<PAGE> 1
[PHOTO APPEARS HERE]
AIM HIGH YIELD FUND
[AIM LOGO APPEARS HERE] ANNUAL REPORT DECEMBER 31, 1996
<PAGE> 2
[PHOTO APPEARS HERE]
AIM HIGH YIELD FUND
For shareholders who seek
a high level of current income.
The Fund invests in a
portfolio consisting primarily
of high-yielding, lower-rated
corporate bonds.
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o AIM High Yield Fund's performance figures are historical and reflect
reinvestment of all distributions and changes in net asset value. Unless
otherwise indicated, the Fund's performance is computed without a sales
charge.
o When sales charges are included in performance figures, Class A share
performance reflects the maximum 4.75% sales charge, and Class B share
performance reflects the applicable contingent deferred sales charge (CDSC)
for the period involved. The CDSC on Class B shares declines from 5%
beginning at the time of purchase to 0% at the beginning of the seventh
year. The performance of the Fund's Class B shares will differ from that of
Class A shares due to differing fees and expenses.
o During the year ended 12/31/96, the Fund paid distributions on Class A and
Class B shares of $0.932 and $0.859 per share, respectively.
o The 30-day yield is calculated on the basis of a formula defined by the SEC.
The formula is based on the portfolio's potential earnings from dividends,
interest, yield-to-maturity or yield-to-call of the bonds in the portfolio,
net of all expenses and expressed on an annualized basis.
o The Fund invests primarily in higher-yielding, lower-rated corporate bonds,
commonly known as "junk bonds." These bonds have a greater risk of price
fluctuation and loss of principal and income than U.S. government
securities, such as U.S. Treasury bonds and bills, which offer a government
guarantee as to the repayment of principal and interest if held to maturity.
o The Fund's investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
o Past performance cannot guarantee comparable future results.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o The unmanaged Lipper High Current Yield Funds Index represents an average of
the performance of the 30 largest high-yield funds tracked by Lipper
Analytical Services, Inc., an independent mutual fund performance monitor.
o The First Boston High Yield Index tracks more than 270 segments within the
high-yield universe and includes credit quality, industry, security type,
and maturity.
o An investment cannot be made in any index listed. Unless otherwise
indicated, index results include reinvested dividends and do not reflect
sales charges.
MUTUAL FUNDS, ANNUITIES, AND OTHER INVESTMENTS
ARE NOT INSURED BY THE FDIC OR ANY OTHER GOVERNMENT AGENCY;
ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR GUARANTEED BY,
ANY BANK OR ANY AFFILIATE; AND ARE SUBJECT TO INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
This report may be distributed only to current shareholders or to
persons who have received a current prospectus of the Fund.
<PAGE> 3
The Chairman's Letter
Dear Fellow Shareholder:
Financial markets produced another noteworthy year in
1996. Stocks surged again to enthusiastic levels, but the
[PHOTO OF advance was marked by dramatic volatility and confined mainly
Charles T. to the performance of a select few large-company stocks.
Bauer, Still, most investors in stock funds were rewarded with
Chairman of double-digit returns for the year. Bonds had a difficult time
the Board of until encouraging economic reports triggered a fall rally
THE FUND, that helped restore prices and bring yields back down to near
APPEARS HERE] 1995 levels.
As we begin 1997, the parallels to last year are striking.
The economy is growing at a moderate rate, corporate earnings
remain healthy, and inflation is modest. Such an environment
is ideal for financial investments.
Still, many suggest, as we do, that 1997 will be marked by
continued uncertainty and short-term volatility. And as the
market's performance continues to exceed historical averages, some advise that
a correction is overdue.
We believe the best way to achieve your investment goals in uncertain
markets is to follow a few basic strategies. First, you should keep a long-term
outlook. If you leave your money invested over the long term, you can help
avoid the results of the volatility that generally accompanies financial
markets over the short term. Those who try to "time the market"--move money in
and out of the market based on some gauge of future market performance--tend to
be less successful than investors using disciplined, long-term investment
strategies. That's because no one, not even expert market watchers, can
consistently predict what the market will do next.
Another strategy, diversification, may help you cushion the effects of a
volatile market and enhance your return potential. A mutual fund is already
diversified because it invests in many securities. You can diversify even
further by placing some of your assets in several different types of domestic
and international funds that may include stocks, bonds, and money market
securities.
Finally, no matter what your investment goals or time horizon, it makes good
sense to review your portfolio regularly with your financial consultant. In
rapidly changing markets, you need an investment professional on your side who
can explain what is happening and how your portfolio may be affected.
Your financial consultant can help you create and follow a regular
investment plan--investing a certain amount of money at regular intervals--that
can help you stay on track regardless of day-to-day market activity.
In 1997, and in the years ahead, we at AIM plan to meet the challenge of
changing financial markets through the consistent application of disciplined
investment strategies that have served our shareholders well for more than 20
years. We are pleased that AIM funds, overall, have turned in attractive, and
often impressive performance when measured against benchmark indexes and peer
group performance.
We appreciate the trust you have placed in us and we look forward to our
continued close association. If you have any questions or comments about this
report, we invite you to call Client Services at 800-959-4246 during normal
business hours. For automated account information 24 hours a day, call the AIM
Investor Line at 800-246-5463.
Sincerely,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
-----------------------------------
In rapidly changing markets,
you need
an investment professional
on your side
who can explain
what is happening and
how your portfolio may be affected.
-----------------------------------
<PAGE> 4
The Managers' Overview
HIGH-YIELD FUNDS ARE THE
TOP PERFORMING BOND FUNDS IN 1996
A roundtable discussion with the Fund management team for AIM High Yield Fund
for the fiscal year ended December 31, 1996.
- --------------------------------------------------------------------------------
Q. HIGH-YIELD SECURITIES HAD A RELATIVELY GOOD YEAR, COMPARED TO OTHER
FIXED-INCOME INVESTMENTS. HOW DID AIM HIGH YIELD FUND PERFORM DURING THE
REPORTING PERIOD?
A. Uncertain economic conditions and ongoing inflation concerns created
dramatic volatility that tested financial markets in 1996, particularly for
fixed-income investors. High-yield securities fared better than most bond
market segments, and high-yield funds topped the performance posted for bond
funds in 1996 with a total return of 12.66%, according to the Lipper High
Current Yield Funds Index.
The Fund's performance was even better--its total return was 15.44% for
Class A shares and 14.68% for Class B shares in the year ended December 31,
1996. That performance was achieved, in part, with the Fund's attractive
current income during the year. As of December 31, 1996, the Fund's 30-day
yield on Class A and Class B shares was 8.74% and 8.40%, respectively.
Q. WHAT FACTORS AFFECTED THE PERFORMANCE OF FIXED-INCOME MARKETS DURING 1996?
A. It was a year of mixed signals for fixed-income markets. Investors in
investment-grade bonds were concerned about changing expectations about the
direction of the economy. Indications of surprisingly strong economic growth
early in the year sent most bond prices tumbling the first half of 1996.
Bonds began to recover in the fall when it became apparent that economic
growth was moderate and without inflation.
Q. HOW WERE HIGH-YIELD SECURITIES AFFECTED?
A. The perspective was quite different for high-yield securities. Investors in
high-yield bonds welcome a lively economy. Healthy economic growth tends to
improve the earnings capacity of the bond-issuing companies and ease credit
concerns for lower quality debt issuers.
Corporate treasurers, who also relish healthy economic growth and low
interest rates, issued nearly $405 billion in corporate debt, second only to
1993's record $416 billion according to The Wall Street Journal. In 1996,
$78 billion of new issues were high-yield securities.
The significant yield advantage of high-yield issues, healthy cash flow
growth, and substantial investor demand made the high-yield sector a top
performer for the year.
Q. HOW DID THE FUND TAKE ADVANTAGE OF THE INVESTMENT ENVIRONMENT?
A. The Fund was invested in many of the better performing industries in 1996,
including energy, chemicals, and gaming. In addition, the Fund was a
participant in many of the more attractive new offerings, particularly in
media and energy companies.
The portfolio was well-positioned to benefit from ongoing consolidation
in
===============================================================================
Current Yield Advantage
As of 12/31/96
AIM High Yield Fund
Class A 30-day yield 8.74%
10-Year U.S. Treasury Note* 6.42%
5-Year U.S. Treasury Note* 6.21%
===============================================================================
8.40% was the 30-day yield for the Fund's Class B shares. *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.
-----------------------------
Low interest rates
have created an
abundance of liquidity that
continues to discount
the cost of financial capital
and fuel the flow of
new corporate debt.
-----------------------------
2
<PAGE> 5
PORTFOLIO COMPOSITION
================================================================================
As of 12/31/96
- --------------------------------------------------------------------------------
U.S. High-Yield Bonds 79.14%
Foreign High-Yield Bonds 10.04
Preferred Stock 4.84
Convertible Bonds 2.22
Other 3.76*
*Equities, Cash
================================================================================
Please keep in mind that the Fund's portfolio is subject to change and there is
no assurance the Fund will continue to hold any particular security.
================================================================================
TOP 10 HOLDINGS TOP 10 INDUSTRIES
================================================================================
1. Trump Atlantic 1. Telecommunications
City Associates 2. Cable Television
2. Coca-Cola Enterprises, Inc. 3. Oil & Gas-Exploration
3. Abraxas Petroleum Corp. & Production
4. Petroleum Heat & 4. Chemicals
Power Co., Inc. 5. Gaming
5. Microcell 6. Paper & Forest Products
Telecommunication Inc. 7. Retail (Stores)
6. Showboat Marina Casino 8. Advertising/
Partnership & Showboat Broadcasting
Marina Financial Corp. 9. Leisure & Recreation
7. Aztar Corp. 10. Retail (Food & Drug)
8. Nextlink Communications Inc.
9. Teleport Communications
Group Inc.
10. Carr-Gottstein Foods Co.
================================================================================
such industries as broadcasting, wireless communications, healthcare, and
retail stores, particularly supermarkets.
Q. HOW WAS THE FUND POSITIONED AT THE END OF THE FISCAL YEAR?
A. As of December 31, 1996, the Fund's largest concentrations were in
telecommunications, cable TV, energy, and chemical companies. The majority
of the Fund's holdings, 79%, were in domestic, high-yield securities, with
the balance invested in high-yield yankee bonds (U.S. dollar denominated)
bonds, domestic convertible bonds, and preferred stock.
The Fund was well diversified with 226 holdings across 53 industry
categories, balanced between defensive and cyclical sectors.
The Fund was primarily invested in the single "B" credit-quality segment
of the high-yield market, as rated by Standard & Poor's (S&P), a widely
known credit rating agency. We continue to believe that segment, known as
the middle "tier," offers the most attractive combination of investment
return for credit risk. In 1996, the middle tier was the best performing
segment in the high-yield market.
The Fund had an average quality rating of Bf as evaluated by S&P. S&P's
ratings are historical and are based on an annual analysis of the Fund's
credit quality, composition, and management.
================================================================================
FUND FACTS
As of 12/31/96
- --------------------------------------------------------------------------------
Inception:
Class A shares 7/11/78
Class B shares 9/1/93
Total Holdings: 226
Total Net Assets: $ 2.341
a billion
1996 Distributions:
Class A shares $ 0.932
Class B shares $ 0.859
Average Credit Quality: B
================================================================================
Q. WHAT IS YOUR OUTLOOK FOR THE MARKET IN 1997?
A. The pace of economic growth will be the key to financial market performance
in 1997. At the close of 1996, economic growth appeared to have settled at
an annual rate of 2.5%. Inflation, likewise, continues to be mild. In recent
testimony before Congress, Fed Chairman Alan Greenspan said, "The economy
has retained considerable vigor, with few signs of the imbalances and
inflationary tensions that have disrupted past expansions."
The economy is growing at a reasonable rate without rising inflation, and
that reduces the likelihood that interest rates may increase over the near
term. Less interest rate volatility generally means less risk--a boost for
high-yield securities.
Low interest rates also have created an abundance of liquidity that
continues to discount the cost of financial capital and fuel the flow of new
corporate debt. The low cost of capital should stoke economic activity in
1997, and that could translate into another positive year for financial
markets.
See important Fund & index disclosures inside front cover.
3
<PAGE> 6
Long-Term Performance
AIM HIGH YIELD FUND VS. BENCHMARK INDEXES
The chart below compares your Fund to benchmark indexes. It is intended to give
you a general idea of how your Fund performed compared to the bond market over
the 10-year period ended 12/31/96. 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 First Boston High
Yield Index and the Lipper High Current Yield Funds Index. Unlike your Fund, an
index is not managed; therefore, there are no sales charges, expenses, or fees.
You cannot invest in an index. But if you could buy all the securities that
make up a particular index, you would incur expenses that would affect the
return on your investment.
================================================================================
GROWTH OF A $10,000 INVESTMENT
12/31/86 - 12/31/96
- --------------------------------------------------------------------------------
AIM High Yield First Boston High Lipper High Current
Fund, Class A Yield Index Yield Funds Index
- --------------------------------------------------------------------------------
(In thousands)
12/86 $ 9,521 $10,000 $10,000
12/87 9,813 10,654 10,193
12/88 11,423 12,110 11,576
12/89 11,558 12,157 11,255
12/90 10,514 11,382 10,004
12/91 14,949 16,362 14,028
12/92 17,730 13,090 16,604
12/93 20,992 22,699 19,898
12/94 20,640 22,480 19,166
12/95 24,120 26,393 22,498
12/96 27,843 29,669 25,347
================================================================================
================================================================================
AVERAGE ANNUAL TOTAL RETURN
As of 12/31/96, including sales charges
- --------------------------------------------------------------------------------
CLASS A SHARES
1 Year 9.95%*
5 Years 12.15
10 Years 10.79
*15.44% excluding sales charge
CLASS B SHARES
1 Year 9.68%**
Inception (9/1/93) 8.64
**14.68% excluding CDSC
================================================================================
Past performance cannot guarantee comparable future results.
Source: Towers Data Systems HYPO--Registered Trademark--; First Boston. Your
Fund's total return includes sales charges, expenses, and management fees. The
performance of the Fund's Class B 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.
4
<PAGE> 7
SCHEDULE OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
CORPORATE BONDS & NOTES-90.81%
ADVERTISING/BROADCASTING-3.63%
Echostar Satellite Broadcasting,
Sr. Disc. Notes, 13.125%,
03/15/04(a) $23,180,000 $ 17,616,800
- ---------------------------------------------------------------
Katz Media Corp.,
Sr. Sub. Notes, 10.50%,
01/15/07(b)
(Acquired 12/13/96; Cost
$7,850,000) 7,850,000 8,056,062
- ---------------------------------------------------------------
Omnicom Group, Inc.,
Conv. Sub. Deb., 4.25%,
01/03/07(b)
(Acquired 12/11/96; Cost
$1,500,000) 1,500,000 1,555,500
- ---------------------------------------------------------------
SFX Broadcasting, Inc.,
Series B Sr. Sub. Notes, 10.75%,
05/15/06 15,430,000 16,317,225
- ---------------------------------------------------------------
Sinclair Broadcast Group, Inc.,
Sr. Sub. Notes, 10.00%, 09/30/05 13,850,000 14,196,250
- ---------------------------------------------------------------
United International Holdings, Inc.,
Sr. Secured Disc. Notes,
14.00%, 11/15/99(c) 2,400,000 1,731,000
- ---------------------------------------------------------------
14.00%, 11/15/99(c)(d) 9,250,000 6,821,875
- ---------------------------------------------------------------
United International Holdings, Inc.,
Series B Sr. Secured Disc. Notes,
14.00%, 11/15/99 15,160,000 10,934,150
- ---------------------------------------------------------------
Viacom, Inc.,
Sub. Deb., 8.00%, 07/07/06 8,000,000 7,740,000
- ---------------------------------------------------------------
84,968,862
- ---------------------------------------------------------------
AIRLINES-1.15%
Airplanes Pass Through Trust,
Sub. Bonds, 10.875%, 03/15/19 12,550,000 13,938,407
- ---------------------------------------------------------------
Continental Airlines, Inc.,
Conv. Sr. Sub. Notes, 6.75%,
04/15/06(b)
(Acquired 02/27/96; Cost
$1,999,275) 2,000,000 2,244,260
- ---------------------------------------------------------------
Greenwich Air Services, Inc.,
Sr. Notes, 10.50%, 06/01/06 9,910,000 10,653,250
- ---------------------------------------------------------------
26,835,917
- ---------------------------------------------------------------
AUTOMOBILE/TRUCK PARTS &
TIRES-1.33%
Blue Bird Body Co.,
Sr. Sub. Notes, 10.75%,
11/15/06(b)
(Acquired 11/13/96-11/20/96;
Cost $12,739,986) 12,520,000 13,114,700
- ---------------------------------------------------------------
CSK Auto Inc.,
Sr. Sub. Notes, 11.00%,
11/01/06(b)
(Acquired 10/23/96; Cost
$13,060,000) 13,060,000 13,566,075
- ---------------------------------------------------------------
Exide Corp.,
Conv. Sr. Sub. Notes, 2.90%,
12/15/05(b)
(Acquired 12/19/96; Cost
$4,518,750) 7,500,000 4,518,750
- ---------------------------------------------------------------
31,199,525
- ---------------------------------------------------------------
BEVERAGES (SOFT DRINKS)-1.04%
Coca-Cola Enterprises, Inc.,
Putable Notes, 7.24%,
06/20/20(c) 125,000,000 24,333,750
- ---------------------------------------------------------------
BUSINESS SERVICES-0.59%
Neodata Services, Inc.,
Series B Sr. Deferred Coupon
Notes, 12.00%, 05/01/03 13,000,000 13,715,000
- ---------------------------------------------------------------
CABLE TELEVISION-7.39%
Cablevision Systems Corp.,
Sr. Sub. Deb., 10.75%, 04/01/04 7,000,000 7,262,500
- ---------------------------------------------------------------
Century Communications Corp.,
Sr. Sub. Notes., 11.875%,
10/15/03 10,900,000 11,676,625
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
CABLE TELEVISION-(CONTINUED)
Comcast UK Cable Partners Ltd.,
(United Kingdom), Sr. Yankee
Disc. Deb., 11.20%, 11/15/07(a) $20,100,000 $ 14,271,000
- ---------------------------------------------------------------
Diamond Cable Communications PLC,
(United Kingdom), Sr. Yankee
Disc. Notes,
11.75%, 12/15/05(a) 22,000,000 15,675,000
- ---------------------------------------------------------------
Fundy Cable Ltd., (Canada),
Sr. Yankee Secured Second
Priority Notes, 11.00%, 11/15/05 11,400,000 12,112,500
- ---------------------------------------------------------------
Heartland Wireless Communications
Inc.,
Sr. Notes, 14.00%, 10/15/04(b)
(Acquired 12/17/96; Cost
$14,880,000) 14,880,000 15,475,200
- ---------------------------------------------------------------
International CableTel, Inc.,
Sr. Notes, 11.50%, 02/01/06(a) 21,200,000 14,469,000
- ---------------------------------------------------------------
Kabelmedia Holdings GmbH, (Germany),
Sr. Disc. Yankee Notes,
13.625%, 08/01/06(a) 26,000,000 14,430,000
- ---------------------------------------------------------------
Marcus Cable Co., L.P.,
Sr. Deb., 11.875%, 10/01/05 12,475,000 13,441,813
- ---------------------------------------------------------------
Sr. Disc. Notes, 14.25%,
12/15/05(a) 12,500,000 9,031,250
- ---------------------------------------------------------------
Rifkin Acquisition Partners L.L.P.,
Sr. Sub. Notes, 11.125%,
01/15/06 12,495,000 12,994,800
- ---------------------------------------------------------------
TeleWest Communications PLC,
(United Kingdom), Sr. Yankee
Disc. Deb., 11.00%, 10/01/07(a) 23,970,000 16,689,112
- ---------------------------------------------------------------
Wireless One, Inc.,
Sr. Notes, 13.00%, 10/15/03 15,740,000 15,425,200
- ---------------------------------------------------------------
172,954,000
- ---------------------------------------------------------------
CHEMICALS-5.28%
Berry Plastics Corp.,
Sr. Sub. Notes, 12.25%, 04/15/04 9,000,000 9,911,250
- ---------------------------------------------------------------
BPC Holding Corp.,
Series B Sr. Notes, 12.50%,
06/15/06 7,750,000 8,185,938
- ---------------------------------------------------------------
Crain Industries, Inc.,
Sr. Sub. Notes, 13.50%, 08/15/05 14,500,000 16,421,250
- ---------------------------------------------------------------
LaRoche Industries, Inc.,
Sr. Sub. Notes, 13.00%, 08/15/04 16,145,000 17,436,600
- ---------------------------------------------------------------
Pioneer Americas Acquisition Corp.,
Sr. Notes, 13.375%, 04/01/05 9,000,000 10,282,500
- ---------------------------------------------------------------
Polymer Group, Inc.,
Sr. Notes, 12.25%, 07/15/02 13,634,000 14,861,060
- ---------------------------------------------------------------
PrintPack Inc.,
Sr. Sub. Notes, 10.625%,
08/15/06(b)
(Acquired 08/15/96-09/23/96;
Cost $10,508,500) 10,450,000 10,868,000
- ---------------------------------------------------------------
Sterling Chemicals Holdings,
Sr. Secured Disc. Notes,
13.50%, 08/15/08(a) 10,500,000 6,090,000
- ---------------------------------------------------------------
Sterling Chemicals, Inc.,
Sr. Sub. Notes, 11.75%, 08/15/06 10,000,000 10,600,000
- ---------------------------------------------------------------
Tri Polyta Finance B.V.,
(Indonesia),
Yankee Secured Gtd. Notes,
11.375%, 12/01/03 18,330,000 19,154,850
- ---------------------------------------------------------------
123,811,448
- ---------------------------------------------------------------
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
COMPUTER NETWORKING-0.12%
3Com Corp.,
Conv. Sub. Notes, 10.25%,
11/01/01(b)
(Acquired 11/08/94-01/04/95;
Cost $1,314,250) $ 1,300,000 $ 2,894,619
- ---------------------------------------------------------------
COMPUTER PERIPHERALS-0.89%
Exide Electronics Group, Inc.,
Sr. Sub. Notes, 11.50%, 03/15/06 13,000,000 13,926,250
- ---------------------------------------------------------------
Sanmina Corp.,
Conv. Sub. Notes, 5.50%,
08/15/02(b)
(Acquired 08/10/95; Cost
$1,000,000) 1,000,000 2,049,490
- ---------------------------------------------------------------
Storage Technology Corp.,
Conv. Deb., 8.00%, 05/31/15 3,500,000 4,783,485
- ---------------------------------------------------------------
20,759,225
- ---------------------------------------------------------------
CONSUMER NON-DURABLES-0.71%
Hines Horticulture, Inc.,
Sr. Sub. Notes, 11.75%, 10/15/05 15,670,000 16,688,550
- ---------------------------------------------------------------
CONTAINERS-2.59%
Ivex Holdings Corp.,
Series B Sr. Disc. Deb.,
13.25%, 03/15/05(a) 20,000,000 15,825,000
- ---------------------------------------------------------------
Ivex Packaging Corp.,
Sr. Sub. Notes, 12.50%, 12/15/02 6,500,000 7,085,000
- ---------------------------------------------------------------
MVE Inc.,
Sr. Secured Notes, 12.50%,
02/15/02 17,250,000 18,392,812
- ---------------------------------------------------------------
National Fiberstok Corp.,
Series B Sr. Notes, 11.625%,
06/15/02 18,530,000 19,363,850
- ---------------------------------------------------------------
60,666,662
- ---------------------------------------------------------------
ELECTRIC POWER-0.43%
Panda Funding Corp.,
Pooled Project Bonds,
11.625%, 08/20/12(b)
(Acquired 07/26/96; Cost
$9,800,000) 9,800,000 10,167,500
- ---------------------------------------------------------------
ENERGY (ALTERNATE SOURCES)-0.47%
CE Casecnan Water & Energy Co.,
Inc., (Philippines), Series A
Sr. Yankee Secured Notes,
11.45%, 11/15/05 10,000,000 11,025,000
- ---------------------------------------------------------------
FINANCE (ASSET MANAGEMENT)-0.08%
Berkshire Hathaway, Inc.,
Conv. Sr. Notes, 3.00%, 12/02/01 2,000,000 1,863,140
- ---------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-0.48%
Aames Financial Corp.,
Conv. Sub. Deb., 5.50%,
03/15/06(b)
(Acquired 02/16/96; Cost
$505,000) 500,000 663,655
- ---------------------------------------------------------------
Outsourcing Solutions Inc.,
Sr. Sub. Notes, 11.00%,
11/01/06(b)
(Acquired 10/31/96; Cost
$10,050,000) 10,050,000 10,552,500
- ---------------------------------------------------------------
11,216,155
- ---------------------------------------------------------------
FINANCE (LEASING COMPANIES)-0.74%
Sea Containers, Ltd., (Bermuda),
Series A Sr. Yankee Sub. Deb.,
12.50%, 12/01/04 5,350,000 5,938,500
- ---------------------------------------------------------------
Series B Sr. Yankee Sub. Deb.,
(Bermuda),
12.50%, 12/01/04 10,220,000 11,293,100
- ---------------------------------------------------------------
17,231,600
- ---------------------------------------------------------------
FOOD/PROCESSING-2.10%
American Rice, Inc.,
Secured Mortgage Notes, 13.00%,
07/31/02 11,513,000 11,167,610
- ---------------------------------------------------------------
Chiquita Brands International, Inc.,
Sr. Notes, 10.25%, 11/01/06 11,520,000 12,326,400
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
FOOD/PROCESSING-(CONTINUED)
International Home Foods Inc.,
Sr. Sub. Notes, 10.375%,
11/01/06(b)
(Acquired 10/29/96; Cost
$10,450,000) $10,450,000 $ 10,920,250
- ---------------------------------------------------------------
Pilgrim's Pride Corp.,
Sr. Sub. Notes, 10.875%,
08/01/03 14,805,000 14,823,506
- ---------------------------------------------------------------
49,237,766
- ---------------------------------------------------------------
FURNITURE-0.76%
Simmons Co.,
Sr. Sub. Notes, 10.75%, 04/15/06 16,800,000 17,766,000
- ---------------------------------------------------------------
GAMING-4.76%
Aztar Corp.,
Sr. Sub. Notes, 13.75%, 10/01/04 19,710,000 21,188,250
- ---------------------------------------------------------------
Coast Hotels & Casinos Inc.,
Series B Secured First Mortgage
Gtd. Notes, 13.00%, 12/15/02 16,510,000 18,284,825
- ---------------------------------------------------------------
Harvey Casinos Resorts,
Sr. Sub. Notes, 10.625%,
06/01/06 10,400,000 11,154,000
- ---------------------------------------------------------------
Showboat Marina Casino Partnership
& Showboat Marina Financial
Corp., First Mortgage Notes,
13.50%, 03/15/03 20,100,000 22,210,500
- ---------------------------------------------------------------
Trump Atlantic City Associates,
Secured First Mortgage Gtd. Notes,
11.25%, 05/01/06 26,340,000 26,208,300
- ---------------------------------------------------------------
Trump Castle Funding, Inc.,
Mortgage Notes, 11.75%, 11/15/03 14,000,000 12,460,000
- ---------------------------------------------------------------
111,505,875
- ---------------------------------------------------------------
HOME BUILDING-0.72%
Continental Homes Holding Corp.,
Sr. Notes, 10.00%, 04/15/06 16,340,000 16,911,900
- ---------------------------------------------------------------
HOTELS/MOTELS-0.18%
HFS, Inc.,
Conv. Sr. Notes, 4.50%, 10/01/99 750,000 2,407,402
- ---------------------------------------------------------------
Prime Hospitality Corp.,
Conv. Sub. Notes, 7.00%,
04/15/02 1,200,000 1,784,496
- ---------------------------------------------------------------
4,191,898
- ---------------------------------------------------------------
LEISURE & RECREATION-3.07%
American Skiing Corp.,
Sr. Sub. Notes, 12.00%,
07/15/06(b)
(Acquired 06/25/96; Cost
$14,574,750) 15,000,000 15,862,500
- ---------------------------------------------------------------
Cobblestone Golf Group Inc.,
Series B Sr. Notes, 11.50%,
06/01/03 5,000,000 5,231,250
- ---------------------------------------------------------------
Cobblestone Holdings Inc.,
Series B Sr. Notes, 13.50%,
06/01/04(c) 23,250,000 9,706,875
- ---------------------------------------------------------------
Icon Fitness Corp.,
Sr. Disc. Notes, 14.00%,
11/15/06(a)(b)
(Acquired 11/15/96; Cost
$7,130,340) 14,000,000 7,542,500
- ---------------------------------------------------------------
Icon Health & Fitness,
Sr. Sub. Notes, 13.00%, 07/15/02 7,250,000 8,237,813
- ---------------------------------------------------------------
IHF Holdings Inc.,
Sr. Sub. Disc. Notes, 15.00%,
11/15/04(a) 10,000,000 7,925,000
- ---------------------------------------------------------------
Stuart Entertainment, Inc.,
Sr. Sub. Notes, 12.50%,
11/15/04(b)
(Acquired 11/07/96; Cost
$17,000,000) 17,000,000 17,340,000
- ---------------------------------------------------------------
71,845,938
- ---------------------------------------------------------------
MACHINERY (HEAVY)-1.41%
Fairfield Manufacturing Co., Inc.,
Sr. Sub. Notes, 11.375%,
07/01/01 13,725,000 14,411,250
- ---------------------------------------------------------------
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
MACHINERY (HEAVY)-(CONTINUED)
PrimeCo Inc.,
Sr. Sub. Notes, 12.75%, 03/01/05 $16,202,000 $ 18,551,290
- ---------------------------------------------------------------
32,962,540
- ---------------------------------------------------------------
MACHINERY (MISCELLANEOUS)-3.91%
AM General Corp.,
Sr. Notes, 12.875%, 05/01/02 12,665,000 12,110,905
- ---------------------------------------------------------------
Calmar Inc.,
Sr. Sub. Notes, 11.50%, 08/15/05 10,500,000 10,893,750
- ---------------------------------------------------------------
Coinmach Corp.,
Series B Sr. Notes, 11.75%,
11/15/05 16,500,000 17,861,250
- ---------------------------------------------------------------
Interlake Corp.,
Sr. Notes, 12.00%, 11/15/01 8,300,000 8,932,875
- ---------------------------------------------------------------
Sr. Sub. Deb., 12.125%, 03/01/02 10,870,000 11,399,913
- ---------------------------------------------------------------
Spinnaker Industries Inc.,
Sr. Secured Notes, 10.75%,
10/15/06(b)
(Acquired 10/18/96-11/13/96;
Cost $11,151,188) 11,100,000 11,571,750
- ---------------------------------------------------------------
Thermo Electron Corp.,
Conv. Deb., 5.00%, 04/15/01(b)
(Acquired 04/07/94; Cost
$1,508,000) 1,500,000 2,770,830
- ---------------------------------------------------------------
Tokheim Corp.,
Sr. Sub. Notes, 11.50%, 08/01/06 14,975,000 15,985,813
- ---------------------------------------------------------------
91,527,086
- ---------------------------------------------------------------
MEDICAL (INSTRUMENTS/PRODUCTS)-1.68%
Dade International Inc.,
Series B Sr. Sub. Notes,
11.125%, 05/01/06 12,360,000 13,441,500
- ---------------------------------------------------------------
Graphic Controls Corp.,
Series A Sr. Sub. Notes, 12.00%,
09/15/05 10,790,000 12,003,875
- ---------------------------------------------------------------
IMED Corp.,
Sr. Sub. Notes, 9.75%,
12/01/06(b)
(Acquired 11/19/96; Cost
$13,680,000) 13,680,000 13,970,700
- ---------------------------------------------------------------
39,416,075
- ---------------------------------------------------------------
MEDICAL (PATIENT SERVICES)-1.68%
American Medical Response, Inc.,
Conv. Sub. Notes, 5.25%,
02/01/01(b) (Acquired
01/03/96-02/08/96; Cost
$2,054,375) 2,000,000 2,162,500
- ---------------------------------------------------------------
Dynacare Inc., (Canada),
Sr. Yankee Notes, 10.75%,
01/15/06 11,550,000 11,723,250
- ---------------------------------------------------------------
HEALTHSOUTH Rehabilitation Corp.,
Conv. Sub. Deb., 5.00%, 04/01/01 1,700,000 3,422,695
- ---------------------------------------------------------------
Multicare Companies Inc.,
Conv. Sub. Deb., 7.00%,
03/15/03(b) (Acquired 03/09/95;
Cost $500,000) 500,000 612,500
- ---------------------------------------------------------------
PhyCor, Inc.,
Conv. Sub. Deb., 4.50%, 02/15/03 3,000,000 2,980,860
- ---------------------------------------------------------------
Tenet Healthcare Corp.,
Conv. Sub. Notes, 6.00%,
12/01/05 1,000,000 1,050,630
- ---------------------------------------------------------------
Sr. Sub. Notes, 10.125%,
03/01/05 15,600,000 17,316,000
- ---------------------------------------------------------------
39,268,435
- ---------------------------------------------------------------
METALS-0.94%
GS Industries, Inc.,
Sr. Notes, 12.00%, 09/01/04 9,475,000 9,889,531
- ---------------------------------------------------------------
Sr. Notes, 12.25%, 10/01/05 11,525,000 12,130,063
- ---------------------------------------------------------------
22,019,594
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
OIL & GAS (EXPLORATION & PRODUCTION)-4.83%
Abraxas Petroleum Corp.,
Sr. Notes, 11.50%, 11/01/04(b)
(Acquired 11/05/96-12/03/96;
Cost $22,868,950) $22,630,000 $ 24,270,675
- ---------------------------------------------------------------
CODA Energy, Inc.,
Series B Sr. Gtd. Sub. Notes,
10.50%, 04/01/06 12,150,000 12,909,375
- ---------------------------------------------------------------
Forest Oil Corp.,
Sr. Sub. Notes, 11.25%, 09/01/03 15,702,000 17,036,670
- ---------------------------------------------------------------
Gerrity Oil & Gas Corp.,
Sr. Sub. Notes, 11.75%, 07/15/04 14,750,000 16,114,375
- ---------------------------------------------------------------
Mariner Energy Corp.,
Sr. Sub. Notes, 10.50%,
08/01/06(b) (Acquired
08/12/96-09/04/96; Cost
$14,000,750) 13,950,000 14,856,750
- ---------------------------------------------------------------
Maxus Energy Corp.,
Deb., 11.50%, 11/15/15 12,200,000 12,871,000
- ---------------------------------------------------------------
Plains Resources, Inc.,
Series B Sr. Gtd. Sub. Notes,
10.25%, 03/15/06 11,630,000 12,473,175
- ---------------------------------------------------------------
Pogo Producing Co.,
Conv. Sub. Notes, 5.50%,
06/15/06 2,000,000 2,516,920
- ---------------------------------------------------------------
113,048,940
- ---------------------------------------------------------------
OIL & GAS (INTEGRATED)-0.48%
Wainoco Oil Corp.,
Sr. Notes, 12.00%, 08/01/02 10,995,000 11,324,850
- ---------------------------------------------------------------
OIL & GAS (REFINING/MARKETING)-1.03%
Petroleum Heat & Power Co., Inc.,
Sub. Deb., 12.25%, 02/01/05 21,575,000 24,029,156
- ---------------------------------------------------------------
OIL & GAS (SERVICES)-1.26%
Falcon Drilling Co., Inc.,
Series B Sr. Notes, 9.75%,
01/15/01 10,100,000 10,630,250
- ---------------------------------------------------------------
Series B Sr. Sub. Notes, 12.50%,
03/15/05 8,500,000 9,530,625
- ---------------------------------------------------------------
Kelley Oil & Gas Corp.,
Sr. Sub. Notes, 10.375%,
10/15/06(b)
(Acquired 10/25/96; Cost
$8,985,000) 9,000,000 9,405,000
- ---------------------------------------------------------------
29,565,875
- ---------------------------------------------------------------
OIL EQUIPMENT & SUPPLIES-0.08%
Pride Petroleum Services, Inc.,
Conv. Sub. Deb., 6.25%, 02/15/06 1,000,000 1,835,000
- ---------------------------------------------------------------
PAPER & FOREST PRODUCTS-4.53%
American Pad & Paper Co.,
Series B Sr. Sub. Notes, 13.00%,
11/15/05 14,906,000 17,514,550
- ---------------------------------------------------------------
RAPP International Finance,
(Indonesia),
Gtd. Yankee Secured Notes,
11.50%, 12/15/00 13,920,000 14,790,000
- ---------------------------------------------------------------
Repap New Brunswick, (Canada),
Sr. Yankee Second Priority
Secured Notes, 10.625%, 04/15/05 14,420,000 15,141,000
- ---------------------------------------------------------------
Riverwood International Corp.,
Sr. Gtd. Sub. Notes, 10.875%,
04/01/08 12,890,000 11,987,700
- ---------------------------------------------------------------
Tjiwi Kimia International Global
Co., B.V., (Indonesia), Sr. Gtd.
Notes, 13.25%, 08/01/01 14,040,000 15,917,850
- ---------------------------------------------------------------
Uniforet Inc., (Canada),
Sr. Yankee Gtd. Notes, 11.125%, 10/15/06(b)
(Acquired 10/07/96-12/19/96;
Cost $17,573,231) 17,885,000 16,722,475
- ---------------------------------------------------------------
</TABLE>
7
<PAGE> 10
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
PAPER & FOREST
PRODUCTS-(CONTINUED)
United Stationer Supply,
Sr. Sub. Notes, 12.75%, 05/01/05 $12,500,000 $ 13,937,500
- ---------------------------------------------------------------
106,011,075
- ---------------------------------------------------------------
POLLUTION CONTROL-0.79%
Norcal Waste Systems Inc.,
Series B Sr. Gtd. Notes, 13.00%,
11/15/05 12,910,000 14,394,650
- ---------------------------------------------------------------
U.S. Filter Corp.,
Conv. Sub. Notes, 4.50%,
12/15/01 2,250,000 2,290,590
- ---------------------------------------------------------------
Conv. Sub. Notes, 6.00%,
09/15/05 1,000,000 1,776,690
- ---------------------------------------------------------------
18,461,930
- ---------------------------------------------------------------
PUBLISHING-1.54%
Affiliated Newspaper Investments,
Sr. Disc. Notes, 13.25%,
07/01/06(a) 15,826,000 13,056,450
- ---------------------------------------------------------------
Garden State Newspapers, Inc.,
Sr. Sub. Secured Notes, 12.00%,
07/01/04 11,500,000 12,592,500
- ---------------------------------------------------------------
MDC Communications Corp., (Canada),
Sr. Sub. Yankee Notes, 10.50%,
12/01/06 10,040,000 10,378,850
- ---------------------------------------------------------------
36,027,800
- ---------------------------------------------------------------
RAILROADS-0.40%
Johnstown America Industries, Inc.,
Sr. Sub. Notes, 11.75%, 08/15/05 9,820,000 9,476,300
- ---------------------------------------------------------------
RETAIL (FOOD & DRUG)-2.92%
Carr-Gottstein Foods Co.,
Sr. Sub. Notes, 12.00%, 11/15/05 19,475,000 20,765,218
- ---------------------------------------------------------------
Core-Mark International, Inc.,
Sr. Sub. Notes, 11.375%,
09/15/03(b)
(Acquired 09/24/96-11/07/96;
Cost $13,643,950) 13,510,000 13,847,750
- ---------------------------------------------------------------
Cumberland Farms,
Secured Notes, 10.50%, 10/01/03 15,004,000 14,553,880
- ---------------------------------------------------------------
Jitney-Jungle Stores of America Inc.,
Sr. Gtd. Notes, 12.00%, 03/01/06 18,000,000 19,102,500
- ---------------------------------------------------------------
68,269,348
- ---------------------------------------------------------------
RESTAURANTS-0.03%
Starbucks Corp.,
Conv. Sub. Deb., 4.25%, 11/01/02 500,000 672,500
- ---------------------------------------------------------------
RETAIL (STORES)-3.87%
Guitar Center Management Co.,
Sr. Notes, 11.00%, 07/01/06 10,200,000 10,824,750
- ---------------------------------------------------------------
Home Depot, Inc.,
Conv. Sub. Notes, 3.25%,
10/01/01 2,000,000 1,953,600
- ---------------------------------------------------------------
Loehmann's Holdings, Inc.,
Sr. Notes, 11.875%, 05/15/03 14,420,000 15,681,750
- ---------------------------------------------------------------
Pamida Inc.,
Sr. Sub. Notes, 11.75%, 03/15/03 14,950,000 12,558,000
- ---------------------------------------------------------------
Saks Holdings, Inc.,
Conv. Sub. Notes, 5.50%,
09/15/06 2,000,000 1,842,500
- ---------------------------------------------------------------
Samsonite Corp.,
Sr. Sub. Notes, 11.125%,
07/15/05 13,590,000 15,373,688
- ---------------------------------------------------------------
Specialty Retailers Inc.,
Sr. Secured Notes, 12.50%,
12/15/00(b)
(Acquired 05/23/96; Cost
$10,000,000) 10,000,000 10,475,000
- ---------------------------------------------------------------
Sr. Sub. Notes, 11.00%, 08/15/03 11,520,000 12,153,600
- ---------------------------------------------------------------
Series D Sr. Sub. Notes, 11.00%,
08/15/03 8,250,000 8,641,875
- ---------------------------------------------------------------
Staples Inc.,
Conv. Sub. Deb., 4.50%,
10/01/00(b)
(Acquired 09/12/95; Cost
$1,000,000) 1,000,000 1,029,160
- ---------------------------------------------------------------
90,533,923
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
SCHOOLS-1.96%
Herff Jones Inc.,
Sr. Sub. Notes, 11.00%, 08/15/05 $13,040,000 $ 14,099,500
- ---------------------------------------------------------------
Scholastic Brands Inc.,
Sr. Sub. Notes, 11.00%,
01/15/07(b)
(Acquired 12/10/96-12/12/96;
Cost $14,062,906) 13,955,000 14,268,988
- ---------------------------------------------------------------
Selmer Co., Inc.,
Sr. Gtd. Sub. Notes, 11.00%,
05/15/05 15,920,000 17,432,400
- ---------------------------------------------------------------
45,800,888
- ---------------------------------------------------------------
SECURITY (SAFETY SERVICES)-0.67%
Cabot Safety Corp.,
Sr. Sub. Notes, 12.50%, 07/15/05 13,975,000 15,652,000
- ---------------------------------------------------------------
SEMICONDUCTORS-0.88%
Advanced Micro Devices, Inc.,
Sr. Secured Notes, 11.00%,
08/01/03 18,965,000 20,671,850
- ---------------------------------------------------------------
STEEL-1.11%
Gulf States Steel Corp.,
First Mortgage Notes, 13.50%,
04/15/03 15,990,000 15,270,450
- ---------------------------------------------------------------
Weirton Steel Corp.,
Sr. Notes, 11.375%, 07/01/04 10,400,000 10,608,000
- ---------------------------------------------------------------
25,878,450
- ---------------------------------------------------------------
TELECOMMUNICATIONS-12.77%
Arch Communications Group, Inc.,
Sr. Disc. Notes, 10.875%,
03/15/08(a) 25,000,000 14,437,500
- ---------------------------------------------------------------
Celcaribe S.A.,
Sr. Secured Notes, 13.50%,
03/15/04 14,500,000 12,687,500
- ---------------------------------------------------------------
Sr. Secured Notes, 13.50%,
03/15/04(a)(b)(e)
(Acquired 05/17/94-05/26/94;
Cost $6,429,128) 8,000,000 9,100,000
- ---------------------------------------------------------------
Clearnet Communications Inc.,
(Canada),
Sr. Yankee Disc. Notes, 14.75%,
12/15/05(a) 30,520,000 19,113,150
- ---------------------------------------------------------------
Colt Telecom Group PLC, (United
Kingdom),
Sr. Yankee Disc. Notes, 12.00%,
12/15/06(f) 20,510,000 12,229,087
- ---------------------------------------------------------------
fONOROLA Inc., (Canada),
Sr. Yankee Secured Notes,
12.50%, 08/15/02 12,500,000 13,671,874
- ---------------------------------------------------------------
GST USA Inc.,
Secured Sr. Disc. Notes,
13.875%, 12/15/05(a) 25,320,000 15,286,950
- ---------------------------------------------------------------
InterCel, Inc.,
Sr. Disc. Notes, 12.00%,
02/01/06(a) 13,330,000 8,597,850
- ---------------------------------------------------------------
Sr. Disc. Notes, 12.00%,
05/01/06(a) 10,000,000 6,250,000
- ---------------------------------------------------------------
Microcell Telecommunications Inc.,
Sr. Disc. Notes, 14.00%,
06/01/06(a) 41,500,000 22,928,750
- ---------------------------------------------------------------
Nextlink Communications Inc.,
Sr. Notes, 12.50%, 04/15/06 19,350,000 20,849,625
- ---------------------------------------------------------------
Omnipoint Corp.,
Series A Sr. Notes, 11.625%,
08/15/06(b)
(Acquired 11/21/96; Cost
$8,149,245) 7,800,000 8,170,500
- ---------------------------------------------------------------
Sr. Notes, 11.625%, 08/15/06 11,550,000 12,098,625
- ---------------------------------------------------------------
Packaging Resources Inc.,
Sr. Notes, 11.625%, 05/01/03 6,648,060 6,153,112
- ---------------------------------------------------------------
Paging Network, Inc.,
Sr. Sub. Notes, 10.00%,
10/15/08(b)
(Acquired 10/10/96-12/04/96;
Cost $15,164,250) 15,150,000 15,396,188
- ---------------------------------------------------------------
</TABLE>
8
<PAGE> 11
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
TELECOMMUNICATIONS-(CONTINUED)
PriCellular Wireless Corp.,
Sr. Disc. Notes, 14.00%,
11/15/01(a) $15,200,000 $ 15,124,000
- ---------------------------------------------------------------
Sr. Notes, 10.75%, 11/01/04(b)
(Acquired 10/30/96; Cost
$5,710,000) 5,710,000 5,974,088
- ---------------------------------------------------------------
ProNet, Inc.,
Sr. Sub. Notes, 11.875%,
06/15/05 14,500,000 13,775,000
- ---------------------------------------------------------------
RSL Communications, Ltd.,
Sr. Notes, 12.25%,
11/15/06(b)(g)
(Acquired 09/30/96-12/03/96;
Cost $17,623,538) 17,620,000 17,884,300
- ---------------------------------------------------------------
Sprint Spectrum L.P.,
Sr. Notes, 11.00%, 08/15/06 12,800,000 13,920,000
- ---------------------------------------------------------------
Sygnet Wireless Inc.,
Sr. Notes, 11.50%, 10/01/06 14,080,000 14,608,000
- ---------------------------------------------------------------
Teleport Communications Group Inc.,
Sr. Disc. Notes, 11.125%,
07/01/07(a) 30,000,000 20,775,000
- ---------------------------------------------------------------
299,031,099
- ---------------------------------------------------------------
TELEPHONE-0.66%
PhoneTel Technologies, Inc.,
Sr. Notes, 12.00%, 12/15/06 14,840,000 15,396,500
- ---------------------------------------------------------------
TRANSPORTATION-2.02%
Gearbulk Holding Ltd.,
Sr. Notes, 11.25%, 12/01/04 13,550,000 14,972,750
- ---------------------------------------------------------------
Stena A.B., (Sweden),
Sr. Yankee Notes, 10.50%,
12/15/05 15,980,000 17,338,300
- ---------------------------------------------------------------
Transportacion Maritima Mexicana
S.A. de CV, (Mexico), Sr. Yankee
Notes, 10.00%, 11/15/06 14,680,000 14,900,200
- ---------------------------------------------------------------
47,211,250
- ---------------------------------------------------------------
TRUCKING-0.85%
AmeriTruck Distribution Corp.,
Sr. Sub. Notes, 12.25%, 11/15/05 19,800,000 19,998,000
- ---------------------------------------------------------------
Total Corporate Bonds & Notes 2,125,880,794
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
COMMON STOCKS-0.77%
AUTOMOBILE/TRUCK PARTS &
TIRES-0.11%
Lear Corp.(h) 72,600 2,477,475
- ---------------------------------------------------------------
LEISURE & RECREATION-0.02%
Cobblestone Holdings Inc.(h) 23,250 465,000
- ---------------------------------------------------------------
MEDICAL (PATIENT SERVICES)-0.15%
Genesis Health Ventures, Inc.(h) 86,069 2,678,909
- ---------------------------------------------------------------
Total Renal Care Holdings, Inc.(h) 24,000 870,000
- ---------------------------------------------------------------
3,548,909
- ---------------------------------------------------------------
MEDICAL INSTRUMENTS/PRODUCTS-0.20%
Omnicare, Inc. 138,520 4,449,955
- ---------------------------------------------------------------
OIL & GAS (DRILLING)-0.08%
Reading & Bates Corp.(h) 72,475 1,920,588
- ---------------------------------------------------------------
OIL & GAS (SERVICES)-0.08%
Kelley Oil & Gas Corp.(h) 781,250 1,904,297
- ---------------------------------------------------------------
PUBLISHING-0.03%
Affiliated Newspaper
Investments(h) 13,826 691,300
- ---------------------------------------------------------------
RETAIL (FOOD & DRUG)-0.04%
Rite Aid Corp. 24,083 957,279
- ---------------------------------------------------------------
TELECOMMUNICATIONS-0.06%
MFS Communications Co., Inc.(h) 2,001 109,050
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TELECOMMUNICATIONS-(CONTINUED)
WorldCom, Inc.(h) 52,534 $ 1,369,167
- ---------------------------------------------------------------
1,478,217
- ---------------------------------------------------------------
Total Common Stocks 17,893,020
- ---------------------------------------------------------------
PREFERRED STOCKS-4.84%
ADVERTISING/BROADCASTING-0.12%
News Corp. Ltd., (Australia),
$5.00 Conv. Pfd.(b)
(Acquired 11/04/96; Cost
$2,980,000) 29,800 2,812,375
- ---------------------------------------------------------------
Time Warner Inc.,
Series M, $102.50 PIK Conv. Pfd. 1 740
- ---------------------------------------------------------------
2,813,115
- ---------------------------------------------------------------
AEROSPACE/DEFENSE-0.16%
Loral Space & Communications,
$3.00 Conv. Pfd.(b)
(Acquired 11/01/96; Cost
$3,232,500) 64,650 3,676,969
- ---------------------------------------------------------------
CABLE TELEVISION-0.83%
Cablevision Systems Corp.,
Series M, $11.125 PIK Conv. Pfd. 216,572 19,491,457
- ---------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES-0.36%
Microsoft Corp.,
Series A, $2.196 Conv. Pfd. 105,000 8,413,125
- ---------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-0.26%
PennCorp Financial Group, Inc.,
$3.375 Conv. Pfd. 20,000 1,680,150
- ---------------------------------------------------------------
SunAmerica, Inc., $3.188 Conv. Pfd. 106,650 4,505,963
- ---------------------------------------------------------------
6,186,113
- ---------------------------------------------------------------
FOOD/PROCESSING-0.23%
Chiquita Brands International,
Inc., Series B, $3.75 Conv. Pfd. 100,000 5,325,000
- ---------------------------------------------------------------
FUNERAL SERVICES-0.08%
SCI Financial LLC,
Series A, $3.125 Conv. Pfd. 20,000 1,882,500
- ---------------------------------------------------------------
GAS DISTRIBUTION-0.09%
NorAm Financing,
$3.125 Conv. Pfd. 35,000 2,222,500
- ---------------------------------------------------------------
HOTELS/MOTELS-0.12%
Host Marriott Financial Trust,
$3.375 Conv. Pfd.(b) (Acquired
11/25/96; Cost $2,500,000) 50,000 2,724,850
- ---------------------------------------------------------------
INSURANCE (MULTI-LINE
PROPERTY)-0.13%
Frontier Financing Trust,
$3.125 Conv. Pfd.(b) (Acquired
10/09/96; Cost $3,000,000) 60,000 3,106,320
- ---------------------------------------------------------------
MACHINERY (HEAVY)-0.06%
Case Corp.,
Series A, $4.50 Conv. Pfd. 10,000 1,329,780
- ---------------------------------------------------------------
OIL & GAS (REFINING/MARKETING)-0.09%
Tosco Financing Trust,
$2.875 Conv. Pfd.(b) (Acquired
12/10/96; Cost $2,000,000) 40,000 2,085,000
- ---------------------------------------------------------------
OIL & GAS (SERVICES)-0.13%
Enron Corp.,
$1.36 Conv. Pfd. 30,000 720,000
- ---------------------------------------------------------------
Kelley Oil & Gas Corp.,
$2.625 Conv. Pfd. 100,000 2,387,500
- ---------------------------------------------------------------
3,107,500
- ---------------------------------------------------------------
</TABLE>
9
<PAGE> 12
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
PUBLISHING-1.11%
K-III Communications Corp.,
$2.875 Pfd. 300,000 $ 8,062,500
- ---------------------------------------------------------------
$10.00 Series D Pfd.(b)
(Acquired 01/19/96-12/10/96;
Cost $17,930,000) 180,000 17,685,000
- ---------------------------------------------------------------
25,747,500
- ---------------------------------------------------------------
RETAIL (STORES)-0.04%
Kmart Financing,
$3.875 Conv. Pfd. 20,000 975,000
- ---------------------------------------------------------------
TELECOMMUNICATIONS-1.03%
ICG Holdings, Inc.,
$14.25 Pfd. 19,000 20,995,000
- ---------------------------------------------------------------
MFS Communications Co., Inc.,
$2.68 Conv. Pfd. 35,000 3,193,750
- ---------------------------------------------------------------
24,188,750
- ---------------------------------------------------------------
Total Preferred Stocks 113,275,479
- ---------------------------------------------------------------
WARRANTS-0.24%
CABLE TELEVISION-0.00%
Wireless One Inc.,
expiring 10/19/00(h) 37,560 37,560
- ---------------------------------------------------------------
CHEMICALS-0.02%
Berry Plastics Corp.,
expiring 04/15/04(h) 6,000 270,120
- ---------------------------------------------------------------
Sterling Chemicals Holdings,
expiring 08/15/08(h) 7,500 262,500
- ---------------------------------------------------------------
532,620
- ---------------------------------------------------------------
COMPUTER PERIPHERALS-0.02%
Exide Electronics Group Inc.,
expiring 03/15/06(h) 13,000 390,000
- ---------------------------------------------------------------
CONTAINERS-0.01%
MVE Inc.,
expiring 02/15/02(h) 6,750 202,500
- ---------------------------------------------------------------
LEISURE & RECREATION-0.06%
IHF Capital Inc.,
Series H, expiring 11/14/99(h) 8,000 1,040,000
- ---------------------------------------------------------------
Series I, expiring 11/14/99(h) 7,250 290,000
- ---------------------------------------------------------------
1,330,000
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MEDICAL (PATIENT SERVICES)-0.01%
Republic Health Corp.,
expiring 04/03/00(h) 17,500 $ 315,000
- ---------------------------------------------------------------
STEEL-0.00%
Bar Technologies Inc.,
expiring 04/01/01(h) 6,000 33,000
- ---------------------------------------------------------------
Gulf States Steel Inc.,
expiring 04/15/03(h) 15,990 79,950
- ---------------------------------------------------------------
112,950
- ---------------------------------------------------------------
TELECOMMUNICATIONS-0.12%
Clearnet Communications Inc.,
(Canada),
expiring 09/15/05(h) 100,715 604,296
- ---------------------------------------------------------------
ICG Communications Inc.,
expiring 09/15/05(h) 39,600 574,200
- ---------------------------------------------------------------
InterCel Inc.,
expiring 02/01/06(h) 42,656 341,248
- ---------------------------------------------------------------
Intermedia Communications Inc.,
expiring 06/01/00(h) 1,500 52,500
- ---------------------------------------------------------------
Microcell Telecommunications Inc.,
Conditional Wts., expiring
12/31/97(b)(h) (Acquired
12/18/96; Cost $35,744) 166,000 41,500
- ---------------------------------------------------------------
expiring 12/31/97(b)(h)
(Acquired 12/18/96; Cost $992,888) 166,000 1,120,500
- ---------------------------------------------------------------
2,734,244
- ---------------------------------------------------------------
Total Warrants 5,654,874
- ---------------------------------------------------------------
REPURCHASE AGREEMENT(i)-1.97%
UBS Securities, Inc., 7.05%,
01/02/97(j) 46,218,974 46,218,974
- ---------------------------------------------------------------
TOTAL INVESTMENTS-98.63% 2,308,923,141
- ---------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-1.37% 32,111,225
- ---------------------------------------------------------------
NET ASSETS-100.00% $2,341,034,366
===============================================================
</TABLE>
Abbreviations:
Conv. - Convertible
Deb. - Debentures
Disc. - Discounted
Gtd. - Guaranteed
PIK - Payment in Kind
Pfd. - Preferred
Sr. - Senior
Sub. - Subordinated
Wts. - Warrants
Notes to Schedule of Investments:
(a) Discounted bond at purchase. Interest rate shown represents coupon rate at
which the bond will accrue at a specified future date.
(b) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined in
accordance with procedures established by the Board of Trustees. The
aggregate market value of these securities at December 31, 1996 was
$373,133,229 which represented 15.94% of the Fund's net assets.
(c) Zero coupon bonds. Interest rate shown represents the rate of original issue
discount.
(d) Issued as a unit. This unit also includes 9,250 warrants to purchase 4.535
shares of common stock per warrant.
(e) Issued as a unit. This unit also includes 1,300,800 Celcaribe Ordinary Trust
Certificates.
(f) Issued as a unit. This unit also includes 20,510 warrants to purchase
ordinary shares at 302.5 pence per share.
(g) Issued as a unit. This unit also includes 17,620 warrants to purchase 1.815
shares of common stock per warrant.
(h) Non-income producing security.
(i) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts, and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(j) Joint repurchase agreement entered into 12/31/96 with a maturing value of
$550,215,417. Collateralized by $732,485,305 U.S. Government agency
obligations, 0% to 9.50% due 1/01/98 to 12/15/26.
See Notes to Financial Statements.
10
<PAGE> 13
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$2,185,508,189) $2,308,923,141
- ----------------------------------------------------------
Receivables for:
Fund shares sold 9,648,445
- ----------------------------------------------------------
Dividends and interest 46,166,949
- ----------------------------------------------------------
Investment for deferred compensation plan 48,098
- ----------------------------------------------------------
Other assets 86,032
- ----------------------------------------------------------
Total assets 2,364,872,665
- ----------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 6,541,806
- ----------------------------------------------------------
Fund shares reacquired 2,455,637
- ----------------------------------------------------------
Dividends 11,121,120
- ----------------------------------------------------------
Deferred compensation plan 48,098
- ----------------------------------------------------------
Accrued advisory fees 953,278
- ----------------------------------------------------------
Accrued administrative service fees 9,349
- ----------------------------------------------------------
Accrued distribution fees 1,821,348
- ----------------------------------------------------------
Accrued trustees' fees 3,683
- ----------------------------------------------------------
Accrued transfer agent fees 311,688
- ----------------------------------------------------------
Accrued operating expenses 572,292
- ----------------------------------------------------------
Total liabilities 23,838,299
- ----------------------------------------------------------
Net assets applicable to shares
outstanding $2,341,034,366
==========================================================
NET ASSETS:
Class A $1,272,974,132
==========================================================
Class B $1,068,060,234
==========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 128,791,474
==========================================================
Class B 108,065,310
==========================================================
Class A:
Net asset value and redemption price per
share $ 9.88
==========================================================
Offering price per share:
(Net asset value of $9.88
divided by 95.25%) $ 10.37
==========================================================
Class B:
Net asset value and offering price per
share $ 9.88
==========================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 194,640,314
- ----------------------------------------------------------
Dividends 3,281,146
- ----------------------------------------------------------
Total investment income 197,921,460
- ----------------------------------------------------------
EXPENSES:
Advisory fees 9,277,005
- ----------------------------------------------------------
Custodian fees 203,583
- ----------------------------------------------------------
Transfer agent fees -- Class A 1,643,305
- ----------------------------------------------------------
Transfer agent fees -- Class B 1,068,773
- ----------------------------------------------------------
Administrative service fees 98,734
- ----------------------------------------------------------
Trustees' fees 18,914
- ----------------------------------------------------------
Distribution fees -- Class A 2,631,156
- ----------------------------------------------------------
Distribution fees -- Class B 8,083,368
- ----------------------------------------------------------
Other 789,703
- ----------------------------------------------------------
Total expenses 23,814,541
- ----------------------------------------------------------
Less: Expenses paid indirectly (30,911)
- ----------------------------------------------------------
Net expenses 23,783,630
- ----------------------------------------------------------
Net investment income 174,137,830
- ----------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENT
SECURITIES:
Net realized gain on sales of investment
securities 17,869,656
- ----------------------------------------------------------
Unrealized appreciation of investment
securities 86,550,248
- ----------------------------------------------------------
Net gain on investment securities 104,419,904
- ----------------------------------------------------------
Net increase in net assets resulting from
operations $ 278,557,734
==========================================================
</TABLE>
See Notes to Financial Statements.
11
<PAGE> 14
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
OPERATIONS:
Net investment income $ 174,137,830 $ 103,866,411
- ----------------------------------------------------------------------------------------------
Net realized gain (loss) on sales of investment securities 17,869,656 (13,744,221)
- ----------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities 86,550,248 64,363,354
- ----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 278,557,734 154,485,544
- ----------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (102,842,087) (72,863,770)
- ----------------------------------------------------------------------------------------------
Class B (72,629,856) (31,951,946)
- ----------------------------------------------------------------------------------------------
Distributions in excess of net investment income:
Class A -- (436,906)
- ----------------------------------------------------------------------------------------------
Class B -- (191,590)
- ----------------------------------------------------------------------------------------------
Share transactions-net:
Class A 327,466,596 271,933,588
- ----------------------------------------------------------------------------------------------
Class B 466,449,407 352,760,393
- ----------------------------------------------------------------------------------------------
Net increase in net assets 897,001,794 673,735,313
- ----------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 1,444,032,572 770,297,259
- ----------------------------------------------------------------------------------------------
End of period $2,341,034,366 $1,444,032,572
==============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $2,295,988,395 $1,505,053,545
- ----------------------------------------------------------------------------------------------
Undistributed net investment income 2,868,653 1,688,456
- ----------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) on sales of
investment securities (81,237,634) (99,574,133)
- ----------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 123,414,952 36,864,704
- ----------------------------------------------------------------------------------------------
$2,341,034,366 $1,444,032,572
==============================================================================================
</TABLE>
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM High Yield Fund (the "Fund") is a series portfolio of AIM Funds Group (the
"Trust"). The trust is a Delaware business trust registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end series
management investment company consisting of nine separate series portfolios,
each having an unlimited number of shares of beneficial interest. The Fund
currently offers two different classes of shares: the Class A shares and the
Class B shares. Class A shares are sold with a front-end sales charge. Class B
shares are sold with a contingent deferred sales charge. Matters affecting each
portfolio or class are voted on exclusively by the shareholders of such
portfolio or class. The assets, liabilities and operations of each portfolio are
accounted for separately. Information presented in these financial statements
pertains only to the Fund. The Fund's objective is to achieve a high level of
current income by investing primarily in publicly traded non-investment grade
debt securities. The Fund will also consider the possibility of capital growth
when it purchases and sells securities. Debt securities of less than investment
grade are considered "high risk" securities (commonly referred to as junk
bonds). These bonds may involve special risks in addition to the risks
associated with investment in higher rated debt securities. High yield bonds may
be more susceptible to real or perceived adverse economic and competitive
industry conditions than higher grade bonds. Also, the secondary market in which
high yield bonds are traded may be less liquid than the market for higher grade
bonds.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. Security Valuations -- Debt securities (including convertible bonds) are
valued on the basis of prices provided by an independent pricing service.
Prices provided by the pricing
12
<PAGE> 15
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 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 Trustees, or persons designated by the Board of Trustees, determines
that 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 either are not readily available or are questionable
are valued at fair value as determined in good faith by or under the
supervision of the Trust's officers in a manner specifically authorized by
the Board of Trustees. Short-term obligations having 60 days or less to
maturity are valued at amortized cost which approximates market value.
B. Securities Transactions, Investment Income and Distributions -- Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income 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. Distributions
from net realized capital gains, if any, are recorded on ex-dividend date and
are paid annually subject to restrictions noted in section "C" below. On
December 31, 1996, undistributed net investment income was increased by
$2,514,310, paid-in capital reduced by $2,981,153 and undistributed net
realized gains increased by $466,843 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.
C. Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income taxes
is recorded in the financial statements. The Fund has a capital loss
carryforward of $81,020,316 (which may be carried forward to offset future
taxable capital gains, if any) which expires, if not previously utilized,
through the year 2003. The Fund cannot distribute capital gains to
shareholders until the tax loss carryforwards have been utilized.
D. Expenses -- Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to both
classes, e.g. advisory fees, are allocated between them.
NOTE 2- ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust 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 an annual rate of 0.625% of
the first $200 million of the Fund's average daily net assets, plus 0.55% of the
Fund's average daily net assets in excess of $200 million to and including $500
million, plus 0.50% of the Fund's average daily net assets in excess of $500
million to and including $1 billion, plus 0.45% of the Fund's average daily net
assets in excess of $1 billion.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to reimburse AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the year ended December 31, 1996, AIM
was reimbursed $98,734 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 and
shareholder services to the Fund. During the year ended December 31, 1996, the
Fund paid AFS $1,723,833 for such services.
The Fund received reductions in transfer agency fees payable to AFS of $28,580
from dividends received on balances in cash management bank accounts. In
addition, pricing service expenses in the amount of $2,331 were paid through
directed brokerage commissions paid by the Fund. The effect of the above
arrangements resulted in a reduction in the Fund's total expenses of $30,911
during the year ended December 31, 1996.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A shares and the Class B shares of the Fund. The Trust has adopted Plans
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A
shares (the "Class A Plan") and with respect to the Fund's Class B shares (the
"Class B Plan") (collectively, the "Plans"). The Fund, pursuant to the Class A
Plan, pays AIM Distributors compensation at an annual rate of 0.25% of the
average daily net assets attributable to the Class A shares. The Class A Plan is
designed to compensate AIM Distributors for certain promotional and other sales
related costs and provides periodic payments to selected dealers and financial
institutions who furnish continuing personal shareholder services to their
customers who purchase and own Class A shares of the Fund. The Fund, pursuant to
the Class B Plan, pays AIM Distributors compensation at an annual rate of 1.00%
of the average daily net assets attributable to the Class B shares. Of this
amount, the Fund may pay a service fee of 0.25% of the average daily net assets
of the Class B shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
Class B shares of the Fund. Any amounts not paid as a service fee under such
13
<PAGE> 16
Plans would constitute an asset-based sales charge. The Plans also impose a cap
on the total sales charges, including asset-based sales charges, that may be
paid by the respective classes. AIM Distributors may, from time to time, assign,
transfer or pledge to one or more assignees, its rights to all or a designated
portion of (a) compensation received by AIM Distributors from the Fund pursuant
to the Class B Plan (but not AIM Distributors' duties and obligations pursuant
to the Class B Plan) and (b) any contingent deferred sales charges payable to
AIM Distributors related to the Class B shares. During the year ended December
31, 1996, the Class A shares and the Class B shares paid AIM Distributors
$2,631,156 and $8,083,368, respectively, as compensation under the Plans.
AIM Distributors received commissions of $1,965,594 from sales of the Class A
shares of the Fund during the year ended December 31, 1996. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended December 31, 1996,
AIM Distributors received $976,702 in contingent deferred sales charges imposed
on redemptions of Fund shares. Certain officers and trustees of the Trust are
officers and directors of AIM, AIM Distributors and AFS.
During the year ended December 31, 1996, the Fund paid legal fees of $7,485
for services rendered by Kramer, Levin, Naftalis & Frankel as counsel to the
Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3-TRUSTEES' FEES
Trustees' fees represent remuneration paid or accrued to each trustee who is not
an "interested person" of AIM. The Trust may invest trustees' fees, if so
elected by a trustee, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $325,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
Prior to an amendment of the line of credit on July 19, 1996, the Fund was
limited to borrowing $17,000,000. During the year ended December 31, 1996, the
Fund did not borrow under the line of credit agreement. The funds which are
parties to the line of credit are charged a commitment fee of 0.08% on the
unused balance of the committed line. The commitment fee is allocated among such
funds based on their respective average net assets for the period.
NOTE 5-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended December 31, 1996 was
$2,230,898,049 and $1,381,114,077, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of December 31, 1996 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $132,068,761
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (9,004,639)
- ---------------------------------------------------------
Net unrealized appreciation of investment
securities $123,064,122
=========================================================
Cost of investments for tax purposes is
$2,185,859,019.
</TABLE>
NOTE 6-SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 1996 and 1995
were as follows:
<TABLE>
<CAPTION>
1996 1995
--------------------------- -----------------------------
SHARES VALUE SHARES VALUE
----------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Sold:
Class A 76,485,479 $ 725,785,892 49,241,443 $ 458,547,804
- ----------------------- --------------------------- -----------------------------
Class B 63,383,789 605,130,108 42,866,225 400,172,189
- ----------------------- --------------------------- -----------------------------
Issued as reinvestment
of dividends:
Class A 6,674,252 64,083,963 4,955,465 46,216,100
- ----------------------- --------------------------- -----------------------------
Class B 3,798,909 36,390,618 1,597,343 14,918,822
- ----------------------- --------------------------- -----------------------------
Reacquired:
Class A (48,380,296) (462,403,259) (25,047,265) (232,830,316)
- ----------------------- --------------------------- -----------------------------
Class B (18,351,224) (175,071,319) (6,678,316) (62,330,618)
- ----------------------- --------------------------- -----------------------------
83,610,909 $ 793,916,003 66,934,895 $ 624,693,981
======================= =========================== =============================
</TABLE>
14
<PAGE> 17
NOTE 7-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a Class A share outstanding during
each of the years in the ten-year period ended December 31, 1996 and for a Class
B share outstanding during each of the years in the three-year period ended
December 31, 1996 and the period September 1, 1993 (date sales commenced)
through December 31, 1993.
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992(a) 1991 1990
---------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A:
Net asset value, beginning of period $ 9.43 $ 8.93 $ 10.05 $ 9.40 $ 8.86 $ 7.07 $ 8.94
- -------------------------------------------- ---------- -------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.92 0.93 0.96 0.97 1.04 1.02 1.09
- -------------------------------------------- ---------- -------- -------- -------- -------- -------- --------
Net gains (losses) on securities (both
realized and unrealized) 0.46 0.52 (1.12) 0.69 0.55 1.81 (1.84)
- -------------------------------------------- ---------- -------- -------- -------- -------- -------- --------
Total from investment operations 1.38 1.45 (0.16) 1.66 1.59 2.83 (0.75)
- -------------------------------------------- ---------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.93) (0.95) (0.96) (1.01) (1.05) (1.04) (1.12)
- -------------------------------------------- ---------- -------- -------- -------- -------- -------- --------
Net asset value, end of period $ 9.88 $ 9.43 $ 8.93 $ 10.05 $ 9.40 $ 8.86 $ 7.07
============================================ ========== ======== ======== ======== ======== ======== ========
Total return(b) 15.44% 16.86% (1.67)% 18.40% 18.60% 42.18% (9.03)%
============================================ ========== ======== ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,272,974 $886,106 $578,959 $550,760 $324,518 $259,677 $204,932
============================================ ========== ======== ======== ======== ======== ======== ========
Ratio of expenses to average net assets 0.97%(c)(d) 0.96% 1.00% 1.12% 1.15% 1.22% 1.21%(e)
============================================ ========== ======== ======== ======== ======== ======== ========
Ratio of net investment income to average
net assets 9.67%(c) 9.95% 10.07% 9.82% 11.00% 12.67% 13.59%(f)
============================================ ========== ======== ======== ======== ======== ======== ========
Portfolio turnover rate 77% 61% 53% 53% 56% 61% 27%
============================================ ========== ======== ======== ======== ======== ======== ========
<CAPTION>
1989 1988 1987
-------- -------- --------
<S> <C> <C> <C>
CLASS A:
Net asset value, beginning of period $ 10.01 $ 9.67 $ 10.54
- -------------------------------------------- -------- -------- --------
Income from investment operations:
Net investment income 1.21 1.18 1.16
- -------------------------------------------- -------- -------- --------
Net gains (losses) on securities (both
realized and unrealized) (1.07) 0.34 (0.83)
- -------------------------------------------- -------- -------- --------
Total from investment operations 0.14 1.52 0.33
- -------------------------------------------- -------- -------- --------
Less distributions:
Dividends from net investment income (1.21) (1.18) (1.20)
- -------------------------------------------- -------- -------- --------
Net asset value, end of period $ 8.94 $ 10.01 $ 9.67
============================================ ======== ======== ========
Total return(b) 1.18% 16.41% 3.07%
============================================ ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $261,920 $274,631 $242,858
============================================ ======== ======== ========
Ratio of expenses to average net assets 0.99% 0.96%(e) 0.92%
============================================ ======== ======== ========
Ratio of net investment income to average
net assets 12.40% 11.84%(f) 11.21%
============================================ ======== ======== ========
Portfolio turnover rate 36% 76% 81%
============================================ ======== ======== ========
</TABLE>
(a) The Fund changed investment advisors on June 30, 1992.
(b) Total returns do not deduct sales charges.
(c) Ratios are based on average net assets of $1,052,462,336.
(d) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly
the ratio of expenses to average net assets would have been the same.
(e) Ratios of expenses to average net assets prior to reduction of advisory fees
were 1.22% and 1.00% for years 1990 and 1988, respectively.
(f) Ratios of net investment income to average net assets prior to reduction of
advisory fees were 13.58% and 11.80% for years 1990 and 1988, respectively.
<TABLE>
<CAPTION>
1996 1995 1994 1993
---------- -------- -------- -------
<S> <C> <C> <C> <C>
CLASS B:
Net asset value, beginning of period $ 9.42 $ 8.92 $ 10.04 $ 9.96
- ------------------------------------------------------------ ---------- -------- -------- -------
Income from investment operations:
Net investment income 0.85 0.85 0.87 0.32
- ------------------------------------------------------------ ---------- -------- -------- -------
Net gains (losses) on securities (both realized and
unrealized) 0.47 0.52 (1.10) 0.07
- ------------------------------------------------------------ ---------- -------- -------- -------
Total from investment operations 1.32 1.37 (0.23) 0.39
- ------------------------------------------------------------ ---------- -------- -------- -------
Less distributions:
Dividends from net investment income (0.86) (0.87) (0.89) (0.31)
- ------------------------------------------------------------ ---------- -------- -------- -------
Net asset value, end of period $ 9.88 $ 9.42 $ 8.92 $ 10.04
============================================================ ========== ======== ======== =======
Total return(a) 14.68% 15.91% (2.48)% 4.00%
============================================================ ========== ======== ======== =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,068,060 $557,926 $191,338 $31,264
============================================================ ========== ======== ======== =======
Ratio of expenses to average net assets 1.68%(b)(c) 1.73% 1.80% 1.93%(d)
============================================================ ========== ======== ======== =======
Ratio of net investment income to average net assets 8.95%(b) 9.18% 9.27% 8.99%(d)
============================================================ ========== ======== ======== =======
Portfolio turnover rate 77% 61% 53% 53%
============================================================ ========== ======== ======== =======
</TABLE>
(a) Total returns do not deduct contingent deferred sales charges and is not
annualized for periods less than one year.
(b) Ratios are based on average net assets of $808,336,751.
(c) Ratio includes expenses paid indirectly. Excluding expenses paid indirectly
the ratio of expenses to average net assets would have been the same.
(d) Annualized.
NOTE 8-SUBSEQUENT EVENT
On November 4, 1996, A I M Management Group Inc. ("AIM Management") and INVESCO
plc announced the execution of an agreement and plan of merger pursuant to which
AIM Management will be merged with and into a direct wholly-owned subsidiary of
INVESCO plc. AIM Management is the parent company of the Fund's advisor. The
merger is expected to take place during the first quarter of 1997.
15
<PAGE> 18
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of
AIM High Yield Fund:
We have audited the accompanying statement of assets and
liabilities of AIM High Yield Fund (a portfolio of AIM
Funds Group), including the schedule of investments, as of
December 31, 1996, the related statement of operations for
the year then ended, the statement of 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. 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 December 31, 1996, 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 High Yield
Fund as of December 31, 1996, 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, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Houston, Texas
February 7, 1997
16
<PAGE> 19
Trustees & Officers
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<S> <C> <C>
BOARD OF TRUSTEES OFFICERS OFFICE OF THE FUND
Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
Chairman and Chief Executive Officer Chairman Suite 1919
A I M Management Group Inc. Houston, TX 77046
Robert H. Graham
Bruce L. Crockett President INVESTMENT ADVISOR
Formerly Director, President, and
Chief Executive Officer John J. Arthur A I M Advisors, Inc.
COMSAT Corporation Senior Vice President and Treasurer 11 Greenway Plaza
Suite 1919
Owen Daly II Carol F. Relihan Houston, TX 77046
Director Senior Vice President and Secretary
Cortland Trust Inc. TRANSFER AGENT
Gary T. Crum
Carl Frischling Senior Vice President A I M Fund Services, Inc.
Partner P.O. Box 4739
Kramer, Levin, Naftalis & Frankel Scott G. Lucas Houston, TX 77210-4739
Senior Vice President
Robert H. Graham CUSTODIAN
President and Chief Operating Officer Dana R. Sutton
A I M Management Group Inc. Vice President and Assistant Treasurer State Street Bank & Trust Company
225 Franklin Street
John F. Kroeger Robert G. Alley Boston, MA 02110
Formerly Consultant Vice President
Wendell & Stockel Associates, Inc. COUNSEL TO THE FUND
Stuart W. Coco
Lewis F. Pennock Vice President Ballard Spahr
Attorney Andrews & Ingersoll
Ian W. Robinson Melville B. Cox 1735 Market Street
Consultant; Formerly Executive Vice President Philadelphia, PA 19103
Vice President and
Chief Financial Officer Karen Dunn Kelley COUNSEL TO THE TRUSTEES
Bell Atlantic Management Vice President
Services, Inc. Kramer, Levin, Naftalis & Frankel
Jonathan C. Schoolar 919 Third Avenue
Louis S. Sklar Vice President New York, NY 10022
Executive Vice President
Hines Interests P. Michelle Grace DISTRIBUTOR
Limited Partnership Assistant Secretary
A I M Distributors, Inc.
David L. Kite 11 Greenway Plaza
Assistant Secretary Suite 1919
Houston, TX 77046
Nancy L. Martin
Assistant Secretary AUDITORS
Ofelia M. Mayo KPMG Peat Marwick LLP
Assistant Secretary 700 Louisiana
NationsBank Bldg.
Kathleen J. Pflueger Houston, TX 77002
Assistant Secretary
Samuel D. Sirko
Assistant Secretary
Stephen I. Winer
Assistant Secretary
Mary J. Benson
Assistant Treasurer
</TABLE>
REQUIRED FEDERAL INCOME TAX INFORMATION
AIM High Yield Fund Class A and Class B shares paid ordinary dividends in the
amounts of $0.932 and $0.8585 per share, respectively, to shareholders during
the Fund's tax year ended December 31, 1996. Of these amounts, 1.82% is
eligible for the dividends received deduction for corporations. Missouri
residents: During the Fund's tax year ended December 31, 1996, 0% of the Fund's
income was derived from U.S. Treasury obligations.
<PAGE> 20
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THE AIM FAMILY OF FUNDS--REGISTERED TRADEMARK--
AGGRESSIVE GROWTH
AIM Aggressive Growth Fund*
AIM Capital Development Fund
AIM Constellation Fund
AIM Global Aggressive Growth Fund
[PHOTO OF GROWTH
11 Greenway Plaza AIM Blue Chip Fund
APPEARS HERE] AIM Global Growth Fund
AIM Growth Fund
AIM International Equity Fund
AIM Value Fund
AIM Weingarten Fund
GROWTH AND INCOME
AIM Balanced Fund
AIM Charter Fund
INCOME AND GROWTH
AIM Global Utilities Fund
HIGH CURRENT INCOME
AIM High Yield Fund
CURRENT INCOME
AIM Global Income Fund
AIM Income Fund
CURRENT TAX-FREE INCOME
AIM Municipal Bond Fund
AIM Tax-Exempt Bond Fund of CT
AIM Tax-Free Intermediate Shares
CURRENT INCOME AND HIGH DEGREE OF SAFETY
AIM Intermediate Government Fund
HIGH DEGREE OF SAFETY AND CURRENT INCOME
AIM Limited Maturity Treasury Shares
STABILITY, LIQUIDITY, AND CURRENT INCOME
AIM Money Market Fund
A I M Management Group Inc. has provided
leadership in the mutual fund industry since STABILITY, LIQUIDITY, AND CURRENT TAX-FREE INCOME
1976 and manages approximately $70 billion in AIM Tax-Exempt Cash Fund
assets for more than 3.5 million
shareholders, including individual investors, *AIM Aggressive Growth Fund was closed to new
corporate clients, and financial institutions investors on July 18, 1995. For more complete
as of February 11, 1997. The AIM Family of information about any AIM Fund(s), including
Funds--Registered Trademark-- is distributed sales charges and expenses, ask your
nationwide, and AIM today ranks among the financial consultant or securities dealer for
nation's top 15 mutual fund companies in a free prospectus(es). Please read the
assets under management, according to Lipper prospectus(es) carefully before you invest or
Analytical Services, Inc. send money.
</TABLE>
[AIM LOGO APPEARS HERE] ---------------
BULK RATE
A I M Distributors, Inc. U.S. POSTAGE
11 Greenway Plaza, Suite 1919 PAID
Houston, TX 77046 HOUSTON, TX
Permit No. 1919
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