<PAGE> 1
[AIM LOGO APPEARS HERE]
AIM GLOBAL
INCOME FUND
SEMIANNUAL REPORT APRIL 30, 1997
<PAGE> 2
-------------------------------
AIM GLOBAL INCOME FUND
For shareholders who seek
a high level of current 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 differing fees and expenses.
o The 30-day yield is calculated on the basis of a formula defined by
the SEC. The formula is based on the portfolio's potential earnings
from dividends, interest, yield-to-maturity, or yield-to-call of the
bonds in the portfolio, net of all expenses and expressed on an
annualized basis.
o The Fund's annualized distribution rate reflects the Fund's most
recent monthly dividend distribution multiplied by 12 and divided by
the most recent month-end net asset value.
o The Fund's investment return and principal value will fluctuate so
that an investor's shares, when redeemed, may be worth more or less
than their original cost.
o The Fund's portfolio composition may change and there is no assurance
the Fund will continue to hold any specific security in any particular
country.
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. Index performance is for the
period 9/30/94 to 4/30/97.
o The Salomon Brothers World Government Bond Index is an unmanaged
composite of long-term foreign government debt securities. Index
performance is for the period 9/30/94 to 4/30/97.
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 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 AFFLIATE;
AND ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS
OF PRINCIPAL AMOUNT INVESTED.
This report may be distributed only to current shareholders or to persons who
have received a current prospectus of the Fund.
<PAGE> 3
The Chairman's Letter
Dear Fellow Shareholder:
We have seen a great deal of change in the markets during
the past few months, change that has been unsettling for
even experienced market watchers.
[PHOTO OF In many instances, the change has occurred suddenly.
Charles T. Global markets fluctuated widely during the last six
Bauer, months, particularly in the U.S. as investors reacted to a
Chairman of cloudy economic picture. For much of the period, concern
the Board of was high that the U.S. economy may be accelerating too
THE FUND, rapidly to be sustained, a possible forerunner to
APPEARS HERE] inflation. At one point, the Federal Reserve Board agreed
and raised short-term interest rates for the first time
since January of 1996, a move which seemed to please bond
investors.
On the following pages, your Fund's portfolio management team offers a
complete discussion of recent market conditions and how the Fund was affected.
They also discuss the Fund's portfolio strategy: why they believe the portfolio
is well-positioned for attractive total return, and why they are confident that
the reasons for investing in the Fund are as compelling as ever. These
discussions will help you better understand the relative performance of your
Fund.
Those of you who are long-time investors, and those who are new shareholders
in The AIM Family of Funds , should recognize that periods of falling prices in
both stock and bond markets are inevitable. Indeed, we can learn important
lessons about investing in periods of market uncertainty.
In our experience, we have observed that the best action to take is to stay
focused-not on the market, but on your own long-term goals. The market can
change from day to day. Those who try to "time" the market, over time, tend to
be less successful than those who continue to follow a disciplined investment
strategy.
It's also important to maintain realistic expectations about investing.
Short-term volatility in financial markets may tempt some investors to liquidate
investments regardless of their personal financial objectives. Remember that
time is the best medicine for uncertain markets. The market's performance in
recent months has been driven by concerns about the possibility of rising
inflation. Yet, no evidence of inflation has materialized.
There are a few time-tested strategies that can help you negotiate through
changing markets. Diversification may help you cushion the effects of a downturn
and reduce your risk exposure in any one type of security. A long-term
perspective may help you maintain your focus despite day-to-day market activity.
It's also a good idea to review your investment plan periodically with your
financial consultant to help you understand the effects of changing markets and
stay on track with your long-term financial goals.
AIM/INVESCO MERGER FINALIZED
We are pleased to announce that the merger of A I M Management Group Inc. and
INVESCO plc was concluded on February 28, 1997. AIM is now part of one of the
------------------
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.
------------------
Continued on next page
<PAGE> 4
The Chairman's Letter
------------------------
It's also a good idea to
review your investment plan
periodically with
your financial consultant
to help you understand the effects of
changing markets
and stay on track with
your long-term financial goals.
------------------------
world's largest independent investment management groups with approximately
$160 billion in assets under management. The combined company, AMVESCAP plc,
has the financial strength necessary to meet your needs in an increasingly
competitive financial services environment, both in the United States and
worldwide. And, we will not change the portfolio management, investment style,
or name of any of the AIM funds you own. We have begun a new and promising era
for AIM, one we believe will yield exciting opportunities.
We appreciate the trust you have placed in us and we look forward to our
continued close association. If you have any questions or comments about this
report, we invite you to call Client Services at 800-959-4246 during normal
business hours. For automated account information 24 hours a day, call the AIM
Investor Line at 800-246-5463. We also invite you to visit AIM's Internet Web
site at www.aimfunds.com.
Sincerely,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
2
<PAGE> 5
The Managers' Overview
MARKET VOLATILITY, STRONG
U.S. DOLLAR AFFECT GLOBAL BONDS
A roundtable discussion with the Fund management team for AIM Global Income
Fund for the six-month period ended April 30, 1997.
- --------------------------------------------------------------------------------
Q. HOW DID AIM GLOBAL INCOME FUND PERFORM?
A. During the six-month period ended April 30, 1997, AIM Global Income
Fund posted a total return of 1.04% and 0.78% for Class A and Class B
shares, respectively. The Fund's performance compared favorably to the
total return of the Salomon Brothers World Government Bond Index of -
4.50%.
Keep in mind, six months is a relatively short period for measuring bond
performance. For the year ended April 30, 1997, AIM Global Income Fund's
total return was 8.47% for Class A shares and 7.92% for Class B shares.
That bested the 0.75% total return of the Salomon Brothers World Government
Bond Index. Since inception (September 15, 1994), the Fund has posted
average annual returns of 10.67% for Class A shares and 10.10% for Class B
shares.
The Fund continued to provide a high level of current income for
investors. As of April 30, 1997, the Fund's 30-day distribution rate at net
asset value was 7.16% for Class A shares and 6.65% for Class B shares. The
Fund's 30-day yield at maximum offering price was 6.15% for Class A shares
and 5.97% for Class B shares.
During the six-month period covered by this report, net assets in the
Fund grew from $38.7 million to more than $50.6 million.
Q. HOW DID YOU MANAGE THE FUND DURING THE PERIOD?
A. We employ a "three-legged stool" approach to investing, holding
securities in three bond-market segments: foreign bonds, domestic
investment-grade bonds, and high-yield securities. These three asset
classes tend to perform differently because the factors that influence them
vary. Holding all three types of bonds diversifies the investment risk
associated with any one class, and that may lower the fund's volatility and
enhance its potential return.
At the end of the reporting period, the Fund's total assets were divided
as follows: foreign bonds, 39.7%; domestic investment-grade bonds, 28.8%;
high-yield bonds, 29.7%; and common and preferred stocks, 1.8%. During the
reporting period, the Fund increased its weighting in high-yield bonds,
which fared better in a strong economic growth environment.
Q. HOW DID FOREIGN BONDS PERFORM?
A. In local currency terms, most of the foreign markets where the Fund
invests performed well during the six-month period ended April 30, 1997.
The Fund benefited from exposure to such markets as the United Kingdom,
where the pound appreciated against the U.S. dollar, as well as Canada,
Australia, and New Zealand. In Europe, the solid performance can be
attributed mainly to the efforts of the various governments to reduce
budget deficits and outstanding indebtedness to comply with the standards
for admission to the European Monetary Union, scheduled to become a reality
in 1999. The Fund took advantage of these efforts by holding Swedish and
Italian securities.
However, the U.S. dollar appreciated against most major currencies and
that adversely affected returns for U.S. investors. This was reflected in
the total return of the Salomon Brothers World Government Bond Index, which
declined 4.50% during the six-month period covered by this report. The Fund
mitigated the effect of a rising dollar by selectively hedging some of its
currency exposure.
PORTFOLIO COMPOSITION
As of 4/30/97, based on total assets
================================================
High-yield bonds 29.7
Foreign bonds 39.7%
Investment-grade bonds 28.8%
Convertible preferred stock 1.8%
================================================
================================================================================
TOP FIVE HOLDINGS COUPON MATURITY
================================================================================
1. U.S. Treasury Bond 6.50% 05/2001 2.96%
2. Western Australia 8.00% 07/2003 2.58
3. U.K. Treasury 7.00% 11/2001 2.55
4. U.S. Treasury Note 6.50% 08/2005 2.34
5. U.S. Treasury Note 6.50% 11/2026 1.85
Please keep in mind that the Fund's portfolio is subject to change and there is
no assurance the Fund will continue to hold any particular security.
================================================================================
See important Fund & index disclosures inside front cover.
3
<PAGE> 6
The Manager's Overview
======================================
COUNTRIES REPRESENTED IN THE PORTFOLIO
As of 4/30/97
- --------------------------------------
Canada
United States
Germany
Netherlands
United Kingdom
France
Switzerland
Italy
Sweden
Japan
New Zealand
Australia
Please keep in mind that the Fund's portfolio is subject to change and there is
no assurance the Fund will continue to hold any specific security in any
particular country.
======================================
Q. WHAT WERE CONDITIONS LIKE IN THE DOMESTIC INVESTMENT-GRADE BOND MARKET?
A. Concern over interest rates dominated the investment-grade bond market
and that created volatility. The Federal Reserve Board maintained a steady
monetary policy in the fall of 1996, and that helped to spark a rally in
the bond market that continued until December when inflation concerns
resurfaced.
Since early 1997, investors have become concerned that the Federal
Reserve Board would raise interest rates to slow growth and contain
inflation. Bond prices ebbed and advanced during December 1996 and January
1997, only to fall in February after Fed Chairman Alan Greenspan warned of
the possibility of a "pre-emptive" tightening of monetary policy to
forestall inflation. On March 25, 1997, the Fed increased the federal funds
rate-the rate banks charge each other for overnight loans-from 5.25% to
5.50%, and that triggered an increase in bond yields as their prices fell.
The weakness in the bond market continued until the end of the reporting
period when new economic reports showed evidence that inflation was not
accelerating and prospects for an agreement to balance the federal budget
sent bond prices higher.
Q. WHAT ABOUT HIGH-YIELD BONDS?
A. High-yield bonds were the top-performing segment of the portfolio.
Unlike investment-grade bonds, high-yield bonds usually benefit from
healthy economic expansion. Improving business conditions and cash flows
can have a positive impact on the credit situation of many corporate
borrowers. Except for a decline from mid-March to mid-April, corresponding
roughly to the downturn in the U.S. stock market, high-yield bonds
performed well throughout most of the period because of burgeoning economic
growth.
Q. HOW WAS THE FUND POSITIONED AT THE END OF THE REPORTING PERIOD?
A. There were 175 holdings in the Fund as of April 30, 1997. The weighted
average maturity of the portfolio was 8.97 years and its duration was 5.5
years. Funds with a shorter duration tend to be less sensitive to market
fluctuations.
The Fund had an average portfolio quality rating of A as measured by
Standard & Poor's Corporation (S&P) and Moody's Investor Service (Moody's),
two widely known credit rating agencies. These ratings are historical and
are based on analysis of the credit quality of the individual securities in
the Fund's portfolio.
Q. WHAT IS YOUR MARKET OUTLOOK?
A. Although the U.S. gross domestic product (GDP) grew at a rate of 5.8%
in the first quarter of 1997-its highest level in nearly 10 years-
inflationary pressures remain modest. The Employment Cost Index, a key
inflation indicator, rose only 0.6% in the first quarter. Additionally, a
balanced budget agreement has been approved that provides tax cuts for
investors. If inflation can be contained and progress toward a balanced
budget achieved, it should prove beneficial to domestic bond markets.
While the Fed left interest rates unchanged at its May meeting, investors
are still concerned the central bank may further tighten monetary policy.
This could perpetuate volatility in the domestic bond market.
We continue to be optimistic about foreign bonds. European central banks
in particular seem to be committed to maintaining a moderate growth
environment, and governments around the globe continue to target lower
fiscal spending and government debt levels. That should help contain
interest rates and create a favorable environment for bonds.
In view of these changing economic developments, the Fund remains
committed to maintaining exposure in the three key bond-market
sectors-foreign bonds, investment-grade bonds, and high-yield bonds-to
reduce volatility and enhance opportunities for attractive returns.
See important Fund & index disclosures inside front cover.
4
<PAGE> 7
Long-Term Performance
AIM GLOBAL INCOME FUND VS. BENCHMARK INDEXES
The chart below compares your Fund to benchmark indexes. It is intended to give
you a general idea of how your Fund performed compared to the bond market over
the period 9/15/94-4/30/97. It is important to understand the difference
between your Fund and an index. An index measures the performance of a
hypothetical portfolio, in this case the Lehman Brothers Government Bond Index
and the Salomon Brothers World Government Bond Index. Unlike your Fund, an
index is not managed; therefore, there are no sales charges, expenses or fees.
You cannot invest in an index. But if you could buy all the securities that
make up a particular index, you would incur expenses that would affect the
return on your investment.
===============================================================================
GROWTH OF A $10,000 INVESTMENT
9/15/94-4/30/97
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
AIM GLOBAL INCOME FUND, AIM GLOBAL INCOME FUND, SALOMON BROTHERS LEHMAN BROTHERS
CLASS A CLASS B WORLD GOVERNMENT BOND INDEX GOVERNMENT BOND INDEX
- -----------------------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
9/15/94 $9,524 $10,000 $10,000 $10,000
11/94 9,510 9,967 9,974 10,021
2/95 9,929 10,395 10,441 10,523
5/95 10,559 11,031 11,074 11,673
8/95 10,798 11,268 11,249 11,365
11/95 11,236 11,713 11,709 11,838
2/96 11,394 11,871 11,704 11,754
5/96 11,480 11,947 11,512 11,693
8/96 11,798 12,262 11,664 12,058
11/96 12,607 13,088 12,329 12,497
2/97 12,539 12,989 12,234 11,974
4/97 12,426 12,571 12,279 11,778
</TABLE>
Past performance is no guarantee of comparable future results.
================================================================================
AVERAGE ANNUAL TOTAL RETURNS
As of 3/31/97, the most recent calendar quarter, including sales charges.
CLASS A SHARES
Inception (9/15/94) 8.48%
1 Year 2.46*
CLASS B SHARES
Inception (9/15/94) 8.98%
1 Year 2.03**
*7.57% excluding sales charges.
**7.03% excluding sales charges.
================================================================================
Your Fund's total return includes sales charges, expenses, and management fees.
For Fund performance calculations and descriptions of indexes cited on this
page, please refer to the inside front cover.
5
<PAGE> 8
For Consideration
WHY SMART MONEY
REMAINS FULLY INVESTED
Some investors like to wait for just the right moment to get into the stock
market . . . and for just the right time to pull their investment out. If that
sounds like you, there's something you should know. During the periods when
you're content to sit on the sidelines, some of the market's best single-day
performances could slip right past you.
Are you so confident in your timing strategy that you're willing to forfeit
those gains? Missing even a handful of them could cost you dearly.
MISSING THE 20 BEST DAYS COULD CUT YOUR RETURN IN HALF
If you had invested a hypothetical $10,000 in the S&P 500 Index on December 31,
1991, by December 31, 1996 your $10,000 would have grown to $20,276, an average
annual total return of 15.18%.
But suppose during that five-year period there were times when you decided to
get out of the market, and as a result you ended up missing the market's 10 best
single-day performances. In that case, your 15.18% return would have been
reduced to 11.03%. If you had missed the market's 20 best days, that 15.18%
return would have been sliced almost in half, down to 7.72%.
SMART INVESTORS DON'T PLAY THE TIMING GAME
The more you try to time the market, the greater your chances become of missing
the market's biggest single-day gains. That's why smart investors don't play
the timing game. They don't let the market's short-term gyrations sideline them
or dictate their investment objectives. They're patient investors-focused on
the long term and on their long-term goals.
Of course, past performance cannot guarantee comparable future results. But
one thing is clear. It's time, not timing, that counts when it comes to
potentially maximizing your investment return.
TALK TO YOUR FINANCIAL CONSULTANT
To find out more about the advantages of investing through the market's ups and
downs, consult the combined expertise of your financial consultant and the
investment management of AIM. Regardless of the market, AIM's investment
strategy stays the same; we believe earnings drive stock prices and stock
prices drive portfolio performance.
AIM managed approximately $73 billion as of May 23, 1997, for financial
institutions, corporate clients and individual investors like you. Your
financial consultant can help you start investing with AIM today.
THE PENALTY FOR MISSING THE MARKET
TRYING TO TIME THE MARKET CAN BE AN INEXACT--AND COSTLY--EXERCISE.
S&P 500 INDEX: DECEMBER 31, 1991-DECEMBER 31, 1996.
==================================================================
AVERAGE ANNUAL GROWTH
PERIOD OF INVESTMENT TOTAL RETURN $10,000
- ------------------------------------------------------------------
Fully Invested 15.18% $20,276
Miss the 10 Best Days 11.03 16,876
Miss the 20 Best Days 7.72 14,507
Miss the 40 Best Days 2.13 11,113
Miss the 60 Best Days (2.37) 8,868
==================================================================
Source: Ibbotson Associates, Towers Data Systems HYPO--Registered Trademark--.
Past performance cannot guarantee comparable future results. The unmanaged
Standard & Poor's Composite Index of 500 Stocks is a group of unmanaged
securities widely regarded to be representative of the stock market in general;
results mentioned assume the reinvestment of dividends. An investment cannot be
made in an index.
--------------------
Instead of panicking
when the market moves,
try focusing on long-term goals.
Remember, it's time--
not timing--
that counts.
--------------------
6
<PAGE> 9
For Consideration
ARE YOU A MUTUAL FUND
TRADER OR INVESTOR?
We all know the story of the tortoise and the hare. The tortoise won the race
because he had a plan, he stuck with it, and he didn't let the hare's fast
start change his tune.
When you consider your investment strategy, are you the tortoise or the hare?
ARE YOU A MUTUAL FUND INVESTOR OR TRADER?
History shows that successful investors achieve good returns by setting goals,
being diversified, buying more when markets correct, and being patient. That's
the same strategy the tortoise used to beat the hare.
Smart investors think like the tortoise. They know mutual funds are long-term
investments, so they overlook daily market fluctuations. And they understand
that discipline and patience are the keys to successful investing.
Mutual fund traders, on the other hand, act like the hare: they pay more
attention to short-term changes rather than long-term goals. While they may
break out to a big lead, they just might run out of gas before they reach the
finish line.
The next time you think about your investments, consider whether you're acting
like the tortoise or the hare. Remember: time, not timing, makes the difference.
TALK TO YOUR FINANCIAL CONSULTANT
The tortoise beat the hare because he knew his goals and how he might reach
them. To help reach your financial goals, ask your financial consultant about
AIM. Regardless of the market, AIM's disciplined investment strategy remains
the same: we believe earnings drive stock prices and stock prices drive
portfolio performance.
AIM companies managed approximately $73 billion as of May 23, 1997 for
financial institutions, corporate clients, and individual investors like you.
Your financial consultant can help you start investing with AIM today.
THE PATIENT INVESTOR . . .
o Develops long-term financial goals and sticks to them
o Disregards short-term market fluctuations
o Considers a loss a buying opportunity
o Trusts expertise and experience of proven management
o Depends on logic to dictate important decisions
o Respects the advantages financial consultants can provide
o Understands the benefits of regular, disciplined investing
o Realizes that sage advice, not sales fees, is paramount
THE RESTLESS TRADER . . .
o Waffles between daily and weekly time horizons
o Frets over daily price changes in the morning paper
o Panics by selling shares at the first sign of a loss
o Solicits hot tips from friends and neighbors
o Succumbs to the emotion of the moment
o Refuses to listen to the wisdom of a financial consultant
o Fails to explore the benefits of consistent investing through dollar-
cost averaging
o Emphasizes transaction costs
Dollar-cost averaging does not assure a profit and does not protect against
loss in declining markets. Since dollar-cost averaging involves continuous
investing regardless of fluctuating securities prices, you should consider your
ability to continue purchases over an extended period of time.
7
<PAGE> 10
SCHEDULE OF INVESTMENTS
APRIL 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
U.S. DOLLAR DENOMINATED
NON-CONVERTIBLE BONDS & NOTES-46.26%
ADVERTISING/BROADCASTING-2.29%
Esat Holdings Ltd., Units,
12.50%, 02/01/07
(acquired 02/21/97-03/05/97;
cost $204,750)(b)(c)(d) $ 350,000 $ 199,062
- --------------------------------------------------------------
News America Holdings, Inc.,
Sr. Gtd. Deb., 9.25%, 02/01/13 250,000 275,105
- --------------------------------------------------------------
SFX Broadcasting, Inc.,
Series B Sr. Sub. Notes, 10.75%,
05/15/06 200,000 210,000
- --------------------------------------------------------------
Time Warner, Inc.,
Notes, 8.18%, 08/15/07 200,000 204,972
- --------------------------------------------------------------
Unsec. Deb., 6.85%, 01/15/26 125,000 122,129
- --------------------------------------------------------------
United International Holdings, Inc.,
Sr. Sec. Disc. Notes, 12.85%,
11/15/99(e) 200,000 145,750
- --------------------------------------------------------------
1,157,018
- --------------------------------------------------------------
AIRLINES-2.37%
Airplanes Pass Through Trust,
Sub. Bonds, 10.875%, 03/15/19 230,000 254,295
- --------------------------------------------------------------
Delta Air Lines, Inc.,
Deb., 9.00%, 05/15/16 550,000 607,244
- --------------------------------------------------------------
United Air Lines, Inc.,
Pass Thru Certificates, 9.56%,
10/19/18 300,000 338,175
- --------------------------------------------------------------
1,199,714
- --------------------------------------------------------------
AUTOMOBILE/TRUCK PARTS & TIRES-1.43%
Blue Bird Body Co.,
Series B Sr. Sub. Notes, 10.75%,
11/15/06 80,000 84,000
- --------------------------------------------------------------
CSK Auto Inc.,
Sr. Sub. Notes, 11.00%, 11/01/06
(acquired 10/23/96; cost $60,000)(b) 60,000 61,725
- --------------------------------------------------------------
Lear Seating,
Sr. Gtd. Sub. Notes, 11.25%,
07/15/00 570,000 579,263
- --------------------------------------------------------------
724,988
- --------------------------------------------------------------
BANKING-3.97%
Bankers Trust New York Corp.,
Gtd. Notes, 7.75%, 02/25/27 400,000 381,044
- --------------------------------------------------------------
Deutsche Bank Financial,
Gtd. Unsec. Sub. Deb., 6.70%,
12/13/06 750,000 720,375
- --------------------------------------------------------------
First Union Bancorp,
Sub. Deb., 7.50%, 04/15/35 200,000 205,122
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
BANKING-(CONTINUED)
Royal Bank of Scotland PLC,
Yankee Sub. Notes, 6.375%,
02/01/11 $ 500,000 $ 451,235
- --------------------------------------------------------------
Sovereign Bancorp, Inc.,
Sub. Notes, 8.00%, 03/15/03 250,000 253,997
- --------------------------------------------------------------
2,011,773
- --------------------------------------------------------------
BEVERAGES (SOFT DRINKS)-1.15%
Coca-Cola Enterprises, Inc.,
Putable Notes, 7.40%, 06/20/20(e) 3,113,000 579,827
- --------------------------------------------------------------
CABLE TELEVISION-2.94%
Comcast Cable Communications,
Notes, 8.50%, 05/01/27
(acquired 04/24/97; cost
$499,145)(b) 500,000 515,000
- --------------------------------------------------------------
Diamond Cable Communications PLC,
Sr. Yankee Disc. Notes, 10.75%,
02/15/07
(acquired 02/21/97; cost
$517,198)(b)(d) 870,000 522,000
- --------------------------------------------------------------
Fundy Cable Ltd.,
Sr. Yankee Sec. Second Priority
Notes, 11.00%, 11/15/05 30,000 31,350
- --------------------------------------------------------------
Kabelmedia Holdings
GmbH, Sr. Yankee Unsec. Disc. Notes,
13.625%, 08/01/06(d) 200,000 117,000
- --------------------------------------------------------------
Rifkin Acquisition Partners L.L.P.,
Sr. Sub. Notes, 11.125%, 01/15/06 40,000 41,000
- --------------------------------------------------------------
TeleWest Communications PLC,
Sr. Yankee Disc. Deb., 11.00%,
10/01/07(d) 50,000 34,000
- --------------------------------------------------------------
Viacom, Inc.,
Sr. Notes, 7.75%, 06/01/05 100,000 97,615
- --------------------------------------------------------------
Wireless One, Inc.,
Sr. Notes, 13.00%, 10/15/03 200,000 132,000
- --------------------------------------------------------------
1,489,965
- --------------------------------------------------------------
CHEMICALS-1.26%
BPC Holding Corp.,
Series B Sr. Notes, 12.50%, 06/15/06 100,000 104,500
- --------------------------------------------------------------
Crain Industries, Inc.,
Sr. Sub. Notes, 13.50%, 08/15/05 40,000 45,400
- --------------------------------------------------------------
LaRoche Industries, Inc.,
Sr. Sub. Notes, 13.00%, 08/15/04 100,000 109,500
- --------------------------------------------------------------
Polymer Group, Inc.,
Sr. Notes, 12.25%, 07/15/02 200,000 219,000
- --------------------------------------------------------------
</TABLE>
8
<PAGE> 11
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
CHEMICALS-(CONTINUED)
Sterling Chemicals, Inc.,
Sr. Unsec. Sub. Notes, 11.75%,
08/15/06 $ 150,000 $ 158,625
- --------------------------------------------------------------
637,025
- --------------------------------------------------------------
CONSUMER NON-DURABLES-0.21%
Hines Horticulture, Inc.,
Series B Sr. Gtd. Sub. Notes,
11.75%, 10/15/05 100,000 104,500
- --------------------------------------------------------------
CONTAINERS-2.38%
Ivex Holdings Corp.,
Series B Sr. Disc. Deb., 13.25%,
03/15/05(d) 500,000 414,375
- --------------------------------------------------------------
MVE Inc.,
Sr. Sec. Notes, 12.50%, 02/15/02 100,000 102,375
- --------------------------------------------------------------
National Fiberstock Corp.,
Series B Sr. Notes, 11.625%,
06/15/02 200,000 207,000
- --------------------------------------------------------------
Owens-Illinois, Inc.,
Sr. Sub Notes, 10.50%, 06/15/02 50,000 52,750
- --------------------------------------------------------------
Sr. Deb., 11.00%, 12/01/03 200,000 222,750
- --------------------------------------------------------------
Tekni-Plex Inc.,
Sr. Sub. Notes, 11.25%, 04/01/07
(acquired 04/01/97; cost
$200,000)(b) 200,000 206,120
- --------------------------------------------------------------
1,205,370
- --------------------------------------------------------------
ELECTRIC POWER-2.01%
AES China Generating Co.,
Sr. Yankee Unsec. Notes, 10.125%,
12/15/06 30,000 31,575
- --------------------------------------------------------------
El Paso Electric Co.,
Series D Sec. 1st Mortgage Bonds,
8.90%, 02/01/06 250,000 262,865
- --------------------------------------------------------------
Series E Sec. 1st Mortgage Bonds,
9.40%, 05/01/11 250,000 268,267
- --------------------------------------------------------------
Panda Funding Corp.,
Series A-1 Pooled Project Bonds,
11.625%, 08/20/12 199,591 206,577
- --------------------------------------------------------------
Panda Global Energy Co.,
Sr. Yankee Sec. Notes, 12.50%,
04/15/04 (acquired 04/11/97;
cost $242,954)(b) 260,000 248,300
- --------------------------------------------------------------
1,017,584
- --------------------------------------------------------------
ELECTRONIC COMPONENTS/MISCELLANEOUS-0.59%
Electronic Retailing Systems
International, Inc., Units,
13.25%, 02/01/04 (acquired 01/21.97;
cost $298,685)(b)(d)(f) 440,000 299,200
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
ENGINEERING & CONSTRUCTION-0.53%
MMI Products Inc.,
Sr. Sub. Notes, 11.25%, 04/15/07
(acquired 04/11/97; cost
$260,000)(b) $ 260,000 $ 269,100
- --------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-1.57%
Associates Corp. of North America,
Series B Sr. Deb., 7.95%, 02/15/10 100,000 105,291
- --------------------------------------------------------------
Household Finance Corp.,
Notes, 7.125%, 09/01/05 700,000 691,187
- --------------------------------------------------------------
796,478
- --------------------------------------------------------------
FOOD/PROCESSING-1.79%
Chiquita Brands International, Inc.,
Sr. Unsec. Notes, 10.25%, 11/01/06 80,000 84,600
- --------------------------------------------------------------
ConAgra Inc.,
Sr. Unsec. Notes, 7.125%, 10/01/26 400,000 400,084
- --------------------------------------------------------------
Del Monte Corp.,
Sr. Sub. Notes, 12.25%, 04/15/07
(acquired 04/15/97;
cost $254,540)(b) 260,000 267,800
- --------------------------------------------------------------
International Home Foods, Inc.,
Sr. Gtd. Sub. Notes, 10.375%,
11/01/06 50,000 51,000
- --------------------------------------------------------------
Pilgrim's Pride Corp.,
Sr. Sub. Notes, 10.875%, 08/01/03 100,000 103,625
- --------------------------------------------------------------
907,109
- --------------------------------------------------------------
FOREIGN GOVERNMENT SECURITIES-0.61%
Province of Manitoba,
Yankee Bonds, 7.75%, 07/17/16 300,000 309,297
- --------------------------------------------------------------
GAMING-0.89%
Coast Hotels & Casinos Inc.,
Series B Sec. 1st Mortgage Gtd.
Notes, 13.00%, 12/15/02 70,000 77,350
- --------------------------------------------------------------
Harvey Casinos Resorts,
Sr. Unsec. Sub. Notes, 10.625%,
06/01/06 100,000 106,125
- --------------------------------------------------------------
Showboat Marina Casino
Partnership & Showboat
Marina Financial Corp.,
Series B Sec. 1st Mortgage Notes,
13.50%, 03/15/03 100,000 114,000
- --------------------------------------------------------------
Trump Atlantic City Associates,
Sec. 1st Mortgage
Gtd. Notes, 11.25%, 05/01/06 155,000 151,125
- --------------------------------------------------------------
448,600
- --------------------------------------------------------------
GAS DISTRIBUTION-0.60%
Ferrellgas Partners,
Series B Sr. Sec. Gtd. Notes,
9.375%, 06/15/06 300,000 301,500
- --------------------------------------------------------------
</TABLE>
9
<PAGE> 12
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
HOME BUILDING-0.11%
Continental Homes Holdings Corp.,
Sr. Unsec. Gtd. Notes, 10.00%,
04/15/06 $ 55,000 $ 54,450
- --------------------------------------------------------------
HOTELS/MOTELS-0.47%
ITT Corp., Unsec. Gtd. Deb.,
7.375%, 11/15/15 150,000 136,933
- --------------------------------------------------------------
John Q. Hammons Hotels Inc.,
Sec. 1st Mortgage Notes, 9.75%,
10/01/05 100,000 100,750
- --------------------------------------------------------------
237,683
- --------------------------------------------------------------
LEISURE & RECREATION-0.36%
Cobblestone Golf Group Inc.,
Series B Sr. Notes, 11.50%, 06/01/03 100,000 104,000
- --------------------------------------------------------------
Icon Health & Fitness,
Series B Sr. Sub. Notes, 13.00%,
07/15/02 70,000 77,350
- --------------------------------------------------------------
181,350
- --------------------------------------------------------------
MACHINERY (HEAVY)-0.10%
Fairfield Manufacturing Co., Inc.,
Sr. Sub. Notes, 11.375%, 07/01/01 50,000 52,375
- --------------------------------------------------------------
MACHINERY (MISCELLANEOUS)-0.09%
Interlake Corp.,
Sr. Notes, 12.00%, 11/15/01 40,000 44,300
- --------------------------------------------------------------
MEDICAL (PATIENT SERVICES)-1.13%
Dynacare Inc.,
Sr. Yankee Notes, 10.75%, 01/15/06 80,000 82,000
- --------------------------------------------------------------
Tenet Healthcare Corp.,
Sr. Notes, 8.00%, 01/15/05 500,000 490,000
- --------------------------------------------------------------
572,000
- --------------------------------------------------------------
MEDICAL INSTRUMENTS/PRODUCTS-0.76%
Dade International Inc.,
Series B Sr. Sub. Notes, 11.125%,
05/01/06 100,000 110,000
- --------------------------------------------------------------
Graphic Controls Corp.,
Series A Sr. Sub. Notes, 12.00%,
09/15/05 70,000 76,300
- --------------------------------------------------------------
IMED Corp.,
Sr. Sub. Notes, 9.75%, 12/01/06
(acquired 11/19/96 to 04/01/97;
cost $198,050)(b) 200,000 200,000
- --------------------------------------------------------------
386,300
- --------------------------------------------------------------
METALS-0.40%
GS Industries, Inc.,
Sr. Gtd. Notes, 12.00%, 09/01/04 75,000 78,750
- --------------------------------------------------------------
Rio Algom Ltd.,
Yankee Unsec. Deb., 7.05%, 11/01/05 130,000 124,275
- --------------------------------------------------------------
203,025
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
OIL & GAS (EXPLORATION & PRODUCTION)-1.62%
Abraxas Petroleum Corp.,
Series B Sr. Notes, 11.50%,
11/01/04 $ 120,000 $ 127,800
- --------------------------------------------------------------
Forest Oil Corp.,
Sr. Sub. Notes, 11.25%, 09/01/03 100,000 107,250
- --------------------------------------------------------------
Mariner Energy, Inc.,
Series B Sr. Sub. Notes, 10.50%,
08/01/06 110,000 112,750
- --------------------------------------------------------------
Maxus Energy Corp.,
Gtd. Deb., 11.50%, 11/15/15 170,000 178,712
- --------------------------------------------------------------
Plains Resources, Inc.,
Series B Sr. Gtd. Sub. Notes,
10.25%, 03/15/06 50,000 52,250
- --------------------------------------------------------------
Talisman Energy, Inc.,
Yankee Deb., 7.125%, 06/01/07 250,000 242,247
- --------------------------------------------------------------
821,009
- --------------------------------------------------------------
OIL & GAS (INTEGRATED)-0.41%
Wainoco Oil Corp.,
Sr. Notes, 12.00%, 08/01/02 200,000 205,500
- --------------------------------------------------------------
OIL & GAS (SPECIALTY)-1.18%
Nova Chemicals Ltd.,
Yankee Deb., 7.00%, 08/15/26 600,000 595,242
- --------------------------------------------------------------
OIL EQUIPMENT & SUPPLIES-0.04%
Falcon Drilling Co., Inc.,
Series B Sr. Notes, 9.75%, 01/15/01 20,000 20,500
- --------------------------------------------------------------
PAPER & FOREST PRODUCTS-0.37%
RAPP International Finance,
Gtd. Yankee Sec. Notes, 11.50%,
12/15/00 50,000 51,250
- --------------------------------------------------------------
United Stationer Supply,
Sr. Sub. Notes, 12.75%, 05/01/05 120,000 134,100
- --------------------------------------------------------------
185,350
- --------------------------------------------------------------
POLLUTION CONTROL-1.62%
Norcal Waste Systems Inc.,
Series B Sr. Gtd. Notes, 13.00%,
11/15/05 150,000 165,750
- --------------------------------------------------------------
WMX Technologies, Inc.,
Unsec. Notes, 7.10%, 08/01/26 650,000 655,428
- --------------------------------------------------------------
821,178
- --------------------------------------------------------------
PUBLISHING-0.12%
MDC Communications Corp.,
Sr. Yankee Unsec. Sub. Notes,
10.50%, 12/01/06 60,000 63,000
- --------------------------------------------------------------
REAL ESTATE-0.99%
Finova Capital Corp.,
Unsec. Notes, 7.40%, 05/06/06 500,000 500,740
- --------------------------------------------------------------
</TABLE>
10
<PAGE> 13
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
RETAIL (FOOD & DRUG)-0.85%
Carr-Gottstein Foods Co.,
Sr. Sub. Notes, 12.00%, 11/15/05 $ 100,000 $ 107,750
- --------------------------------------------------------------
Great Atlantic & Pacific
Tea Co., Inc.,
Yankee Gtd. Notes, 7.78%, 11/01/00
(acquired 10/18/95;
cost $100,000)(b) 100,000 101,899
- --------------------------------------------------------------
Jitney-Jungle Stores of America Inc.,
Sr. Gtd. Notes, 12.00%, 03/01/06 200,000 218,250
- --------------------------------------------------------------
427,899
- --------------------------------------------------------------
RETAIL (STORES)-0.36%
Loehmann's Holdings, Inc.,
Sr. Unsec. Notes, 11.875%, 05/15/03 100,000 104,375
- --------------------------------------------------------------
Specialty Retailers Inc.,
Series B Sr. Sub. Notes, 11.00%,
08/15/03 75,000 78,656
- --------------------------------------------------------------
183,031
- --------------------------------------------------------------
SCHOOLS-0.38%
Herff Jones Inc.,
Sr. Sub. Notes, 11.00%, 08/15/05 100,000 105,875
- --------------------------------------------------------------
Scholastic Brands Inc.,
Sr. Sub. Notes, 11.00%, 01/15/07
(acquired 12/10/96-12/12/96; cost
$85,694)(b) 85,000 87,125
- --------------------------------------------------------------
193,000
- --------------------------------------------------------------
SEMICONDUCTORS-0.24%
Advanced Micro Devices, Inc.,
Sr. Sec. Notes, 11.00%, 08/01/03 110,000 120,038
- --------------------------------------------------------------
STEEL-0.11%
Gulf States Steel Corp.,
1st Mortgage Notes, 13.50%, 04/15/03 60,000 57,000
- --------------------------------------------------------------
TELECOMMUNICATIONS-6.08%
Capstar Broadcasting Partners,
Sr. Disc. Notes, 12.75%, 02/01/09
(acquired 02/14/97-02/19/97; cost
$213,762)(b)(d) 390,000 219,375
- --------------------------------------------------------------
Celcaribe S.A.,
Sr. Sec. Notes, 13.50%, 03/15/04(d) 500,000 447,500
- --------------------------------------------------------------
Dial Call Communications,
Sr. Disc. Notes, 12.25%, 04/15/04(d) 140,000 110,250
- --------------------------------------------------------------
ICG Holdings, Inc.,
Sr. Disc. Notes, 11.625%, 03/15/07
(acquired 03/06/97; cost
$227,064)(b)(d) 400,000 211,420
- --------------------------------------------------------------
Nextel Communications, Inc.,
Sr. Disc. Notes, 11.50%, 09/01/03(d) 220,000 182,600
- --------------------------------------------------------------
Orion Network Systems, Inc.,
Units, 11.25%, 01/15/07(g) 420,000 424,200
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
TELECOMMUNICATIONS-(CONTINUED)
PriCellular Wireless Corp.,
Sr. Notes, 10.75%, 11/01/04 $ 130,000 $ 135,200
- --------------------------------------------------------------
PrimeCo Inc.,
Sr. Sub. Notes, 12.75%, 03/01/05 80,000 90,600
- --------------------------------------------------------------
ProNet, Inc.,
Sr. Sub. Notes, 11.875%, 06/15/05 30,000 28,050
- --------------------------------------------------------------
Sprint Spectrum L.P.,
Sr. Unsec. Notes, 11.00%, 08/15/06 200,000 217,000
- --------------------------------------------------------------
Sygnet Wireless Inc.,
Sr. Unsec. Notes, 11.50%, 10/01/06 160,000 159,800
- --------------------------------------------------------------
TCI Communications Inc.,
Sr. Notes, 8.00%, 08/01/05 150,000 148,425
- --------------------------------------------------------------
Teleport Communications Group Inc.,
Sr. Unsec. Disc. Notes, 11.125%,
07/01/07(d) 300,000 207,750
- --------------------------------------------------------------
360 Communications Co.,
Sr. Unsec. Notes, 7.50%, 03/01/06 500,000 494,350
- --------------------------------------------------------------
3,076,520
- --------------------------------------------------------------
TELEPHONE-0.16%
PhoneTel Technologies, Inc.,
Sr. Unsec. Gtd. Notes, 12.00%,
12/15/06 80,000 79,200
- --------------------------------------------------------------
TRANSPORTATION-1.12%
Stena A.B.,
Sr. Yankee Unsec. Notes, 10.50%,
12/15/05 80,000 85,200
- --------------------------------------------------------------
Transportacion Maritima
Mexicana S.A. de C.V.,
Sr. Yankee Unsec. Notes, 10.00%,
11/15/06 200,000 190,000
- --------------------------------------------------------------
Travelcenters of America,
Sr. Sub. Notes, 10.25%, 04/01/07
(acquired 03/24/97-04/07/97; cost
$288,500)(b) 290,000 290,000
- --------------------------------------------------------------
565,200
- --------------------------------------------------------------
TRUCKING-0.60%
AmeriTruck Distribution Corp.,
Series B Sr. Sub. Notes, 12.25%,
11/15/05 300,000 306,000
- --------------------------------------------------------------
Total U.S. Dollar Denominated
Non-Convertible Bonds & Notes 23,410,938
- --------------------------------------------------------------
U.S. DOLLAR DENOMINATED CONVERTIBLE
BONDS & NOTES-0.54%
TRANSPORTATION-0.54%
Laidlaw, Inc.,
Yankee Unsec. Conv. Deb., 6.00%,01/15/99
(acquired 08/19/96; cost $265,000)(b) 200,000 271,126
- --------------------------------------------------------------
</TABLE>
11
<PAGE> 14
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
NON-U.S. DOLLAR DENOMINATED
NON-CONVERTIBLE BONDS &
NOTES(h)-11.80%
CANADA-5.82%
Bank of Montreal (Banking),
Sub. Deb., 7.92%, 07/31/12 CAD 300,000 $ 228,876
- --------------------------------------------------------------
Bell Canada (Telecommunications),
Unsec. Deb., 10.875, 10/11/04 250,000 218,379
- --------------------------------------------------------------
Canadian Oil Debco Inc. (Oil & Gas),
Deb., 11.00%, 10/31/00 250,000 204,026
- --------------------------------------------------------------
NAV Canada (Transportation),
Bonds, 7.40%, 06/01/27 1,000,000 711,324
- --------------------------------------------------------------
Telegobe Canada, Inc.
(Telecommunications),
Unsec. Deb., 8.35%, 06/20/03 650,000 503,994
- --------------------------------------------------------------
Trans-Canada Pipelines (Oil & Gas)
Unsec. Notes, 8.55%, 02/01/06 500,000 393,880
- --------------------------------------------------------------
Series Q Deb., 10.625%, 10/20/09 375,000 337,956
- --------------------------------------------------------------
Westcoast Energy, Inc. (Electric Power),
Deb., 6.45%, 12/18/06 (acquired
12/03/96; cost $369,585)(b) 500,000 344,477
- --------------------------------------------------------------
2,942,912
- --------------------------------------------------------------
FRANCE-0.45%
Credit Foncier de France (Banking),
Sr. Unsec. Unsub. Eurobonds,
6.50%, 02/22/99 FRF 750,000 97,140
- --------------------------------------------------------------
Sr. Unsec. Unsub. Eurobonds,
6.00%, 11/15/01 250,000 44,920
- --------------------------------------------------------------
IBM International Finance N.V.
(Computer Mainframes),
Sr. Unsec. Unsub. Eurobonds,
10.00%, 08/29/97 500,000 87,857
- --------------------------------------------------------------
229,917
- --------------------------------------------------------------
GERMANY-2.60%
Daimler-Benz A.G. (Finance-Consumer Credit)
Gtd. Unsub. Eurobonds, 4.125%,
07/05/03 DEM 400,000 314,990
- --------------------------------------------------------------
International Bank for
Reconstruction & Development
(Supranational Organization),
Unsec. Global Bonds, 7.125%,
04/12/05 475,000 300,091
- --------------------------------------------------------------
LKB Global (Banking),
Gtd. Notes, 6.00%, 01/25/06 1,200,000 701,929
- --------------------------------------------------------------
1,317,010
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
ITALY-1.48%
KFW International Finance Inc.
(Finance-Consumer Credit), Gtd.
Eurobonds, 11.625%, 11/27/98 ITL 1,200,000,000 $ 747,926
- --------------------------------------------------------------
SWEDEN-0.86%
Swedish Export Credit
(Finance-Consumer Credit),
Unsec. Unsub. Eurobonds,
11.70%, 12/04/98 SEK 700,000,000 437,210
- --------------------------------------------------------------
UNITED KINGDOM-0.59%
Ford Credit Europe PLC
(Automobile-Manufacturers),
Deb., 6.00%, 03/30/99 GBP 200,000 119,852
- --------------------------------------------------------------
KFW International Finance
(Finance-Asset Management),
Gtd. Eurobonds, 10.625%, 09/03/01 100,000 179,692
- --------------------------------------------------------------
299,544
- --------------------------------------------------------------
Total Non-U.S. Dollar Denominated
Non-Convertible Bonds & Notes 5,974,519
- --------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED
CONVERTIBLE BONDS & NOTES(h)-3.75%
FRANCE-0.10%
Societe Generale (Banking),
Conv. Deb., 3.50%, 01/01/00 FRF 231,000 47,542
- --------------------------------------------------------------
JAPAN-2.71%
JUSCO Co. Ltd.
(Consumer Non-Durables),
Conv. Bonds, 1.20%, 02/20/01 JPY 40,000,000 566,116
- --------------------------------------------------------------
Sony Corp.
(Electronic Components/Miscellaneous),
Conv. Deb., 1.40%, 03/31/05 8,000,000 75,472
- --------------------------------------------------------------
Sumitomo Bank International
Finance N.V. (Banking),
Conv. Gtd. Eurobonds, 0.75%,
05/31/01 60,000,000 505,180
- --------------------------------------------------------------
Toyota Motor Corp.
(Automobile-Manufacturers),
Conv. Bonds, 1.20%, 01/28/98 15,000,000 224,229
- --------------------------------------------------------------
1,370,997
- --------------------------------------------------------------
UNITED KINGDOM-0.09%
Glaxo Wellcome PLC (Medical-Drugs),
Conv. Unsub. Notes, 4.30%,
09/28/98 GBP 4,000,000 47,426
- --------------------------------------------------------------
</TABLE>
12
<PAGE> 15
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
SWITZERLAND-0.85%
Aderans Co. Ltd.
(Cosmetics & Toiletries),
Unsec. Conv. Deb., 0.875%,
08/31/98 CHF 300,000 $ 215,216
- --------------------------------------------------------------
Yamada Denki Co. Ltd.
(Retail-Stores),
Unsec. Conv. Notes, 0.25%,
03/31/00 300,000 216,234
- --------------------------------------------------------------
431,450
- --------------------------------------------------------------
Total Non-U.S. Dollar Denominated
Convertible Bonds & Notes 1,897,415
- --------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED GOVERNMENT
BONDS & NOTES(h)-22.28%
AUSTRALIA-3.72%
Australian Government,
Bonds, 7.50%, 07/15/05 AUD 750,000 576,198
- --------------------------------------------------------------
Western Australia Treasury Corp.,
Gtd. Notes, 8.00%, 07/15/03 1,650,000 1,306,869
- --------------------------------------------------------------
1,883,067
- --------------------------------------------------------------
CANADA-3.36%
B.C. Generic Residual,
Deb., 6.80%, 06/21/04(e) CAD 150,000 66,781
- --------------------------------------------------------------
Canadian Government,
Bonds, 7.00%, 12/01/06 1,000,000 734,789
- --------------------------------------------------------------
Municipal Finance Authority of
British Columbia,
Unsec. Bonds, 7.75%, 12/01/05 500,000 381,396
- --------------------------------------------------------------
Ontario Province,
Sr. Unsec. Unsub. Deb., 6.875%,
09/15/00 GBP 35,000 55,901
- --------------------------------------------------------------
Sr. Unsec. Unsub. Global Bonds,
8.00%, 03/11/03 CAD 600,000 463,636
- --------------------------------------------------------------
1,702,503
- --------------------------------------------------------------
FRANCE-1.22%
French Treasury Bill,
5.75%, 11/12/98 FRF 3,500,000 618,414
- --------------------------------------------------------------
GERMANY-1.42%
Bundesrepublic Deutschland
Bonds, 6.75, 07/15/04 DEM 750,000 466,812
- --------------------------------------------------------------
Bonds, 6.875%, 05/12/05 400,000 249,682
- --------------------------------------------------------------
716,494
- --------------------------------------------------------------
NEW ZEALAND-1.97%
New Zealand Government
Bonds, 10.00%, 07/15/97 NZD 425,000 296,513
- --------------------------------------------------------------
Bonds, 8.00%, 02/15/01 1,000,000 702,111
- --------------------------------------------------------------
998,624
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
SWEDEN-4.34%
Swedish Government
Bonds, 13.00%, 06/15/01 SEK 3,000,000 $ 477,915
- --------------------------------------------------------------
Bonds, 10.25%, 05/05/03 5,000,000 751,431
- --------------------------------------------------------------
Bonds, 6.00%, 02/09/05 4,000,000 481,293
- --------------------------------------------------------------
Bonds, 6.50%, 10/25/06 4,000,000 486,188
- --------------------------------------------------------------
2,196,827
- --------------------------------------------------------------
UNITED KINGDOM-6.25%
Fannie Mae, Sr. Unsec. Notes,
6.875%, 06/07/02 GBP 350,000 558,213
- --------------------------------------------------------------
United Kingdom Treasury
Bonds, 8.00%, 12/07/00 350,000 583,712
- --------------------------------------------------------------
Gtd. Notes, 7.00%, 11/06/01 800,000 1,288,947
- --------------------------------------------------------------
Bonds, 7.50%, 12/07/06 450,000 732,300
- --------------------------------------------------------------
3,163,172
- --------------------------------------------------------------
Total Non-U.S. Dollar Denominated
Government Bonds & Notes 11,279,101
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
CONVERTIBLE PREFERRED STOCKS-1.66%
ELECTRIC POWER-0.50%
Citizens Utilities Co.-$2.50 Conv. Pfd. 5,000 253,750
- --------------------------------------------------------------
INSURANCE (LIFE & HEALTH)-1.16%
Conseco Inc.-$4.278 Conv. Pfd. PRIDES 4,000 586,000
- --------------------------------------------------------------
Total Convertible Preferred Stocks 839,750
- --------------------------------------------------------------
WARRANTS-0.02%
CABLE TELEVISION-0.00%
Wireless One, Inc., expiring 10/19/00(i) 150 0
- --------------------------------------------------------------
CONTAINERS-0.00%
MVE Inc., expiring 02/15/02(i) 100 2,000
- --------------------------------------------------------------
LEISURE & RECREATION-0.01%
IHF Capital Inc., expiring
11/14/99(b)(i)
(acquired 11/04/94-12/07/94; cost $0) 70 2,800
- --------------------------------------------------------------
STEEL-0.00%
Gulf States Steel Corp., expiring
04/15/03(i) 60 270
- --------------------------------------------------------------
TELECOMMUNICATIONS-0.01%
Clearnet Communications Inc.,
expiring 09/15/05(i) 330 1,155
- --------------------------------------------------------------
Intermedia Communications Inc.,
expiring 06/01/00(i) 150 3,000
- --------------------------------------------------------------
4,155
- --------------------------------------------------------------
Total Warrants 9,225
- --------------------------------------------------------------
</TABLE>
13
<PAGE> 16
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
U.S. TREASURY SECURITIES-8.12%
Bonds, 6.50%, 05/31/01 $1,500,000 $ 1,498,650
- --------------------------------------------------------------
Notes, 6.50%, 08/15/05 1,200,000 1,182,648
- --------------------------------------------------------------
Notes, 6.50%, 10/15/06 500,000 492,005
- --------------------------------------------------------------
Notes, 6.50%, 11/15/26 1,000,000 938,600
- --------------------------------------------------------------
Total U.S. Treasury Securities 4,111,903
- --------------------------------------------------------------
U.S. GOVERNMENT AGENCY-0.79%
Tennessee Valley Authority, Bonds,
5.98%, 04/01/36 400,000 400,860
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
REPURCHASE AGREEMENT-3.01%(j)
HSBC Securities Inc., 5.05%,
05/01/97(k) $1,522,498 $ 1,522,498
- --------------------------------------------------------------
TOTAL INVESTMENTS-98.23% 49,717,335
- --------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-1.77% 894,754
- --------------------------------------------------------------
NET ASSETS-100.00% $ 50,612,089
==============================================================
</TABLE>
Notes to Schedule of Investments:
(a) Principal amount is in U.S. Dollars, except as indicated by
note (h).
(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, 1997 was $4,316,529 which represented 8.53% of the
Fund's net assets.
(c) Issued as a unit. This unit also includes one Sr. Deferred
Coupon Note plus one warrant to purchase 0.0447 shares of
common stock.
(d) Discounted bond at purchase. Interest rate represents coupon
rate at which the bond will accrue at a specified future
date.
(e) Zero coupon bond issued at a discount. The interest rate
shown represents the rate of original issue discount.
(f) Issued as a unit. This unit also includes one Sr. Disc. Note
plus one warrant to purchase 17.23 shares of common stock at
$5.23 per share.
(g) Issued as a unit. This unit also includes one Sr. Note plus
warrants to purchase 0.8444 shares of common stock.
(h) Foreign denominated security. Par value and coupon are
denominated in currency of country indicated.
(i) Non-income producing security acquired as part of a unit
with or in exchange for other securities.
(j) 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.
(k) Joint repurchase agreement entered into 04/30/97 with a
maturing value of $100,014,028. Collateralized by
$96,950,000 U.S. Treasury obligations, 7.50% to 7.875% due
10/31/99 to 12/31/99 with an aggregate market value at April
30, 1997 of $102,002,050.
Abbreviations:
AUD - Australian Dollar JPY - Japanese Yen
CAD - Canadian Dollar NZD - New Zealand Dollar
CHF - Swiss Franc PRIDES - Preferred Redemption Increase
Conv. - Convertible Dividend Equity Security
Deb. - Debentures Sec. - Secured
DEM - German Deutschemark SEK - Swedish Krona
Disc. - Discounted Sr. - Senior
FRF - French Franc Sub. - Subordinated
GBP - British Pound Sterling Unsec. - Unsecured
Gtd. - Guaranteed Unsub. - Unsubordinated
ITL - Italian Lire Wt. - Warrant
See Notes to Financial Statements.
14
<PAGE> 17
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1997
(Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$50,131,433) $49,717,335
- -----------------------------------------------------------
Foreign currencies, at market value (cost
$42,577) 42,404
- -----------------------------------------------------------
Receivables for:
Capital stock sold 364,575
- -----------------------------------------------------------
Forward contracts 97,593
- -----------------------------------------------------------
Dividends and interest 1,158,168
- -----------------------------------------------------------
Investment for deferred compensation plan 7,236
- -----------------------------------------------------------
Other assets 24,242
- -----------------------------------------------------------
Total assets 51,411,553
- -----------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 617,970
- -----------------------------------------------------------
Capital stock reacquired 57,907
- -----------------------------------------------------------
Dividends 57,763
- -----------------------------------------------------------
Deferred compensation plan 7,236
- -----------------------------------------------------------
Accrued administrative service fees 6,692
- -----------------------------------------------------------
Accrued distribution fees 30,171
- -----------------------------------------------------------
Accrued transfer agent fees 11,258
- -----------------------------------------------------------
Accrued operating expenses 10,467
- -----------------------------------------------------------
Total liabilities 799,464
- -----------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $50,612,089
===========================================================
NET ASSETS:
Class A $28,252,818
- -----------------------------------------------------------
Class B $22,359,271
===========================================================
CAPITAL STOCK, $.001 PAR VALUE PER SHARE:
Class A:
Authorized 200,000,000
- -----------------------------------------------------------
Outstanding 2,698,256
===========================================================
Class B:
Authorized 200,000,000
- -----------------------------------------------------------
Outstanding 2,137,569
===========================================================
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>
STATEMENT OF OPERATIONS
For the six months ended April 30, 1997
(Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $1,733,926
- -----------------------------------------------------------
Dividends 14,808
- -----------------------------------------------------------
1,748,734
- -----------------------------------------------------------
EXPENSES:
Advisory fees 156,434
- -----------------------------------------------------------
Administrative service fees 40,811
- -----------------------------------------------------------
Directors' fees 4,046
- -----------------------------------------------------------
Distribution fees-Class A 62,979
- -----------------------------------------------------------
Distribution fees-Class B 97,518
- -----------------------------------------------------------
Custodian fees 15,492
- -----------------------------------------------------------
Transfer agent fees-Class A 29,434
- -----------------------------------------------------------
Transfer agent fees-Class B 24,344
- -----------------------------------------------------------
Other 53,789
- -----------------------------------------------------------
Total expenses 484,847
- -----------------------------------------------------------
Less: Expenses assumed by advisor (156,434)
- -----------------------------------------------------------
Expenses paid indirectly (373)
- -----------------------------------------------------------
Net expenses 328,040
- -----------------------------------------------------------
Net investment income 1,420,694
- -----------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES, FOREIGN CURRENCY
TRANSACTIONS AND FORWARD CURRENCY CONTRACTS:
Net realized gain (loss) on sales of:
Investment securities (142,676)
- -----------------------------------------------------------
Foreign currency transactions (56,752)
- -----------------------------------------------------------
Forward currency contracts 396,716
- -----------------------------------------------------------
197,288
- -----------------------------------------------------------
UNREALIZED APPRECIATION (DEPRECIATION) OF:
Investment securities (1,346,639)
- -----------------------------------------------------------
Foreign currency transactions (32,761)
- -----------------------------------------------------------
Forward currency contracts 56,702
- -----------------------------------------------------------
(1,322,698)
- -----------------------------------------------------------
Net gain (loss) from investment securities,
foreign currency transactions and forward
currency contracts. (1,125,410)
- -----------------------------------------------------------
Net increase in net assets resulting from
operations $ 295,284
===========================================================
</TABLE>
See Notes to Financial Statements.
15
<PAGE> 18
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended April 30, 1997 and the year ended October 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
1997 1996
----------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,420,694 $ 1,844,305
- -----------------------------------------------------------------------------------------
Net realized gain on sales of investment securities,
foreign currency transactions and forward currency
contracts 197,288 418,371
- -----------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities, foreign currency transactions and forward
currency contracts (1,322,698) 543,300
- -----------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 295,284 2,805,976
- -----------------------------------------------------------------------------------------
Dividends to shareholders from net investment income:
Class A (828,771) (1,175,361)
- -----------------------------------------------------------------------------------------
Class B (591,923) (705,239)
- -----------------------------------------------------------------------------------------
Dividends in excess of net investment income:
Class A (111,708)
- -----------------------------------------------------------------------------------------
Class B (86,484)
- -----------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on
investment securities:
Class A (213,278) (122,866)
- -----------------------------------------------------------------------------------------
Class B (162,115) (57,565)
- -----------------------------------------------------------------------------------------
Share transactions-net:
Class A 7,285,001 11,543,105
- -----------------------------------------------------------------------------------------
Class B 6,312,313 12,214,514
- -----------------------------------------------------------------------------------------
Net increase in net assets 11,898,319 24,502,564
- -----------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 38,713,770 14,211,206
- -----------------------------------------------------------------------------------------
End of period $50,612,089 $ 38,713,770
=========================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $50,878,467 $ 37,281,153
- -----------------------------------------------------------------------------------------
Undistributed net investment income (loss) (74,537) 123,655
- -----------------------------------------------------------------------------------------
Undistributed net realized gain on sales of investment
securities, foreign currency transactions and forward
currency contracts 152,309 330,414
- -----------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities, foreign currency transactions and forward
currency contracts (344,150) 978,548
- -----------------------------------------------------------------------------------------
$50,612,089 $ 38,713,770
=========================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
April 30, 1997
(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-Debt obligations (including convertible bonds) are valued
on the basis of prices provided by an independent pricing service. Prices
provided by the pricing service may be determined without exclusive reliance
on quoted
16
<PAGE> 19
prices, and may reflect appropriate factors such as institution-size trading
in similar groups of securities, developments related to special securities,
yield, quality, coupon rate, maturity, type of issue, individual trading
characteristics and other market data. Investment securities for which prices
are not provided by the pricing service and which are listed or traded on an
exchange (except convertible bonds) are valued at the last sales price on the
exchange where the security is principally traded or, lacking any sales on a
particular day, at the mean between the closing bid and asked prices on that
day unless the Board of 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
prices. 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 Company'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 would 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 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, 1997 were as follows:
<TABLE>
<CAPTION>
UNREALIZED
SETTLEMENT CONTRACT TO APPRECIATION
DATE DELIVER VALUE RECEIVE (DEPRECIATION)
---------- ------------- ---------- ----------- --------------
<S> <C> <C> <C> <C>
06/10/97 CHF 100,000 $ 68,149 $ 67,866 $ (283)
07/31/97 CHF 525,000 359,906 362,419 2,513
05/20/97 DEM 1,400,000 809,554 835,821 26,267
07/14/97 DEM 570,000 330,951 333,528 2,577
07/28/97 DEM 1,700,000 988,037 996,483 8,446
06/05/97 JPY 47,500,000 374,227 396,858 22,631
06/17/97 JPY 18,000,000 141,815 147,905 6,090
07/14/97 JPY 70,000,000 551,525 558,414 6,889
08/06/97 JPY 32,000,000 252,135 258,065 5,930
07/29/97 SEK 16,000,000 2,047,450 2,063,983 16,533
---------- ---------- -------
$5,923,749 $6,021,342 $97,593
========== ========== =======
</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 is recorded on the ex-dividend
date. It is the policy of the Fund to declare daily dividends from net
investment income. Such dividends are paid monthly.
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. It is estimated that the Fund will incur a return
of capital for tax purposes during its year ended October 31, 1997.
F. Expenses-Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to both
classes, e.g. advisory fees, are allocated between them.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The 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, 1997, AIM waived fees of $156,434.
The Fund, pursuant to a master administrative services agreement, has agreed
to reimburse AIM for administrative costs incurred in providing accounting
services to the Fund. During the six months ended April 30, 1997, AIM was
reimbursed $40,811 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for
17
<PAGE> 20
providing transfer agency services to the Fund. During the six months ended
April 30, 1997, the Fund paid AFS $33,895 for such services.
The Fund received reductions in transfer agency fees of $352 from dividends
received on balances in cash management bank accounts. In addition, the Fund
incurred expenses of $21 for pricing services which are paid through directed
brokerage commissions. The effect of the above arrangements resulted in a
reduction in the Fund's total expenses of $373 during the six months ended April
30, 1997.
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, pays 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, pays 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 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, 1997, the Class A shares
and the Class B shares paid AIM Distributors $62,979 and $97,518, respectively,
as compensation under the Plans.
AIM Distributors received commissions of $35,437 from sales of the Class A
shares of the Fund during the six months ended April 30, 1997. Such commissions
are not an expense of the Fund. They are deducted from, and are not included in
the proceeds from sales of Class A shares. During the six months ended April 30,
1997, AIM Distributors received commissions of $1,208 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, 1997, the Fund incurred legal fees of
$2,409 for services rendered by the law firm of Kramer, Levin, Naftalis, &
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 is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $325,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
During the six months ended April 30, 1997, the Fund did not borrow under the
line of credit agreement. The funds which are party to the line of credit are
charged a commitment fee of 0.08% on the unused balance of the committed line.
The commitment fee is allocated among the funds based on their respective
average net assets for the period.
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, 1997 was
$24,498,962 and $10,823,076, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
as of April 30, 1997, is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $1,143,869
- ------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (1,557,967)
- ------------------------------------------------------
Net unrealized appreciation (depreciation)
of investment securities $ (414,098)
======================================================
</TABLE>
Investments have the same cost for tax and financial statement purposes.
18
<PAGE> 21
NOTE 6-CAPITAL STOCK
Changes in the Fund's capital stock outstanding during the six months ended
April 30, 1997 and the year ended October 31, 1996 were as follows:
<TABLE>
<CAPTION>
APRIL 30, 1997 OCTOBER 31, 1996
----------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Sold:
Class A 1,016,103 $10,879,307 1,609,644 $17,019,341
- ---------------------------------------------------------------------------------------------------------------
Class B 736,279 7,878,719 1,313,279 13,876,204
- ---------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 92,385 989,496 92,969 985,383
- ---------------------------------------------------------------------------------------------------------------
Class B 64,275 687,709 58,431 618,362
- ---------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (430,381) (4,583,802) (613,922) (6,461,619)
- ---------------------------------------------------------------------------------------------------------------
Class B (211,095) (2,254,115) (215,814) (2,280,052)
- ---------------------------------------------------------------------------------------------------------------
1,267,566 $13,597,314 2,244,587 $23,757,619
===============================================================================================================
</TABLE>
NOTE 7-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a Class A share and Class B share
outstanding during the six months ended April 30, 1997, each of the years in the
two-year period ended October 31, 1996 and the period September 15, 1994 (dates
operations commenced) through October 31, 1994.
<TABLE>
<CAPTION>
CLASS A CLASS B
------------------------------------------ ----------------------------------------
OCTOBER 31, OCTOBER 31,
APRIL 30, ---------------------------- APRIL 30, --------------------------
1997 1996 1995 1994 1997 1996 1995 1994
---------- ------- ------- ------ ---------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.85 $10.74 $10.02 $10.00 $ 10.84 $10.73 $10.01 $10.00
- ----------------------------------------- ----------------------------------------- ----------------------------------------
Income from investment operations:
Net investment income 0.35 0.79(a) 0.79 0.08 0.32 0.74(a) 0.74 0.07
- ----------------------------------------- ----------------------------------------- ----------------------------------------
Net gains (losses) on securities (both
realized and unrealized) (0.23) 0.25 0.75 0.01 (0.23) 0.24 0.75 0.01
- ----------------------------------------- ----------------------------------------- ----------------------------------------
Total from investment operations 0.12 1.04 1.54 0.09 0.09 0.98 1.49 0.08
- ----------------------------------------- ----------------------------------------- ----------------------------------------
Less distributions:
Dividends from investment income (0.40) (0.81) (0.82) (0.07) (0.37) (0.75) (0.77) (0.07)
- ----------------------------------------- ----------------------------------------- ----------------------------------------
Distributions from net realized capital
gains (0.10) (0.12) -- -- (0.10) (0.12) -- --
- ----------------------------------------- ----------------------------------------- ----------------------------------------
Total distributions (0.50) (0.93) (0.82) (0.07) (0.47) (0.87) (0.77) (0.07)
- ----------------------------------------- ----------------------------------------- ----------------------------------------
Net asset value, end of period $ 10.47 $10.85 $10.74 $10.02 $ 10.46 $10.84 $10.73 $10.01
========================================= ========================================= ========================================
Total return(b) 1.04% 10.22% 16.07% 0.93% 0.78% 9.66% 15.56% 0.79%
========================================= ========================================= ========================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $28,253 $21,926 $10,004 $2,661 $22,359 $16,787 $4,207 $362
========================================= ========================================= ========================================
Ratio of expenses to average net
assets(c) 1.25%(d)(e) 1.25% 1.25% 1.25%(f) 1.75%(d)(e) 1.75% 1.74% 1.73%(f)
========================================= ========================================== ========================================
Ratio of net investment income to
average net assets(c) 6.57%(d) 7.27% 7.38% 6.01%(f) 6.07%(d) 6.77% 6.88% 3.59%(f)
========================================= ========================================= ========================================
Portfolio turnover rate 25% 83% 128% 6% 25% 83% 128% 6%
========================================= ========================================= ========================================
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges and for periods less than one year, total
returns are not annualized.
(c) After fee waivers and/or expense reimbursements. The ratios of expenses and
net investment income to average net assets prior to fee waivers and/or
expense reimbursements were as follows:
<TABLE>
<CAPTION>
CLASS A CLASS B
------------------------- -------------------------
NET INVESTMENT NET INVESTMENT
EXPENSES INCOME EXPENSES INCOME
-------- -------------- -------- --------------
<S> <C> <C> <C> <C>
April 30, 1997 (annualized) 1.95% 5.87% 2.44% 5.38%
- ----------------------------------------------------------------------------------------------
October 31, 1996 2.02% 6.51% 2.53% 6.00%
- ----------------------------------------------------------------------------------------------
October 31, 1995 3.03% 5.59% 3.57% 5.05%
- ----------------------------------------------------------------------------------------------
October 31, 1994 (annualized) 5.61% 1.65% 22.09% (16.77)%
==============================================================================================
</TABLE>
(d) Ratios are annualized and based on average net assets of $25,400,530 for
Class A shares and $19,665,182 for Class B shares.
(e) Ratio includes indirectly paid expenses. Excluding indirectly paid expenses,
the ratio of expenses to average net assets would have remained the same for
both Class A shares and Class B shares.
(f) Annualized.
19
<PAGE> 22
SUPPLEMENTAL PROXY INFORMATION -- SHAREHOLDER MEETING
- --------------------------------------------------------------------------------
The Annual Meeting of Shareholders of the Company was held on February 7, 1997.
The meeting was held for the following purposes:
(1) To elect directors as follows: Charles T. Bauer, Bruce L. Crockett, Owen
Daly II, Carl Frischling, Robert H. Graham, John F. Kroeger, Lewis F.
Pennock, Ian W. Robinson, and Louis S. Sklar.
(2) To approve a new Investment Advisory Agreement between the Company and AIM.
(3) To approve the elimination of the fundamental investment policy prohibiting
or restricting investments in other investment companies and/or the
amendment of certain related fundamental investment policies.
(4) Ratification of KPMG Peat Marwick LLP as independent accountants for the
Company's fiscal year ending October 31, 1997.
The following votes were cast with respect to each item:
<TABLE>
<CAPTION>
Votes
Director/Matter Votes For Against Abstentions
--------------- --------- ------------- -----------
<S> <C> <C> <C> <C>
(1) Charles T. Bauer............................................ 130,433,380 0 3,798,959
Bruce L. Crockett........................................... 130,563,964 0 3,668,375
Owen Daly II................................................ 130,421,284 0 3,811,055
Carl Frischling............................................. 130,515,713 0 3,716,626
Robert H. Graham............................................ 130,587,498 0 3,644,841
John F. Kroeger............................................. 130,446,846 0 3,785,493
Lewis F. Pennock............................................ 130,506,142 0 3,726,197
Ian W. Robinson............................................. 130,446,093 0 3,786,246
Louis S. Sklar.............................................. 130,573,480 0 3,658,859
(2) Approval of new Investment Advisory Agreement............... 2,328,031 16,695 93,860
(3) Elimination of Fundamental Investment Policy................ 1,812,986 52,636 101,451
(4) KPMG Peat Marwick LLP....................................... 128,509,801 995,829 4,726,709
</TABLE>
20
<PAGE> 23
Directors & Officers
<TABLE>
<S> <C> <C>
BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
Chairman Chairman Suite 100
A I M Management Group Inc. Houston, TX 77046
Robert H. Graham
Bruce L. Crockett President INVESTMENT ADVISOR
Formerly Director, President, and Chief
Executive Officer John J. Arthur A I M Advisors, Inc.
COMSAT Corporation Senior Vice President and Treasurer 11 Greenway Plaza
Suite 100
Owen Daly II Carol F. Relihan Houston, TX 77046
Director Senior Vice President
Cortland Trust Inc. and Secretary TRANSFER AGENT
Jack Fields Gary T. Crum A I M Fund Services, Inc.
Formerly Member of the Senior Vice President P.O. Box 4739
U.S. House of Representatives Houston, TX 77210-4739
Scott G. Lucas
Carl Frischling Senior Vice President CUSTODIAN
Partner
Kramer, Levin, Naftalis & Frankel Dana R. Sutton State Street Bank & Trust
Vice President and Assistant Treasurer 225 Franklin Street
Robert H. Graham Boston, MA 02110
President and Chief Executive Officer Robert G. Alley
A I M Management Group Inc. Vice President COUNSEL TO THE FUND
John F. Kroeger Melville B. Cox Ballard Spahr
Formerly Consultant Vice President Andrews & Ingersoll
Wendell & Stockel Associates, Inc. 1735 Market Street
Jonathan C. Schoolar Philadelphia, PA 19103
Lewis F. Pennock Vice President
Attorney COUNSEL TO THE DIRECTORS
P. Michelle Grace
Ian W. Robinson Assistant Secretary Kramer, Levin, Naftalis & Frankel
Consultant; Formerly Executive 919 Third Avenue
Vice President and David L. Kite New York, NY 10022
Chief Financial Officer Assistant Secretary
Bell Atlantic Management DISTRIBUTOR
Services, Inc. Nancy L. Martin
Assistant Secretary A I M Distributors, Inc.
Louis S. Sklar 11 Greenway Plaza
Executive Vice President Ofelia M. Mayo Suite 100
Hines Interests Assistant Secretary Houston, TX 77046
Limited Partnership
Kathleen J. Pflueger
Assistant Secretary
Samuel D. Sirko
Assistant Secretary
Stephen I. Winer
Assistant Secretary
Mary J. Benson
Assistant Treasurer
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<PAGE> 24
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<S> <C>
THE AIM FAMILY OF FUNDS--Registered Trademark--
AGGRESSIVE GROWTH
AIM Aggressive Growth Fund*
AIM Capital Development Fund
AIM Constellation Fund
AIM Global Aggressive Growth Fund
GROWTH
[PHOTO OF AIM Blue Chip Fund
11 GREENWAY PLAZA AIM Global Growth Fund
APPEARS HERE] AIM Growth Fund
AIM International Equity Fund
AIM Value Fund
AIM Weingarten Fund
GROWTH AND INCOME
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
A I M Management Group Inc. has provided leadership in the *AIM Aggressive Growth Fund was closed to new investors on
mutual fund industry since 1976 and managed approximately June 5, 1997. For more complete information about any AIM
$73 billion in assets for more than 3.5 million shareholders, Fund(s), including sales charges and expenses, ask your
including individual investors, corporate clients, and financial financial consultant or securities dealer for a free
institutions as of May 23, 1997. The AIM Family of prospectus(es). Please read the prospectus(es) carefully
Funds--Registered Trademark-- is distributed nationwide, and before you invest or send money.
AIM today ranks among the nation's top 15 mutual fund
companies in assets under management, according to Lipper
Analytical Services, Inc.
[AIM LOGO APPEARS HERE] -----------------
BULK RATE
A I M Distributors, Inc. U.S. POSTAGE
11 Greenway Plaza, Suite 100 PAID
Houston, TX 77046 HOUSTON, TX
Permit No. 1919
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