<PAGE> 1
AIM GLOBAL INCOME FUND
[COVER IMAGE]
[AIM LOGO APPEARS HERE] ANNUAL REPORT OCTOBER 31 1998
INVEST WITH DISCIPLINE--Registered Trademark--
<PAGE> 2
[COVER IMAGE]
----------------------------------------------
THE WATER LILY POND BY CLAUDE MONET
AIM GLOBAL INCOME FUND IS BRIDGING CONTINENTS
TO BRING SHAREHOLDERS NEW INVESTMENT OPPORTUNITIES.
WIDE OCEANS NO LONGER FORM MUCH MORE OF A BARRIER TO
GLOBAL INVESTING THAN THE TRANQUIL POND DEPICTED IN
MONET'S PAINTING. THE MANAGEMENT TEAM HAS CONSTRUCTED
A DIVERSE PORTFOLIO CONSISTING OF GOVERNMENT AND
CORPORATE BONDS FROM AROUND THE WORLD.
----------------------------------------------
AIM Global Income Fund is for shareholders who seek a high level of current
income. The Fund invests in a portfolio of debt 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 at net asset value
without a sales charge.
o When sales charges are included in performance figures, Class A share
performance reflects the maximum 4.75% sales charge, and Class B and Class
C share performance reflects the applicable contingent deferred sales
charge (CDSC) for the period involved. The CDSC on Class B shares declines
from 5% beginning at the time of purchase to 0% at the beginning of the
seventh year. The CDSC on Class C shares is 1% for the first year after
purchase. The performance of the Fund's Class B and Class C shares will
differ from that of Class A shares due to differences in sales charge
structure and expenses.
o The Fund's investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
o The Fund's 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 International investing presents certain risks not associated with
investing solely in the United States. These include risks relating to
fluctuations in the value of the U.S. dollar relative to the values 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.
o The Salomon Brothers World Government Bond Index is an unmanaged composite
of long-term foreign government debt securities.
o The Fund invests in higher-yielding, lower-rated corporate bonds, commonly
known as "junk bonds." These bonds have greater risk of price fluctuation
and loss of principal than U.S. government securities, such as U.S.
Treasury bonds and bills, which offer a government guarantee as to the
repayment of principal and interest if held to maturity.
o Government securities, such as U.S. Treasury bills, notes, and bonds, offer
a high degree of safety and are guaranteed as to the timely payment of
principal and interest if held to maturity. Fund shares are not insured,
and their value will vary with market conditions.
o An investment cannot be made in any index listed. Unless otherwise
indicated, index results include reinvested dividends and do not reflect
sales charges.
MUTUAL FUNDS, ANNUITIES, AND OTHER INVESTMENTS ARE NOT INSURED BY THE
FDIC OR ANY OTHER GOVERNMENT AGENCY; ARE NOT DEPOSITS OR OTHER
OBLIGATIONS OF, OR GUARANTEED BY, ANY BANK OR ANY 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.
AIM GLOBAL INCOME FUND
<PAGE> 3
ANNUAL REPORT / CHAIRMAN'S LETTER
---------------------------
THE ABRUPT REVERSALS
OF SENTIMENT DURING
THIS FISCAL YEAR
REINFORCE OUR CONVICTION
THAT MARKETS ARE
UNPREDICTABLE IN THE
SHORT TERM.
---------------------------
Dear Fellow Shareholder:
Throughout the fiscal year covered by this report, markets
[PHOTO OF worldwide vacillated between optimism that the woes in Asia
Charles T. would be contained and worry that they would become a major
Bauer, economic drag on the U.S. and the rest of the world. As a
Chairman of result, markets worldwide were especially volatile.
the Board of We understand how unnerving this year's level of
THE FUND volatility can be. Many of you undoubtedly were tempted
APPEARS HERE] simply to exit the markets completely. Our reaction, of
course, is that you should not. The abrupt reversals of
sentiment during this fiscal year reinforce our conviction
that markets are unpredictable in the short term. Since even
the best money managers cannot know when to enter and exit a
market, we think the wisest strategy is to stay fully
invested despite volatility and short-term disappointment.
MARKET RECAP
Even in a year as unsettling as this one, August was particularly difficult. A
variety of events converged to produce harsh market conditions around the globe:
the seemingly intractable downturn in Japan, Russia's default on much of its
foreign debt, and fear that Latin America could be engulfed by the world's
difficulties. In a global display of lost confidence, investors flocked to
securities perceived as safe and liquid, especially U.S. Treasury issues. Even
high-quality corporate bonds went out of favor. High-yield corporate bonds
plummeted in value.
Fortunately, the U.S. Federal Reserve Board (the Fed) intervened. For most
of the fiscal year, the Fed had focused on the potential for inflation in the
U.S. economy. Shortly before the fiscal year ended, it shifted direction,
lowering interest rates twice to pump liquidity and confidence into the markets
and demonstrate that it would intervene to forestall a recession. Numerous
interest rate cuts in other countries followed. (After the fiscal year closed,
as this report was being written, the Fed lowered rates a third time.) Investors
responded favorably, and by the close of the fiscal year, many bond markets were
regaining equilibrium.
However difficult this fiscal year has been, the fundamental principles of
investing remain unchanged:
o broad portfolio diversification;
o realistic expectations, recognizing that the potential for downturns is
always present; and
o as always, long-term thinking.
Your financial consultant is your best resource for helping you construct a
diversified portfolio and weather turbulent markets.
YOUR FUND MANAGERS' COMMENTS
We are pleased to send you this report on your Fund's fiscal year. On the pages
that follow, your Fund's management team offers more detailed discussion of how
markets behaved, how they managed the portfolio, and what they foresee for your
Fund and the markets where it invests. We hope you find their discussion
informative. If you have any questions or comments, please contact our Client
Services department at 800-959-4246 or e-mail your inquiry to us at
[email protected]. You can access information about your account through our
AIM Investor Line at 800-246-5463 or on our Web site, www.aimfunds.com. We often
post market updates on our Web site.
We thank you for your continued participation in The AIM Family of
Funds--REGISTERED TRADEMARK--.
Sincerely,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
AIM GLOBAL INCOME FUND
<PAGE> 4
ANNUAL REPORT / MANAGERS' OVERVIEW
----------------------------------------
MOREOVER, WE REMAIN CONFIDENT THAT
OUR DIVERSIFIED APPROACH TO INVESTING
WILL ENHANCE RETURNS AND REDUCE RISK
OVER THE LONG TERM.
----------------------------------------
FUND CONTENDS WITH EXTREMELY NARROW BOND MARKET
THE BOND MARKET WAS VERY NARROW FOR MUCH OF THE FISCAL YEAR. HOW DID AIM GLOBAL
INCOME FUND PERFORM?
The Fund continued to provide a high level of current income. As of October 31,
1998, the Fund's 30-day distribution rate at net asset value was 6.79% for Class
A shares and 6.23% for Class B and Class C shares. The Fund's 30-day yield at
maximum offering price was 5.56% for Class A shares and 5.34% for Class B and
Class C shares. That compared favorably to the 5.15% yield of the 30-year U.S.
Treasury bond at the end of the reporting period.
For the fiscal year ended October 31, 1998, total return was 3.95%, 3.38%,
and 3.39% for Class A, B, and C shares, respectively. An extremely narrow market
environment, favoring the highest-rated government bonds-particularly U.S.
Treasury securities-detracted from the Fund's total return.
Since our last report six months ago, nets assets in the Fund grew from $72
million to $96 million.
WHY WAS THE BOND MARKET SO NARROW?
An assortment of global crises created an aversion to risk among investors.
These crises included severe economic dislocations in Asia, Russia, and Latin
America as well as political controversy in the U.S. In this unsettled market
environment, investors flocked to U.S. Treasury securities and foreign
government issues because of their relative safety and liquidity. Such a
phenomenon is known as a "flight to quality."
DID YOU CHANGE YOUR INVESTMENT STRATEGY, GIVEN THE UNUSUAL MARKET ENVIRONMENT?
No, we adhered to our disciplined strategy of investing in three major bond
classes: foreign bonds, U.S. domestic investment-grade bonds, and high-yield
securities. We believe the unusual narrowness that pervaded the global bond
market during much of the reporting period will eventually give way to more
normal conditions. Moreover, we remain confident that our diversified approach
to investing will enhance returns and reduce risk over the long term.
At the end of the reporting period, the Fund's total assets were divided as
follows: foreign bonds, 35.31%; domestic investment-grade bonds, 35.23%,
high-yield bonds, 20.75%; and other assets, 8.71%.
WHAT WERE SOME OF THE MAJOR THEMES IN THE GLOBAL BOND MARKET?
Europe and other developed markets were relative safe havens from the economic
turmoil that swept across other parts of the world during the fiscal year. In
most developed countries, higher-rated bonds were the beneficiaries of a
low-inflation, low-interest-rate environment and the efforts of foreign
governments to balance their budgets and reduce deficits. Bond markets we liked
included the United Kingdom, Germany, and New Zealand.
For much of the reporting period, the U.S. dollar was strong relative to
most other major currencies, although the dollar did weaken toward the end of
the fiscal year. The general strength of the dollar diminished returns for U.S.
investors. We mitigated the effect of a strong dollar by selectively hedging
some of the Fund's currency exposure.
Russia's default in August had a disastrous effect on emerging market debt,
which was already languishing as a result of the economic malaise in Asia.
However, the poor performance of emerging market debt was of little consequence
to the Fund since it invests primarily in developed markets and had no exposure
to Russia.
HOW DID U.S. DOMESTIC INVESTMENT-GRADE BONDS FARE?
In the U.S., Treasury securities soared in price, sending their yields to
historic lows. For example, the yield of the benchmark 30-year Treasury bond
fell from 6.16% at the beginning of the fiscal year to 4.72% on October 5,
1998-its lowest level since this issue came into existence in 1977.
While the Treasury market skyrocketed, other investment-grade bonds
appreciated less dramatically in value. Investment grade corporate bonds, for
example, underperformed Treasuries because of declining company profits and an
overabundance of supply. That caused the yield differentials between Treasuries
and investment-grade corporate bonds to widen substantially.
However, the Federal Reserve Board (the Fed), in an effort to infuse
liquidity back into the broader financial market, cut interest rates at the end
of September and again in mid-October. Investors began to shift their focus away
from Treasury issues toward other asset classes. As a result, the yield spreads
between Treasuries and investment-grade corporate bonds began to contract during
the final weeks of the fiscal year.
See important Fund and index disclosures inside front cover.
AIM GLOBAL INCOME FUND
2
<PAGE> 5
ANNUAL REPORT / MANAGERS' OVERVIEW
PORTFOLIO COMPOSITION
As of 10/31/98, based on total net assets
<TABLE>
<CAPTION>
========================================================================================================
% OF NET
TOP FIVE BOND HOLDINGS COUPON MATURITY ASSETS
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. U.S. Treasury Bonds 6.125% 11/2027 5.25 Foreign bonds 35.31%
2. U.S. Treasury Bonds 5.50 08/2028 3.27 Investment-grade bonds 35.23%
3. U.S. Treasury Bonds 6.875 05/2006 1.78 High-yield bonds 20.75%
4. Swedish Government 5.00 01/2009 1.56 Other 8.71%
5. United Kingdom Treasury 7.00 11/2001 1.46
Please keep in mind the Fund's portfolio is subject to change and there is no
assurance the Fund will continue to hold any particular security.
========================================================================================================
</TABLE>
WHAT ABOUT HIGH-YIELD BONDS?
High-yield bonds were among the asset classes most adversely affected by the
"flight to quality." The performance of this sector had been solid during the
first half of the fiscal year when economic growth was robust and corporate
profits were strong. However, it deteriorated significantly after April in the
wake of declining corporate profits and rising default rates. We believe the
drop in high-yield bond prices could create some attractive buying opportunities
in this sector.
HOW WAS THE FUND STRUCTURED AT THE END OF THE REPORTING PERIOD?
The Fund had 209 holdings as of October 31, 1998. The weighted average maturity
of the portfolio was 12.96 years and its duration was 7.49 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.
HOW WILL THE NEW CURRENCY IN EUROPE AFFECT THE FUND?
Starting January 1, 1999, Europe will launch a brand new currency-the euro. At
first, only 11 countries will adopt it: Austria, Belgium, Finland, France,
Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain. The
changeover will take place gradually. New coins and paper currency will not be
introduced until January 2002.
The euro is expected to bring greater unity to the European business world.
Price comparison of goods, services, and labor across Europe will be much
easier. Because of this "price transparency," European companies will be forced
to become more competitive. Furthermore, corporate bond issuance could increase
in Europe as 11 small bond markets will be replaced by one large bond market.
This could create more investment opportunities for the Fund.
The introduction of a new currency can present unique risks and
uncertainties for investors. Please see your Fund prospectus for more
information about these risk factors.
WHAT IS YOUR OUTLOOK?
At the close of the fiscal year, the environment was favorable for bonds in
Europe, the U.S., and other developed countries. Inflation and interest rates
were low, and economic growth was continuing at a healthy pace. Moreover, the
concerns that precipitated the flight to U.S. Treasury securities and other
high-quality issues appeared to be receding as investors were shifting their
focus to other asset classes. The performance of U.S. investment-grade corporate
bonds, for example, improved significantly during the final weeks of the fiscal
year.
Additionally, the U.S. and other leading economic powers were pursuing
policies aimed at creating a favorable climate for investors both at home and
abroad. In late October, the Group of Seven nations-the U.S., the United
Kingdom, Canada, Germany, Italy, France, and Japan-approved a plan designed to
prop up financial markets in developing nations. That plan allows the
International Monetary Fund to provide loans to financially troubled countries
before foreign investors pull out. And in the U.S. in November, after the
reporting period ended, the Fed approved another interest rate cut-its third in
seven weeks.
Regardless of market trends, we plan to maintain our three-pronged approach
of investing in domestic investment- grade, high-yield, and global bonds in an
effort to reduce risk and enhance potential return.
See important Fund and index disclosures inside front cover.
AIM GLOBAL INCOME FUND
3
<PAGE> 6
ANNUAL REPORT / PERFORMANCE HISTORY
YOUR FUND'S LONG-TERM PERFORMANCE
RESULTS OF A $10,000 INVESTMENT
AIM GLOBAL INCOME FUND VS. BENCHMARK INDEXES
9/15/94-10/31/98
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
AIM Global AIM Global Salomon Brothers Lehman Brothers
Income Fund Income Fund World Government Government
Class B shares Class A shares Bond Index Bond Index
- --------------------------------------------------------------------------------------
In thousands
<S> <C> <C> <C> <C>
9/15/94 $10,000 $ 9,524 $10,000 $10,000
10/31/94 10,079 9,613 9,992 10,160
2/28/95 10,395 9,929 10,441 10,523
6/30/95 11,054 10,574 11,159 11,742
10/31/95 11,647 11,158 11,529 11,706
2/29/96 11,871 11,394 11,704 11,754
6/30/96 12,139 11,670 11,661 11,785
10/31/96 12,772 12,298 12,119 12,334
2/28/97 12,989 12,535 12,234 11,974
6/30/97 13,279 12,830 12,523 12,243
10/31/97 13,855 13,411 13,166 12,656
2/28/98 14,277 13,845 13,536 12,648
6/30/98 14,538 14,123 13,933 12,771
10/31/98 14,323 13,940 14,653 14,244
================================================================================
Past Performance cannot guarantee comparable future results.
================================================================================
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
As of 10/31/98 including sales charges
CLASS A SHARES
Inception (9/15/94) 8.38%
1 Year -1.03*
CLASS B SHARES
Inception (9/15/94) 8.73%
1 Year -1.47**
CLASS C SHARES
Inception (8/4/97) 5.19
1 Year 2.42***
*3.95% excluding sales charges
**3.38 excluding sales charges
***3.39 excluding sales charges
================================================================================
Sources: Towers Data Systems HYPO--REGISTERED TRADEMARK-- and Bloomberg.
Your Fund's total return includes sales charges, expenses, and management
fees. The performance of Class B and Class C shares will differ from that of
Class A shares due to differing fees and expenses. For Fund performance
calculations and descriptions of indexes cited on this page, please refer to the
inside front cover.
MARKET VOLATILITY CAN SIGNIFICANTLY IMPACT SHORT-TERM PERFORMANCE. RESULTS OF AN
INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL PERFORMANCE
SHOWN.
ABOUT THIS CHART
The chart 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 9/15/94-10/31/98. Index performance is for the period from
8/31/94-10/31/98. 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. Market indexes such as the
above-mentioned are not managed, incurring no sales charges, expenses, or fees.
If you could buy all the securities that make up a market index, you would incur
expenses that would affect your investment's return.
AIM GLOBAL INCOME FUND
4
<PAGE> 7
YEAR 2000 READINESS DISCLOSURE
AIM PREPARES FOR THE YEAR 2000
THE YEAR 2000. THE WORDS STIR THE IMAGINATION, MAKING US WONDER WHAT THE NEXT
MILLENNIUM WILL BRING. BUT THE WORDS ARE ALSO STARTING TO MAKE SOME PEOPLE
WORRY, SINCE THERE'S BEEN SO MUCH TALK LATELY ABOUT A COMPUTER GLITCH CALLED
"THE YEAR 2000 PROBLEM." BECAUSE THIS IS A PROBLEM THAT COULD AFFECT MOST
AMERICAN INDUSTRIES, INCLUDING THE MUTUAL FUND INDUSTRY, WE WANT TO BRING YOU
THIS UPDATE TO LET YOU KNOW HOW AIM IS GETTING READY.
WHAT IS THE YEAR 2000 PROBLEM?
It has to do with the way that computers understand dates. Most computers were
programmed to recognize only the last two digits of a four-digit date ("98" for
1998). When the year 2000 hits, the computer will read "00"--but it may
interpret that as the year 1900. So, if the computer makes a calculation
involving a date of January 1, 2000, or later, it could be processed
incorrectly. Date-sensitive calculations are found in all kinds of places--from
elevators to air traffic control systems--but they are especially prevalent in
the financial services industry.
AIM'S YEAR 2000 COMPLIANCE
AIM's technology team has been addressing Year 2000 issues for some time now.
Our internal team, together with an independent technology consultant, are
implementing a comprehensive Year 2000 Compliance Project for A I M Management
Group Inc. and its subsidiaries.
So far, we've inventoried all software applications that we rely on, and
we've identified the applications that might need adjustments to function
properly when the year 2000 arrives. We are now in the final phase of the
project, making corrections and testing applications that need adjustment. We
plan to complete this phase during the fourth quarter of 1998.
AN INDUSTRY-WIDE TEST
In the spring of 1999, AIM intends to participate in industry-wide testing that
should simulate the arrival of the year 2000. This should allow mutual fund
companies, banks, exchanges, and other players in the financial community to
test various kinds of transactions and to determine if any further adjustments
need to be made before the end of the year.
We believe our plans are quite comprehensive, and we're committed to
monitoring all software applications through the critical period, extending as
far as needed into the 21st century.
AIM GLOBAL INCOME FUND
5
<PAGE> 8
SCHEDULE OF INVESTMENTS
October 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL(a) MARKET
AMOUNT VALUE
<S> <C> <C>
U.S. DOLLAR DENOMINATED
NON-CONVERTIBLE BONDS & NOTES-52.79%
AEROSPACE/DEFENSE-0.29%
Pacific Aerospace & Electronics,
Sr. Sub. Notes, 11.25%, 08/01/05
(Acquired 07/24/98; Cost
$350,000)(b) $ 350,000 $ 278,250
- ---------------------------------------------------------------
AIR FREIGHT-0.37%
Atlas Air, Inc., Sr. Notes, 10.75%,
08/01/05 350,000 351,750
- ---------------------------------------------------------------
AIRLINES-1.87%
Airplanes Pass Through Trust, Sub.
Bonds, 10.875%, 03/15/19 230,000 239,345
- ---------------------------------------------------------------
America West Airlines, Inc., Pass
Through Ctfs., 6.86%, 07/02/04 575,999 578,753
- ---------------------------------------------------------------
Delta Air Lines, Inc., Deb., 9.00%,
05/15/16 550,000 622,199
- ---------------------------------------------------------------
United Air Lines, Inc., Pass
Through Ctfs., 9.56%, 10/19/18 300,000 366,051
- ---------------------------------------------------------------
1,806,348
- ---------------------------------------------------------------
AUTO PARTS & EQUIPMENT-0.31%
Advance Stores Co., Sr. Sub. Notes,
10.25%, 04/15/08 (Acquired
04/07/98; Cost $310,000)(b) 310,000 296,050
- ---------------------------------------------------------------
BANKS (MAJOR REGIONAL)-1.10%
Regions Financial Corp., Sub.
Notes, 7.75%, 09/15/24 500,000 556,345
- ---------------------------------------------------------------
Royal Bank of Scotland PLC (United
Kingdom), Yankee Sub. Notes,
6.375%, 02/01/11 500,000 505,825
- ---------------------------------------------------------------
1,062,170
- ---------------------------------------------------------------
BANKS (MONEY CENTER)-1.01%
Deutsche Bank Financial, Gtd.
Unsec. Sub. Deb., 6.70%, 12/13/06 750,000 754,800
- ---------------------------------------------------------------
First Union Bancorp, Sub. Deb.,
7.50%, 04/15/35 200,000 218,858
- ---------------------------------------------------------------
973,658
- ---------------------------------------------------------------
BANKS (REGIONAL)-1.66%
HSBC Americas Inc., Sub. Notes,
7.00%, 11/01/06 500,000 515,530
- ---------------------------------------------------------------
Mercantile Bancorp Inc., Unsec.
Sub. Notes, 7.30%, 06/15/07 1,000,000 1,083,050
- ---------------------------------------------------------------
1,598,580
- ---------------------------------------------------------------
BEVERAGES (NON-ALCOHOLIC)-0.77%
Coca-Cola Enterprises, Inc.,
Putable Notes, 8.35%, 06/20/20(c) 3,113,000 743,042
- ---------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE)-2.02%
Comcast Cable Communications,
Notes, 8.50%, 05/01/27 500,000 600,665
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL(a) MARKET
AMOUNT VALUE
<S> <C> <C>
BROADCASTING (TELEVISION, RADIO &
CABLE)-(CONTINUED)
CSC Holdings Inc., Sr. Unsec. Deb.,
7.625%, 07/15/18 $ 400,000 $ 372,144
- ---------------------------------------------------------------
EchoStar DBS Corp., Sr. Gtd. Notes,
12.50%, 07/01/02 320,000 328,000
- ---------------------------------------------------------------
Kabelmedia Holdings GmbH (Germany),
Sr. Unsec. Disc. Yankee Notes,
13.625%, 08/01/06(d) 200,000 153,000
- ---------------------------------------------------------------
Knology Holdings, Inc., Sr. Disc.
Notes, 11.875% 10/15/07(d) 700,000 323,750
- ---------------------------------------------------------------
TCI Communications Inc., Sr. Notes,
8.00%, 08/01/05 150,000 170,283
- ---------------------------------------------------------------
1,947,842
- ---------------------------------------------------------------
CHEMICALS-2.90%
Agrium, Inc. (Canada), Unsec.
Yankee Notes, 7.00%, 02/01/04 350,000 359,772
- ---------------------------------------------------------------
Airgas Inc., Medium Term Notes,
7.14%, 03/08/04 500,000 519,375
- ---------------------------------------------------------------
Nova Chemicals Ltd. (Canada),
Yankee Deb., 7.00%, 08/15/26 600,000 623,292
- ---------------------------------------------------------------
Nova Gas Transmission Ltd.
(Canada), Yankee Deb., 8.50%,
12/15/12 450,000 549,153
- ---------------------------------------------------------------
Solutia Inc., Bonds, 6.72%,
10/15/37 500,000 512,990
- ---------------------------------------------------------------
Sterling Chemicals, Inc., Sr.
Unsec. Sub. Notes, 11.75%,
08/15/06 300,000 232,500
- ---------------------------------------------------------------
2,797,082
- ---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-0.26%
ProNet, Inc., Sr. Sub. Notes,
11.875%, 06/15/05 250,000 253,750
- ---------------------------------------------------------------
COMPUTERS (NETWORKING)-0.33%
Exodus Communications, Inc., Sr.
Notes, 11.25%, 07/01/08 (Acquired
06/26/98; Cost $360,000)(b) 360,000 322,200
- ---------------------------------------------------------------
CONSTRUCTION (CEMENT & AGGREGATES)-0.29%
Schuff Steel Co., Sr. Unsec. Gtd.
Sub. Notes, 10.50%, 06/01/08 350,000 281,750
- ---------------------------------------------------------------
CONSUMER FINANCE-1.13%
Countrywide Capital III, Gtd.
Notes, 8.05%, 06/15/27 350,000 349,465
- ---------------------------------------------------------------
Household Finance Corp., Notes,
7.125%, 09/01/05 700,000 737,751
- ---------------------------------------------------------------
1,087,216
- ---------------------------------------------------------------
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
PRINCIPAL(a) MARKET
AMOUNT VALUE
<S> <C> <C>
CONTAINERS & PACKAGING
(PAPER)-0.18%
BPC Holding Corp., Series B, Sr.
Sec. Notes, 12.50%, 06/15/06 $ 100,000 $ 101,500
- ---------------------------------------------------------------
MVE Inc., Sr. Sec. Notes, 12.50%,
02/15/02 75,000 71,625
- ---------------------------------------------------------------
173,125
- ---------------------------------------------------------------
DISTRIBUTORS (FOOD & HEALTH)-0.21%
AmeriServ Food Co., Gtd. Notes,
10.125%, 07/15/07 240,000 200,400
- ---------------------------------------------------------------
ELECTRIC COMPANIES-2.94%
Cleveland Electric Illumination,
Series D Sr. Notes, 7.88%,
11/01/17 500,000 508,590
- ---------------------------------------------------------------
El Paso Electric Co.
Series D Sec. First Mortgage
Bonds, 8.90%, 02/01/06 250,000 277,600
- ---------------------------------------------------------------
Series E Sec. First Mortgage
Bonds, 9.40%, 05/01/11 250,000 285,083
- ---------------------------------------------------------------
Niagara Mohawk Power Corp.
First Mortgage Notes, 9.25%,
10/01/01 650,000 706,901
- ---------------------------------------------------------------
Sr. Unsec. Notes, 7.75%, 10/01/08 1,000,000 1,056,740
- ---------------------------------------------------------------
2,834,914
- ---------------------------------------------------------------
ELECTRICAL EQUIPMENT-0.11%
Electronic Retailing Systems
International, Inc., Sr. Disc.
Notes, 13.25%, 02/01/04(d) 290,000 102,950
- ---------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS)-0.23%
Panda Funding Corp., Series A-1
Pooled Project Bonds, 11.625%,
08/20/12 199,591 218,552
- ---------------------------------------------------------------
ENTERTAINMENT-1.89%
Ascent Entertainment Group, Sr.
Sec. Disc. Notes, 11.875%,
12/15/04(d) 150,000 83,250
- ---------------------------------------------------------------
Silver Cinemas Inc., Sr. Sub.
Notes, 10.50%, 04/15/05 350,000 309,750
- ---------------------------------------------------------------
Time Warner, Inc.
Deb., 9.125%, 01/15/13 500,000 618,815
- ---------------------------------------------------------------
Notes, 8.18%, 08/15/07 200,000 229,670
- ---------------------------------------------------------------
Unsec. Deb., 6.85%, 01/15/26 250,000 264,860
- ---------------------------------------------------------------
Viacom, Inc., Sr. Unsec. Gtd. Deb.,
7.625%, 01/15/16 300,000 317,034
- ---------------------------------------------------------------
1,823,379
- ---------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-1.18%
Associates Corp. of North America,
Bonds, 6.95%, 11/01/18 500,000 504,425
- ---------------------------------------------------------------
Associates Corp. of North America,
Series B Sr. Deb., 7.95%,
02/15/10 100,000 112,789
- ---------------------------------------------------------------
Finova Capital Corp., Unsec. Notes,
7.40%, 05/06/06 500,000 520,545
- ---------------------------------------------------------------
1,137,759
- ---------------------------------------------------------------
FOODS-1.62%
ConAgra Inc., Sr. Unsec. Notes,
7.125%, 10/01/26 900,000 955,314
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL(a) MARKET
AMOUNT VALUE
<S> <C> <C>
FOODS-(CONTINUED)
Del Monte Corp./Foods Co., Sr.
Unsec. Sub. Notes, 12.25%,
04/15/07 $ 260,000 $ 279,500
- ---------------------------------------------------------------
RAB Enterprise, Inc., Sr. Notes,
10.50%, 05/01/05 (Acquired
04/28/98; Cost $350,000)(b) 350,000 322,000
- ---------------------------------------------------------------
1,556,814
- ---------------------------------------------------------------
GAMING, LOTTERY & PARIMUTUEL COMPANIES-0.12%
Showboat Marina Casino Partnership
& Showboat Marina Financial
Corp., Series B Sec. First
Mortgage Notes, 13.50%, 03/15/03 100,000 113,500
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC & OTHER)-0.79%
Global Health Sciences, Sr. Notes,
11.00%, 05/01/08 270,000 238,950
- ---------------------------------------------------------------
Watson Pharmaceuticals Inc., Sr.
Notes, 7.125%, 05/15/08 500,000 525,155
- ---------------------------------------------------------------
764,105
- ---------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT)-0.53%
Tenet Healthcare Corp., Sr. Notes,
8.00%, 01/15/05 500,000 508,720
- ---------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)-1.08%
Alaris Medical Systems, Sr. Unsec.
Gtd. Sub. Deb., 9.75%, 12/01/06 200,000 187,000
- ---------------------------------------------------------------
Beckman Coulter, Sr. Unsec. Gtd.
Notes, 7.45%, 03/04/08 500,000 493,710
- ---------------------------------------------------------------
Dade International Inc., Series B
Sr. Sub. Notes, 11.125%, 05/01/06 100,000 107,500
- ---------------------------------------------------------------
Mediq, Inc., Sr. Unsec. Sub. Notes,
11.00%, 06/01/08 (Acquired
05/21/98; Cost $280,000)(b) 280,000 253,400
- ---------------------------------------------------------------
1,041,610
- ---------------------------------------------------------------
HOMEBUILDING-0.75%
D.R. Horton, Inc., Unsec. Gtd.
Notes, 10.00%, 04/15/06 55,000 56,375
- ---------------------------------------------------------------
Engle Homes Inc., Sr. Unsec. Gtd.
Sub. Notes, 9.25%, 02/01/08 350,000 335,125
- ---------------------------------------------------------------
Schuler Homes, Sr. Unsec. Gtd. Sub.
Notes, 9.00%, 04/15/08 370,000 334,850
- ---------------------------------------------------------------
726,350
- ---------------------------------------------------------------
HOUSEWARES-0.31%
Decora Industries, Inc., Sr. Sec.
Notes, 11.00%, 05/01/05 (Acquired
04/24/98; Cost $341,730)(b) 350,000 302,750
- ---------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-0.78%
Torchmark Corp., Notes, 7.875%,
05/15/23 750,000 751,028
- ---------------------------------------------------------------
</TABLE>
7
<PAGE> 10
<TABLE>
<CAPTION>
PRINCIPAL(a) MARKET
AMOUNT VALUE
<S> <C> <C>
INSURANCE (PROPERTY-CASUALTY)-1.07%
Terra Nova Holdings (United
Kingdom), Sr. Sec. Gtd. Notes,
7.20%, 08/15/07 $ 500,000 $ 517,054
- ---------------------------------------------------------------
Sr. Unsec. Gtd. Notes, 7.00%,
05/15/08 (Acquired 05/12/98; Cost
$499,495)(b) 500,000 511,135
- ---------------------------------------------------------------
1,028,189
- ---------------------------------------------------------------
IRON & STEEL-0.46%
Acme Metal Inc., Sr. Unsec. Gtd.
Deb., 10.875%, 12/15/07(e) 438,000 89,790
- ---------------------------------------------------------------
GS Industries, Inc., Sr. Gtd.
Notes, 12.00%, 09/01/04 200,000 151,000
- ---------------------------------------------------------------
Sheffield Steel Corp., First
Mortgage Notes, 11.50%, 12/01/05 250,000 203,750
- ---------------------------------------------------------------
444,540
- ---------------------------------------------------------------
LODGING-HOTELS-0.59%
Coast Hotels & Casinos Inc., Series
B Sec. First Mortgage Gtd. Notes,
13.00%, 12/15/02 70,000 78,750
- ---------------------------------------------------------------
ITT Corp., Unsec. Gtd. Deb.,
7.375%, 11/15/15 150,000 129,302
- ---------------------------------------------------------------
John Q. Hammons Hotels Inc., Sec.
First Mortgage Notes, 9.75%,
10/01/05 100,000 89,750
- ---------------------------------------------------------------
Stena Line A.B. (Sweden), Sr.
Yankee Notes, 10.625%, 06/01/08 310,000 271,250
- ---------------------------------------------------------------
569,052
- ---------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-1.25%
First Wave Marine, Inc., Sr. Unsec.
Gtd. Notes, 11.00%, 02/01/08 250,000 238,750
- ---------------------------------------------------------------
MMI Products Inc., Sr. Unsec. Sub.
Notes, 11.25%, 04/15/07 260,000 271,700
- ---------------------------------------------------------------
Owens Corning, Unsec. Bonds, 7.50%,
08/01/18 750,000 692,504
- ---------------------------------------------------------------
1,202,954
- ---------------------------------------------------------------
METALS MINING-0.28%
Rio Algom Ltd. (Canada), Yankee
Unsec. Deb., 7.05%, 11/01/05 250,000 273,865
- ---------------------------------------------------------------
NATURAL GAS-1.42%
Dynegy Inc., Sr. Unsec. Deb.,
7.125%, 05/15/18 500,000 511,935
- ---------------------------------------------------------------
Enron Corp., Sr. Sub. Deb., 8.25%,
09/15/12 500,000 567,909
- ---------------------------------------------------------------
Ferrellgas Partners, Series B Sr.
Sec. Gtd. Notes, 9.375%, 06/15/06 300,000 292,500
- ---------------------------------------------------------------
1,372,344
- ---------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES-0.21%
United Stationer Supply, Sr. Sub.
Notes, 12.75%, 05/01/05 180,000 200,700
- ---------------------------------------------------------------
OIL (INTERNATIONAL INTEGRATED)-0.59%
Gulf Canada Resources, Ltd.
(Canada), Sr. Yankee Unsec.
Notes, 8.35%, 08/01/06 550,000 571,093
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL(a) MARKET
AMOUNT VALUE
<S> <C> <C>
OIL & GAS (DRILLING & EQUIPMENT)-1.25%
Petro Geo-Services ASA (Norway),
Sr. Notes, 7.125%, 03/30/28 $ 500,000 $ 486,295
- ---------------------------------------------------------------
R&B Falcon Corp., Sr. Unsec. Notes,
7.375%, 04/15/18 750,000 722,205
- ---------------------------------------------------------------
1,208,500
- ---------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION)-2.34%
Abraxas Petroleum Corp., Series D
Sr. Unsec. Gtd. Notes, 11.50%,
11/01/04 95,000 71,725
- ---------------------------------------------------------------
Canadian Forest Oil Ltd. (Canada)
Sr. Yankee Unsec. Sub. Notes,
8.75%, 09/15/07 250,000 223,750
- ---------------------------------------------------------------
Chesapeake Energy Corp., Sr. Unsec.
Gtd. Notes, 9.625%, 05/01/05 160,000 137,600
- ---------------------------------------------------------------
Kelley Oil & Gas Corp.,
Series B Sr. Gtd. Sub. Notes,
10.375%, 10/15/06 250,000 188,750
- ---------------------------------------------------------------
Series C Sr. Sub. Notes, 10.375%,
10/15/06 (Acquired 05/26/98; Cost
$101,500)(b) 100,000 75,500
- ---------------------------------------------------------------
Louis Dreyfus Natural Gas, Sr. Sub.
Notes, 9.25%, 06/15/04 500,000 545,935
- ---------------------------------------------------------------
Queens Sand Resources, Sr. Notes,
12.50%, 07/01/08 (Acquired
06/30/98; Cost $350,000)(b) 350,000 281,750
- ---------------------------------------------------------------
Talisman Energy Inc. (Canada)
Yankee Deb.,
7.125%, 06/01/07 250,000 254,760
- ---------------------------------------------------------------
7.25%, 10/15/27 500,000 476,725
- ---------------------------------------------------------------
2,256,495
- ---------------------------------------------------------------
OIL & GAS (REFINING & MARKETING)-0.31%
Texas Petrochemical Corp., Sr.
Unsec. Sub. Notes, 11.125%,
07/01/06 320,000 299,200
- ---------------------------------------------------------------
PERSONAL CARE-0.54%
Alberto-Culver Corp., Notes,
6.375%, 06/15/28 500,000 523,915
- ---------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT)-0.51%
Kincaid Generation LLC, Sec. Bonds,
7.33%, 06/15/20 (Acquired
04/30/98; Cost $501,235)(b) 500,000 492,425
- ---------------------------------------------------------------
PUBLISHING (NEWSPAPERS)-0.32%
News America Holdings, Inc., Sr.
Gtd. Deb., 9.25%, 02/01/13 250,000 307,110
- ---------------------------------------------------------------
RAILROADS-0.51%
Norfolk Southern Corp., Putable
Bonds, 7.05%, 05/01/37 450,000 495,108
- ---------------------------------------------------------------
</TABLE>
8
<PAGE> 11
<TABLE>
<CAPTION>
PRINCIPAL(a) MARKET
AMOUNT VALUE
<S> <C> <C>
REAL ESTATE INVESTMENT TRUST-1.38%
Glenborough Realty Trust, Sr.
Notes, 7.625%, 03/15/05 (Acquired
03/18/98; Cost $499,185)(b) $ 500,000 $ 493,516
- ---------------------------------------------------------------
Health Care REIT, Inc., Sr. Unsec.
Notes, 7.625%, 03/15/08 400,000 386,980
- ---------------------------------------------------------------
Spieker Properties LP, Unsec. Deb.,
7.35%, 12/01/17 500,000 448,645
- ---------------------------------------------------------------
1,329,141
- ---------------------------------------------------------------
RETAIL (FOOD CHAINS)-0.30%
Carr-Gottstein Foods Co., Sr. Sub.
Notes, 12.00%, 11/15/05 250,000 286,875
- ---------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE)-0.18%
Plainwell, Inc., Sr. Sub. Notes,
11.00%, 03/01/08 (Acquired
03/03/98-03/04/98; Cost
$231,025)(b) 230,000 173,650
- ---------------------------------------------------------------
RETAIL (SPECIALTY)-1.16%
CEX Holdings, Inc., Sr. Sub. Notes,
9.625%, 06/01/08 (Acquired
05/20/98; Cost $350,000)(b) 350,000 332,500
- ---------------------------------------------------------------
CSK Auto Inc., Sr. Gtd. Sub. Deb.,
11.00%, 11/01/06 130,000 130,650
- ---------------------------------------------------------------
Renters Choice Inc., Sr. Sub.
Notes, 11.00%, 08/15/08 (Acquired
08/13/98; Cost $350,000)(b) 350,000 339,500
- ---------------------------------------------------------------
US Office Products Co., Sr. Sub.
Notes, 9.75%, 06/15/08 (Acquired
06/05/98; Cost $348,383)(b) 350,000 276,500
- ---------------------------------------------------------------
Wilson's-The Leather Experts, Inc.,
Sr. Notes, 11.25%, 08/15/04 40,000 40,200
- ---------------------------------------------------------------
1,119,350
- ---------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-0.12%
J Crew Operating Corp., Sr. Sub.
Notes, 10.375%, 10/15/07 150,000 113,250
- ---------------------------------------------------------------
SAVINGS & LOAN COMPANIES-0.65%
Sovereign Bancorp, Inc., Sub.
Notes, 8.00%, 03/15/03 600,000 626,058
- ---------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING)-0.21%
MDC Communications Corp. (Canada),
Sr. Yankee Unsec. Sub. Notes,
10.50%, 12/01/06 200,000 199,000
- ---------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-0.54%
Choice Hotels International, Inc.,
Notes, 7.125%, 05/01/08 (Acquired
04/28/98; Cost $496,770)(b) 500,000 515,545
- ---------------------------------------------------------------
SERVICES (EMPLOYMENT)-0.25%
MSX International Inc., Unsec. Sr.
Sub. Notes, 11.375%, 01/15/08 260,000 236,600
- ---------------------------------------------------------------
SERVICES (FACILITIES & ENVIRONMENTAL)-0.18%
ATC Group Services Inc., Sr. Unsec.
Gtd. Sub. Notes, 12.00%, 01/15/08 250,000 176,250
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL(a) MARKET
AMOUNT VALUE
<S> <C> <C>
SHIPPING-0.52%
Alpha Shipping PLC (United
Kingdom), Series A Sr. Notes,
9.50%, 02/15/08 $ 320,000 $ 174,400
- ---------------------------------------------------------------
Holt Group, Sr. Notes, 9.75%,
01/15/06 (Acquired 01/15/98; Cost
$25,188)(b) 25,000 16,625
- ---------------------------------------------------------------
Pacific & Atlantic Holdings, First Mortgage
Notes, 11.50%, 05/30/08 (Acquired
05/21/98; Cost $384,345)(b) 390,000 312,000
- ---------------------------------------------------------------
503,025
- ---------------------------------------------------------------
SOVEREIGN DEBT-1.44%
Province of Manitoba (Canada),
Yankee Bonds, 7.75%, 07/17/16 300,000 348,828
- ---------------------------------------------------------------
Province of Quebec (Canada), Notes,
6.29%, 03/06/26 500,000 517,120
- ---------------------------------------------------------------
Province of Quebec (Canada), Yankee
Notes, 5.735%, 03/02/26 500,000 525,895
- ---------------------------------------------------------------
1,391,843
- ---------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-1.07%
KMC Telecom Holdings Inc., Sr.
Unsec. Disc. Notes, 12.50%,
02/15/08(d) 360,000 166,500
- ---------------------------------------------------------------
Nextel Communications, Series AI
Sr. Notes, 12.00%, 11/01/08
(Acquired 10/28/98; Cost
$522,463)(b) 530,000 551,200
- ---------------------------------------------------------------
PageMart Wireless, Inc., Sr. Sub.
Disc. Notes, 11.25%, 02/01/08(d) 600,000 312,000
- ---------------------------------------------------------------
1,029,700
- ---------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-2.06%
Cable & Wireless Communications PLC
(United Kingdom), Yankee Notes,
6.75%, 03/06/08 500,000 505,510
- ---------------------------------------------------------------
Centel Capital, Deb., 9.00%,
10/15/19 300,000 376,425
- ---------------------------------------------------------------
Esprit Telecom Group PLC (United
Kingdom), Sr. Unsec. Yankee
Notes, 11.50%, 12/15/07 250,000 226,250
- ---------------------------------------------------------------
MCI Communications Corp., Putable
Sr. Unsec. Deb., 7.125%, 06/15/27 650,000 701,272
- ---------------------------------------------------------------
Versatel Telecom B.V.
(Netherlands), Sr. Notes, 13.25%,
5/15/08 (Acquired 05/20/98; Cost
$190,000)(b) 190,000 177,650
- ---------------------------------------------------------------
1,987,107
- ---------------------------------------------------------------
TELEPHONE-1.96%
Dobson Wireline Co., Sr. Notes,
12.25%, 06/15/08 (Acquired
06/10/98; Cost $350,000)(b) 350,000 308,875
- ---------------------------------------------------------------
Esat Holdings Ltd. (Ireland), Sr.
Yankee Notes, 12.50%, 02/01/07(d) 350,000 211,750
- ---------------------------------------------------------------
ICG Services Inc., Sr. Unsec. Disc.
Notes, 10.00%, 02/15/08(d) 600,000 295,500
- ---------------------------------------------------------------
</TABLE>
9
<PAGE> 12
<TABLE>
<CAPTION>
PRINCIPAL(a) MARKET
AMOUNT VALUE
<S> <C> <C>
TELEPHONE-(CONTINUED)
NTL Inc., Sr. Notes, 11.50%,
10/01/08 (Acquired 10/26/98; Cost
$520,000)(b) $ 520,000 $ 538,200
- ---------------------------------------------------------------
SBC Communications Inc., Deb.,
7.375%, 07/15/43 500,000 536,185
- ---------------------------------------------------------------
1,890,510
- ---------------------------------------------------------------
TEXTILES (APPAREL)-0.52%
Fruit of the Loom, Notes, 6.50%,
11/15/03 500,000 503,190
- ---------------------------------------------------------------
TRUCKERS-0.29%
Travelcenters of America Inc., Sr.
Unsec. Gtd. Sub. Deb., 10.25%,
04/01/07 290,000 283,475
- ---------------------------------------------------------------
WASTE MANAGEMENT-1.28%
Allied Waste Industries, Sr. Unsec.
Disc. Notes, 11.30%, 06/01/07(d) 540,000 407,700
- ---------------------------------------------------------------
Norcal Waste Systems Inc., Series B
Sr. Gtd. Notes, 13.50%, 11/15/05 125,000 135,625
- ---------------------------------------------------------------
WMX Technologies, Inc., Unsec.
Notes, 7.10%, 08/01/26 650,000 695,071
- ---------------------------------------------------------------
1,238,396
- ---------------------------------------------------------------
Total U.S. Dollar Denominated
Non-Convertible Bonds & Notes
(Cost $52,167,765) 50,904,099
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
NON-U.S. DOLLAR DENOMINATED
NON-CONVERTIBLE BONDS & NOTES(F)-13.48%
CANADA-6.45%
Bank of Montreal (Banks-Money
Center), Sub. Deb., 7.92%,
07/31/12 CAD 300,000 $ 221,506
- --------------------------------------------------------------
Bell Canada (Telephone), Unsec.
Deb., 10.875%, 10/11/04 250,000 205,820
- --------------------------------------------------------------
Bell Mobility Cellular
(Telecommunications-
Cellular/Wireless), Deb., 6.55%,
06/02/08 750,000 489,943
- --------------------------------------------------------------
Canadian Oil Debco Inc. (Oil &
Gas-Exploration & Production),
Deb., 11.00%, 10/31/00 250,000 177,877
- --------------------------------------------------------------
Clearnet Communications
(Telecommunications-Cellular/Wireless),
Sr. Disc. Notes,(d) 10.40%,
05/15/08 1,200,000 348,136
- --------------------------------------------------------------
Sr. Disc. Notes, 11.75%, 08/13/07
(Acquired 07/31/97-11/04/97; Cost
$517,483)(b)(d) 1,100,000 369,044
- --------------------------------------------------------------
Molson Breweries Co. Ltd.
(Beverages-Alcoholic), Unsub.
Notes, 6.00%, 06/02/08 (Acquired
01/27/98; Cost $480,552)(b) 700,000 453,811
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL(a) MARKET
AMOUNT VALUE
<S> <C> <C>
CANADA-(CONTINUED)
NAV Canada (Services-Commercial &
Consumer), Bonds, 7.40%,
06/01/27 CAD 1,000,000 $ 758,697
- ---------------------------------------------------------------
Ontario Hydro (Electric Companies),
Deb., 9.00%, 06/24/02 1,000,000 737,597
- ---------------------------------------------------------------
Ontario Hydro Residual (Electric
Companies), Deb., 10.00%,
02/06/20(c) 2,750,000 491,060
- ---------------------------------------------------------------
Poco Petroleums Ltd. (Oil &
Gas-Exploration & Production),
Unsec. Deb., 6.60%, 09/11/07 750,000 467,492
- ---------------------------------------------------------------
Telegobe Canada, Inc. (Telephone),
Unsec. Deb., 8.35%, 06/20/03 650,000 466,437
- ---------------------------------------------------------------
Trans-Canada Pipelines (Natural
Gas), Series Q Deb., 10.625%,
10/20/09 375,000 327,389
- ---------------------------------------------------------------
Unsec. Notes, 8.55%, 02/01/06 500,000 369,754
- ---------------------------------------------------------------
Westcoast Energy, Inc. (Oil &
Gas-Exploration & Production),
Deb., 6.45%,12/18/06 (Acquired
12/03/96; Cost $369,682)(b) 500,000 334,989
- ---------------------------------------------------------------
6,219,552
- ---------------------------------------------------------------
GERMANY-1.86%
International Bank for
Reconstruction & Development
(Banks-Money Center), Unsec.
Global Bonds, 7.125%, 04/12/05DEM 1,400,000 999,701
- ---------------------------------------------------------------
LKB Global (Financial-Diversified),
Gtd. Notes, 6.00%, 01/25/06 1,200,000 794,923
- ---------------------------------------------------------------
1,794,624
- ---------------------------------------------------------------
NEW ZEALAND-2.98%
International Bank for
Reconstruction & Development
(Banks-Money Centers), Sr. Unsec.
Notes, 7.25%, 01/16/02 NZD 500,000 271,883
- ---------------------------------------------------------------
Sr. Unsec. Sub. Notes, 7.25%.
05/27/03 2,200,000 1,214,913
- ---------------------------------------------------------------
Sr. Notes, 6.77%, 08/20/07(c) 750,000 230,009
- ---------------------------------------------------------------
Sr. Unsec. Sub. Notes, 5.50%,
11/03/08 2,250,000 1,152,029
- ---------------------------------------------------------------
2,868,834
- ---------------------------------------------------------------
UNITED KINGDOM-2.19%
International Bank for
Reconstruction & Development
(Banks-Money Center), Sr. Unsec.
Sub. Notes, 6.875%, 07/14/00 GBP 750,000 1,272,189
- ---------------------------------------------------------------
</TABLE>
10
<PAGE> 13
<TABLE>
<CAPTION>
PRINCIPAL(a) MARKET
AMOUNT VALUE
<S> <C> <C>
UNITED KINGDOM-(CONTINUED)
Sutton Bridge Financial
Ltd.(Financial-Diversified), Gtd.
Bonds, 8.625%, 06/30/22 (Acquired
05/29/97; Cost $733,642)(b) GBP 450,000 $ 843,232
- ---------------------------------------------------------------
2,115,421
- ---------------------------------------------------------------
Total Non-U.S. Dollar
Denominated Non-Convertible
Bonds & Notes (Cost
$13,252,025) 12,998,431
- ---------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED
CONVERTIBLE BONDS & NOTES(F)-0.89%
GERMANY-0.40%
Daimler-Benz A.G. (Automobiles),
Conv. Gtd. Unsub. Eurobonds,
4.125%, 07/05/03 DEM 430,000 388,406
- ---------------------------------------------------------------
UNITED KINGDOM-0.49%
National Grid Co. PLC (Electric
Companies), Conv. Bonds, 4.25%,
02/17/08 GBP 250,000 467,417
- ---------------------------------------------------------------
Total Non-U.S. Dollar
Denominated Convertible Bonds
& Notes (Cost $765,956) 855,823
- ---------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED
GOVERNMENT BONDS & NOTES(F)-13.33%
CANADA-3.58%
B.C. Generic Residual, Deb.,
13.88%, 06/21/04(c) CAD 150,000 72,371
- ---------------------------------------------------------------
Municipal Finance Authority of
British Columbia, Bonds, 7.75%,
12/01/05 500,000 367,138
- ---------------------------------------------------------------
Canada Government,
Bonds, 7.00%, 12/01/06 1,000,000 731,384
- ---------------------------------------------------------------
Bonds, 6.625%, 10/03/07 NZD 1,200,000 650,614
- ---------------------------------------------------------------
Ontario Province, Deb.,
11.125%, 02/14/01 GBP 650,000 1,192,910
- ---------------------------------------------------------------
Sr. Unsub. Notes, 8.00%,
03/11/03 CAD 600,000 435,343
- ---------------------------------------------------------------
3,449,760
- ---------------------------------------------------------------
GERMANY-1.84%
Bundesrepublik Deutschland, Bonds,
6.75%, 07/15/04 DEM 750,000 519,835
- ---------------------------------------------------------------
Bonds, 6.875%, 05/12/05 400,000 281,322
- ---------------------------------------------------------------
Bonds, 5.25%, 01/04/08 1,500,000 978,933
- ---------------------------------------------------------------
1,780,090
- ---------------------------------------------------------------
NEW ZEALAND-2.17%
Federal National Mortgage
Association, Notes, 7.25%,
06/20/02 NZD 1,250,000 684,999
- ---------------------------------------------------------------
New Zealand Government,
Bonds, 8.00%, 02/15/01 1,000,000 560,537
- ---------------------------------------------------------------
Bonds, 8.00%, 11/15/06 500,000 309,522
- ---------------------------------------------------------------
Bonds, 7.00%, 07/15/09 900,000 538,799
- ---------------------------------------------------------------
2,093,857
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL(a) MARKET
AMOUNT VALUE
<S> <C> <C>
SWEDEN-2.74%
Swedish Government,
Bonds, 6.00%, 02/09/05 SEK 4,000,000 $ 557,609
- ---------------------------------------------------------------
Bonds, 6.50%, 10/25/06 4,000,000 579,828
- ---------------------------------------------------------------
Bonds, 5.00%, 01/28/09 11,500,000 1,507,025
- ---------------------------------------------------------------
2,644,462
- ---------------------------------------------------------------
UNITED KINGDOM-3.00%
United Kingdom Treasury,
Bonds, 8.00%, 12/07/00 GBP 350,000 616,148
- ---------------------------------------------------------------
Bonds, 7.50%, 12/07/06 450,000 871,418
- ---------------------------------------------------------------
Gtd. Notes, 7.00%, 11/06/01 800,000 1,405,209
- ---------------------------------------------------------------
2,892,775
- ---------------------------------------------------------------
Total Non-U.S. Dollar
Denominated Government Bonds
& Notes (Cost $12,535,884) 12,860,944
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
DOMESTIC COMMON STOCKS-0.01%
TELECOMMUNICATIONS (CELLULAR/
WIRELESS)-0.01%
Nextel Communications, Inc.-Class
A(e) (Cost $9,000) 557 $ 10,096
- --------------------------------------------------------------
DOMESTIC CONVERTIBLE PREFERRED STOCKS-0.97%
BANKS (REGIONAL)-0.48%
Westpac Banking Corp. STRYPES
Trust-$3.135 Conv. Pfd. 16,000 459,000
- --------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-0.49%
Conseco Inc.-$4.278 Conv. PRIDES 4,000 476,000
- --------------------------------------------------------------
Total Domestic Convertible
Preferred Stocks (Cost
$746,100) 935,000
- --------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY INTERESTS-0.13%
FRANCE-0.05%
Societe Generale (Banks-Major
Regional) 350 46,320
- --------------------------------------------------------------
UNITED KINGDOM-0.08%
Glaxo Wellcome PLC (Health
Care-Drugs-Generic & Other) 2,607 80,954
- --------------------------------------------------------------
Total Foreign Stocks & Other
Equity Interests (Cost
$84,949) 127,274
- --------------------------------------------------------------
WARRANTS-0.04%
ELECTRICAL EQUIPMENT-0.00%
Electronic Retailing Systems
International, Inc., expiring
02/01/04(g) 290 1,450
- --------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT)-0.00%
KMC Telecom Holdings Inc., expiring
04/15/08 (Acquired
01/26/98-03/03/98; Cost $0)(b)(g) 360 1,170
- --------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)-0.00%
MVE Inc., expiring 02/15/02(g) 100 1,000
- --------------------------------------------------------------
</TABLE>
11
<PAGE> 14
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-(CONTINUED)
Versatel, expiring 01/15/07
(Acquired 05/20/98; Cost
$0)(b)(g) 190 $ 1,924
- --------------------------------------------------------------
2,924
- --------------------------------------------------------------
PERSONAL CARE-0.00%
IHF Capital Inc., Series I,
expiring 11/14/99(g) 70 35
- --------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-0.01%
Clearnet Communications Inc.,
expiring 09/15/05(g) 330 2,310
- --------------------------------------------------------------
Orion Network Systems, Inc.,
expiring 01/15/07(g) 420 4,830
- --------------------------------------------------------------
7,140
- --------------------------------------------------------------
TELEPHONE-0.03%
ESAT Holdings Ltd., expiring
02/01/07 (Acquired 06/16/97; Cost
$0)(b)(g) 350 14,875
- --------------------------------------------------------------
Intermedia Communications Inc.,
expiring 06/01/00(g) 150 8,235
- --------------------------------------------------------------
Knology Holdings, Inc., expiring
10/15/07 (Acquired 03/12/98; Cost
$0)(b)(g) 700 1,575
- --------------------------------------------------------------
24,685
- --------------------------------------------------------------
Total Warrants (Cost $2,812) 37,404
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL(a) MARKET
AMOUNT VALUE
<S> <C> <C>
U.S. TREASURY SECURITIES-13.71%
Bonds, 6.875%, 05/15/06 $ 1,500,000 $ 1,717,050
- ---------------------------------------------------------------
Bonds, 6.375%, 08/15/27 1,000,000 1,152,260
- ---------------------------------------------------------------
Bonds, 6.125%, 11/15/27 4,500,000 5,059,170
- ---------------------------------------------------------------
Bonds, 5.50%, 08/15/28 3,000,000 3,155,160
- ---------------------------------------------------------------
Notes, 5.75%, 04/30/03 1,000,000 1,056,350
- ---------------------------------------------------------------
Notes, 5.625%, 05/15/08 1,000,000 1,077,500
- ---------------------------------------------------------------
Total U.S. Treasury Securities
(Cost $12,796,171) 13,217,490
- ---------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES-1.09%
Fannie Mae, Unsec. Sr. Notes,
6.875%, 06/07/02(f) GBP 350,000 613,921
- ---------------------------------------------------------------
Tennessee Valley Authority, Bonds,
5.98%, 04/01/36 400,000 430,664
- ---------------------------------------------------------------
Total U.S. Government Agency
Securities (Cost $981,642) 1,044,585
- ---------------------------------------------------------------
REPURCHASE AGREEMENT(H)-3.39%
SBC Warburg Dillion Read Inc.,
5.40%, 11/02/98(i) (Cost
$3,269,626) 3,269,626 3,269,626
- ---------------------------------------------------------------
TOTAL INVESTMENTS-99.83% 96,260,772
- ---------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-0.17% 164,933
- ---------------------------------------------------------------
NET ASSETS-100.00% $96,425,705
===============================================================
</TABLE>
Notes to Schedule of Investments:
(a) Principal amount is in U.S. Dollars, except as indicated by note(f).
(b) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144 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 10/31/98 was $9,191,841 which
represented 9.53% of the Fund's net assets.
(c) Zero coupon bond issued at a discount. The interest rate shown represents
the rate of original issue discount.
(d) Discounted bond at purchase. Interest rate shown represents the coupon rate
at which the bond will accrue at a specified future date.
(e) Non-income producing security.
(f) Foreign denominated security. Par value and coupon are denominated in
currency of country indicated.
(g) Non-income producing security acquired as part of a unit with or in exchange
for other securities.
(h) 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 is at least 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.
(i) Joint repurchase agreement entered into 10/30/98 with a maturing value of
$1,300,585,000. Collateralized by $2,856,569,000, U.S. Government
obligations, 0% to 5.50% due 11/15/98 to 02/15/25 with an aggregate market
value at 10/31/98 of $1,326,231,109.
Abbreviations:
AUD - Australian Dollar
CAD - Canadian Dollar
Conv. - Convertible
Ctfs. - Certificates
Deb. - Debentures
DEM - German Deutschmark
Disc. - Discounted
FRF - French Franc
GBP - British Pound Sterling
Gtd. - Guaranteed
JPY - Japanese Yen
NZD - New Zealand Dollar
Pfd. - Preferred
PIK - Payment in Kind
PRIDES - Preferred Redemption Increased Dividend Equity Securities
Sec. - Secured
SEK - Swedish Krona
Sr. - Senior
STRYPES - Structured Yield Product Exchangeable for Stock
Sub. - Subordinated
Unsec. - Unsecured
Unsub. - Unsubordinated
See Notes to Financial Statements.
12
<PAGE> 15
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$96,611,930) $96,260,772
- -----------------------------------------------------------
Foreign currencies, at value (cost $102,681) 101,056
- -----------------------------------------------------------
Receivables for:
Investments sold 1,454,678
- -----------------------------------------------------------
Capital stock sold 608,272
- -----------------------------------------------------------
Dividends and interest 2,188,276
- -----------------------------------------------------------
Investment for deferred compensation plan 15,013
- -----------------------------------------------------------
Other assets 14,249
- -----------------------------------------------------------
Total assets 100,642,316
- -----------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 3,290,537
- -----------------------------------------------------------
Capital stock reacquired 425,030
- -----------------------------------------------------------
Dividends 90,387
- -----------------------------------------------------------
Deferred compensation plan 15,013
- -----------------------------------------------------------
Forward contracts 263,269
- -----------------------------------------------------------
Accrued advisory fees 19,371
- -----------------------------------------------------------
Accrued administrative services fees 6,500
- -----------------------------------------------------------
Accrued directors' fees 710
- -----------------------------------------------------------
Accrued distribution fees 58,901
- -----------------------------------------------------------
Accrued transfer agent fees 35,268
- -----------------------------------------------------------
Accrued operating expenses 11,625
- -----------------------------------------------------------
Total liabilities 4,216,611
- -----------------------------------------------------------
Net assets applicable to shares outstanding $96,425,705
- -----------------------------------------------------------
NET ASSETS:
Class A $58,115,163
===========================================================
Class B $36,525,102
===========================================================
Class C $ 1,785,440
===========================================================
Capital stock, $0.001 par value per share:
Class A:
Authorized 200,000,000
- -----------------------------------------------------------
Outstanding 5,485,113
===========================================================
Class B:
Authorized 200,000,000
- -----------------------------------------------------------
Outstanding 3,449,368
===========================================================
Class C:
Authorized 200,000,000
- -----------------------------------------------------------
Outstanding 168,672
===========================================================
Class A:
Net asset value and redemption price per
share $ 10.60
- -----------------------------------------------------------
Offering price per share:
(Net asset value of $10.60 divided by
95.25%) $ 11.13
- -----------------------------------------------------------
===========================================================
Class B:
Net asset value and offering price per share $ 10.59
===========================================================
Class C:
Net asset value and offering price per share $ 10.59
===========================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended October 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 5,562,739
- -----------------------------------------------------------
Dividends (net of $1,316 foreign withholding
tax) 76,224
- -----------------------------------------------------------
Total investment income 5,638,963
- -----------------------------------------------------------
EXPENSES:
Advisory fees 518,363
- -----------------------------------------------------------
Administrative services fees 81,456
- -----------------------------------------------------------
Custodian fees 25,580
- -----------------------------------------------------------
Directors' fees 9,626
- -----------------------------------------------------------
Distribution fees-Class A 213,249
- -----------------------------------------------------------
Distribution fees-Class B 304,834
- -----------------------------------------------------------
Distribution fees-Class C 9,186
- -----------------------------------------------------------
Transfer agent fees-Class A 98,614
- -----------------------------------------------------------
Transfer agent fees-Class B 77,632
- -----------------------------------------------------------
Transfer agent fees-Class C 2,340
- -----------------------------------------------------------
Other 101,251
- -----------------------------------------------------------
Total expenses 1,442,131
- -----------------------------------------------------------
Less:
Fees waived by advisor (365,730)
- -----------------------------------------------------------
Expenses paid indirectly (2,411)
- -----------------------------------------------------------
Net expenses 1,073,990
- -----------------------------------------------------------
Net investment income 4,564,973
- -----------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN CURRENCIES
AND FORWARD CURRENCY CONTRACTS:
Net realized gain (loss) from:
Investment securities (736,111)
- -----------------------------------------------------------
Foreign currencies (7,238)
- -----------------------------------------------------------
Forward currency contracts 450,204
- -----------------------------------------------------------
(293,145)
- -----------------------------------------------------------
Net unrealized appreciation (depreciation) of:
Investment securities (2,167,780)
- -----------------------------------------------------------
Foreign currencies 3,285
- -----------------------------------------------------------
Forward currency contracts (215,660)
- -----------------------------------------------------------
(2,380,155)
- -----------------------------------------------------------
Net gain (loss) from investment securities,
foreign currencies and forward currency
contracts (2,673,300)
- -----------------------------------------------------------
Net increase in net assets resulting from
operations $ 1,891,673
===========================================================
</TABLE>
See Notes to Financial Statements.
13
<PAGE> 16
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
------------ -----------
<S> <C> <C>
OPERATIONS:
Net investment income $ 4,564,973 $ 3,129,370
- -----------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies and forward currency contracts (293,145) 397,245
- -----------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities, foreign currencies and forward currency
contracts (2,380,155) 794,339
- -----------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 1,891,673 4,320,954
- -----------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (2,295,926) (1,835,866)
- -----------------------------------------------------------------------------------------
Class B (1,495,827) (1,337,369)
- -----------------------------------------------------------------------------------------
Class C (42,707) (767)
- -----------------------------------------------------------------------------------------
Return of capital distribution:
Class A (354,717) --
- -----------------------------------------------------------------------------------------
Class B (250,576) --
- -----------------------------------------------------------------------------------------
Class C (8,211) --
- -----------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A (258,088) (311,081)
- -----------------------------------------------------------------------------------------
Class B (181,448) (242,850)
- -----------------------------------------------------------------------------------------
Class C (5,682) (605)
- -----------------------------------------------------------------------------------------
Share transactions-net:
Class A 29,014,691 8,692,165
- -----------------------------------------------------------------------------------------
Class B 12,527,487 8,049,066
- -----------------------------------------------------------------------------------------
Class C 1,597,917 239,702
- -----------------------------------------------------------------------------------------
Net increase in net assets 40,138,586 17,573,349
=========================================================================================
NET ASSETS:
Beginning of period 56,287,119 38,713,770
- -----------------------------------------------------------------------------------------
End of period $ 96,425,705 $56,287,119
=========================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $ 96,795,220 $54,262,086
- -----------------------------------------------------------------------------------------
Undistributed net investment income (loss) 222,498 (10,921)
- -----------------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies and forward currency
contracts 15,255 263,067
- -----------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities, foreign currencies and forward currency
contracts (607,268) 1,772,887
- -----------------------------------------------------------------------------------------
$ 96,425,705 $56,287,119
=========================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
October 31, 1998
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 series management investment company consisting of six
separate portfolios: AIM Global Income Fund, AIM Asian Growth Fund, AIM European
Development 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 shares and Class C shares are sold
with a contingent deferred sales charge. Matters affecting each portfolio or
class are voted on exclusively by the shareholders of such portfolio or class.
The assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in the financial statements pertains only to
the Fund. The Fund's investment objective is to provide high current income.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies followed by the Fund
in the preparation of its financial statements.
14
<PAGE> 17
A. Security Valuations-Debt obligations (including convertible bonds) are valued
on the basis of prices provided by an independent pricing service. Prices
provided by the pricing service may be determined without exclusive reliance
on quoted prices, and may reflect appropriate factors such as institution-
size trading in similar groups of securities, developments related to special
securities, yield, quality, coupon rate, maturity, type of issue, individual
trading characteristics and other market data. Investment securities for
which prices are not provided by the pricing service and which are listed or
traded on an exchange (except convertible bonds) are valued at the last sales
price on the exchange where the security is principally traded or, lacking
any sales on a particular day, at the mean between the closing bid and asked
prices on that day unless the Board of 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, 1998 were as follows:
<TABLE>
<CAPTION>
UNREALIZED
SETTLEMENT CONTRACT TO APPRECIATION
DATE DELIVER VALUE RECEIVE (DEPRECIATION)
- ---------- ---------------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C>
11/04/98 CAD 5,500,000 $ 3,565,633 $ 3,650,786 $ 85,153
11/04/98 NZD 2,200,000 1,164,217 1,119,140 (45,077)
11/04/98 NZD 800,000 423,352 399,480 (23,872)
11/09/98 CAD 2,750,000 1,782,812 1,806,003 23,191
11/10/98 CAD 2,250,000 1,458,664 1,486,012 27,348
11/30/98 DEM 3,100,000 1,875,845 1,725,971 (149,874)
11/30/98 GBP 2,000,000 3,330,145 3,260,000 (70,145)
11/30/98 NZD 1,900,000 1,005,231 924,730 (80,501)
11/30/98 NZD 1,150,000 608,430 550,016 (58,414)
12/01/98 CAD 300,000 194,489 192,530 (1,959)
01/13/99 NZD 4,500,000 2,380,127 2,343,375 (36,752)
01/14/99 GBP 1,900,000 3,145,286 3,202,906 57,620
01/15/99 DEM 3,000,000 1,819,170 1,839,622 20,452
01/29/99 SEK 20,000,000 2,572,734 2,562,295 (10,439)
----------- ----------- ---------
$25,326,135 $25,062,866 $(263,269)
----------- ----------- ---------
</TABLE>
D. Securities Transactions, Investment Income and Distributions-Securities
transactions are accounted for on a trade date basis. Realized gains or
losses are computed on the basis of specific identification of the securities
sold. Interest income is recorded as earned from settlement date and is
recorded on an accrual basis. Dividend income is recorded on the ex-dividend
date. It is the policy of the Fund to declare daily dividends from net
investment income. Such dividends are paid monthly. On October 31, 1998,
undistributed net investment income was increased by $116,410, undistributed
net realized gains increased by $490,551 and paid-in capital decreased by
$606,961 in order to comply with the requirements of the American Institute
of Certified Public Accountants Statement of Position 93-2. Net assets of the
Fund were unaffected by the reclassifications discussed above.
E. Federal Income Taxes-The Fund intends to comply with the requirements of the
Internal Revenue Code necessary to qualify as a regulated investment company
and, as such, will not be subject to federal income taxes on otherwise
taxable income (including net realized capital gains) which is distributed to
shareholders. Therefore, no provision for federal income taxes is recorded in
the financial statements.
F. Expenses-Distribution and transfer agency expenses directly attributable to a
class of shares are charged to that class' operations. All other expenses
which are attributable to more than one class are allocated among the
classes.
15
<PAGE> 18
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The 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, 1998, AIM waived fees of $365,730.
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, 1998, AIM was reimbursed
$81,456 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency
services to the Fund. During the year ended October 31, 1998, the Fund paid AFS
$97,772 for such services.
The Company has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, 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 and Class C shares (the "Class A and C Plan"), and the
Fund's Class B shares (the "Class B Plan") (collectively, the "Plans"). The
Fund, pursuant to the Class A and C Plan, pays AIM Distributors compensation at
an annual rate of 0.50% of the average daily net assets of the Class A shares
and 1.00% of the average daily net assets of Class C shares. The Fund, pursuant
to the Class B Plan, pays AIM Distributors compensation at an annual rate of
1.00% of the average daily net assets of the Class B shares. Of these amounts,
the Fund may pay a service fee of 0.25% of the average daily net assets of the
Class A, Class B or C shares to selected dealers and financial institutions who
furnish continuing personal shareholder services to their customers who purchase
and own the appropriate class of shares of the Fund. Any amounts not paid as a
service fee under the Plans would constitute an asset-based sales charge. The
Plans also impose a cap on the total sales charges, including asset-based sales
charges that may be paid by the respective classes. During the year ended
October 31, 1998, the Class A, Class B and Class C shares paid AIM Distributors
$213,249, $304,834 and $9,186, respectively, as compensation under the Plans.
AIM Distributors received commissions of $50,768 from sales of the Class A
shares of the Fund during the year ended October 31, 1998. 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, 1998,
AIM Distributors received commissions of $9,510 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, 1998, the Fund incurred legal fees of
$3,576 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
During the year ended October 31, 1998, the Fund received reductions in transfer
agency fees from AFS (an affiliate of AIM) and reductions in custodian fees of
$766 and $1,645, respectively, under expense offset arrangements. The effect of
the above arrangements resulted in a reduction of the Fund's total expenses of
$2,411 during the year ended October 31, 1998.
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) $1,000,000,000 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 May 1, 1998, the Fund was limited
to borrowing up to the lesser of (i) $500,000,000 or (ii) the limits set by its
prospectus for borrowings. During the year ended October 31, 1998, 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, 1998 was
$75,209,715, and $33,486,994, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
as of October 31, 1998, is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment
securities $ 3,377,406
- -------------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (3,728,564)
- -------------------------------------------------------------
Net unrealized appreciation of investment
securities $ (351,158)
=============================================================
</TABLE>
Investments have the same cost for tax and financial statement purposes.
16
<PAGE> 19
NOTE 7-CAPITAL STOCK
Changes in the Fund's capital stock outstanding during the years ended October
31, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
1998 1997
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Sold:
Class A 3,840,125 $41,970,650 1,677,097 $17,985,938
- --------------------------------------------------------------------------------------------------------------------
Class B 1,818,456 19,865,377 1,244,806 13,337,043
- --------------------------------------------------------------------------------------------------------------------
Class C* 155,501 1,696,174 23,915 258,631
- --------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 221,486 2,412,254 168,472 1,809,673
- --------------------------------------------------------------------------------------------------------------------
Class B 144,487 1,573,639 118,888 1,275,952
- --------------------------------------------------------------------------------------------------------------------
Class C* 4,387 47,595 71 779
- --------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (1,406,526) (15,368,213) (1,035,690) (11,103,446)
- --------------------------------------------------------------------------------------------------------------------
Class B (814,522) (8,911,529) (610,857) (6,563,929)
- --------------------------------------------------------------------------------------------------------------------
Class C* (13,394) (145,852) (1,808) (19,708)
- --------------------------------------------------------------------------------------------------------------------
3,950,000 $43,140,095 1,584,894 $16,980,933
====================================================================================================================
</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 and Class B
capital stock outstanding during each of the years in the four-year period ended
October 31, 1998 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 year ended October 31, 1998 and the period August 4, 1997 (date sales
commenced) through October 31, 1997.
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.93 $ 10.85 $10.74 $10.02 $10.00
- ------------------------------------------------------------ ------- ------- ------- ------- ------
Income from investment operations:
Net investment income 0.71 0.72 0.79(a) 0.79 0.08
- ------------------------------------------------------------ ------- ------- ------- ------- ------
Net gains (losses) on securities (both realized and
unrealized) (0.27) 0.21 0.25 0.75 0.01
- ------------------------------------------------------------ ------- ------- ------- ------- ------
Total from investment operations 0.44 0.93 1.04 1.54 0.09
- ------------------------------------------------------------ ------- ------- ------- ------- ------
Less distributions:
Dividends from investment income (0.61) (0.72) (0.81) (0.82) (0.07)
- ------------------------------------------------------------ ------- ------- ------- ------- ------
Distributions from net realized gains (0.07) (0.13) (0.12) -- --
- ------------------------------------------------------------ ------- ------- ------- ------- ------
Return of capital (0.09) -- -- -- --
- ------------------------------------------------------------ ------- ------- ------- ------- ------
Total distributions (0.77) (0.85) (0.93) (0.82) (0.07)
- ------------------------------------------------------------ ------- ------- ------- ------- ------
Net asset value, end of period $ 10.60 $ 10.93 $10.85 $10.74 $10.02
============================================================ ======= ======= ======= ======= ======
Total return(b) 3.95% 9.05% 10.22% 16.07% 0.93%
============================================================ ======= ======= ======= ======= ======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $58,115 $30,924 $21,926 $10,004 $2,661
============================================================ ======= ======= ======= ======= ======
Ratio of expenses to average net assets(c) 1.23%(d) 1.25% 1.25% 1.25% 1.25%(e)
============================================================ ======= ======= ======= ======= ======
Ratio of net investment income to average net assets(f) 6.38%(d) 6.54% 7.27% 7.38% 6.01%(e)
============================================================ ======= ======= ======= ======= ======
Portfolio turnover rate 47% 61% 83% 128% 6%
============================================================ ======= ======= ======= ======= ======
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges.
(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
1.73%, 1.86%, 2.02%, 3.03% and 5.61% (annualized) for the periods 1998-1994.
(d) Ratios are based on average net assets of $42,649,812.
(e) Annualized.
(f) 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 5.89%, 5.93%, 6.51%, 5.59% and 1.65% (annualized) for
the periods 1998-1994.
17
<PAGE> 20
NOTE 8-FINANCIAL HIGHLIGHTS-continued
<TABLE>
<CAPTION>
CLASS B CLASS C
------------------------------------------------- ----------------
1998 1997 1996 1995 1994 1998 1997
------- ------- ------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.92 $ 10.84 $ 10.73 $10.01 $10.00 $10.92 $10.76
- ------------------------------------------------------- ------- ------- ------- ------ ------ ------ ------
Income from investment operations:
Net investment income 0.65 0.67 0.74(a) 0.74 0.07 0.66 0.15(a)
- ------------------------------------------------------- ------- ------- ------- ------ ------ ------ ------
Net gains (losses) on securities (both realized and
unrealized) (0.27) 0.21 0.24 0.75 0.01 (0.28) 0.17
- ------------------------------------------------------- ------- ------- ------- ------ ------ ------ ------
Total from investment operations 0.38 0.88 0.98 1.49 0.08 0.38 0.32
- ------------------------------------------------------- ------- ------- ------- ------ ------ ------ ------
Less distributions:
Dividends from investment income (0.55) (0.67) (0.75) (0.77) (0.07) (0.55) (0.13)
- ------------------------------------------------------- ------- ------- ------- ------ ------ ------ ------
Distributions from net realized gains (0.07) (0.13) (0.12) -- -- (0.07) (0.03)
- ------------------------------------------------------- ------- ------- ------- ------ ------ ------ ------
Return of capital (0.09) -- -- -- -- (0.09) --
- ------------------------------------------------------- ------- ------- ------- ------ ------ ------ ------
Total distributions (0.71) (0.80) (0.87) (0.77) (0.07) (0.71) (0.16)
- ------------------------------------------------------- ------- ------- ------- ------ ------ ------ ------
Net asset value, end of period $ 10.59 $ 10.92 $ 10.84 $10.73 $10.01 $10.59 $10.92
======================================================= ======= ======= ======= ====== ====== ====== ======
Total return(b) 3.38% 8.48% 9.66% 15.56% 0.79% 3.39% 2.99%
======================================================= ======= ======= ======= ====== ====== ====== ======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $36,525 $25,121 $16,787 $4,207 $ 362 $1,785 $ 242
======================================================= ======= ======= ======= ====== ====== ====== ======
Ratio of expenses to average net assets(c) 1.75%(d) 1.76% 1.75% 1.74% 1.73%(e) 1.73%(d) 1.76%(e)
======================================================= ======= ======= ======= ====== ====== ====== ======
Ratio of net investment income to average net assets(f) 5.87%(d) 6.03% 6.77% 6.88% 3.59%(e) 5.88%(d) 6.03%(e)
======================================================= ======= ======= ======= ====== ====== ====== ======
Portfolio turnover rate 47% 61% 83% 128% 6% 47% 61%
======================================================= ======= ======= ======= ====== ====== ====== ======
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(c) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
2.25%, 2.37%, 2.53%, 3.57% and 22.09% (annualized) for 1998-1994 for Class B
and 2.22% and 2.37% (annualized) for 1998-1997 for Class C.
(d) Ratios are based on average net assets of $30,483,393 and $918,640 for Class
B and Class C, respectively.
(e) Annualized.
(f) After fee waivers and/or expense reimbursements. Ratios of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursements were 5.37%, 5.42%, 6.00%, 5.05% and (16.77)% (annualized) for
1998-1994 for Class B and 5.40% and 5.42% (annualized) for 1998-1997 for
Class C.
18
<PAGE> 21
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, 1998, 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 in the four-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, 1998, 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, 1998, 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 in the four-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 4, 1998
19
<PAGE> 22
Directors & Officers
<TABLE>
<CAPTION>
BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
<S> <C> <C>
Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
Chairman Chairman Suite 100
A I M Management Group Inc. Houston, TX 77046
Robert H. Graham
Bruce L. Crockett President INVESTMENT ADVISOR
Director
ACE Limited; John J. Arthur A I M Advisors, Inc.
Formerly Director, President, and Senior Vice President and Treasurer 11 Greenway Plaza
Chief Executive Officer Suite 100
COMSAT Corporation Carol F. Relihan Houston, TX 77046
Senior Vice President and Secretary
Owen Daly II TRANSFER AGENT
Director Gary T. Crum
Cortland Trust Inc. Senior Vice President A I M Fund Services, Inc.
P.O. Box 4739
Edward K. Dunn Jr. Jonathan C. Schoolar Houston, TX 77210-4739
Chairman, Mercantile Mortgage Corp.; Senior Vice President
Formerly Vice Chairman and President, CUSTODIAN
Mercantile-Safe Deposit & Trust Co.; and Dana R. Sutton
President, Mercantile Bankshares Vice President and Assistant Treasurer State Street Bank and Trust Company
225 Franklin Street
Jack Fields Melville B. Cox Boston, MA 02110
Chief Executive Officer Vice President
Texana Global, Inc.; COUNSEL TO THE FUND
Formerly Member Renee A. Friedli
of the U.S. House of Representatives Assistant Secretary Ballard Spahr
Andrews & Ingersoll, LLP
Carl Frischling P. Michelle Grace 1735 Market Street
Partner Assistant Secretary Philadelphia, PA 19103
Kramer, Levin, Naftalis & Frankel
Jeffrey H. Kupor COUNSEL TO THE DIRECTORS
Robert H. Graham Assistant Secretary
President and Chief Executive Officer Kramer, Levin, Naftalis & Frankel
A I M Management Group Inc. Nancy L. Martin 919 Third Avenue
Assistant Secretary New York, NY 10022
Prema Mathai-Davis
Chief Executive Officer, YWCA of the U.S.A. Ofelia M. Mayo DISTRIBUTOR
Commissioner, New York City Dept. for the Assistant Secretary
Aging; and member of the Board of Directors A I M Distributors, Inc.
Metropolitan Transportation Authority of Lisa A. Moss 11 Greenway Plaza
New York State Assistant Secretary Suite 100
Houston, TX 77046
Lewis F. Pennock Kathleen J. Pflueger
Attorney Assistant Secretary AUDITORS
Ian W. Robinson Samuel D. Sirko KPMG Peat Marwick LLP
Consultant; Formerly Executive Assistant Secretary 700 Louisiana
Vice President and Houston, TX 77002
Chief Financial Officer Stephen I. Winer
Bell Atlantic Management Assistant Secretary
Services, Inc.
Mary J. Benson
Louis S. Sklar Assistant Treasurer
Executive Vice President
Hines Interests
Limited Partnership
</TABLE>
Required Federal Income Tax Information
AIM Global Income Fund Class A, Class B and Class C shares paid ordinary
dividends in the amount of $0.6061, $0.5461, $0.5461 per share, respectively, to
shareholders during its tax year ended October 31, 1998. Of this amount 1.79% is
eligible for the dividends received deduction for corporations. The Fund also
distributed long-term capital gains of $0.0659 per share for Class A, Class B
and Class C shares during the Fund's tax year ended October 31, 1998.
Income Tax Information
Of total income dividends paid, 3.67% was derived from U.S. Treasury
obligations.
20
<PAGE> 23
HOW AIM MAKES INVESTING
EASIER 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 reinvestment 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. Certain restrictions
apply.
o RETIREMENT PLANS. You may purchase shares of an AIM fund for your
Individual Retirement Account (IRA), Roth 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
The AIM Family of Funds--Registered Trademark--
<TABLE>
<S> <C>
GROWTH FUNDS INTERNATIONAL GROWTH FUNDS
AIM Aggressive Growth Fund(1) AIM Advisor International Value Fund
AIM Blue Chip Fund AIM Asian Growth Fund
AIM Capital Development Fund AIM Developing Markets Fund(2)
AIM Constellation Fund AIM Emerging Markets Fund(2)
AIM Mid Cap Equity Fund(2), (A) AIM Europe Growth Fund(2)
AIM Select Growth Fund(3) AIM European Development Fund
AIM Small Cap Growth Fund(2), (B) AIM International Equity Fund
AIM Small Cap Opportunities Fund AIM International Growth Fund(2)
AIM Value Fund AIM Japan Growth Fund(2)
AIM Weingarten Fund AIM Latin American Growth Fund(2)
AIM New Pacific Growth Fund(2)
GROWTH & INCOME FUNDS
AIM Advisor Flex Fund GLOBAL GROWTH FUNDS
AIM Advisor Large Cap Value Fund AIM Global Aggressive Growth Fund
AIM Advisor MultiFlex Fund AIM Global Growth Fund
AIM Advisor Real Estate Fund AIM Worldwide Growth Fund(2)
AIM Balanced Fund
AIM Basic Value Fund(2), (C) GLOBAL GROWTH & INCOME FUNDS
AIM Charter Fund AIM Global Growth & Income Fund(2)
AIM Global Utilities Fund
INCOME FUNDS
AIM Floating Rate Fund(2) GLOBAL INCOME FUNDS
AIM High Yield Fund AIM Emerging Markets Debt Fund(2), (D)
AIM High Yield Fund II AIM Global Government Income Fund(2)
AIM Income Fund AIM Global Income Fund
AIM Intermediate Government Fund AIM Strategic Income Fund(2)
AIM Limited Maturity Treasury Fund
THEME FUNDS
TAX-FREE INCOME FUNDS AIM Global Consumer Products and Services Fund(2)
AIM High Income Municipal Fund AIM Global Financial Services Fund(2)
AIM Municipal Bond Fund AIM Global Health Care Fund(2)
AIM Tax-Exempt Bond Fund of Connecticut AIM Global Infrastructure Fund(2)
AIM Tax-Free Intermediate Fund AIM Global Resources Fund(2)
AIM Global Telecommunications Fund(2)
MONEY MARKET FUNDS AIM Global Trends Fund(2), (E)
AIM Dollar Fund(2)
AIM Money Market Fund
AIM Tax-Exempt Cash Fund
</TABLE>
(1) AIM Aggressive Growth Fund reopened to new investors November 16, 1998.
(2) Effective May 29, 1998, A I M Advisors, Inc. became advisor to the former GT
Global Funds. (3) On May 1, 1998, AIM Growth Fund was renamed AIM Select Growth
Fund. (A) On September 8, 1998, AIM Mid Cap Growth Fund was renamed AIM Mid Cap
Equity Fund. (B) On September 8, 1998, AIM Small Cap Equity Fund was renamed
AIM Small Cap Growth Fund. (C) On September 8, 1998, AIM America Value Fund was
renamed AIM Basic Value Fund. (D) On September 8, 1998, AIM Global High Income
Fund was renamed AIM Emerging Markets Debt Fund. (E) On September 8, 1998, AIM
New Dimension Fund was renamed AIM Global Trends Fund. For more complete
information about any AIM Fund(s), including sales charges and expenses, ask
your financial consultant or securities dealer for a free prospectus(es). Please
read the prospectus(es) carefully before you invest or send money.
A I M Management Group Inc. has provided
leadership in the mutual fund industry
since 1976 and managed approximately $91
billion in assets for more than 5.5 million
shareholders, including individual investors,
corporate clients, and financial institutions,
as of September 30, 1998.
The AIM Family of Funds--Registered Trademark--
is distributed nationwide, and AIM today is the
11th-largest mutual fund complex in the U.S. in
assets under management, according to Strategic
Insight, an independent mutual fund monitor.
