0.07)
- ------------------------------------------------------------------- ------------------------------
Distributions from net realized
capital gains (0.12) -- -- (0.12) -- --
- ------------------------------------------------------------------- ------------------------------
Total distributions (0.55) (0.82) (0.07) (0.52) (0.77) (0.07)
- ------------------------------------------------------------------- ------------------------------
Net asset value, end of period $10.47 $10.74 $10.02 $10.46 $10.73 $10.01
=================================================================== ==============================
Total return(a) 2.67% 16.07% 0.93% 2.40% 15.56% 0.79%
=================================================================== ==============================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $16,548 $10,004 $2,661 $10,637 $4,207 $362
=================================================================== ==============================
Ratio of expenses to average net
assets 1.25%(b) 1.25% 1.25% 1.75%(c) 1.74% 1.73%
=================================================================== ==============================
Ratio of net investment income to
average net assets 7.28%(b) 7.38% 6.01% 6.79%(c) 6.88% 3.59%
=================================================================== ==============================
Portfolio turnover rate 56% 128% 6% 56% 128% 6%
=================================================================== ==============================
</TABLE>
(a) Does not deduct sales charges and for periods less than one year, total
returns are not annualized.
(b) After fee waivers and expense reimbursements. Annualized ratios are based on
average net assets of $12,799,314. Annualized ratios of expenses and net
investment income to average net assets before fee waivers and expense
reimbursements are 2.20% and 6.33%, respectively.
(c) After fee waivers and expense reimbursements. Annualized ratios are based on
average net assets of $7,067,453. Annualized ratios of expenses and net
investment income to average net assets before fee waivers and expense
reimbursements are 2.67% and 5.86%, respectively.
20
<PAGE> 23
<TABLE>
<S> <C> <C>
BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
CHARLES T. BAUER CHARLES T. BAUER 11 Greenway Plaza
Chairman and Chief Executive Officer Chairman Suite 1919
A I M Management Group Inc. Houston, TX 77046
ROBERT H. GRAHAM
BRUCE L. CROCKETT President INVESTMENT ADVISOR
Director, President, and Chief
Executive Officer JOHN J. ARTHUR A I M Advisors, Inc.
COMSAT Corporation Senior Vice President and Treasurer 11 Greenway Plaza
Suite 1919
OWEN DALY II GARY T. CRUM Houston, TX 77046
Director Senior Vice President
Cortland Trust Inc. TRANSFER AGENT
SCOTT G. LUCAS
CARL FRISCHLING Senior Vice President A I M Fund Services, Inc.
Partner P.O. Box 4739
Kramer, Levin, Naftalis, Nessen, CAROL F. RELIHAN Houston, TX 77210-4739
Kamin & Frankel Senior Vice President and Secretary
CUSTODIAN
ROBERT H. GRAHAM DANA R. SUTTON
President and Chief Operating Officer Vice President and Assistant Treasurer State Street Bank & Trust Company
A I M Management Group Inc. 225 Franklin Street
ROBERT G. ALLEY Boston, MA 02110
JOHN F. KROEGER Vice President
Formerly, Consultant COUNSEL TO THE FUND
Wendell & Stockel Associates, Inc. MELVILLE B. COX
Vice President Ballard Spahr
LEWIS F. PENNOCK Andrews & Ingersoll
Attorney JONATHAN C. SCHOOLAR 1735 Market Street
Vice President Philadelphia, PA 19103
IAN W. ROBINSON
Consultant; Formerly Executive P. MICHELLE GRACE COUNSEL TO THE DIRECTORS
Vice President and Assistant Secretary
Chief Financial Officer Kramer, Levin, Naftalis,
Bell Atlantic Management DAVID L. KITE Nessen, Kamin & Frankel
Services, Inc. Assistant Secretary 919 Third Avenue
New York, NY 10022
LOUIS S. SKLAR NANCY L. MARTIN
Executive Vice President Assistant Secretary DISTRIBUTOR
Hines Interests
Limited Partnership OFELIA M. MAYO A I M Distributors, Inc.
Assistant Secretary 11 Greenway Plaza
Suite 1919
KATHLEEN J. PFLUEGER Houston, TX 77046
Assistant Secretary
SAMUEL D. SIRKO
Assistant Secretary
STEPHEN I. WINER
Assistant Secretary
MARY J. BENSON
Assistant Treasurer
</TABLE>
<PAGE> 24
<TABLE>
<S> <C>
[PHOTO OF 11 GREENWAY PLAZA] THE AIM FAMILY OF FUNDS(R)
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 Management Group has provided leadership AIM Tax-Exempt Cash Fund
in the mutual fund industry since 1976
and currently manages approximately $54 billion *AIM Aggressive Growth Fund was closed to new
in assets for more than 2.3 million investors on July 18, 1995. **On September 25,
shareholders, including individual investors, 1995, AIM Government Securities Fund became AIM
corporate clients, and financial institutions. Intermediate Government Fund. For more complete
The AIM Family of Funds(R) is distributed information about any AIM Fund(s), including
nationwide, and AIM today ranks among the sales charges and expenses, ask your financial
nation's top 15 mutual fund companies in consultant or securities dealer for a free prospectus(es).
assets under management, according to Please read the prospectus(es) carefully before you
Lipper Analytical Services, Inc. invest or send money.
[AIM LOGO APPEARS HERE] ----------------------
BULK RATE
A I M Distributors, Inc. U.S. POSTAGE
11 Greenway Plaza, Suite 1919 PAID
Houston, TX 77046 HOUSTON, TX
Permit No. 1919
----------------------
</TABLE>
