<PAGE> 1
AIM GLOBAL
INCOME FUND
[AIM LOGO APPEARS HERE] ANNUAL REPORT OCTOBER 31, 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 and Class C shares will
differ from that of Class A shares due to difference in sales charge
structure and fund expenses.
o Class C shares commenced sales August 4, 1997.
o The Fund's annualized distribution rate reflects the Fund's most recent
monthly dividend distribution multiplied by 12 divided by the most recent
month-end net asset value.
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 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 Past performance cannot guarantee comparable future results.
o International investing presents certain risks not associated with
investing solely in the U.S. These include risks relating to fluctuations
of the U.S. dollar relative to the value of other currencies, the custody
arrangements made for the Fund's foreign holdings, differences in
accounting, political risks, and the lesser degree of public information
required to be provided by non-U.S. companies.
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
9/30/94-10/31/97.
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 9/30/94-10/31/97.
o An investment cannot be made in any index listed. Unless otherwise
indicated, index results include reinvested dividends and do not reflect
sales charges.
MUTUAL FUNDS, ANNUITIES, AND OTHER INVESTMENTS
ARE NOT INSURED BY THE FDIC OR ANY OTHER GOVERNMENT AGENCY;
ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR GUARANTEED BY,
ANY BANK OR ANY AFFILIATE; AND ARE SUBJECT TO INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
This report may be distributed only to current shareholders
or to persons who have received a current prospectus of the Fund.
<PAGE> 3
The Chairman's Letter
Dear Fellow Shareholder:
The fiscal year ended October 31 experienced no let-up in
market volatility, and it ended on an unsettling note. In late
October, in the wake of a currency crisis in Southeast Asia,
[PHOTO OF equity markets worldwide declined. Fulfilling their usual role
Charles T. as relatively safe havens, bond markets, particularly the U.S.
Bauer, Treasury market, rallied in response. As bond prices rose,
Chairman of Treasury securities saw some of their lowest yields of the
the Board of year. Yield on the 10-year Treasury had dropped below 6% at
THE FUND the close of the fiscal year.
APPEAR HERE] Many investment managers, including AIM, had been warning
that a correction was inevitable, especially in equity
markets; but when markets become overvalued, no one knows what
will precipitate a decline. No one foresaw that a currency
devaluation by Thailand beginning in July would lead to such
market turbulence the last week of October 1997.
Now that a market correction has occurred, for the
foreseeable future we can probably expect relative stability in the U.S. and in
the developed world, the markets where your Fund invests almost exclusively.
Domestically, the impact from worldwide market uncertainty will likely be to
put Federal Reserve Board policy on hold. In Europe, positive steps to reduce
inflation and curtail government deficits will almost certainly continue. Of
course, the story will be different in Asia; but in the few weeks since the
close of the reporting period, various Asian countries have announced plans to
stabilize the situation and wring excesses out of their markets.
REALISTIC EXPECTATIONS
Uncertainty such as we have recently experienced can teach us important
lessons. One is the value of diversification to help cushion the effects of
volatility and reduce risk exposure in any one type of security. Another is the
importance of realistic expectations about investing, expectations that
recognize the inevitability of market declines. A final one is the desirability
of having an investment plan. Short-term volatility can tempt you to liquidate
investments regardless of your personal financial objectives, which can have
regrettable consequences. Managing your investments in volatile markets can be
challenging. Your financial consultant can help you devise a plan and stick
with it.
We are pleased to send you this report on your Fund. Please contact our
Client Services department at 800-959-4246 if you have any questions or
comments. Don't forget that automated information about your AIM account is
available 24 hours a day on the AIM Investor Line, 800-246-5463. Or visit our
Web site, at www.aimfunds.com.
Sincerely,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
------------------------------------
Domestically, the impact
from worldwide market uncertainty
will likely be
to put Federal Reserve Board
policy on hold.
------------------------------------
<PAGE> 4
The Managers' Overview
FUND BENEFITS FROM DIVERSIFIED STRATEGY
A roundtable discussion with the Fund management team for AIM Global Income
Fund for the year ended October 31, 1997.
- --------------------------------------------------------------------------------
Q. IT WAS A TURBULENT YEAR IN THE BOND MARKET. HOW DID AIM GLOBAL INCOME FUND
PERFORM?
A. The Fund's diversified investment strategy enabled it to post solid
returns despite an often stormy market environment. For the fiscal year
ended October 31, 1997, total return for Class A and B shares was 9.05%
and 8.48%, respectively. (Class C shares commenced sales August 4, 1997
and had a total return of 2.99% for the period ended October 31, 1997).
That bested the 2.61% total return for the Salomon Brothers World
Government Bond Index.
The Fund's performance was particularly strong in the second half of
the year. At the middle of the reporting period, the Fund had posted
six-month total return of 1.04% and 0.78% for Class A and Class B shares,
respectively. During the second half of the year, however, the Fund's
total return was 7.93% for Class A shares and 7.64% for Class B shares.
The Fund continued to provide a high level of current income during
the year covered by this report. As of October 31, 1997, the Fund's 30-day
distribution rate at net asset value was 6.59% for Class A shares and
6.04% for Class B shares. The Fund's 30-day yield at maximum offering
price was 6.27% for Class A shares and 6.04% for Class B and Class C
shares.
During the year covered by this report, net assets in the Fund grew
45% to more than $56 million.
Q. HOW DID YOU MANAGE THE FUND?
A. We adhered to our time-tested strategy of investing in the three major
sectors of the bond-market: foreign bonds, domestic investment-grade
bonds, and high-yield securities. These three types of bonds tend to react
differently to economic and market trends. Diversifying the portfolio in
this manner tends to reduce the risk associated with investing in one
class of bonds. Moreover, it can also enhance total return as it allows
the Fund to take advantage of a rally in more than one segment of the bond
market.
As interest rates fell in the second half of the year, we increased
our holdings in longer-term bonds to take advantage of their higher
yields.
During the six months since our last report, we have made only minor
adjustments to our sector holdings. At the end of the reporting period,
the Fund's total net assets were divided as follows: foreign bonds, 39.7%;
domestic investment-grade bonds, 26.9%; high-yield bonds, 28.7%; common
stocks and warrants, 2.4%; and convertible preferred stocks, 2.3%.
Q. WHAT WERE SOME OF THE TRENDS IN THE FOREIGN-BOND MARKET?
A. Foreign bonds benefited from the low inflation environment in most
developed countries. Corporate restructuring overseas and global
competition combined to keep prices for goods and services from rising
significantly. Also, the efforts of foreign governments to balance their
budgets and reduce their deficits helped to curtail inflation.
The bond markets we found particularly attractive included the United
King-
================================================================================
MORNINGTAR RATINGS, CLASS A AND B SHARES
- --------------------------------------------------------------------------------
As of 10/31/97
Funds in Taxable
Fixed Rating
Period Income Category
Overall **** N/A
3 Years **** 1,338
================================================================================
Morningstar proprietary ratings reflect risk-adjusted performance through
9/30/97. The ratings are subject to change every month. Ratings are calculated
from the fund's three-, five-, and 10-year returns (with fee adjustments) in
excess of 90-day Treasury bill returns, and a risk factor that reflects fund
performance below 90-day T-bill returns. If the fund scores in the top 10% of
its category it receives 5 stars; if it falls in the next 22.5% it receives 4
stars; a place in the middle 35% earns it 3 stars; those in the next 22.5%
receive 2 stars; and the bottom 10% get 1 star.
================================================================================
PORTFOLIO COMPOSITION
- --------------------------------------------------------------------------------
Convertible Preferred Stocks 2.3%
Common Stocks and Warrants 2.4%
High-Yield Bonds 28.7%
Foreign Bonds 39.7%
Investment-Grade Bonds 26.9%
================================================================================
See important fund and index disclosures inside front cover.
2
<PAGE> 5
================================================================================
TOP FIVE BOND HOLDINGS
- --------------------------------------------------------------------------------
As of 10/31/97, based on total net assets
COUPON MATURITY
1. U.K. Treasury 7.00% 11/2001 2.41%
2. Mercantile Bancorp., Inc. 7.30 06/2007 1.86
3. New Zealand 10.00 03/2002 1.86
Government Bonds
4. Conagra, Inc. 7.13 10/2026 1.69
5. British Airport Authority 5.75 03/2006 1.48
Eurobond
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.
================================================================================
dom (UK), Canada, New Zealand, and Sweden. The UK had the strongest
econ-omy in Europe and its currency appreciated against both the U.S.
dollar and the German mark. During the reporting period, we reduced some
of our exposure in continental Europe where bond yields declined relative
to those in the United States.
In local currency terms, most of the foreign markets where the Fund
invests performed well during the year. However, the strength of the U.S.
dollar in relation to most other major currencies diminished returns for
U.S. investors. The Fund mitigated the effect of a strong dollar by
selectively hedging some of its currency exposure.
Q. WHAT WERE CONDITIONS LIKE IN THE DOMESTIC INVESTMENT-GRADE BOND MARKET?
A. Despite volatility, it was a relatively good year for domestic
investment-grade bonds. The volatility stemmed from concerns that a
vibrant economy would accelerate inflation and cause the Federal Reserve
Board (the Fed) to raise interest rates.
When the reporting period began, the bond market was in the midst of a
rally amid mounting evidence that the economy was growing at a reasonable
rate without significant inflation. However, rapid economic growth in the
first quarter of 1997 rekindled concerns that the Fed would tighten
monetary policy to contain inflation. Bond prices were already declining--
and yields rising--when the Fed raised interest rates in March.
The decline continued until late April when indications of moderating
economic growth, combined with improved prospects for a balanced U.S.
federal budget, ignited an impressive bond rally that persisted until
August when inflation concerns resurfaced. These concerns subsided in
September, however, and bond prices resumed their upward climb.
Q. WHAT ABOUT HIGH-YIELD BONDS?
A. High-yield bonds continued to be the top-performing portion of the
portfolio. Unlike investment-grade bonds, high-yield bonds usually benefit
from robust economic expansion. When business conditions and cash flows
are favorable, corporate issuers of high-yield bonds are generally better
able to meet their debt obligations. For most of the year, high-yield
bonds performed well because of strong economic growth.
Q. HOW DID THE CURRENCY DEVALUATIONS IN SOUTHEAST ASIA AND THE SUBSEQUENT
STOCK MARKET TUMBLE OF OCTOBER 1997 AFFECT BONDS?
A. When global stock markets plunged on October 27, investors sought refuge in
fixed-income securities, igniting a rally in most major bond markets.
Foreign and domestic government bonds were among the chief benefactors.
The yield on the 30-year U.S. Treasury bond dropped to 6.12%, its lowest
level since February 1996, and ended the reporting period at 6.16%.
Investment-grade corporate and high-yield bonds initially experienced some
weakness when world stock markets dropped, but quickly rebounded as
confidence recovered.
The most adversely affected bond class was emerging market debt. This
was of little consequence for the Fund because it invests primarily in
developed markets and had little exposure in Asia at the end of the
reporting period.
Q. HOW WAS THE FUND POSITIONED AT THE END OF THE REPORTING PERIOD?
A. There were 168 holdings in the Fund as of October 31, 1997. The weighted
average maturity of the portfolio was 10.29 years and its duration was
6.24 years. 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. We continue to be optimistic about global bonds for a number of reasons:
o In the U.S., the economy continues to grow at a healthy pace--the
gross domestic product (GDP) rose 3.3% in the third quarter of 1997--but
without significant inflation. For the year ended October 31, 1997,
consumer prices were up just 2.1%, the lowest rate of increase since 1987.
If inflation continues to be low, it will diminish the prospects that the
Fed will tighten monetary policy. Such an environment should prove
favorable to domestic investment-grade and high-yield bonds.
o Globally, we expect corporate restructuring, international
competition, and the efforts of governments to balance budgets and reduce
deficits to keep inflation contained. This should be a boon to global
bonds.
Regardless of market trends, we will adhere to our disciplined
strategy of investing in foreign, domestic investment-grade, and
high-yield bonds to reduce risk and enhance potential return.
See important fund and index disclosures inside front cover.
3
<PAGE> 6
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 9/15/94-10/31/97. It is important to understand the difference
between your Fund and an index. Your Fund's total return is shown with a sales
charge and includes Fund expenses and management fees. An index measures the
performance of a hypothetical portfolio, in this case the Lehman Brothers
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
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CLASS A CLASS B SOLOMON BROS. LEHMAN BROS.
SHARES SHARES WORLD GOV'T GOV'T BOND
BOND INDEX INDEX
- --------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
9/15/94 $9,524 $10,000 $10,000.00 $10,000.00
10/94 9,613 10,079 9,992.00 9,991.00
1/95 9,671 10,128 10,221.50 10,230.48
4/95 10,314 10,789 10,644.69 10,639.35
7/95 10,711 11,182 11,117.65 11,119.69
10/95 11,158 11,647 11,529.45 11,522.42
1/96 11,463 11,948 11,948.02 11,949.00
7/97 11,456 11,926 11,531.69 11,518.79
7/96 11,695 12,160 11,689.74 11,686.10
10/96 12,298 12,772 12,118.52 12,121.92
1/97 12,467 12,931 12,217.04 12,216.95
4/97 12,426 12,871 12,278.77 12,267.85
7/97 13,094 13,546 12,878.73 12,873.58
10/97 13,855 13,855 13,166.40 13,162.29
================================================================================
</TABLE>
Past performance cannot guarantee comparable future results.
================================================================================
AVERAGE ANNUAL TOTAL RETURNS
As of 10/31/97 including sales charges
CLASS A SHARES
Inception (9/15/94) 9.84%
3 Years 9.94
1 Year 3.88*
CLASS B SHARES
Inception (9/15/94) 10.22%
3 Years 10.37
1 Year 3.48**
CLASS C SHARES
Inception (8/4/97) 1.99%***
*9.05% excluding sales charges
**8.48% excluding sales charges
***2.99% 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. Class C shares commenced sales
August 4, 1997.
4
<PAGE> 7
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
U.S. DOLLAR DENOMINATED
NON-CONVERTIBLE BONDS & NOTES-50.55%
AGRICULTURAL PRODUCTS-0.20%
Hines Horticulture, Inc.,
Series B Sr. Gtd. Sub. Notes,
11.75%, 10/15/05 $ 100,000 $ 110,750
- --------------------------------------------------------------
AIRLINES-3.32%
Airplanes Pass Through Trust,
Sub. Bonds, 10.875%, 03/15/19 230,000 263,495
- --------------------------------------------------------------
America West Airlines, Inc.,
Pass Thru Certificates, 6.86%,
07/02/04 587,999 591,675
- --------------------------------------------------------------
Delta Air Lines, Inc.,
Deb., 9.00%, 05/15/16 550,000 652,636
- --------------------------------------------------------------
United Air Lines, Inc.,
Pass Thru Certificates, 9.56%,
10/19/18 300,000 362,391
- --------------------------------------------------------------
1,870,197
- --------------------------------------------------------------
BANKS (MAJOR REGIONAL)-1.25%
First Union Bancorp,
Sub. Deb., 7.50%, 04/15/35 200,000 220,060
- --------------------------------------------------------------
Royal Bank of Scotland PLC (United
Kingdom),
Yankee Sub. Notes, 6.375%,
02/01/11 500,000 481,780
- --------------------------------------------------------------
701,840
- --------------------------------------------------------------
BANKS (MONEY CENTER)-2.08%
Bankers Trust New York Corp.,
Gtd. Notes, 7.875%, 02/25/27 400,000 409,974
- --------------------------------------------------------------
Deutsche Bank Financial,
Gtd. Unsec. Sub. Deb., 6.70%,
12/13/06 750,000 760,808
- --------------------------------------------------------------
1,170,782
- --------------------------------------------------------------
BANKS (REGIONAL)-1.86%
Mercantile Bancorp Inc.,
Unsec. Sub. Notes, 7.30%,
06/15/07 1,000,000 1,046,320
- --------------------------------------------------------------
BEVERAGES (NON-ALCOHOLIC)-1.13%
Coca-Cola Enterprises, Inc.,
Putable Notes, 7.15%, 06/20/20(b) 3,113,000 635,301
- --------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE)-4.44%
Capstar Broadcasting Partners,
Sr. Disc. Notes, 12.75%,
02/01/09(c) 390,000 278,850
- --------------------------------------------------------------
Comcast Cable Communications,
Notes, 8.50%, 05/01/27
(acquired 04/24/97; cost
$499,145)(d) 500,000 572,980
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
BROADCASTING (TELEVISION, RADIO &
CABLE)-(CONTINUED)
Diamond Cable Communications PLC
(United Kingdom), Sr. Yankee
Disc. Notes, 10.75%, 02/15/07(c) $ 870,000 $ 567,675
- --------------------------------------------------------------
Echostar DBS Corp.,
Sr. Sec. Gtd. Notes, 12.50%,
07/01/02
(acquired 06/20/97; cost
$320,000)(d) 320,000 340,800
- --------------------------------------------------------------
Kabelmedia Holdings GmbH (Germany),
Sr. Yankee Unsec. Disc. Notes,
13.625%, 08/01/06(c) 200,000 146,000
- --------------------------------------------------------------
Rifkin Acquisition Partners L.L.P.,
Sr. Sub. Notes, 11.125%, 01/15/06 40,000 43,500
- --------------------------------------------------------------
TCI Communications Inc.,
Sr. Notes, 8.00%, 08/01/05 150,000 157,845
- --------------------------------------------------------------
TeleWest Communications PLC
(United Kingdom), Sr. Yankee
Disc. Deb., 11.00%, 10/01/07(c) 300,000 226,500
- --------------------------------------------------------------
United International Holdings,
Inc.,
Sr. Sec. Disc. Notes, 10.28%,
11/15/99(b) 200,000 163,000
- --------------------------------------------------------------
2,497,150
- --------------------------------------------------------------
CHEMICALS-1.40%
Nova Chemicals Ltd. (Canada),
Yankee Deb., 7.00%, 08/15/26 600,000 620,898
- --------------------------------------------------------------
Sterling Chemicals, Inc.,
Sr. Unsec. Sub. Notes, 11.75%,
08/15/06 150,000 167,250
- --------------------------------------------------------------
788,148
- --------------------------------------------------------------
CHEMICALS (SPECIALTY)-0.08%
Crain Industries, Inc.,
Sr. Sub. Notes, 13.50%, 08/15/05 40,000 45,800
- --------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-0.48%
ProNet, Inc.,
Sr. Sub. Notes, 11.875%, 06/15/05 250,000 271,250
- --------------------------------------------------------------
CONSUMER (JEWELRY, NOVELTIES & GIFTS)-0.15%
Commemorative Brands,
Sr. Sub. Notes, 11.00%, 01/15/07 85,000 86,488
- --------------------------------------------------------------
CONSUMER FINANCE-1.28%
Household Finance Corp.,
Notes, 7.125%, 09/01/05 700,000 720,076
- --------------------------------------------------------------
CONTAINERS & PACKAGING
(PAPER)-0.77%
BPC Holding Corp.,
Series B Sr. Notes, 12.50%,
06/15/06 100,000 110,500
- --------------------------------------------------------------
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
CONTAINERS & PACKAGING (PAPER)-(CONTINUED)
MVE Inc.,
Sr. Sec. Notes, 12.50%, 02/15/02 $ 100,000 $ 101,500
- --------------------------------------------------------------
Tekni-Plex Inc.,
Sr. Sub. Notes, 11.25%, 04/01/07 200,000 219,500
- --------------------------------------------------------------
431,500
- --------------------------------------------------------------
DISTRIBUTORS (FOOD & HEALTH)-0.45%
AmeriServ Food Co.,
Sr. Sub. Notes, 10.125%, 07/15/07
(acquired 07/09/97; cost
$240,000)(d) 240,000 250,800
- --------------------------------------------------------------
ELECTRIC COMPANIES-0.99%
El Paso Electric Co.,
Series D Sec. 1st Mortgage Bonds,
8.90%, 02/01/06 250,000 272,545
- --------------------------------------------------------------
Series E Sec. 1st Mortgage Bonds,
9.40%, 05/01/11 250,000 283,700
- --------------------------------------------------------------
556,245
- --------------------------------------------------------------
ELECTRICAL EQUIPMENT-0.54%
Electronic Retailing Systems
International, Inc.,
Sr. Disc. Notes, 13.25%,
02/01/04(c) 440,000 305,800
- --------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS)-0.58%
Advanced Micro Devices, Inc.,
Sr. Sec. Notes, 11.00%, 08/01/03 110,000 119,213
- --------------------------------------------------------------
Panda Funding Corp.,
Series A-1 Pooled Project Bonds,
11.625%, 08/20/12 199,591 208,573
- --------------------------------------------------------------
327,786
- --------------------------------------------------------------
ENTERTAINMENT-1.83%
Time Warner, Inc.
Deb., 9.125%, 01/15/13 500,000 582,845
- --------------------------------------------------------------
Notes, 8.18%, 08/15/07 200,000 218,086
- --------------------------------------------------------------
Unsec. Deb., 6.85%, 01/15/26 125,000 126,673
- --------------------------------------------------------------
Viacom, Inc.,
Sr. Notes, 7.75%, 06/01/05 100,000 101,629
- --------------------------------------------------------------
1,029,233
- --------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-1.13%
Associates Corp. of North America,
Series B Sr. Deb., 7.95%,
02/15/10 100,000 111,814
- --------------------------------------------------------------
Finova Capital Corp.,
Unsec. Notes, 7.40%, 05/06/06 500,000 524,850
- --------------------------------------------------------------
636,664
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
FOODS-2.34%
ConAgra Inc.,
Sr. Unsec. Notes, 7.125%,
10/01/26 $ 900,000 $ 952,389
- --------------------------------------------------------------
Del Monte Corp./Foods Co.,
Sr. Unsec. Sub. Notes, 12.25%,
04/15/07 260,000 288,600
- --------------------------------------------------------------
Pilgrim's Pride Corp.,
Sr. Sub. Notes, 10.875%, 08/01/03 70,000 73,850
- --------------------------------------------------------------
1,314,839
- --------------------------------------------------------------
GAMING, LOTTERY & PARI-MUTUEL COMPANIES-0.21%
Showboat Marina Casino Partnership
&
Showboat Marina Financial Corp.,
Series B Sec. 1st Mortgage Notes,
13.50%, 03/15/03 100,000 115,500
- --------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT)-0.90%
Tenet Healthcare Corp., Sr. Notes,
8.00%, 01/15/05 500,000 507,500
- --------------------------------------------------------------
HEALTH CARE (LONG TERM CARE)-0.81%
Sun Healthcare Group, Inc.,
Sr. Sub. Notes, 9.50%, 07/01/07
(acquired 07/01/97; cost
$448,200)(d) 450,000 455,625
- --------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)-0.56%
Alaris Medical Systems,
Sr. Unsec. Gtd. Sub. Deb., 9.75%,
12/01/06 200,000 205,000
- --------------------------------------------------------------
Dade International Inc.,
Series B Sr. Sub. Notes, 11.125%,
05/01/06 100,000 111,500
- --------------------------------------------------------------
316,500
- --------------------------------------------------------------
HEALTH CARE (SPECIALIZED
SERVICES)-0.15%
Dynacare Inc. (Canada),
Sr. Yankee Notes, 10.75%,
01/15/06 80,000 84,200
- --------------------------------------------------------------
HOMEBUILDING-0.10%
Continental Homes Holdings Corp.,
Sr. Unsec. Gtd. Notes, 10.00%,
04/15/06 55,000 58,025
- --------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-1.40%
Torchmark Corp.,
Notes, 7.875%, 05/15/23 750,000 790,035
- --------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE-0.54%
Travelcenters of America Inc.,
Sr. Gtd. Unsec. Sub. Deb.,
10.25%, 04/01/07 290,000 303,050
- --------------------------------------------------------------
IRON & STEEL-0.15%
GS Industries, Inc.,
Sr. Gtd. Notes, 12.00%, 09/01/04 75,000 81,937
- --------------------------------------------------------------
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
LODGING-HOTELS-0.59%
Coast Hotels & Casinos Inc.,
Series B Sec. 1st Mortgage Gtd.
Notes, 13.00%, 12/15/02 $ 70,000 $ 78,750
- --------------------------------------------------------------
ITT Corp.,
Unsec. Gtd. Deb., 7.375%,
11/15/15 150,000 151,119
- --------------------------------------------------------------
John Q. Hammons Hotels Inc.,
Sec. 1st Mortgage Notes, 9.75%,
10/01/05 100,000 104,750
- --------------------------------------------------------------
334,619
- --------------------------------------------------------------
MACHINERY (DIVERSIFIED)-0.10%
Fairfield Manufacturing Co., Inc.,
Sr. Sub. Notes, 11.375%, 07/01/01 50,000 53,500
- --------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-0.51%
MMI Products Inc.,
Sr. Unsec. Sub. Notes, 11.25%,
04/15/07 260,000 284,700
- --------------------------------------------------------------
METAL FABRICATORS-0.11%
Gulf States Steel Corp.,
1st Mortgage Notes, 13.50%,
04/15/03 60,000 61,950
- --------------------------------------------------------------
METALS MINING-0.23%
Rio Algom Ltd. (Canada),
Yankee Unsec. Deb., 7.05%,
11/01/05 130,000 131,940
- --------------------------------------------------------------
NATURAL GAS-0.56%
Ferrellgas Partners,
Series B Sr. Sec. Gtd. Notes,
9.375%, 06/15/06 300,000 316,500
- --------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES-0.24%
United Stationer Supply, Sr. Sub.
Notes, 12.75%, 05/01/05 120,000 135,900
- --------------------------------------------------------------
OIL (INTERNATIONAL
INTEGRATED)-1.08%
Gulf Canada Resources, Ltd.
(Canada),
Sr. Yankee Unsec. Notes, 8.35%,
08/01/06 550,000 607,189
- --------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT)-0.04%
Falcon Drilling Co., Inc.,
Series B Sr. Notes, 9.75%,
01/15/01 20,000 21,050
- --------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION)-0.64%
Abraxas Petroleum Corp.,
Series B Sr. Notes, 11.50%,
11/01/04 95,000 104,500
- --------------------------------------------------------------
Talisman Energy, Inc. (Canada),
Yankee Deb., 7.125%, 06/01/07 250,000 256,875
- --------------------------------------------------------------
361,375
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
PAPER & FOREST PRODUCTS-1.15%
Indah Kiat Fin Mauritius,
Sr. Gtd. Unsec. Notes, 10.00%,
07/01/07
(acquired 06/26/97; cost
$466,931)(d) $ 470,000 $ 434,750
- --------------------------------------------------------------
National Fiberstock Corp.,
Series B Sr. Notes, 11.625%,
06/15/02 200,000 210,500
- --------------------------------------------------------------
645,250
- --------------------------------------------------------------
PUBLISHING (NEWSPAPERS)-0.52%
News America Holdings, Inc.,
Sr. Gtd. Deb., 9.25%, 02/01/13 250,000 291,293
- --------------------------------------------------------------
RAILROADS-0.84%
Norfolk Southern Corp.,
Bonds, 7.05%, 05/01/37 450,000 474,638
- --------------------------------------------------------------
RETAIL (DISCOUNTERS)-0.18%
Loehmann's Holdings, Inc.,
Sr. Unsec. Notes, 11.875%,
05/15/03 100,000 102,500
- --------------------------------------------------------------
RETAIL (FOOD CHAINS)-0.78%
Carr-Gottstein Foods Co.,
Sr. Sub. Notes, 12.00%, 11/15/05 100,000 110,500
- --------------------------------------------------------------
Great Atlantic & Pacific Tea Co.,
Inc. (Canada),
Yankee Gtd. Notes, 7.78%,
11/01/00
(acquired 10/18/95; cost
$100,000)(d) 100,000 103,642
- --------------------------------------------------------------
Jitney-Jungle Stores of America
Inc., Sr. Gtd. Notes, 12.00%,
03/01/06 200,000 225,500
- --------------------------------------------------------------
439,642
- --------------------------------------------------------------
RETAIL (SPECIALTY)-0.80%
CSK Auto Inc.,
Sr. Gtd. Sub. Deb., 11.00%,
11/01/06 60,000 64,500
- --------------------------------------------------------------
Icon Health & Fitness,
Series B Sr. Sub. Notes, 13.00%,
07/15/02 70,000 78,750
- --------------------------------------------------------------
United Auto Group, Inc.,
Sr. Sub. Notes, 11.00%, 07/15/07
(acquired 07/22/97; cost
$197,500)(d) 200,000 206,000
- --------------------------------------------------------------
Wilsons The Leather Experts Inc.,
Sr. Notes, 11.25%, 08/15/04
(acquired 08/14/97; cost
$100,000)(d) 100,000 99,250
- --------------------------------------------------------------
448,500
- --------------------------------------------------------------
SAVINGS & LOAN COMPANIES-0.47%
Sovereign Bancorp, Inc.,
Sub. Notes, 8.00%, 03/15/03 250,000 263,523
- --------------------------------------------------------------
SERVICES
(ADVERTISING/MARKETING)-0.38%
MDC Communications Corp.(Canada),
Sr. Yankee Unsec. Sub. Notes,
10.50%, 12/01/06 200,000 215,500
- --------------------------------------------------------------
</TABLE>
7
<PAGE> 10
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
SHIPPING-0.99%
Hutchison Whampoa Ltd. (Cayman
Islands),
Series D Sr. Yankee Gtd. Unsec. Unsub. Deb.,
6.988%, 08/01/37
(acquired 10/02/97; cost
$502,005)(d) $ 500,000 $ 467,595
- --------------------------------------------------------------
Stena A.B. (Sweden),
Sr. Yankee Unsec. Notes, 10.50%,
12/15/05 80,000 87,400
- --------------------------------------------------------------
554,995
- --------------------------------------------------------------
SOVEREIGN DEBT-0.59%
Province of Manitoba (Canada),
Yankee Bonds, 7.75%, 07/17/16 300,000 334,791
- --------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-3.96%
Celcaribe S.A.,
Sr. Secured Notes, 13.50%,
03/15/04(c) 500,000 502,500
- --------------------------------------------------------------
GST Equipment Funding,
Sr. Sec. Notes, 13.25%, 05/01/07
(acquired 05/08/97; cost
$200,000)(d) 200,000 225,500
- --------------------------------------------------------------
ICG Holdings Inc.,
Gtd. Unsec. Sr. Disc. Notes,
11.625%,
03/15/07(c) 290,000 194,300
- --------------------------------------------------------------
Orion Network Systems, Inc.,
Sr. Notes, 11.25%, 01/15/07(e) 420,000 476,700
- --------------------------------------------------------------
Pricellular Wireless Corp.,
Sr. Notes, 10.75%, 11/01/04 130,000 141,050
- --------------------------------------------------------------
Sygnet Wireless Inc.,
Sr. Unsec. Notes, 11.50%,
10/01/06 160,000 173,600
- --------------------------------------------------------------
360 Communications Co.,
Sr. Unsec. Notes, 7.50%, 03/01/06 500,000 516,700
- --------------------------------------------------------------
2,230,350
- --------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-1.00%
MCI Communications Corp.,
Putable Deb., 7.125%, 06/15/27 450,000 480,402
- --------------------------------------------------------------
PhoneTel Technologies, Inc.,
Sr. Gtd. Unsec. Notes, 12.00%,
12/15/06 80,000 82,600
- --------------------------------------------------------------
563,002
- --------------------------------------------------------------
TELEPHONE-0.70%
Esat Holdings Ltd. (Ireland),
Sr. Yankee Notes, 12.50%,
02/01/07(c) 350,000 243,250
- --------------------------------------------------------------
Hermes Europe Railtel BV,
Sr. Notes, 11.50%, 08/15/07
(acquired 08/14/97; cost
$142,413)(d) 140,000 153,300
- --------------------------------------------------------------
396,550
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
TRUCKERS-0.56%
AmeriTruck Distribution Corp.,
Series B Sr. Sub. Notes, 12.25%,
11/15/05 $ 300,000 $ 318,000
- --------------------------------------------------------------
TRUCKS & PARTS-0.15%
Blue Bird Body Co.,
Series B Sr. Sub. Notes, 10.75%,
11/15/06 80,000 84,500
- --------------------------------------------------------------
WASTE MANAGEMENT-2.26%
Allied Waste Industries, Inc.,
Sr. Disc. Notes, 11.30%, 06/01/07
(acquired 05/01/97; cost
$356,103)(c)(d) 620,000 424,700
- --------------------------------------------------------------
Norcal Waste Systems Inc.,
Series B Sr. Gtd. Notes, 13.00%,
11/15/05 150,000 172,875
- --------------------------------------------------------------
WMX Technologies, Inc.,
Unsec. Notes, 7.10%, 08/01/26 650,000 677,417
- --------------------------------------------------------------
1,274,992
- --------------------------------------------------------------
Total U.S. Dollar Denominated
Non-Convertible Bonds & Notes 28,456,090
- --------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED
NON-CONVERTIBLE BONDS &
NOTES(F)-14.34%
CANADA-7.21%
Bank of Montreal (Banks-Money
Center),
Sub. Deb., 7.92%, 07/31/12 CAD 300,000 $ 242,897
- --------------------------------------------------------------
Bell Canada (Telephone),
Unsec. Deb., 10.875, 10/11/04 250,000 228,786
- --------------------------------------------------------------
Bell Mobility Cellular
(Telecommunications-Cellular/Wireless),
Bonds, 6.55%, 06/02/08 750,000 540,042
- --------------------------------------------------------------
Canadian Oil Debco Inc.
(Oil & Gas-Exploration &
Production),
Deb., 11.00%, 10/31/00 250,000 203,876
- --------------------------------------------------------------
Clearnet Communications
(Telecommunications-Cellular/Wireless),
Sr. Disc. Notes, 11.75%, 08/13/07
(acquired 07/31/97; cost
$347,582)(c)(d) 850,000 366,392
- --------------------------------------------------------------
NAV Canada (Services-Commercial &
Consumer), Bonds, 7.40%, 06/01/27 1,000,000 800,731
- --------------------------------------------------------------
Telegobe Canada, Inc. (Telephone),
Unsec. Deb., 8.35%, 06/20/03 650,000 523,496
- --------------------------------------------------------------
Trans-Canada Pipelines
(Oil & Gas-Exploration &
Production),
Series Q Deb., 10.625%, 10/20/09 375,000 365,477
- --------------------------------------------------------------
Unsec. Notes, 8.55%, 02/01/06 500,000 417,784
- --------------------------------------------------------------
</TABLE>
8
<PAGE> 11
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
CANADA-(CONTINUED)
Westcoast Energy, Inc. (Oil & Gas-
Exploration & Production), Deb.,
6.45%, 12/18/06
(acquired 12/03/96; cost
$369,632)(d) CAD 500,000 $ 368,955
- --------------------------------------------------------------
4,058,436
- --------------------------------------------------------------
FRANCE-0.26%
Credit Foncier de France
(Financial-Diversified)
Sr. Unsec. Unsub. Eurobonds,
6.50%, 02/22/99 SEK 750,000 101,061
- --------------------------------------------------------------
Sr. Unsec. Unsub. Eurobonds,
6.00%, 11/15/01 FRF 250,000 44,838
- --------------------------------------------------------------
145,899
- --------------------------------------------------------------
GERMANY-2.36%
Daimler-Benz A.G. (Automobiles),
Gtd. Unsub. Eurobonds, 4.125%,
07/05/03 DEM 430,000 314,258
- --------------------------------------------------------------
International Bank for
Reconstruction &
Development (Banks-Money Center),
Unsec. Global Bonds, 7.125%,
04/12/05 475,000 301,434
- --------------------------------------------------------------
LKB Global (Financial-Diversified),
Gtd. Notes, 6.00%, 01/25/06 1,200,000 712,120
- --------------------------------------------------------------
1,327,812
- --------------------------------------------------------------
ITALY-1.33%
KFW International Finance Inc.
(Investment Banking/Brokerage),
Gtd. Eurobonds, 11.625%,
11/27/98 ITL 1,200,000,000 749,592
- --------------------------------------------------------------
NEW ZEALAND-0.44%
International Bank for
Reconstruction &
Development (Banks-Money Center),
Bonds, 6.63%, 08/20/07(b) NZD 750,000 245,869
- --------------------------------------------------------------
SWEDEN-0.78%
Swedish Export Credit
(Financial-Diversified),
Unsec. Unsub. Eurobonds, 11.70%,
12/04/98 ITL 700,000,000 437,965
- --------------------------------------------------------------
UNITED KINGDOM-1.96%
Ford Credit Europe PLC
(Financial-Diversified),
Deb., 6.00%, 03/30/99 DEM 200,000 118,298
- --------------------------------------------------------------
KFW International Finance
(Investment Banking/Brokerage),
Gtd. Eurobonds, 10.625%,
09/03/01 GBP 100,000 186,255
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
UNITED KINGDOM-(CONTINUED)
Sutton Bridge
(Financial-Diversified),
Gtd. Eurobonds, 8.625%, 06/30/22
(acquired 05/29/97; cost
$733,585)(d) GBP 450,000 $ 800,287
- --------------------------------------------------------------
1,104,840
- --------------------------------------------------------------
Total Non-U.S. Dollar
Denominated
Non-Convertible Bonds & Notes 8,070,413
- --------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED
CONVERTIBLE BONDS &
NOTES(F)-2.58%
FRANCE-0.08%
Societe Generale (Banks-Money
Center),
Conv. Deb., 3.50%, 01/01/00 FRF 231,000 48,841
- --------------------------------------------------------------
JAPAN-0.64%
Glaxo Wellcome PLC
(Financial-Diversified),
Conv. Unsub. Notes, 4.30%,
09/28/98 JPY 4,000,000 55,708
- --------------------------------------------------------------
Sony Corp. (Electronic Equipment),
Conv. Deb., 1.40%, 03/31/05 8,000,000 87,744
- --------------------------------------------------------------
Toyota Motor Corp. (Automobiles),
Conv. Bonds, 1.20%, 01/28/98 15,000,000 215,060
- --------------------------------------------------------------
358,512
- --------------------------------------------------------------
SWITZERLAND-0.38%
Yamada Denki Co. Ltd. (Retail-
Computers & Electronics), Unsec.
Conv. Notes, 0.25%, 03/31/00 CHF 300,000 212,105
- --------------------------------------------------------------
UNITED KINGDOM-1.48%
British Airport Authority
(Airlines),
Eurobonds, 5.75%, 03/29/06 GBP 450,000 834,261
- --------------------------------------------------------------
Total Non-U.S. Dollar
Denominated Convertible Bonds
& Notes 1,453,719
- --------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED
GOVERNMENT BONDS &
NOTES(F)-20.94%
CANADA-3.21%
B.C. Generic Residual,
Deb., 13.88%, 06/21/04(b) CAD 150,000 74,269
- --------------------------------------------------------------
Canadian Government,
Bonds, 7.00%, 12/01/06 1,000,000 787,824
- --------------------------------------------------------------
</TABLE>
9
<PAGE> 12
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
Municipal Finance Authority of
British Columbia,
Bonds, 7.75%, 12/01/05 CAD 500,000 $ 404,842
- --------------------------------------------------------------
Ontario Province,
Sr. Unsec. Unsub. Deb.,
6.875%, 09/15/00 GBP 35,000 58,193
- --------------------------------------------------------------
Sr. Unsec. Unsub. Global Bonds,
8.00%, 03/11/03 CAD 600,000 480,021
- --------------------------------------------------------------
1,805,149
- --------------------------------------------------------------
FRANCE-1.09%
French Treasury Bill,
Notes, 5.75%, 11/12/98 FRF 3,500,000 617,085
- --------------------------------------------------------------
GERMANY-1.29%
Bundesrepublik Deutschland,
Bonds, 6.75%, 07/15/04 DEM 750,000 471,006
- --------------------------------------------------------------
Bonds, 6.875%, 05/12/05 400,000 252,736
- --------------------------------------------------------------
723,742
- --------------------------------------------------------------
ITALY-0.48%
Republic of Italy,
Conv. Bonds, 6.50%, 06/28/01 ITL 400,000,000 273,172
- --------------------------------------------------------------
NEW ZEALAND-4.73%
Federal National Mortgage
Association,
Notes, 7.25%, 06/20/02 NZD 750,000 469,042
- --------------------------------------------------------------
New Zealand Government,
Bonds, 8.00%, 02/15/01 1,000,000 644,440
- --------------------------------------------------------------
Bonds, 10.00%, 03/15/02 1,500,000 1,047,453
- --------------------------------------------------------------
Bonds, 8.00%, 04/15/04 750,000 500,116
- --------------------------------------------------------------
2,661,051
- --------------------------------------------------------------
SWEDEN-4.19%
Swedish Government,
Bonds, 13.00%, 06/15/01 SEK 3,000,000 492,824
- --------------------------------------------------------------
Bonds, 10.25%, 05/05/03 5,000,000 797,374
- --------------------------------------------------------------
Bonds, 6.00%, 02/09/05 4,000,000 527,110
- --------------------------------------------------------------
Bonds, 6.50%, 10/25/06 4,000,000 539,527
- --------------------------------------------------------------
2,356,835
- --------------------------------------------------------------
UNITED KINGDOM-5.95%
Federal National Mortgage
Association,
Sr. Unsec. Notes, 6.875%,
06/07/02 GBP 350,000 585,451
- --------------------------------------------------------------
United Kingdom Treasury,
Bonds, 8.00%, 12/07/00 350,000 606,708
- --------------------------------------------------------------
Gtd. Notes, 7.00%, 11/06/01 800,000 1,354,548
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
UNITED KINGDOM-(CONTINUED)
Bonds, 7.50%, 12/07/06 GBP 450,000 $ 801,823
- --------------------------------------------------------------
3,348,530
- --------------------------------------------------------------
Total Non-U.S. Dollar
Denominated Government Bonds
& Notes 11,785,564
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
DOMESTIC COMMON STOCK-0.03%
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-0.03%
Nextel Communications, Inc.(g) 557 $ 14,621
- --------------------------------------------------------------
DOMESTIC CONVERTIBLE PREFERRED STOCKS-2.16%
BANKS (REGIONAL)-0.88%
Westpac Banking Corp. STRYPES
Trust-$3.135 Conv. Pfd. 16,000 496,000
- --------------------------------------------------------------
ENTERTAINMENT-0.00%
Time Warner Inc.-Series M,
$102.50 PIK Conv. Pfd. 1 1,165
- --------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-1.08%
Conseco Inc.-$4.278 Conv. PRIDES 4,000 608,000
- --------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT)-0.20%
Citizens Utilities Co.-$2.50 Conv.
Pfd. 2,300 109,681
- --------------------------------------------------------------
Total Domestic Convertible
Preferred Stocks 1,214,846
- --------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY INTERESTS-2.20%
UNITED KINGDOM-2.20%
J Sainsbury PLC (Retail-Food
Chains)(g) 148,367 1,238,390
- --------------------------------------------------------------
WARRANTS-0.09%
BROADCASTING (TELEVISION, RADIO & CABLE)-0.00%
Wireless One, Inc., expiring
10/19/00(h) 150 0
- --------------------------------------------------------------
ELECTRICAL EQUIPMENT-0.04%
Electronic Retailing Systems,
expiring 01/24/98(h) 440 22,000
- --------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)-0.01%
MVE Inc., expiring 02/15/02(h) 100 3,000
- --------------------------------------------------------------
METAL FABRICATORS-0.00%
Gulf States Steel Corp.,
expiring 04/15/03(h) 60 270
- --------------------------------------------------------------
PERSONAL CARE-0.01%
IHF Capital Inc., expiring
11/14/99(h)
(acquired 11/04/94-12/07/94; cost
$0)(d) 70 3,465
- --------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-0.01%
Clearnet Communications Inc.,
expiring 09/15/05(h) 330 2,970
- --------------------------------------------------------------
</TABLE>
10
<PAGE> 13
<TABLE>
<CAPTION>
MARKET
WARRANTS-(CONTINUED) SHARES VALUE
<S> <C> <C>
Orion Network Systems, Inc.,
expiring 01/15/07(h) 420 $ 5,880
- --------------------------------------------------------------
8,850
- --------------------------------------------------------------
TELEPHONE-0.02%
ESAT Holdings Ltd., expiring
02/01/07(h)
(acquired 06/16/97; cost $0)(d) 350 1,137
- --------------------------------------------------------------
Intermedia Communications Inc.,
expiring 06/01/00(h) 150 10,500
- --------------------------------------------------------------
11,637
- --------------------------------------------------------------
Total Warrants 49,222
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
U.S. TREASURY SECURITIES-1.65%
Notes, 6.50%, 05/31/01 $ 400,000 $ 409,844
- --------------------------------------------------------------
Notes, 6.625%, 02/15/27 100,000 106,047
- --------------------------------------------------------------
Notes, 6.375%, 08/15/27 400,000 412,360
- --------------------------------------------------------------
Total U.S. Treasury Securities 928,251
- --------------------------------------------------------------
U.S. GOVERNMENT AGENCY
SECURITIES-0.73%
Tennessee Valley Authority, Bonds,
5.98%, 04/01/36 400,000 410,280
- --------------------------------------------------------------
REPURCHASE AGREEMENT(i)-2.13%
Sanwa Securities (U.S.A.) Co., L.P.
5.73%, 11/03/97(j) 1,201,988 1,201,988
- --------------------------------------------------------------
TOTAL INVESTMENTS-97.40% 54,823,384
- --------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-2.60% 1,463,735
- --------------------------------------------------------------
NET ASSETS-100.00% $ 56,287,119
- --------------------------------------------------------------
</TABLE>
Notes to Schedule of Investments:
(a) Principal amount is in U.S. Dollars, except as indicated by
note (f).
(b) Zero coupon bond issued at a discount. The interest rate
shown represents the rate of original issue discount.
(c) Discounted bond at purchase. Interest rate shown represents
the coupon rate at which the bond will accrue at a specified
future date.
(d) Restricted Security. May be resold to qualified
institutional buyers in accordance with the provisions of
Rule 144A under the Securities Act of 1933, as amended. The
valuation of these securities has been determined in
accordance with procedures established by the Board of
Directors. The aggregate market value of these securities at
10/31/97 was $5,275,178 which represented 9.37% of the
Fund's net assets.
(e) Issued as a unit. Each unit consists of $1,000 Sr. notes
plus warrants to purchase 0.8463 shares of common stock.
(f) Foreign denominated security. Par value and coupon are
denominated in currency of country indicated.
(g) Non-income producing security.
(h) Non-income producing security acquired as part of a unit
with or in exchange for other securities.
(i) Collateral on repurchase agreements, including the Fund's
pro-rata interest in joint repurchase agreements, is taken
into possession by the Fund upon entering into the
repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sales
price of the repurchase agreement. The investments in some
repurchase agreements are through participation in joint
accounts with other mutual funds, private accounts, and
certain non-registered investment companies managed by the
investment advisor or its affiliates.
(j) Joint repurchase agreement entered into 10/31/97 with a
maturing value of $200,095,500. Collateralized by
$201,314,000 U.S. Government obligations, 0% to 8.875% due
11/15/97 to 08/15/27 with an aggregate market value at
10/31/97 of $204,000,545.
Abbreviations:
<TABLE>
<S> <C>
CAD - Canadian Dollar Pfd. - Preferred
CHF - Swiss Franc PIK - Payment in Kind
Conv. - Convertible PRIDES - Preferred Redemption
Deb. - Debentures Increased Dividend Equity Securities
DEM - German Deutschemark Sec. - Secured
Disc. - Discounted SEK - Swedish Krona
FRF - French Franc Sr. - Senior
GBP - British Pound Sterling STRYPES - Structured Yield Product
Gtd. - Guaranteed Exchangeable for Stock
ITL - Italian Lire Sub. - Subordinated
JPY - Japanese Yen Unsec. - Unsecured
NZD - New Zealand Dollar Unsub. - Unsubordinated
</TABLE>
See Notes to Financial Statements.
11
<PAGE> 14
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$53,006,761) $54,823,384
- -----------------------------------------------------------
Foreign currencies, at market value (cost
$57,610) 57,391
- -----------------------------------------------------------
Receivables for:
Capital stock sold 349,669
- -----------------------------------------------------------
Dividends and interest 1,249,220
- -----------------------------------------------------------
Investment for deferred compensation plan 10,356
- -----------------------------------------------------------
Other assets 17,042
- -----------------------------------------------------------
Total assets 56,507,062
- -----------------------------------------------------------
LIABILITIES:
Payables for:
Capital stock reacquired 34,206
- -----------------------------------------------------------
Forward contracts 47,608
- -----------------------------------------------------------
Dividends 63,819
- -----------------------------------------------------------
Deferred compensation plan 10,356
- -----------------------------------------------------------
Accrued advisory fees 7,612
- -----------------------------------------------------------
Accrued administrative service fees 2,604
- -----------------------------------------------------------
Accrued distribution fees 34,324
- -----------------------------------------------------------
Accrued transfer agent fees 9,826
- -----------------------------------------------------------
Accrued operating expenses 9,588
- -----------------------------------------------------------
Total liabilities 219,943
- -----------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $56,287,119
===========================================================
NET ASSETS:
Class A $30,924,029
===========================================================
Class B $25,120,996
===========================================================
Class C $ 242,094
===========================================================
CAPITAL STOCK, $.001 PAR VALUE PER SHARE:
CLASS A:
Authorized 200,000,000
- -----------------------------------------------------------
Outstanding 2,830,028
===========================================================
CLASS B:
Authorized 200,000,000
- -----------------------------------------------------------
Outstanding 2,300,947
===========================================================
CLASS C:
Authorized 200,000,000
- -----------------------------------------------------------
Outstanding 22,178
===========================================================
CLASS A:
NET ASSET VALUE AND REDEMPTION PRICE PER
SHARE $ 10.93
===========================================================
OFFERING PRICE PER SHARE:
(Net asset value of $10.93 divided
by 95.25%) $ 11.48
===========================================================
CLASS B:
NET ASSET VALUE AND OFFERING PRICE PER SHARE $ 10.92
===========================================================
CLASS C:
NET ASSET VALUE AND OFFERING PRICE PER SHARE $ 10.92
===========================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended October 31, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $3,826,335
- -----------------------------------------------------------
Dividends 31,675
- -----------------------------------------------------------
Total investment income 3,858,010
- -----------------------------------------------------------
EXPENSES:
Advisory fees 346,653
- -----------------------------------------------------------
Administrative service fees 74,031
- -----------------------------------------------------------
Directors' fees 8,735
- -----------------------------------------------------------
Distribution fees-Class A 137,912
- -----------------------------------------------------------
Distribution fees-Class B 219,155
- -----------------------------------------------------------
Distribution fees-Class C 240
- -----------------------------------------------------------
Custodian fees 25,984
- -----------------------------------------------------------
Transfer agent fees-Class A 62,912
- -----------------------------------------------------------
Transfer agent fees-Class B 54,149
- -----------------------------------------------------------
Transfer agent fees-Class C 59
- -----------------------------------------------------------
Other 103,320
- -----------------------------------------------------------
Total expenses 1,033,150
- -----------------------------------------------------------
Less: Fees waived by advisor (302,278)
- -----------------------------------------------------------
Expenses paid indirectly (2,232)
- -----------------------------------------------------------
Net expenses 728,640
- -----------------------------------------------------------
Net investment income 3,129,370
- -----------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENT SECURITIES, FOREIGN CURRENCIES AND
FORWARD CURRENCY CONTRACTS:
Net realized gain (loss) on sales of:
Investment securities 109,553
- -----------------------------------------------------------
Foreign currencies (101,917)
- -----------------------------------------------------------
Forward currency contracts 389,609
- -----------------------------------------------------------
397,245
- -----------------------------------------------------------
Net unrealized appreciation (depreciation) of:
Investment securities 884,081
- -----------------------------------------------------------
Foreign currencies (1,291)
- -----------------------------------------------------------
Forward currency contracts (88,451)
- -----------------------------------------------------------
794,339
- -----------------------------------------------------------
Net gain from investment securities, foreign
currencies and forward currency contracts. 1,191,584
- -----------------------------------------------------------
Net increase in net assets resulting from
operations $4,320,954
===========================================================
</TABLE>
See Notes to Financial Statements.
12
<PAGE> 15
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
----------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 3,129,370 $ 1,844,305
- -----------------------------------------------------------------------------------------
Net realized gain on sales of investment securities,
foreign currencies and forward currency contracts 397,245 418,371
- -----------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities,
foreign currencies and forward currency contracts 794,339 543,300
- -----------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 4,320,954 2,805,976
- -----------------------------------------------------------------------------------------
Dividends to shareholders from net investment income:
Class A (1,835,866) (1,175,361)
- -----------------------------------------------------------------------------------------
Class B (1,337,369) (705,239)
- -----------------------------------------------------------------------------------------
Class C (767) --
- -----------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on
investment securities:
Class A (311,081) (122,866)
- -----------------------------------------------------------------------------------------
Class B (242,850) (57,565)
- -----------------------------------------------------------------------------------------
Class C (605) --
- -----------------------------------------------------------------------------------------
Share transactions-net:
Class A 8,692,165 11,543,105
- -----------------------------------------------------------------------------------------
Class B 8,049,066 12,214,514
- -----------------------------------------------------------------------------------------
Class C 239,702
- -----------------------------------------------------------------------------------------
Net increase in net assets 17,573,349 24,502,564
- -----------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 38,713,770 14,211,206
- -----------------------------------------------------------------------------------------
End of period $56,287,119 $ 38,713,770
=========================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $54,262,086 $ 37,281,153
- -----------------------------------------------------------------------------------------
Undistributed net investment income (10,921) 123,655
- -----------------------------------------------------------------------------------------
Undistributed net realized gain on sales of investment
securities, foreign currencies and forward currency
contracts 263,067 330,414
- -----------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies and forward currency contracts 1,772,887 978,548
- -----------------------------------------------------------------------------------------
$56,287,119 $ 38,713,770
=========================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
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 operating
series portfolios: AIM Global Income Fund, AIM Global Aggressive Growth Fund,
AIM Global Growth Fund and AIM International Equity Fund. The Fund currently
offers three different classes of shares: Class A shares, Class B shares and
Class C shares. Class A shares are sold with a front-end sales charge. Class B
and Class C shares are sold with a contingent deferred sales charge. Class C
shares commenced sales on August 4, 1997. 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 prices, and may reflect appropriate factors such as institution-
size trading in similar groups of securities, developments
13
<PAGE> 16
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 October 31, 1997 were as follows:
<TABLE>
<CAPTION>
UNREALIZED
SETTLEMENT CONTRACT TO APPRECIATION
DATE DELIVER VALUE RECEIVE (DEPRECIATION)
---------- ------------- ----------- ----------- --------------
<S> <C> <C> <C> <C>
11/18/97 NZD 3,580,000 $ 2,229,087 $ 2,279,923 $ 50,836
11/20/97 DEM 1,400,000 812,843 763,734 (49,109)
12/05/97 JPY 41,000,000 340,690 352,536 11,846
12/10/97 CHF 300,000 215,180 204,026 (11,154)
12/19/97 NZD 1,000,000 623,387 633,000 9,613
01/14/97 DEM 570,000 332,383 327,210 (5,173)
01/28/98 DEM 1,850,000 1,079,618 1,046,380 (33,238)
01/29/98 SEK 18,000,000 2,410,316 2,420,005 9,689
01/30/98 GBP 1,200,000 2,035,398 2,004,480 (30,918)
----------- ----------- --------
$10,078,902 $10,031,294 $(47,608)
=========== =========== ========
</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 annually. On October 31, 1997,
undistributed net investment income was decreased by $89,944 and
undistributed net realized gains increased by $89,944 in order to comply with
the requirements of the American Institute of Certified Public Accountants
Statement of Position 93-2. Net assets of the Fund were unaffected by the
reclassifications discussed above.
E. Federal Income Taxes-The Fund intends to comply with the requirements of the
Internal Revenue Code necessary to qualify as a regulated investment company
and, as such, will not be subject to federal income taxes on otherwise
taxable income (including net realized capital gains) which is distributed to
shareholders. Therefore, no provision for federal income taxes is recorded in
the financial statements.
F. Expenses-Distribution and transfer agency expenses directly attributable to a
class of shares are charged to that class' operations. All other expenses
which are attributable to more than one class are allocated between the
classes.
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 year ended
October 31, 1997, AIM waived fees of $302,278.
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 year ended October 31, 1997, AIM was reimbursed
$74,031 for such services.
14
<PAGE> 17
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency
services to the Fund. During the year ended October 31, 1997, the Fund paid AFS
$72,578 for such services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor of the Class
A, Class B and Class C 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"), the Fund's Class B shares (the "Class B Plan"),
and the Fund's Class C shares (the "Class C Plan") (collectively, the "Plans").
The Fund, pursuant to the Plan, pays AIM Distributors compensation at the annual
rate of 0.50% of the average daily net assets of Class A shares and 1.00% of the
average daily net assets of Class C shares. The Plan is designed to compensate
AIM Distributors for certain promotional and other sales related costs, and to
implement a dealer incentive program which provides for periodic payments to
selected dealers who furnish continuing personal shareholder services to their
customers who purchase and own Class A or Class C 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 year ended October
31, 1997 for the Class A shares and Class B shares and the period August 4, 1997
(date sales commenced) through October 31, 1997, the Class C shares paid AIM
Distributors $137,912, $219,155 and $240, respectively, as compensation under
the Plans.
AIM Distributors received commissions of $59,763 from sales of the Class A
shares of the Fund during the year ended October 31, 1997. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in the
proceeds from sales of Class A shares. During the year ended October 31, 1997,
AIM Distributors received commissions of $3,397 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 year ended October 31, 1997, the Fund incurred legal fees of $3,931
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-INDIRECT EXPENSES
AIM has directed certain portfolio trades to brokers who paid a portion of the
Fund's expenses related to pricing services used by the Fund which reduced the
Fund's expenses by $190 during the year ended October 31, 1997. The Fund also
received reductions in transfer agency fees from AFS (an affiliate of AIM) and
reductions in custodian fees of $649 and $1,393, respectively, under expense
offset arrangements. The effect of the above arrangements resulted in a
reduction of the Fund's total expenses of $2,232 during the year ended October
31, 1997.
NOTE 4-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 5-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $500,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
Prior to an amendment of the line of credit on July 15, 1997, the Fund was
limited to borrowing up to the lessor of (i) $325,000,000 or (ii) the limit set
by its prospectus for borrowings. During the year ended October 31, 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 0.05% 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 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended October 31, 1997 was
$45,325,570 and $28,881,069, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
as of October 31, 1997, is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $ 2,907,693
- ------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (1,091,792)
- ------------------------------------------------------
Net unrealized appreciation
(depreciation) of investment securities $ 1,815,901
======================================================
Cost of investments for tax purposes is $53,007,483.
</TABLE>
15
<PAGE> 18
NOTE 7-CAPITAL STOCK
Changes in the Fund's capital stock outstanding during the year ended October
31, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
1997 1996
------------------------ -----------------------
SHARES AMOUNT SHARES AMOUNT
---------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Sold:
Class A 1,677,097 $17,985,938 1,609,644 $17,019,341
- ----------------------------------------------------------------------------------------------------------------
Class B 1,244,806 13,337,043 1,313,279 13,876,204
- ----------------------------------------------------------------------------------------------------------------
Class C* 23,915 258,631 -- --
- ----------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 168,472 1,809,673 92,969 985,383
- ----------------------------------------------------------------------------------------------------------------
Class B 118,888 1,275,952 58,431 618,362
- ----------------------------------------------------------------------------------------------------------------
Class C* 71 779 -- --
- ----------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (1,035,690) (11,103,446) (613,922) (6,461,619)
- ----------------------------------------------------------------------------------------------------------------
Class B (610,857) (6,563,929) (215,814) (2,280,052)
- ----------------------------------------------------------------------------------------------------------------
Class C* (1,808) (19,708) -- --
- ----------------------------------------------------------------------------------------------------------------
1,584,894 $16,980,933 2,244,587 $23,757,619
================================================================================================================
</TABLE>
* Class C Shares commenced sales on August 4, 1997.
NOTE 8-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A capital stock
and a share of Class B capital stock outstanding during each of the years in the
three-year period ended October 31, 1997 and the period September 15, 1994
(dates operations commenced) through October 31, 1994 and for a share of Class C
capital stock outstanding during the period August 4, 1997 (date sales
commenced) through October 31, 1997.
<TABLE>
<CAPTION>
1997 1996 1995 1994
---------- ------- ------- ------
<S> <C> <C> <C> <C>
CLASS A:
Net asset value, beginning of period $ 10.85 $10.74 $10.02 $10.00
- -----------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.72 0.79(a) 0.79 0.08
- -----------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.21 0.25 0.75 0.01
- -----------------------------------------------------------------------------------------------------------
Total from investment operations 0.93 1.04 1.54 0.09
- -----------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from investment income (0.72) (0.81) (0.82) (0.07)
- -----------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.13) (0.12) -- --
- -----------------------------------------------------------------------------------------------------------
Total distributions (0.85) (0.93) (0.82) (0.07)
- -----------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.93 $10.85 $10.74 $10.02
===========================================================================================================
Total return(b) 9.05% 10.22% 16.07% 0.93%
===========================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $30,924 $21,926 $10,004 $2,661
===========================================================================================================
Ratio of expenses to average net assets(c) 1.25%(d)(e) 1.25% 1.25% 1.25%(f)
===========================================================================================================
Ratio of net investment income to average net assets(g) 6.54%(d) 7.27% 7.38% 6.01%(f)
===========================================================================================================
Portfolio turnover rate 61% 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 to
average net assets prior to fee waivers and/or expense reimbursements were
1.86%, 2.02%, 3.03% and 5.61% (annualized) for the periods 1997-1994,
respectively.
(d) Ratios are based on average net assets of $27,582,444.
(e) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have been 1.24%.
(f) Annualized.
(g) After fee waivers and/or expense reimbursements. The ratios of net
investment income to average net assets prior to fee waivers and/or expense
reimbursements were 5.93%, 6.51%, 5.59% and 1.65% (annualized) for the
periods 1997-1994, respectively.
16
<PAGE> 19
<TABLE>
<CAPTION>
1997 1996 1995 1994
---------- ------- ------ ------
<S> <C> <C> <C> <C>
CLASS B:
Net asset value, beginning of period $ 10.84 $10.73 $10.01 $10.00
- -------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.67 0.74(a) 0.74 0.07
- -------------------------------------------------------------------------------------------------------
Net gains on securities (both realized and unrealized) 0.21 0.24 0.75 0.01
- -------------------------------------------------------------------------------------------------------
Total from investment operations 0.88 0.98 1.49 0.08
- -------------------------------------------------------------------------------------------------------
Less distributions:
Dividends from investment income (0.67) (0.75) (0.77) (0.07)
- -------------------------------------------------------------------------------------------------------
Distributions from net realized gains (0.13) (0.12) -- --
- -------------------------------------------------------------------------------------------------------
Total distributions (0.80) (0.87) (0.77) (0.07)
- -------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 10.92 $10.84 $10.73 $10.01
=======================================================================================================
Total return(b) 8.48% 9.66% 15.56% 0.79%
=======================================================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $25,121 $16,787 $4,207 $362
=======================================================================================================
Ratio of expenses to average net assets(c) 1.76%(d)(e) 1.75% 1.74% 1.73%(f)
=======================================================================================================
Ratio of net investment income to average net assets(g) 6.03%(d) 6.77% 6.88% 3.59%(f)
=======================================================================================================
Portfolio turnover rate 61% 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 to
average net assets prior to fee waivers and/or expense reimbursements were
2.37%, 2.53%, 3.57% and 22.09% (annualized) for the periods 1997-1994,
respectively.
(d) Ratios are based on average net assets of $21,915,481.
(e) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly,
the ratio of expenses to average net assets would have remained the same.
(f) Annualized.
(g) After fee waivers and/or expense reimbursements. The ratios of net
investment income (loss) to average net assets prior to fee waivers and/or
expense reimbursements were 5.42%, 6.00%, 5.05% and (16.77)% (annualized)
for the periods 1997-1994, respectively.
<TABLE>
<CAPTION>
1997
CLASS C: ----------
<S> <C>
Net asset value, beginning of period $10.76
- ------------------------------------------------------------ ------
Income from investment operations:
Net investment income 0.15(a)
- ------------------------------------------------------------ ------
Net gains on securities (both realized and unrealized) 0.17
- ------------------------------------------------------------ ------
Total from investment operations 0.32
- ------------------------------------------------------------ ------
Less distributions:
Dividends from net investment income (0.13)
- ------------------------------------------------------------ ------
Distributions from net realized gains (0.03)
- ------------------------------------------------------------ ------
Total distributions (0.16)
- ------------------------------------------------------------ ------
Net asset value, end of period $10.92
============================================================ ======
Total return(b) 2.99%
============================================================ ======
Ratios/supplement data:
Net assets, end of period (000s omitted) $ 242
============================================================ ======
Ratio of expenses to average net assets(c) 1.76%(e)(d)
============================================================ ======
Ratio of net investment income (loss) to average net
assets(f) 6.03%(c)(d)
============================================================ ======
Portfolio turnover rate 61%
============================================================ ======
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges and periods for less than one year,
total returns are not annualized.
(c) After fee waivers and/or expense reimbursements. Ratio of expenses
to average net assets prior to fee waivers and/or expense
reimbursements was 2.37% (annualized).
(d) Ratios are annualized and based on average net assets of $98,262.
(e) Ratio includes expenses paid indirectly. Excluding expenses paid
indirectly, the ratio of expenses to average net assets would have
remained the same.
(f) After fee waivers and/or expense reimbursements. Ratio of net
investment income to average net assets prior to fee waivers and/or
expense reimbursements was 5.42% (annualized).
17
<PAGE> 20
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
AIM International Funds, Inc.:
We have audited the accompanying statement of assets and
liabilities of the AIM Global Income Fund (a portfolio of
AIM International Funds, Inc.), including the schedule of
investments, as of October 31, 1997, and the related
statement of operations for the year then ended, the
statement of changes in net assets for each of the years
in the two-year period then ended and the financial
highlights for each of the years or periods in the
three-year period then ended, and for the period
September 15, 1994 (date operations commenced) through
October 31, 1994. These financial statements and
financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion
on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of
securities owned as of October 31, 1997, by
correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and
financial highlights referred to above present fairly, in
all material respects, the financial position of AIM
Global Income Fund as of October 31, 1997, the results of
its operations for the year then ended, the changes in
its net assets for each of the years in the two-year
period then ended and the financial highlights for each
of the years or periods in the three-year period then
ended and for the period September 15, 1994 (date
operations commenced) through October 31, 1994, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Houston, Texas
December 5, 1997
18
<PAGE> 21
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 Withhold/
Director/Matter Votes For Against Abstentions
--------------- --------- ------------- -----------
<S> <C> <C> <C> <C>
(1) Charles T. Bauer............................................ 130,433,380 N/A 3,798,959
Bruce L. Crockett........................................... 130,563,964 N/A 3,668,375
Owen Daly II................................................ 130,421,284 N/A 3,811,055
Carl Frischling............................................. 130,515,713 N/A 3,716,626
Robert H. Graham............................................ 130,587,498 N/A 3,644,841
John F. Kroeger............................................. 130,446,846 N/A 3,785,493
Lewis F. Pennock............................................ 130,506,142 N/A 3,726,197
Ian W. Robinson............................................. 130,446,093 N/A 3,786,246
Louis S. Sklar.............................................. 130,573,480 N/A 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
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19
<PAGE> 22
Directors and Officers
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BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
Chairman Chairman Suite 100
AIM Management Group Inc. Houston, TX 77046
Robert H. Graham
Bruce L. Crockett President INVESTMENT ADVISOR
Directors
ACE Limited; John J. Arthur A I M Advisors, Inc.
Formerly Director, President, and Chief Senior Vice President and Treasurer 11 Greenway Plaza
Executive Officer Suite 100
COMSAT Corporation Carol F. Relihan Houston, TX 77046
Senior Vice President
Owen Daly II and Secretary TRANSFER AGENT
Director
Cortland Trust Inc. Gary T. Crum A I M Fund Services, Inc.
Senior Vice President P.O. Box 4739
Jack Fields Houston, TX 77210-4739
Formerly Member of the Dana R. Sutton
U.S. House of Representatives Vice President and Assistant Treasurer CUSTODIAN
Carl Frischling Robert G. Alley State Street Bank & Trust Company
Partner Vice President 225 Franklin Street
Kramer, Levin, Naftalis & Frankel Boston, MA 02110
Melville B. Cox
Robert H. Graham Vice President COUNSEL TO THE FUND
President and Chief Executive Officer
A I M Management Group Inc. Jonathan C. Schoolar Ballard Spahr
Vice President Andrews & Ingersoll
John F. Kroeger 1735 Market Street
Formerly Consultant P. Michelle Grace Philadelphia, PA 19103
Wendell & Stockel Associates, Inc. Assistant Secretary
COUNSEL TO THE DIRECTORS
Lewis F. Pennock David L. Kite
Attorney Assistant Secretary Kramer, Levin, Naftalis & Frankel
919 Third Avenue
Ian W. Robinson Nancy L. Martin New York, NY 10022
Consultant; Formerly Executive Assistant Secretary
Vice President and DISTRIBUTOR
Chief Financial Officer Ofelia M. Mayo
Bell Atlantic Management Assistant Secretary A I M Distributors, Inc.
Services, Inc. 11 Greenway Plaza
Kathleen J. Pflueger Suite 100
Louis S. Sklar Assistant Secretary Houston, TX 77046
Executive Vice President
Hines Interests Samuel D. Sirko AUDITORS
Limited Partnership Assistant Secretary
KPMG Peat Marwick LLP
Stephen I. Winer 700 Louisiana
Assistant Secretary Houston, TX 77002
Mary J. Benson
Assistant Treasurer
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REQUIRED FEDERAL INCOME TAX INFORMATION
AIM Global Income Fund Class A, Class B, and Class C shares paid ordinary
dividends in the amount of $0.7975, $0.74, and $0.137 per share, respectively,
to shareholders during its tax year ended October 31, 1997. Of this amount 0.87%
is eligible for the dividends received deduction for corporations. The Fund also
distributed long-term capital gains of $0.057 per share for Class A and Class B
shares and $0.023 per share for Class C shares during the Funds tax year ended
October 31, 1997. Of this amount, 10.66% is 20% rate gain.
INCOME TAX INFORMATION
Of total income dividends paid, 5.27% was derived from U.S. Treasury
obligations.
<PAGE> 23
HOW AIM MAKES INVESTING
EASY FOR YOU
o Low Initial Investment. You can get your investment program started for as
little as $500. Subsequent investments can be made for only $50.
o Automatic Reinvestment of Dividends and/or Capital Gains. Distributions
may be received in cash or reinvested in the Fund free of charge. Over
time, the power of compounding can significantly increase the value of your
assets.
o Automatic Investment Plan. You may build your investment by regularly
purchasing additional shares. Pre-authorized checks for $50 or more can be
drafted monthly from your personal checking account.
o Easy Access to Your Money. Your shares may be redeemed at net asset value
any day the New York Stock Exchange is open. The price of shares sold may
be more or less than their original cost, depending on market conditions.
o Systematic Withdrawal Plan. You may elect to receive checks of at least $50
monthly or quarterly through a systematic withdrawal plan.
o Exchange Privilege. As your goals change, you may exchange all or part
of your assets for those of other funds within the same share class of The
AIM Family of Funds--Registered Trademark--. The exchange privilege may be
modified or discontinued for any of the AIM Funds.
o Retirement Plans. You may purchase shares of the Fund for your Individual
Retirement Account (IRA) or any other type of retirement plan, and earn
tax-deferred dollars for your retirement.
o Toll-Free Access. Current shareholders can call our AIM Investor Line at
800-246-5463 for 24-hour-a-day account information. Or, of course, you may
contact your financial consultant for assistance.
o www.aimfunds.com. As a current shareholder, you can check account balances
24-hours-a-day over the Internet. State-of-the-art encryption lets you send
us questions that include confidential information without the fear of
eavesdropping, tampering or forgery.
---------------------------
Current shareholders
can call our
AIM Investor Line at
800-246-5463
for 24-hour-a-day
account information.
---------------------------
<PAGE> 24
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THE AIM FAMILY OF FUNDS--Registered Trademark--
AGGRESSIVE GROWTH
AIM Aggressive Growth Fund*
AIM Capital Development Fund
AIM Constellation Fund
AIM Global Aggressive Growth Fund
GROWTH OF CAPITAL
AIM Advisor International Value Fund
[PHOTO OF AIM Blue Chip Fund
11 GREENWAY PLAZA AIM Global Growth Fund
APPEARS HERE] AIM Growth Fund
AIM International Equity Fund
AIM Value Fund
AIM Weingarten Fund
GROWTH AND INCOME OR INCOME WITH CAPITAL GROWTH
AIM Advisor Flex Fund
AIM Advisor Large Cap Value Fund
AIM Advisor MultiFlex Fund
AIM Advisor Real Estate Fund
AIM Balanced Fund
AIM Charter Fund
AIM Global Utilities Fund
HIGH CURRENT INCOME OR CURRENT INCOME
AIM High Yield Fund
AIM Global Income Fund
AIM Income Fund
CURRENT TAX-FREE INCOME
AIM Municipal Bond Fund
AIM Tax-Exempt Bond Fund of Connecticut
AIM Tax-Free Intermediate Shares
CURRENT INCOME AND HIGH DEGREE OF SAFETY
AIM Intermediate Government Fund
AIM Limited Maturity Treasury Shares
AIM Money Market Fund
AIM Tax-Exempt Cash Fund
A I M Management Group Inc. has provided leadership in the *AIM Aggressive Growth Fund was closed to new investors on
mutual fund industry since 1976 and managed approximately June 5, 1997. For more complete information about any AIM
$72 billion in assets for more than 3.5 million shareholders, Fund(s), including sales charges and expenses, ask your
including individual investors, corporate clients, and financial financial consultant or securities dealer for a free
institutions as of June 30, 1997. The AIM Family of prospectus(es). Please read the prospectus(es) carefully
Funds--Registered Trademark-- is distributed nationwide, and before you invest or send money.
AIM today ranks among the nation's top 15 mutual fund
companies in assets under management, according to Lipper INVEST WITH DISCIPLINE-SM-
Analytical Services, Inc.
[AIM LOGO APPEARS HERE] -----------------
BULK RATE
A I M Distributors, Inc. U.S. POSTAGE
11 Greenway Plaza, Suite 100 PAID
Houston, TX 77046 HOUSTON, TX
Permit No. 1919
-----------------
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