<PAGE> 1
SEMIANNUAL REPORT / JUNE 30 1999
AIM HIGH YIELD FUND
[COVER IMAGE]
[AIM LOGO APPEARS HERE]
<PAGE> 2
[COVER IMAGE]
-------------------------------------
WHEAT FIELD WITH A LARK
BY VINCENT VAN GOGH (1853-1890, DUTCH)
GOOD TIMES ARE COMMONLY REPRESENTED BY A WHEAT SHEAF,
CONNOTING NATURE'S BOUNTY AND THE HARVEST THAT IS REAPED
AFTER ARDUOUS LABOR. ALTHOUGH HARDSHIP MAY BE INCURRED
ALONG THE WAY, THE DISCIPLINED INVESTOR KNOWS THAT IN THE
LONG TERM, PERSEVERANCE SHOULD RESULT IN REWARD.
-------------------------------------
AIM High Yield Fund is 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 performance figures are historical and reflect
reinvestment of all distributions and changes in net asset value.
o When sales charges are included in performance figures, Class A share
performance reflects the maximum 4.75% sales charge, and Class B and Class C
share performance reflects the applicable contingent deferred sales charge
(CDSC) for the period involved. The CDSC on Class B shares declines from 5%
beginning at the time of purchase to 0% at the beginning of the seventh
year. The CDSC on Class C shares is 1% for the first year after purchase.
The performance of the fund's Class B and Class C shares will differ from
that of Class A shares due to differences in sales-charge structure and
expenses.
o The 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 an
investor's shares, when redeemed, may be worth more or less than their
original cost.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o The Lehman High Yield Bond Index is an unmanaged composite generally
considered representative of high-yield debt securities. It is compiled by
Lehman Brothers, a well-known global investment bank.
o Government securities, such as U.S. Treasury bills, notes and bonds, offer a
high degree of safety and are guaranteed as to the timely payment of
principal and interest if held to maturity. Fund shares are not insured, and
their value will vary with market conditions.
o An investment cannot be made in any index listed. Unless otherwise
indicated, index results include reinvested dividends and do not reflect
sales charges.
AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OF A BANK AND IS NOT INSURED
OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR
ANY OTHER GOVERNMENT AGENCY. THERE IS A RISK THAT
YOU COULD LOSE SOME OR ALL OF YOUR MONEY.
This report may be distributed only to current shareholders or to persons
who have received a current prospectus of the fund.
================================================================================
AVERAGE ANNUAL TOTAL RETURNS
As of 6/30/99, including sales charges
A SHARES
10 Years 9.14%
5 Years 6.84
1 Year -10.63*
*-6.18%, excluding sales charges
B SHARES
Since Inception (9/1/93) 6.40%
5 Years 6.79
1 Year -11.08*
*-6.84%, excluding CDSC
C SHARES
Since Inception (8/4/97) 0.10%
1 Year -7.79*
*-6.95%, excluding CDSC
Past performance is no guarantee of comparable future results.
================================================================================
MARKET VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE.
RESULTS OF AN INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY
FROM THE HISTORICAL PERFORMANCE SHOWN.
AIM HIGH YIELD FUND
<PAGE> 3
SEMIANNUAL REPORT / CHAIRMAN'S LETTER
Dear Fellow Shareholder:
With only several months remaining in 1999, the question on
[PHOTO OF many of your minds may be, "How will the year 2000 computer
Charles T. issue affect AIM and my investments?" We would like you to
Bauer, feel comfortable. We are pleased to be able to report to
Chairman of you that as of June 1999 we achieved a major milestone
the Board of toward year 2000 compliance status: we have successfully
THE FUND completed the testing of all of our mission-critical
APPEARS HERE] systems.
Earlier this year, AIM participated in an industrywide
test that gave us a chance to see how our technology
systems might be affected by the changeover to the year
2000 (Y2K). Everything went as well as we had hoped; in
general, the industry sailed through the testing process
with flying colors. The financial industry has been seen as
a leader in planning for year 2000 concerns. Thus, it was
no surprise to most participants that the test was an
overwhelming success.
The general purpose of the process was to test electronic interfaces among
financial industry members in the United States and to follow transactions
through a typical trading cycle--from order entry to the settlement process.
Investment banks, broker-dealers, custodian banks and mutual fund companies all
worked together to make this possible. Approximately 400 firms were involved in
the testing; AIM was one of 70 asset managers.
During the testing process, thousands of transactions were submitted and
approximately 260,000 steps were tested. Of those, only a handful experienced
minor glitches--just 0.02% of the total number of transactions. All problems
were worked through quickly before the hypothetical trades were settled. Of
course, AIM will keep testing and planning throughout 1999 as a precaution.
AIM'S INTERNAL EFFORTS CONTINUE
As you know from our previous communications to you, AIM has been addressing the
year 2000 issue for several years. Now that we have finished adjusting our
applications and systems, our focus for the rest of 1999 is to continue
monitoring the year 2000 readiness status of outside sources we're linked to
electronically. On the investment side, our portfolio management staff is
continually evaluating the Y2K preparedness of the domestic and foreign
companies in which we invest.
We feel that our preparations for 2000 are very comprehensive, and the
industrywide testing showed that our colleagues in the financial industry are
also working hard to be ready for the new year. We do not think shareholders
need to take any extraordinary measures with their investments to prepare for
2000. However, if you have any lingering concerns, it may reassure you to know
that AIM is finalizing contingency plans that will be ready if necessary. Our
plans will give AIM employees guidelines to follow for a wide variety of
situations.
For a more comprehensive discussion of our Y2K efforts and for periodic
updates, please visit our Web site, www.aimfunds.com.
We are pleased to send you this report covering your fund's performance over
the last six months. If you have any questions or comments, please contact our
Client Services department at 800-959-4246, or e-mail your inquiry to us at
[email protected]. You can access information about your account through our
automated AIM Investor Line at 800-246-5463 or at our Web site.
Thank you for your continued participation in The AIM Family of
Funds--Registered Trademark--. We appreciate your business.
Sincerely,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
A I M Advisors, Inc.
-------------------------------------
THE FINANCIAL INDUSTRY
HAS BEEN SEEN AS A
LEADER IN PLANNING FOR
YEAR 2000 CONCERNS.
-------------------------------------
PLEASE NOTE THAT THE INFORMATION ABOUT THE YEAR 2000 IN THIS LETTER
IS DEEMED AIM'S YEAR 2000 READINESS DISCLOSURE.
AIM HIGH YIELD FUND
<PAGE> 4
SEMIANNUAL REPORT / MANAGERS' OVERVIEW
HIGH-YIELD MARKET RECOVERS SLOWLY
HOW DID AIM HIGH YIELD FUND PERFORM DURING THE REPORTING PERIOD?
By the end of the first quarter of 1999, yield spreads in the high-yield market
had narrowed substantially on their way back to more favorable levels
established before last fall's market downturn. However, the high-yield market's
lackluster performance in the second quarter of 1999 resulted in weak
performance for AIM High Yield Fund, as it continued to struggle back from the
extreme volatility in 1998. Cumulative total return for the six-month reporting
period ended June 30, 1999, was 2.21% for Class A shares and 1.91% for Class B
and Class C shares. Fund performance during the reporting period was competitive
with the 2.20% return of the Lehman High Yield Bond Index.
Despite the slow pace of the high-yield market's comeback, the fund
continued to provide attractive current income. As of June 30, 1999, the fund's
30-day SEC yield was 9.08% for Class A shares and 8.75% for Class B and Class C
shares. By comparison, the yield on the benchmark 30-year U.S. Treasury bond was
5.97%.
Net assets under management totaled $3.49 billion at the reporting period's
end.
WHAT WERE THE MAJOR TRENDS IN THE BOND MARKETS DURING THE FIRST HALF OF 1999?
Bond performance was generally disappointing for the reporting period. This poor
performance stemmed from heightened concerns that the Federal Reserve Board (the
Fed) would raise interest rates to slow economic growth and combat inflation.
These concerns surfaced early in the reporting period after economic data showed
that the U.S. gross domestic product continued to expand at a blistering pace.
But the primary catalyst for concerns about a Fed rate hike was the dramatic and
unexpected rise in the inflation rate in April.
Uncertainty regarding the extent to which the Fed might raise interest rates
eroded bond prices in May and June, sending their yields higher. The yield of
the benchmark 30-year U.S. Treasury bond soared from 5.09% at the beginning of
the reporting period to 6.16% on June 24, its highest level since 1997. On June
30, the Fed raised the federal funds rate from 4.75% to 5%, but returned to a
neutral rate policy. The latter decision signaled that rate hikes were unlikely
in the near future and sparked a "relief rally" in the bond market.
HOW DID HIGH-YIELD BONDS FARE IN THIS MARKET ENVIRONMENT?
During the reporting period, emerging-markets debt and high-yield securities
were among the better-performing segments of the bond market. Poorer performers
included Treasuries and foreign-government bonds. High-yield bonds generally
outperform other fixed-income assets when interest rates rise because these
bonds usually have higher coupons and shorter durations, which make them less
sensitive to interest-rate moves.
Despite these positive changes in 1999, the high-yield market continued to
suffer from lack of investor confidence.
Although high-yield bonds performed better than most other types of
fixed-income instruments in the first half of the year, investors remained wary
of the bonds' riskier nature. This general decline in investor confidence was
also fueled by an increase in default rates during the reporting period. Through
the first six months of 1999, the default rate for high-yield bonds was 4.5%
compared to 3.4% last year and 2% in 1997.
GIVEN CURRENT MARKET CONDITIONS, HOW HAVE YOU MANAGED THE FUND'S PORTFOLIO?
As yield spreads returned to more "normal" levels in early 1999, riskier assets
once again outperformed higher-quality issues because bond issuers compensated
investors for taking on more risk. As a result, the middle- and lower-rated
tiers of the high-yield market--B, CCC and non-rated bonds--have been the
best-performing this year. The fund benefited from having approximately 89% of
total net assets in these bonds as of June 30.
Fund performance was also helped by a significant rebound in the steel,
energy, paper and chemical industries. In a dramatic reversal of trends, sectors
that had been the hardest hit during the market downturn in 1998 have benefited
the most so far in 1999.
At the reporting period's close, the fund's largest holdings were in the
telecommunications and telephone industries, which continued to benefit from
consolidation and from growing investor interest in the new generation of
communications spawned by the computer age. Domestic high-yield securities were
81.71% of net assets. The introduction of the euro in January sparked a surge of
-------------------------------------
DURING THE REPORTING PERIOD,
EMERGING-MARKETS DEBT AND HIGH-YIELD
SECURITIES WERE AMONG THE BETTER-
PERFORMING SEGMENTS OF THE
BOND MARKET.
-------------------------------------
See important fund and index disclosures inside front cover.
AIM HIGH YIELD FUND
2
<PAGE> 5
SEMIANNUAL REPORT / MANAGERS' OVERVIEW
PORTFOLIO COMPOSITION
As of 6/30/99, based on total net assets
<TABLE>
<CAPTION>
=========================================================================================================
TOP 10 HOLDINGS TOP 10 INDUSTRIES
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Airplanes Pass Through Trust 1.73% 1. Telecommunications (Cellular/Wireless) 9.80%
2. Econophone Inc. 1.54 2. Telecommunications (Long Distance) 8.03
3. Logix Communications 1.40 3. Telephone 7.91
4. ICG Services, Inc. 1.31 4. Manufacturing (Specialized) 5.05
5. ZSC Speciality Chemicals PLC 1.25 5. Retail (Specialty) 3.62
6. Venetian Casino/Resort LLC 1.23 6. Airlines 3.26
7. US Xchange LLC 1.15 7. Broadcasting (Television, Radio & Cable) 3.11
8. Avis Rent A Car Inc. 1.10 8. Auto Parts & Equipment 2.83
9. Nextel Communications Inc. 1.07 9. Gaming, Lottery & Parimutuel Companies 2.76
10. Viatel Inc. 1.01 10. Oil & Gas (Exploration & Production) 2.62
The fund's portfolio is subject to change, an there is no assurance
that the fund will continue to hold any particular security.
=========================================================================================================
</TABLE>
new bond issues from European companies. We took this opportunity to add to
the fund's dollar-denominated international holdings, which represented 13.82%
of total net assets on June 30.
Another significant development during the reporting period was our decision
to sell off the fund's position in convertible bonds, which previously had
accounted for approximately 5% of total net assets.
WHAT ARE CONVERTIBLE BONDS? WHY DID YOU ELIMINATE THE FUND'S POSITION IN THIS
ASSET CLASS?
Convertible bonds are corporate bonds that may be exchanged for a fixed number
of shares of the issuing company's common stock. During the third quarter of
1998, the convertible sector was among the hardest hit in the high-yield market
downturn. We decided at that time to take advantage of their attractive
valuation and allocated a small percentage of the fund's assets to convertibles.
The fund benefited from this opportunistic move when the high-yield market
bounced back in 1999. However, as other sectors of the high-yield market
improved, we decided to take our gains from this investment and redeploy the
proceeds to other higher-yielding issues. We believe that shareholders may begin
to see the benefits from this re-allocation in the near future.
WHAT IS YOUR OUTLOOK FOR HIGH-YIELD BONDS FOR THE REMAINDER OF 1999?
Several economic forces for favorable bond performance are now in place: modest
inflationary pressures, full employment, income growth, relatively low interest
rates, and capital formation. By the end of the reporting period, high-yield
bonds boasted some excellent values relative to other fixed-income securities.
Indeed, even if the prices of high-yield bonds remain low, their yields of about
10%, on average, provide a valuable safety cushion. As fundamentals continue to
improve in the next few months, a full recovery in the high-yield market may
depend on the time it takes for investors to become comfortable again with the
risk-reward profile of this asset class. Although we cannot predict if and when
this shift in market sentiment will occur, we believe that high-yield bonds
remain an attractive option for investors looking for high income with some
potential of appreciation.
-------------------------------------
BY THE END OF THE REPORTING
PERIOD, HIGH-YIELD BONDS BOASTED
SOME EXCELLENT VALUES RELATIVE TO
OTHER FIXED-INCOME SECURITIES.
-------------------------------------
================================================================================
PORTFOLIO CREDIT QUALITY
[BAR CHART]
BB 4.56%
B 60.20%
CCC 13.58%
Non-Rated 14.96%
================================================================================
See important fund and index disclosures inside front cover.
AIM HIGH YIELD FUND
3
<PAGE> 6
SCHEDULE OF INVESTMENTS
June 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
CORPORATE BONDS & NOTES-90.54%
AEROSPACE/DEFENSE-0.89%
Earthwatch, Inc., Sr. Disc. B35
Notes, 12.50%, 03/01/01
(Acquired 03/14/97; Cost
$15,500,000)(a)(b) $15,500,000 $ 12,438,750
- ---------------------------------------------------------------
Precision Partners, Inc., Sr.
Sub. Notes, 12.00%, 03/15/09
(Acquired 03/16/99; Cost
$19,425,000)(a) 19,425,000 18,550,875
- ---------------------------------------------------------------
30,989,625
- ---------------------------------------------------------------
AIR FREIGHT-0.81%
Atlas Air, Inc., Sr. Unsec.
Notes, 10.75%, 08/01/05 27,397,000 28,150,417
- ---------------------------------------------------------------
AIRLINES-3.26%
Airplanes Pass Through Trust,
Series D Gtd. Sub. Bonds,
10.875%, 03/15/19 62,860,000 60,574,725
- ---------------------------------------------------------------
Amtran, Inc., Sr. Unsec. Gtd.
Notes, 10.50%, 08/01/04 26,750,000 27,151,250
- ---------------------------------------------------------------
Continental Airlines, Notes,
8.00%, 12/15/05 8,000,000 7,771,040
- ---------------------------------------------------------------
Dunlop Standard Aero Holdings
(United Kingdom), Sr. Notes,
11.875%, 05/15/09 (Acquired
05/07/99; Cost $17,882,233)(a) 17,960,000 18,319,200
- ---------------------------------------------------------------
113,816,215
- ---------------------------------------------------------------
AUTO PARTS & EQUIPMENT-2.83%
Advance Stores Co., Inc., Series
B Sr. Unsec. Gtd. Sub. Notes,
10.25%, 04/15/08 23,300,000 22,368,000
- ---------------------------------------------------------------
Exide Corp., Sr. Notes, 10.00%,
04/15/05 27,975,000 28,254,750
- ---------------------------------------------------------------
JL French Automotive Casting, Sr.
Sub. Notes, 11.50%, 06/01/09
(Acquired 05/25/99; Cost
$13,250,000)(a) 13,250,000 13,581,250
- ---------------------------------------------------------------
Newcor, Inc., Series B Sr. Gtd.
Sub. Notes, 9.875%, 03/01/08 4,675,000 4,160,750
- ---------------------------------------------------------------
Venture Holdings Trust,
Sr. Notes, 11.00%, 06/01/07
(Acquired 05/26/99; Cost
$10,000,000) 10,000,000 10,150,000
- ---------------------------------------------------------------
Sr. Sub. Notes, 12.00%,
06/01/09 (Acquired 05/26/99;
Cost $20,000,000)(a) 20,000,000 20,200,000
- ---------------------------------------------------------------
98,714,750
- ---------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO &
CABLE)-3.03%
Diamond Cable Communications PLC
(United Kingdom), Sr. Unsec.
Disc. Yankee Notes, 11.75%,
12/15/05(b) 32,380,000 29,303,900
- ---------------------------------------------------------------
Digital TV Services LLC, Series B
Sr. Gtd. Sub. Notes, 12.50%,
08/01/07 17,500,000 19,075,000
- ---------------------------------------------------------------
Fox Family Worldwide, Inc., Sr.
Unsec. Disc. Notes, 10.25%,
11/01/07(b) 42,750,000 26,932,500
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
BROADCASTING (TELEVISION, RADIO &
CABLE)-(CONTINUED)
Knology Holdings, Inc., Sr. Disc.
Notes, 11.875%, 10/15/07(b) $52,305,000 $ 30,467,662
- ---------------------------------------------------------------
105,779,062
- ---------------------------------------------------------------
BUILDING MATERIALS-0.72%
Congoleum Corp., Sr. Unsec.
Notes, 8.625%, 08/01/08 12,015,000 11,474,325
- ---------------------------------------------------------------
Imperial Home Decor Group, Series
B Sr. Unsec. Gtd. Sub. Notes,
11.00%, 03/15/08 19,100,000 13,847,500
- ---------------------------------------------------------------
25,321,825
- ---------------------------------------------------------------
CHEMICALS-0.38%
Sterling Chemicals, Inc., Sr.
Unsec. Sub. Notes, 11.75%,
08/15/06 17,045,000 13,209,875
- ---------------------------------------------------------------
CHEMICALS (SPECIALTY)-2.62%
Key Plastics, Inc., Series B Sr.
Unsec. Gtd. Sub. Notes, 10.25%,
03/15/07 23,770,000 23,235,175
- ---------------------------------------------------------------
Trans-Resources, Inc.,
Series B Sr. Unsec. Disc.
Notes, 12.00%, 03/15/08(b) 11,750,000 5,963,125
- ---------------------------------------------------------------
Notes, 10.75%, 03/15/08 19,450,000 18,866,500
- ---------------------------------------------------------------
ZSC Specialty Chemicals PLC
(United Kingdom), Sr. Notes,
11.00%, 07/01/09 (Acquired
06/24/99; Cost $43,150,000)(a) 43,150,000 43,581,500
- ---------------------------------------------------------------
91,646,300
- ---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-1.87%
Dialog Corp. PLC (United
Kingdom), Series A Sr. Sub.
Yankee Notes, 11.00%, 11/15/07 26,250,000 23,887,500
- ---------------------------------------------------------------
GST Telecommunications, Inc., Sr.
Sec. Disc. Notes, 10.50%,
05/01/08 (Acquired
04/15/99-06/21/99; Cost
$21,577,250)(a)(b) 34,950,000 20,183,625
- ---------------------------------------------------------------
ProNet, Inc., Sr. Sub. Notes,
11.875%, 06/15/05 23,940,000 21,186,900
- ---------------------------------------------------------------
65,258,025
- ---------------------------------------------------------------
COMPUTERS (HARDWARE)-0.05%
Candescent Technology Corp., Sr.
Conv. Sub. Deb., 7.00%,
05/01/03 (Acquired
11/09/98-02/10/99; Cost
$1,993,250)(a) 2,250,000 1,755,000
- ---------------------------------------------------------------
COMPUTERS (NETWORKING)-1.84%
Convergent Communications, Series
B Sr. Unsec. Notes, 13.00%,
04/01/08(c) 33,500,000 30,652,500
- ---------------------------------------------------------------
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
COMPUTERS (NETWORKING)-(CONTINUED)
Exodus Communications, Inc.,
Sr. Notes, 11.25%, 07/01/08
(Acquired 06/17/99; Cost
$8,040,000)(a) $ 8,000,000 $ 8,460,000
- ---------------------------------------------------------------
Unsec. Notes, 11.25%, 07/01/08 23,660,000 25,020,450
- ---------------------------------------------------------------
64,132,950
- ---------------------------------------------------------------
COMPUTERS (PERIPHERALS)-0.66%
Metal Management, Inc., Sr.
Unsec. Gtd. Sub. Notes, 10.00%,
05/15/08 28,500,000 23,085,000
- ---------------------------------------------------------------
CONSTRUCTION (CEMENT & AGGREGATES)-0.48%
Schuff Steel Co., Sr. Unsec. Gtd.
Sub. Notes, 10.50%, 06/01/08 18,550,000 16,695,000
- ---------------------------------------------------------------
CONTAINERS & PACKAGING (PAPER)-0.33%
BPC Holding Corp., Series B Sr.
Sec. Notes, 12.50%, 06/15/06 11,875,000 11,637,500
- ---------------------------------------------------------------
DISTRIBUTORS (FOOD & HEALTH)-1.14%
Core-Mark International, Inc.,
Sr. Sub. Notes, 11.375%,
09/15/03 16,340,000 15,890,650
- ---------------------------------------------------------------
Fleming Companies, Inc., Sr.
Unsec. Gtd. Sub. Notes,
10.625%, 07/31/07 25,700,000 24,029,500
- ---------------------------------------------------------------
39,920,150
- ---------------------------------------------------------------
ELECTRICAL EQUIPMENT-0.15%
Electronic Retailing Systems
International, Inc., Sr. Disc.
Notes, 13.25%, 02/01/04(b) 18,342,000 5,227,470
- ---------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS)-0.44%
Panda Funding Corp., Series A-1
Pooled Project Bonds, 11.625%,
08/20/12 14,950,869 15,324,641
- ---------------------------------------------------------------
ENTERTAINMENT-0.58%
Ascent Entertainment Group, Sr.
Sec. Disc. Notes, 11.875%,
12/15/04(b) 27,812,000 20,163,700
- ---------------------------------------------------------------
FOODS-1.51%
AmeriServe Food Distributors,
Inc., Sr. Unsec. Gtd. Notes,
8.875%, 10/15/06 9,135,000 8,449,875
- ---------------------------------------------------------------
Vlasic Foods International, Inc.,
Sr. Sub. Notes, 10.25%,
07/01/09 (Acquired 06/23/99;
Cost $22,853,750)(a) 23,500,000 23,294,375
- ---------------------------------------------------------------
Volume Services America Inc., Sr.
Sub. Notes, 11.25%, 03/01/09
(Acquired 02/25/99; Cost
$19,000,000)(a) 19,000,000 20,995,000
- ---------------------------------------------------------------
52,739,250
- ---------------------------------------------------------------
GAMING, LOTTERY & PARIMUTUEL
COMPANIES-2.76%
Argosy Gaming Co., Sr. Sub.
Notes, 10.75%, 06/01/09
(Acquired 06/03/99-06/14/99;
Cost $26,370,625)(a) 26,300,000 26,957,500
- ---------------------------------------------------------------
Resort at Summerlin/RAS Co., Sr.
Unsec. Sub. PIK Notes, 13.00%,
12/15/07 28,723,000 26,281,545
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
GAMING, LOTTERY & PARIMUTUEL
COMPANIES-(CONTINUED)
Venetian Casino Resort LLC, Sec.
Gtd. Mortgage Notes, 12.25%,
11/15/04 $43,700,000 $ 43,044,500
- ---------------------------------------------------------------
96,283,545
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC &
OTHER)-1.08%
Biovail Corp. International, Sr.
Notes, 10.875%, 11/15/05 16,875,000 17,634,375
- ---------------------------------------------------------------
King Pharmaceuticals, Inc., Sr.
Unsec. Gtd. Sub. Notes, 10.75%,
02/15/09 19,570,000 20,254,950
- ---------------------------------------------------------------
37,889,325
- ---------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT)-0.89%
Triad Hospitals Holdings Inc.,
Sr. Sub. Notes, 11.00%,
05/15/09 (Acquired
04/30/99-06/15/99; Cost
$30,531,563)(a) 30,320,000 31,002,200
- ---------------------------------------------------------------
HEALTH CARE (LONG TERM CARE)-0.41%
Harborside Healthcare, Sr. Unsec.
Gtd. Disc. Sub. Notes, 11.00%,
08/01/08(b) 34,000,000 14,322,500
- ---------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-1.39%
Alaris Medical, Inc.,
Sr. Disc. Notes, 11.125%,
08/01/08(b) 19,300,000 10,566,750
- ---------------------------------------------------------------
Unsec. Gtd. Sub. Notes, 9.75%,
12/01/06 14,085,000 13,873,725
- ---------------------------------------------------------------
DJ Orthopedics LLC, Sr. Sub.
Notes, 12.625%, 06/15/09
(Acquired 06/17/99; Cost
$18,611,070)(a) 19,000,000 18,762,500
- ---------------------------------------------------------------
Mediq, Inc., Sr. Disc. Deb.,
13.00%, 06/01/09(b) 13,750,000 5,293,750
- ---------------------------------------------------------------
48,496,725
- ---------------------------------------------------------------
HEALTH CARE (SPECIALIZED
SERVICES)-0.49%
Team Health, Inc., Sr. Sub.
Notes, 12.00%, 03/15/09
(Acquired 03/05/99-06/10/99;
Cost $16,965,000)(a) 16,930,000 17,268,600
- ---------------------------------------------------------------
HOMEBUILDING-2.13%
D.R. Horton, Inc., Unsec. Gtd.
Notes, 10.00%, 04/15/06 16,055,000 17,138,712
- ---------------------------------------------------------------
Engle Homes, Inc., Series C Sr.
Unsec. Gtd. Notes, 9.25%,
02/01/08 21,100,000 20,150,500
- ---------------------------------------------------------------
Schuler Homes, Sr. Unsec. Gtd.
Notes, 9.00%, 04/15/08 8,745,000 8,351,475
- ---------------------------------------------------------------
U.S. Home Corp., Sr. Unsec. Sub.
Notes, 8.875%, 02/15/09 30,000,000 28,800,000
- ---------------------------------------------------------------
74,440,687
- ---------------------------------------------------------------
HOUSEHOLD FURNISHING &
APPLIANCES-0.51%
Falcon Products, Inc., Sr. Sub.
Notes, 11.375%, 06/15/09
(Acquired 06/14/99; Cost
$17,900,000)(a) 17,900,000 17,989,500
- ---------------------------------------------------------------
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
HOUSEWARES-0.59%
Decora Industries, Inc., Series B
Sr. Sec. Gtd. Notes, 11.00%,
05/01/05 $21,370,000 $ 20,622,050
- ---------------------------------------------------------------
IRON & STEEL-1.12%
Acme Metals, Inc., Sr. Unsec.
Gtd. Notes, 10.875%,
12/15/07(d) 27,564,000 3,169,860
- ---------------------------------------------------------------
GS Industries, Inc., Sr. Gtd.
Notes, 12.00%, 09/01/04 21,755,000 18,056,650
- ---------------------------------------------------------------
Sheffield Steel Corp., Series B
First Mortgage Notes, 11.50%,
12/01/05 19,100,000 17,810,750
- ---------------------------------------------------------------
39,037,260
- ---------------------------------------------------------------
LEISURE TIME (PRODUCTS)-0.81%
Marvel Enterprises, Inc., Sr.
Notes, 12.00%, 06/15/09
(Acquired 02/17/99; Cost
$27,180,000)(a) 27,180,000 28,335,150
- ---------------------------------------------------------------
LODGING-HOTELS-1.35%
American Skiing Co., Series B Sr.
Sub. Notes, 12.00%, 07/15/06 19,275,000 14,938,125
- ---------------------------------------------------------------
Booth Creek Ski Holdings, Sr.
Unsec. Gtd. Notes, 12.50%,
03/15/07 20,310,000 17,974,350
- ---------------------------------------------------------------
Stena Line A.B. (Sweden), Sr.
Unsec. Yankee Notes, 10.625%,
06/01/08 18,680,000 14,150,100
- ---------------------------------------------------------------
47,062,575
- ---------------------------------------------------------------
MACHINERY (DIVERSIFIED)-0.58%
National Equipment Services,
Series B, Sr. Sub. Notes,
10.00%, 11/30/04 20,000,000 20,400,000
- ---------------------------------------------------------------
MANUFACTURING (DIVERSIFIED)-2.20%
Anthony Crane Rentals LP, Series
B Sr. Unsec. Gtd. Notes,
10.375%, 08/01/08 21,585,000 20,937,450
- ---------------------------------------------------------------
Elgin National Industries, Series
B Sr. Unsec. Gtd. Notes,
11.00%, 11/01/07 13,185,000 13,119,075
- ---------------------------------------------------------------
Glenoit Corp., Sr. Unsec. Gtd.
Sub. Notes, 11.00%, 04/15/07 24,915,000 22,049,775
- ---------------------------------------------------------------
Jordan Industries, Inc., Series D
Sr. Unsec. Notes, 10.375%,
08/01/07 20,500,000 20,602,500
- ---------------------------------------------------------------
76,708,800
- ---------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-4.80%
Berry Plastics Corp.,
Series B Sr. Sub. Notes,
12.25%, 04/15/04 (Acquired
06/11/99; Cost $5,023,125)(a) 4,750,000 4,916,250
- ---------------------------------------------------------------
Sr. Gtd. Sub. Notes, 12.25%,
04/15/04 13,000,000 13,455,000
- ---------------------------------------------------------------
Brand Scaffold Services, Sr.
Unsec. Notes, 10.25%, 02/15/08 26,800,000 26,130,000
- ---------------------------------------------------------------
Derby Cycle Corp. (The), Sr.
Unsec. Notes, 10.00%, 05/15/08 18,955,000 15,258,775
- ---------------------------------------------------------------
First Wave Marine, Inc., Sr.
Unsec. Gtd. Notes, 11.00%,
02/01/08 21,835,000 19,979,025
- ---------------------------------------------------------------
Globe Manufacturing Corp., Series
B Sr. Unsec. Gtd. Sub. Notes,
10.00%, 08/01/08 17,050,000 12,872,750
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
MANUFACTURING (SPECIALIZED)-(CONTINUED)
MMI Products, Inc., Sr. Unsec.
Sub. Notes, 11.25%, 04/15/07 $19,140,000 $ 19,714,200
- ---------------------------------------------------------------
Neenah Corp.,
Series B Sr. Sub. Notes,
11.125%, 05/01/07 4,000,000 3,940,000
- ---------------------------------------------------------------
Series D Sr. Sub. Notes,
11.125%, 05/01/07 15,000,000 14,775,000
- ---------------------------------------------------------------
Omega Cabinets, Sr. Sub. Notes,
10.50%, 06/15/07 23,990,000 24,109,950
- ---------------------------------------------------------------
Precise Technology, Inc., Series
B Sr. Unsec. Gtd. Sub. Notes,
11.125%, 06/15/07 12,900,000 12,464,625
- ---------------------------------------------------------------
167,615,575
- ---------------------------------------------------------------
METALS MINING-1.30%
Centaur Mining & Exploration Ltd.
(Australia), Sr. Gtd. Yankee
Notes, 11.00%, 12/01/07 27,800,000 25,645,500
- ---------------------------------------------------------------
Doe Run Resources Corp., Series B
Sr. Unsec. Gtd. Notes, 11.25%,
03/15/05 21,790,000 19,719,950
- ---------------------------------------------------------------
45,365,450
- ---------------------------------------------------------------
NATURAL GAS-0.35%
Western Gas Resources, Inc., Sr.
Sub. Notes, 10.00%, 06/15/09
(Acquired 06/10/99-06/11/99;
Cost $11,912,250)(a) 12,000,000 12,285,000
- ---------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES-0.64%
Global Imaging Systems Inc., Sr.
Sub. Notes, 10.75%, 02/15/07
(Acquired 03/03/99-03/04/99;
Cost $22,811,250)(a) 22,800,000 22,458,000
- ---------------------------------------------------------------
OIL & GAS (DRILLING &
EQUIPMENT)-0.32%
Pride International, Inc., Sr.
Unsec. Notes, 10.00%, 06/01/09 11,000,000 11,275,000
- ---------------------------------------------------------------
OIL & GAS (EXPLORATION &
PRODUCTION)-2.62%
Abraxas Petroleum Corp., Series D
Sr. Unsec. Gtd. Notes, 11.50%,
11/01/04 10,205,000 6,429,150
- ---------------------------------------------------------------
Canadian Forest Oil Ltd.
(Canada), Sr. Unsec. Gtd.
Yankee Sub. Notes, 8.75%,
09/15/07 20,356,000 19,694,430
- ---------------------------------------------------------------
Chesapeake Energy Corp., Series B
Sr. Unsec. Gtd. Notes, 9.625%,
05/01/05 13,730,000 12,906,200
- ---------------------------------------------------------------
Comstock Resources, Inc., Sr.
Notes, 11.25%, 05/01/07
(Acquired 04/26/99-05/25/99;
Cost $21,296,901)(a) 21,275,000 21,700,500
- ---------------------------------------------------------------
Pogo Producing Co., Series B, Sr.
Unsec. Sub. Notes, 10.375%,
02/15/09 21,335,000 22,295,075
- ---------------------------------------------------------------
Queen Sand Resources, Inc., Sr.
Unsec. Gtd. Notes, 12.50%,
07/01/08 13,145,000 8,347,075
- ---------------------------------------------------------------
91,372,430
- ---------------------------------------------------------------
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
OIL & GAS (REFINING & MARKETING)-0.49%
Texas Petrochemical Corp.,
Series B Sr. Sub. Notes,
11.125%, 07/01/06 $ 4,470,000 $ 4,000,650
- ---------------------------------------------------------------
Sr. Unsec. Sub. Notes, 11.125%,
07/01/06 14,480,000 12,959,600
- ---------------------------------------------------------------
16,960,250
- ---------------------------------------------------------------
PHOTOGRAPHY/IMAGING-0.64%
Polaroid Corp., Sr. Unsec. Notes,
11.50%, 02/15/06 21,120,000 22,492,800
- ---------------------------------------------------------------
PUBLISHING-0.18%
Liberty Group Publishing, Inc.,
Sr. Unsec. Disc. Deb., 11.625%,
02/01/09(b) 11,360,000 6,191,200
- ---------------------------------------------------------------
RAILROADS-1.51%
Railworks Corp. Sr. Sub. Notes,
11.50%, 04/15/09 (Acquired
04/01/99-06/14/99; Cost
$25,680,875)(a) 25,500,000 25,691,250
- ---------------------------------------------------------------
TFM, S.A. de C.V. (Mexico), Sr.
Gtd. Disc. Yankee Notes,
11.75%, 06/15/09(b) 45,000,000 27,225,000
- ---------------------------------------------------------------
52,916,250
- ---------------------------------------------------------------
RESTAURANTS-0.49%
AFC Enterprises, Sr. Unsec. Sub.
Notes, 10.25%, 05/15/07 16,990,000 17,244,850
- ---------------------------------------------------------------
RETAIL (FOOD CHAINS)-0.47%
Cumberland Farms, Inc., Sec.
Notes, 10.50%, 10/01/03 16,569,000 16,361,887
- ---------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE)-0.60%
Plainwell, Inc., Series B Sr.
Unsec. Sub. Notes, 11.00%,
03/01/08 25,905,000 20,853,525
- ---------------------------------------------------------------
RETAIL (SPECIALTY)-3.62%
Cabot Safety Corp., Sr. Sub.
Notes, 12.50%, 07/15/05 18,975,000 20,398,125
- ---------------------------------------------------------------
CEX Holdings, Inc., Series B Sr.
Unsec. Gtd. Sub. Notes, 9.625%,
06/01/08 20,175,000 19,014,937
- ---------------------------------------------------------------
CSK Auto Inc., Series A Sr. Gtd.
Sub. Notes, 11.00%, 11/01/06 15,245,000 15,778,575
- ---------------------------------------------------------------
Neff Corp, Sr. Unsec. Gtd. Sub.
Notes, 10.25%, 06/01/08 27,650,000 28,402,000
- ---------------------------------------------------------------
Rent-A-Center, Inc., Sr. Unsec.
Gtd. Sub. Notes, 11.00%,
08/15/08 23,060,000 23,232,950
- ---------------------------------------------------------------
Vista Eyecare, Inc., Series B Sr.
Unsec. Gtd. Notes, 12.75%,
10/15/05 19,700,000 19,601,500
- ---------------------------------------------------------------
126,428,087
- ---------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-1.44%
Big 5 Corp., Series B Sr. Unsec.
Notes, 10.875%, 11/15/07 17,890,000 18,247,800
- ---------------------------------------------------------------
GFSI Holdings, Inc., Series B Sr.
Disc. Notes, 11.375%,
09/15/09(b) 20,000,000 14,100,000
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
RETAIL (SPECIALTY-APPAREL)-(CONTINUED)
J Crew Operating Corp., Sr. Sub.
Notes, 10.375%, 10/15/07 $18,245,000 $ 17,971,325
- ---------------------------------------------------------------
50,319,125
- ---------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING)-1.17%
Dimac Corp., Sr. Sub. Notes,
12.50%, 10/01/08 (Acquired
10/16/98; Cost $24,308,250)(a) 25,000,000 15,125,000
- ---------------------------------------------------------------
MDC Corporation, Inc. (Canada),
Sr. Unsec. Sub. Yankee Notes,
10.50%, 12/01/06 24,470,000 25,571,150
- ---------------------------------------------------------------
40,696,150
- ---------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-2.42%
Avis Rent A Car, Inc., Sr. Sub.
Notes, 11.00%, 05/01/09
(Acquired 06/25/99; Cost
$37,650,000)(a) 37,650,000 38,403,000
- ---------------------------------------------------------------
Coinmach Corp., Series D Sr.
Unsec. Notes, 11.75%, 11/15/05 27,760,000 30,536,000
- ---------------------------------------------------------------
Hydrochem Industrial Service,
Series B Sr. Sec. Gtd. Sub.
Notes, 10.375%, 08/01/07 17,310,000 15,665,550
- ---------------------------------------------------------------
84,604,550
- ---------------------------------------------------------------
SERVICES (EMPLOYMENT)-0.65%
MSX International, Inc.,
Series B Sr. Sub. Notes,
11.375%, 01/15/08 (Acquired
05/13/99; Cost $4,902,500)(a) 5,000,000 4,875,000
- ---------------------------------------------------------------
Sr. Unsec. Gtd. Sub. Notes,
11.375%, 01/15/08 18,130,000 17,676,750
- ---------------------------------------------------------------
22,551,750
- ---------------------------------------------------------------
SHIPPING-0.92%
Millenium Seacarriers, First
Priority Ship Mortgage Notes,
12.00%, 07/15/05 19,900,000 10,447,500
- ---------------------------------------------------------------
Navigator Gas Transport PLC
(United Kingdom), Notes,
10.50%, 06/30/07 (Acquired
07/31/97-09/04/97; Cost
$17,716,250)(a) 17,520,000 9,198,000
- ---------------------------------------------------------------
Pegasus Shipping Hellas Co.
(Bermuda), Series A Sr. Sec.
Gtd. Mortgage Notes, 11.875%,
11/15/04 22,500,000 12,487,500
- ---------------------------------------------------------------
32,133,000
- ---------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/
WIRELESS)-7.47%
Cencall Communications Corp., Sr.
Disc. Notes, 10.125%,
01/15/04(b) 31,020,000 31,795,500
- ---------------------------------------------------------------
Clearnet Communications, Inc.
(Canada), Sr. Disc. Yankee Notes,
10.125%, 05/01/09(b) 15,450,000 8,845,125
- ---------------------------------------------------------------
Sr. Unsec. Disc. Yankee Notes,
14.75%, 12/15/05(b) 12,360,000 11,309,400
- ---------------------------------------------------------------
</TABLE>
7
<PAGE> 10
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
TELECOMMUNICATIONS
(CELLULAR/WIRELESS)-(CONTINUED)
Crown Castle International Corp.,
Sr. Disc. Notes, 10.375%,
05/15/11(b) $ 2,750,000 $ 1,625,938
- ---------------------------------------------------------------
Unsec. Disc. Notes, 10.625%,
11/15/07(b) 16,844,000 11,875,020
- ---------------------------------------------------------------
KMC Telecom Holdings, Inc., Sr.
Notes, 13.50%, 05/15/09
(Acquired 05/19/99; Cost
$18,000,000)(a) 18,000,000 18,090,000
- ---------------------------------------------------------------
Microcell Telecommunications,
Inc. (Canada), Series B Sr.
Disc. Yankee Notes, 14.00%,
06/01/06(b) 29,530,000 24,140,775
- ---------------------------------------------------------------
Nextel Communications, Inc., Sr.
Unsec. Notes, 12.00%, 11/01/08 29,040,000 33,105,600
- ---------------------------------------------------------------
Orion Network Systems, Inc., Sr.
Gtd. Notes, 11.25%, 01/15/07 24,000,000 21,240,000
- ---------------------------------------------------------------
PageMart Wireless, Inc., Sr. Sub.
Disc. Notes, 11.25%,
02/01/08(b) 43,640,000 18,110,600
- ---------------------------------------------------------------
Powertel, Inc.,
Sr. Unsec. Disc. Notes, 12.00%,
05/01/06(b) 38,000,000 32,164,720
- ---------------------------------------------------------------
Notes, 11.125%, 06/01/07 16,500,000 17,077,500
- ---------------------------------------------------------------
Spectrasite Holdings, Inc., Sr.
Disc. Notes,
11.25%, 04/15/09 (Acquired
04/13/99; Cost
$12,301,087)(a)(b) 21,230,000 12,207,250
- ---------------------------------------------------------------
12.00%, 07/15/08 (Acquired
06/23/98; Cost
$16,815,591)(a)(b) 30,300,000 19,240,500
- ---------------------------------------------------------------
260,827,928
- ---------------------------------------------------------------
TELECOMMUNICATIONS (LONG
DISTANCE)-7.57%
Call-Net Enterprises, Inc.
(Canada), Sr. Unsec. Disc.
Yankee Notes,
10.80%, 05-15-09(b) 23,000,000 12,765,000
- ---------------------------------------------------------------
8.94%, 08/15/08(b) 28,000,000 15,820,000
- ---------------------------------------------------------------
Econophone, Inc.,
Sr. Unsec. Notes, 13.50%,
07/15/07 20,200,000 21,563,500
- ---------------------------------------------------------------
Disc. Notes, 11.00%,
02/15/08(b) 60,000,000 32,400,000
- ---------------------------------------------------------------
Esprit Telecom Group PLC (United
Kingdom), Sr. Unsec. Yankee
Notes, 11.50%, 12/15/07 19,500,000 21,255,000
- ---------------------------------------------------------------
FirstCom Corp., Sr. Notes,
14.00%, 10/27/07 25,990,000 17,738,175
- ---------------------------------------------------------------
Long Distance International Inc.,
Sr. Notes, 12.25%, 04/15/08 26,290,000 17,154,225
- ---------------------------------------------------------------
Primus Telecommunications Group,
Inc., Sr. Sec. Notes, 11.75%,
08/01/04 20,000,000 20,400,000
- ---------------------------------------------------------------
RSL Communications Ltd. (United
Kingdom), Bonds, 12.00%,
11/01/08 14,500,000 15,225,000
- ---------------------------------------------------------------
Sr. Yankee Gtd. Notes, 12.25%,
11/15/06 17,134,000 18,247,710
- ---------------------------------------------------------------
Versatel Telecom International
N.V. (Netherlands),
Sr. Notes, 13.25%, 05/15/08 20,250,000 21,060,000
- ---------------------------------------------------------------
Sr. Unsec. Notes, 13.25%,
05/15/08 14,810,000 15,513,475
- ---------------------------------------------------------------
Viatel, Inc., Sr. Notes, 11.25%,
04/15/08 34,500,000 35,362,500
- ---------------------------------------------------------------
264,504,585
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
TELEPHONE-7.80%
Alestra S.A. (Mexico),
Sr. Notes, 12.625%, 05/15/09
(Acquired 05/12/99; Cost
$25,500,000)(a) $25,500,000 $ 24,735,000
- ---------------------------------------------------------------
Sr. Notes, 12.125%, 05/15/06
(Acquired 05/12/99; Cost
$30,000,000)(a) 30,000,000 29,100,000
- ---------------------------------------------------------------
Esat Telecom Group PLC (Ireland),
Sr. Disc. Yankee Notes, 12.50%,
02/01/07(b) 25,530,000 18,253,950
- ---------------------------------------------------------------
ICG Services, Inc., Sr. Unsec.
Disc. Notes, 10.00%,
02/15/08(b) 81,650,000 45,928,125
- ---------------------------------------------------------------
Logix Communications,
Sr. Unsec. Notes, 12.25%,
06/15/08 53,750,000 49,046,875
- ---------------------------------------------------------------
Disc. Notes, 12.25%,
06/01/09(b) 16,500,000 9,735,000
- ---------------------------------------------------------------
Nextlink Communications, Inc.,
Sr. Unsec. Notes, 10.75%,
11/15/08 20,000,000 20,650,000
- ---------------------------------------------------------------
NTL Communications Corp., Series
B Sr. Unsec. Notes, 11.50%,
10/01/08 16,055,000 17,780,913
- ---------------------------------------------------------------
U.S. Xchange LLC, Sr. Unsec.
Notes, 15.00%, 07/01/08 38,400,000 40,032,000
- ---------------------------------------------------------------
Worldwide Fiber, Inc. (Canada),
Sr. Notes, 12.50%, 12/15/05
(Acquired 12/18/98-04/15/99;
Cost $17,181,003)(a) 17,065,000 17,278,313
- ---------------------------------------------------------------
272,540,176
- ---------------------------------------------------------------
TEXTILES (APPAREL)-1.55%
Cherokee International, Sr. Sub.
Notes, 10.50%, 05/01/09
(Acquired 04/27/99; Cost
$11,850,000)(a) 11,850,000 11,850,000
- ---------------------------------------------------------------
Panolam Industries International,
Sr. Sub. Notes, 11.50%,
02/15/09 (Acquired
02/10/99-06/09/99; Cost
$18,443,750)(a) 18,330,000 18,788,250
- ---------------------------------------------------------------
Perry Ellis International Inc.,
Sr. Unsec. Gtd. Sub. Notes,
12.25%, 04/01/06 (Acquired
03/31/99; Cost $23,032,516)(a) 23,300,000 23,649,500
- ---------------------------------------------------------------
54,287,750
- ---------------------------------------------------------------
TRUCKERS-0.50%
Travelcenters of America, Inc.,
Sr. Unsec. Gtd. Sub. Deb.,
10.25%, 04/01/07 17,530,000 17,617,650
- ---------------------------------------------------------------
TRUCKS & PARTS-1.12%
Blue Bird Body Co., Series B Sr.
Sub. Notes, 10.75%, 11/15/06 15,425,000 16,504,750
- ---------------------------------------------------------------
HDA Parts System, Inc., Sr. Sub.
Notes, 12.00%, 08/01/05
(Acquired 07/28/98-09/08/98;
Cost $22,127,500)(a) 22,400,000 22,736,000
- ---------------------------------------------------------------
39,240,750
- ---------------------------------------------------------------
Total Corporate Bonds & Notes
(Cost $3,349,661,257) 3,162,569,390
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
COMMON STOCKS-0.62%
BROADCASTING (TELEVISION, RADIO &
CABLE)-0.08%
UnitedGlobalCom. Inc.-Class A(e) 41,949 $ 2,836,784
- ---------------------------------------------------------------
</TABLE>
8
<PAGE> 11
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
REAL ESTATE INVESTMENT
TRUSTS-0.03%
Meditrust Companies 89,908 $ 1,180,039
- ---------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/
WIRELESS)-0.26%
Celcaribe S.A., Ordinary Trust
Certificates (Acquired
05/17/94-01/23/97; Cost
$0)(a)(e) 2,276,400 6,260,100
- ---------------------------------------------------------------
Nextel Communications, Inc.-Class
A(e) 52,195 2,619,537
- ---------------------------------------------------------------
8,879,637
- ---------------------------------------------------------------
TELECOMMUNICATIONS (LONG
DISTANCE)-0.20%
Viatel, Inc.(e) 121,387 6,812,845
- ---------------------------------------------------------------
TELEPHONE-0.05%
Intermedia Communications,
Inc.(e) 63,087 1,892,604
- ---------------------------------------------------------------
Total Common Stocks (Cost
$3,526,153) 21,601,909
- ---------------------------------------------------------------
PREFERRED STOCKS-2.39%
AEROSPACE/DEFENSE-0.06%
Earthwatch Inc.-Series C, $1.20
Conv. Pfd. (Acquired 03/14/97;
Cost $4,824)(a) 101,393 2,053,209
- ---------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-0.25%
Brand Scaffold Services, Inc.,
$3.625 Pfd. 280,000 8,750,000
- ---------------------------------------------------------------
SHIPPING-0.15%
Pegasus Shipping Hellas Co.
(Bermuda), 12.75% PIK Pfd.
(Acquired 06/24/98; Cost
$7,461,000)(a)(e) 15,000 5,400,000
- ---------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/
WIRELESS)-1.93%
Amdocs Ltd., $1.51 Conv. Pfd.
TRACES 38,100 847,725
- ---------------------------------------------------------------
Dobson Communications Corp.,
$122.50 PIK Pfd. 31,948 29,072,680
- ---------------------------------------------------------------
Nextel Communications, Inc.,
Series E $111.25 PIK Pfd. 36,972 37,342,179
- ---------------------------------------------------------------
67,262,584
- ---------------------------------------------------------------
Total Preferred Stocks (Cost
$79,195,141) 83,465,793
- ---------------------------------------------------------------
WARRANTS-0.48%
BROADCASTING (TELEVISION, RADIO &
CABLE)-0.00%
Knology Holdings, Inc., expiring
10/15/07 (Acquired 03/12/98;
Cost $0)(a)(e) 47,250 106,312
- ---------------------------------------------------------------
Wireless One, Inc., expiring
10/19/00(e) 37,560 376
- ---------------------------------------------------------------
106,688
- ---------------------------------------------------------------
CHEMICALS-0.00%
Sterling Chemicals Holdings,
expiring 08/15/08(e) 7,500 112,500
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (NETWORKING)-0.00%
Convergent Communications,
expiring 04/01/08(e) 132,800 $ 1,328
- ---------------------------------------------------------------
ELECTRICAL EQUIPMENT-0.00%
Electronic Retailing Systems
International, Inc., expiring
02/01/04(e) 18,802 94,010
- ---------------------------------------------------------------
GAMING, LOTTERY & PARIMUTUEL
COMPANIES-0.00%
Resort At Summerlin/RAS Co.,
expiring 12/15/07(e) 23,900 239
- ---------------------------------------------------------------
HEALTH CARE (HOSPITAL
MANAGEMENT)-0.01%
Republic Health Corp., expiring
04/03/00(e) 17,500 315,000
- ---------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-0.00%
Mediq, Inc., expiring 06/01/09
(Acquired 05/21/98; Cost
$0)(a)(e) 13,750 138
- ---------------------------------------------------------------
IRON & STEEL-0.01%
Bar Technologies, Inc., expiring
04/01/01(e) 6,000 120,000
- ---------------------------------------------------------------
METAL FABRICATORS-0.00%
Gulf States Steel, Inc., expiring
04/15/03(e) 15,990 160
- ---------------------------------------------------------------
PERSONAL CARE-0.00%
IHF Capital, Inc.,
Series H expiring 11/14/99
(Acquired 11/04/94; Cost
$0)(a)(e) 8,000 80
- ---------------------------------------------------------------
Series I expiring 11/14/99
(Acquired 11/04/94-03/01/95;
Cost $0)(a)(e) 7,250 3,625
- ---------------------------------------------------------------
3,705
- ---------------------------------------------------------------
SHIPPING-0.00%
Millenium Seacarriers, expiring
07/15/03(e) 19,900 24,875
- ---------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/
WIRELESS)-0.14%
Cellnet Data System, expiring
10/01/07 (Acquired
09/24/97-10/15/97; Cost
$0)(a)(e) 10,000 82,500
- ---------------------------------------------------------------
Clearnet Communications Inc.
(Canada), expiring 09/15/05(e) 100,716 856,086
- ---------------------------------------------------------------
ICG Communications, Inc.,
expiring 10/15/05(e) 39,600 712,800
- ---------------------------------------------------------------
Loral Space & Communications,
Ltd., expiring 01/15/07(e) 43,600 385,800
- ---------------------------------------------------------------
McCaw Intl. Ltd., expiring
04/15/07(e) 39,500 108,625
- ---------------------------------------------------------------
Microcell Telecommunications,
Inc. (Canada) expiring 06/01/06
(Acquired 12/18/96; Cost
$0)(a)(e) 118,000 1,979,214
- ---------------------------------------------------------------
Powertel Inc., expiring
02/01/06(e) 42,656 543,864
- ---------------------------------------------------------------
4,668,889
- ---------------------------------------------------------------
</TABLE>
9
<PAGE> 12
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TELECOMMUNICATIONS (LONG
DISTANCE)-0.26%
Firstcom Corp., expiring 10/27/07
(Acquired 05/12/99; Cost
$0.00)(a)(e) 804,650 $ 3,218,600
- ---------------------------------------------------------------
Long Distance International Inc.,
expiring 04/13/08(e) 25,610 64,025
- ---------------------------------------------------------------
Primus Telecommunications Group,
Inc., expiring 08/01/04(e) 20,000 405,000
- ---------------------------------------------------------------
RSL Communications, Ltd. (United
Kingdom), expiring 11/15/06(e) 45,145 3,701,890
- ---------------------------------------------------------------
Versatel Telecom International
N.V. (Netherlands), expiring
05/15/08 (Acquired
05/20/98-05/24/99; Cost
$1,654)(a)(e) 35,060 1,761,765
- ---------------------------------------------------------------
9,151,280
- ---------------------------------------------------------------
TELEPHONE-0.06%
Esat Telecom Group PLC (Ireland),
expiring 02/01/07 (Acquired
06/16/97; Cost $0)(a)(e) 25,530 2,055,165
- ---------------------------------------------------------------
Intermedia Communications, Inc.,
expiring 06/01/00(e) 1,500 145,875
- ---------------------------------------------------------------
2,201,040
- ---------------------------------------------------------------
Total Warrants (Cost
$3,729,839) 16,799,852
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
TIME DEPOSITS-1.29%
Dresdner Kleinwort Benson North
America, LLC, 5.75%, 07/01/99 $44,907,963 $ 44,907,963
- ---------------------------------------------------------------
REPURCHASE AGREEMENTS-2.80%(f)
Credit Suisse First Boston,
5.10%, 07/01/99(g) 52,998,353 52,998,353
- ---------------------------------------------------------------
SBC Warburg Dillon Read, Inc.,
5.75%, 07/01/99(h) 45,000,000 45,000,000
- ---------------------------------------------------------------
Total Repurchase Agreements
(Cost $97,998,353) 97,998,353
- ---------------------------------------------------------------
TOTAL INVESTMENTS-98.12% 3,427,343,260
- ---------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-1.88% 65,527,877
- ---------------------------------------------------------------
NET ASSETS-100.00% $3,492,871,137
===============================================================
</TABLE>
Investment Abbreviations:
Conv. - Convertible
Deb. - Debentures
Disc. - Discounted
Gtd. - Guaranteed
Pfd. - Preferred
PIK - Payment in Kind
Sec. - Secured
Sr. - Senior
Sub. - Subordinated
TRACES - Trust Automatic Common Exchange Securities
Unsec. - Unsecured
Notes to Schedule of Investments:
(a) 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 06/30/99 was $727,072,546
which represented 20.82% of the Fund's net assets.
(b) Step bond issued at a discount. Interest rate shown represents coupon rate
at which the bond will accrue at a specified future date.
(c) Consists of more than one class of securities traded together as a unit. In
addition to the debt obligations listed, each unit contains warrants that
enable the holder to purchase common stock in the issuer at a predetermined
price per share of common stock.
(d) Defaulted security. Currently, the issuer is partially in default with
respect to interest payments.
(e) Non-income producing security.
(f) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value is at least 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts, and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(g) Joint repurchase agreement entered into 06/30/99 with a maturing value of
$350,049,583. Collateralized by U.S. Government obligations.
(h) Joint repurchase agreement entered into 06/30/99 with a maturing value of
$400,056,667. Collateralized by U.S. Government obligations.
See Notes to Financial Statements.
10
<PAGE> 13
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$3,579,018,706) $3,427,343,260
- ----------------------------------------------------------
Receivables for:
Investments sold 12,731,308
- ----------------------------------------------------------
Fund shares sold 10,351,977
- ----------------------------------------------------------
Dividends and interest 69,988,891
- ----------------------------------------------------------
Investment for deferred compensation plan 68,923
- ----------------------------------------------------------
Other assets 980,099
- ----------------------------------------------------------
Total assets 3,521,464,458
- ----------------------------------------------------------
LIABILITIES:
Payables for:
Fund shares reacquired 10,063,657
- ----------------------------------------------------------
Dividends 13,423,886
- ----------------------------------------------------------
Deferred compensation plan 68,923
- ----------------------------------------------------------
Accrued advisory fees 1,368,872
- ----------------------------------------------------------
Accrued distribution fees 3,257,328
- ----------------------------------------------------------
Accrued operating expenses 410,655
- ----------------------------------------------------------
Total liabilities 28,593,321
- ----------------------------------------------------------
Net assets applicable to shares
outstanding $3,492,871,137
- ----------------------------------------------------------
NET ASSETS:
Class A $1,552,225,534
==========================================================
Class B $1,804,446,619
==========================================================
Class C $ 136,198,984
==========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 182,227,999
==========================================================
Class B 211,888,128
==========================================================
Class C 16,028,607
==========================================================
Class A:
Net asset value and redemption price per
share $ 8.52
- ----------------------------------------------------------
Offering price per share:
(Net asset value of $8.52
divided by 95.25%) $ 8.94
==========================================================
Class B:
Net asset value and offering price per
share $ 8.52
==========================================================
Class C:
Net asset value and offering price per
share $ 8.50
==========================================================
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 186,882,386
- ---------------------------------------------------------
Dividends 1,357,781
- ---------------------------------------------------------
Total investment income 188,240,167
- ---------------------------------------------------------
EXPENSES:
Advisory fees 8,528,981
- ---------------------------------------------------------
Administrative services fees 74,274
- ---------------------------------------------------------
Transfer agent fees -- Class A 1,051,349
- ---------------------------------------------------------
Transfer agent fees -- Class B 1,233,807
- ---------------------------------------------------------
Transfer agent fees -- Class C 89,782
- ---------------------------------------------------------
Trustees' fees 18,933
- ---------------------------------------------------------
Distribution fees -- Class A 2,046,129
- ---------------------------------------------------------
Distribution fees -- Class B 9,140,423
- ---------------------------------------------------------
Distribution fees -- Class C 636,573
- ---------------------------------------------------------
Other 47,669
- ---------------------------------------------------------
Total expenses 22,867,920
- ---------------------------------------------------------
Less: Expenses paid indirectly (111,408)
- ---------------------------------------------------------
Net expenses 22,756,512
- ---------------------------------------------------------
Net investment income 165,483,655
- ---------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES:
Net realized gain (loss) from investment
securities (157,644,793)
- ---------------------------------------------------------
Change in net unrealized appreciation of
investment securities 66,270,212
- ---------------------------------------------------------
Net gain (loss) from investment
securities (91,374,581)
- ---------------------------------------------------------
Net increase in net assets resulting from
operations $ 74,109,074
=========================================================
</TABLE>
See Notes to Financial Statements.
11
<PAGE> 14
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND THE YEAR ENDED DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 165,483,655 $ 336,256,233
- ----------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities and
foreign currencies (157,644,793) (188,887,632)
- ----------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities 66,270,212 (359,473,146)
- ----------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 74,109,074 (212,104,545)
- ----------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (83,916,079) (170,021,135)
- ----------------------------------------------------------------------------------------------
Class B (86,072,714) (158,792,161)
- ----------------------------------------------------------------------------------------------
Class C (6,001,019) (6,792,770)
- ----------------------------------------------------------------------------------------------
Share transactions-net:
Class A (72,879,550) 142,435,247
- ----------------------------------------------------------------------------------------------
Class B 35,724,175 448,570,951
- ----------------------------------------------------------------------------------------------
Class C 26,898,115 101,384,122
- ----------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (112,137,998) 144,679,709
- ----------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 3,605,009,135 3,460,329,426
- ----------------------------------------------------------------------------------------------
End of period $3,492,871,137 $3,605,009,135
==============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $4,001,479,659 $4,011,736,919
- ----------------------------------------------------------------------------------------------
Undistributed net investment income (5,016,019) 5,490,138
- ----------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities and foreign currencies (351,917,058) (194,272,265)
- ----------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities (151,675,445) (217,945,657)
- ----------------------------------------------------------------------------------------------
$3,492,871,137 $3,605,009,135
==============================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
(UNAUDITED)
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 three different classes of shares: Class A shares, Class B
shares, and Class C shares. Class A shares are sold with a front-end sales
charge. Class B and Class C shares are sold with a contingent deferred sales
charge. 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 preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies followed by the Fund
in the preparation of its financial statements.
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 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. Equity
securities which are listed or traded on an exchange or the NASDAQ National
Market System are valued at the last sales price on the exchange where
principally traded or, lacking any sales on a
12
<PAGE> 15
particular day, at the closing bid price on that day. 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 closing bid
price. 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 distributions 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.
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 $118,664,039 as of December 31, 1998 (which may be carried
forward to offset future taxable capital gains, if any) which expires, if
not previously utilized, through the year 2006. The Fund cannot distribute
capital gains to shareholders until the tax loss carryforwards have been
utilized.
D. Foreign Currency Translation -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are translated
into U.S. dollar amounts on the respective dates of such transactions. The
Fund does not separately account for that portion of the results of
operations resulting from changes in foreign exchange rates on investments
and the fluctuations arising from changes in market prices of securities
held. Such fluctuations are included with the net realized and unrealized
gain or loss from investments.
E. Foreign Currency Contracts -- A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a foreign currency contract for the purchase
or sale of a security denominated in a foreign currency in order to "lock
in" the U.S. dollar price of that security. The Fund could be exposed to
risk if counterparties to the contracts are unable to meet the terms of
their contracts.
F. Expenses -- Distribution and transfer agency expenses directly attributable
to a class of shares are charged to that class' operations. All other
expenses which are attributable to more than one class are allocated among
the classes.
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 pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the six months ended June 30, 1999, AIM
was paid $74,274 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 six months ended June 30, 1999, the
Fund paid AFS $1,535,836 for such services.
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, Class B and Class C shares of the Fund. The Trust has adopted
distribution plans pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Class A shares and Class C shares (the "Class A and C Plan"), and the
Fund's Class B shares (the "Class B Plan") (collectively, the "Plans"). The
Fund, pursuant to the Class A and C Plan, pays AIM Distributors compensation at
an annual rate of 0.25% of the average daily net assets of the Class A shares
and 1.00% of the average daily net assets of the Class C shares. The Fund
pursuant to the Class B Plan, pays AIM Distributors compensation at an annual
rate of 1.00% of the average daily net assets of the Class B shares. Of these
amounts, the Fund may pay a service fee of 0.25% of the average daily net assets
of the Class A, Class B or Class C shares to selected dealers and financial
institutions who furnish continuing personal shareholder services to their
customers who purchase and own the appropriate class of shares of the Fund. Any
amounts not paid as a service fee under the Plans would constitute an
asset-based sales charge. The Plans also impose a cap on the total sales
charges, including asset-based sales charges that may be paid by the respective
classes. During the six months ended June 30, 1999, the Class A, Class B and
Class C shares paid AIM Distributors $2,046,129, $9,140,423 and $636,573,
respectively, as compensation under the Plans.
AIM Distributors received commissions of $534,635 from sales of the Class A
shares of the Fund during the six months ended June 30, 1999. Such commissions
are not an expense of the Fund. They are deducted from, and are not included in,
the proceeds from sales of Class A shares. During the six months ended June 30,
1999, AIM Distributors received $233,353 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 six months ended June 30, 1999, the Fund paid legal fees of $5,403
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.
13
<PAGE> 16
NOTE 3-INDIRECT EXPENSES
During the six months ended June 30, 1999, the Fund received reductions in
transfer agency fees from AFS (an affiliate of AIM) and reductions in custodian
fees of $23,107 and $88,301, respectively under expense offset arrangements. The
effect of the above arrangements resulted in a reduction of the Fund's total
expenses of $111,408 during the six months ended June 30, 1999.
NOTE 4-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 5-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $975,000,000 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. During the six
months ended June 30, 1999, 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 0.09% 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. Prior to May 28, 1999, the commitment fee rate was
0.05%.
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the six months ended June 30, 1999 was
$1,816,815,567 and $1,780,170,458, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of June 30, 1999 was as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $ 90,594,316
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (243,451,462)
- ---------------------------------------------------------
Net unrealized appreciation (depreciation)
of investment securities $(152,857,146)
=========================================================
</TABLE>
Cost of investments for tax purposes is $3,580,200,406.
NOTE 7-SHARE INFORMATION
Changes in shares outstanding during the six months ended June 30, 1999 and the
year ended December 31, 1998 were as follows:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
------------------------------ ------------------------------
SHARES AMOUNT SHARES AMOUNT
------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C>
Sold:
Class A 48,054,310 $ 421,013,988 113,312,954 $ 1,099,027,598
- --------------------------------------------------------------------------------------
Class B 30,611,215 267,540,063 81,983,594 793,346,240
- --------------------------------------------------------------------------------------
Class C 6,038,493 52,685,254 31,084,188 309,774,327
- --------------------------------------------------------------------------------------
Issued as
reinvestment of
dividends:
Class A 6,261,895 54,601,149 11,706,241 112,173,341
- --------------------------------------------------------------------------------------
Class B 5,052,957 44,039,989 8,418,057 80,427,189
- --------------------------------------------------------------------------------------
Class C 461,419 4,013,434 480,845 4,500,556
- --------------------------------------------------------------------------------------
Reacquired:
Class A (62,645,898) (548,494,687) (110,296,515) (1,068,765,692)
- --------------------------------------------------------------------------------------
Class B (31,576,430) (275,855,877) (44,848,230) (425,202,478)
- --------------------------------------------------------------------------------------
Class C (3,421,427) (29,800,573) (21,196,339) (212,890,761)
- --------------------------------------------------------------------------------------
(1,163,466) $ (10,257,260) 70,644,795 $ 692,390,320
======================================================================================
</TABLE>
14
<PAGE> 17
NOTE 8-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A and a share of
Class B outstanding during the six months ended June 30, 1999 and each of the
years in the five-year period ended December 31, 1998, and for a share of Class
C outstanding during the six months ended June 30, 1999, the year ended December
31, 1998 and the period August 4, 1997 (date sales commenced) through December
31, 1997.
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------------------------------
DECEMBER 31,
JUNE 30, ------------------------------------------------------------------
1999 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.77 $ 10.16 $ 9.88 $ 9.43 $ 8.93 $ 10.05
- ---------------------------------------------- ---------- ---------- ---------- ---------- -------- --------
Income from investment operations:
Net investment income 0.42 0.92 0.90 0.92 0.93 0.96
- ---------------------------------------------- ---------- ---------- ---------- ---------- -------- --------
Net gains (losses) on securities (both
realized and unrealized) (0.23) (1.40) 0.28 0.46 0.52 (1.12)
- ---------------------------------------------- ---------- ---------- ---------- ---------- -------- --------
Total from investment operations 0.19 (0.48) 1.18 1.38 1.45 (0.16)
- ---------------------------------------------- ---------- ---------- ---------- ---------- -------- --------
Less distributions:
Dividends from net investment income (0.44) (0.91) (0.90) (0.93) (0.95) (0.96)
- ---------------------------------------------- ---------- ---------- ---------- ---------- -------- --------
Net asset value, end of period $ 8.52 $ 8.77 $ 10.16 $ 9.88 $ 9.43 $ 8.93
============================================== ========== ========== ========== ========== ======== ========
Total return(a) 2.21% (5.10)% 12.52% 15.44% 16.86% (1.67)%
============================================== ========== ========== ========== ========== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,552,226 $1,670,863 $1,786,352 $1,272,974 $886,106 $578,959
============================================== ========== ========== ========== ========== ======== ========
Ratio of expenses to average net assets 0.86%(b) 0.85% 0.90% 0.97% 0.96% 1.00%
============================================== ========== ========== ========== ========== ======== ========
Ratio of net investment income to average net
assets 9.63%(b) 9.45% 9.08% 9.67% 9.95% 10.07%
============================================== ========== ========== ========== ========== ======== ========
Portfolio turnover rate 53% 76% 80% 77% 61% 53%
============================================== ========== ========== ========== ========== ======== ========
</TABLE>
(a) Does not deduct sales charges and is not annualized for periods less than
one year.
(b) Ratios are annualized and based on average net assets of $1,650,468,438.
<TABLE>
<CAPTION>
CLASS B CLASS C
---------------------------------------------------------------------------- --------
DECEMBER 31,
JUNE 30, -------------------------------------------------------------- JUNE 30,
1999 1998 1997 1996 1995 1994 1999
---------- ---------- ---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 8.76 $ 10.16 $ 9.88 $ 9.42 $ 8.92 $ 10.04 $ 8.74
- -------------------------------- ---------- ---------- ---------- ---------- -------- -------- --------
Income from investment
operations:
Net investment income 0.38 0.84 0.83 0.85 0.85 0.87 0.38
- -------------------------------- ---------- ---------- ---------- ---------- -------- -------- --------
Net gains (losses) on
securities (both realized
and unrealized) (0.21) (1.40) 0.28 0.47 0.52 (1.10) (0.21)
- -------------------------------- ---------- ---------- ---------- ---------- -------- -------- --------
Total from investment
operations 0.17 (0.56) 1.11 1.32 1.37 (0.23) 0.17
- -------------------------------- ---------- ---------- ---------- ---------- -------- -------- --------
Less distributions:
Dividends from net investment
income (0.41) (0.84) (0.83) (0.86) (0.87) (0.89) (0.41)
- -------------------------------- ---------- ---------- ---------- ---------- -------- -------- --------
Net asset value, end of period $ 8.52 $ 8.76 $ 10.16 $ 9.88 $ 9.42 $ 8.92 $ 8.50
================================ ========== ========== ========== ========== ======== ======== ========
Total return(b) 1.91% (5.90)% 11.71% 14.68% 15.91% (2.48)% 1.91%
================================ ========== ========== ========== ========== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $1,804,447 $1,820,899 $1,647,801 $1,068,060 $557,926 $191,338 $136,199
================================ ========== ========== ========== ========== ======== ======== ========
Ratio of expenses to average net
assets 1.62%(c) 1.61% 1.65% 1.68% 1.73% 1.80% 1.62%(c)
================================ ========== ========== ========== ========== ======== ======== ========
Ratio of net investment income
to average net assets 8.87%(c) 8.69% 8.33% 8.95% 9.18% 9.27% 8.87%(c)
================================ ========== ========== ========== ========== ======== ======== ========
Portfolio turnover rate 53% 76% 80% 77% 61% 53% 53%
================================ ========== ========== ========== ========== ======== ======== ========
<CAPTION>
CLASS C
--------------------
DECEMBER 31,
--------------------
1998 1997
-------- --------
<S> <C> <C>
Net asset value, beginning of
period $ 10.14 $ 10.04
- -------------------------------- -------- --------
Income from investment
operations:
Net investment income 0.82(a) 0.35
- -------------------------------- -------- --------
Net gains (losses) on
securities (both realized
and unrealized) (1.38) 0.10
- -------------------------------- -------- --------
Total from investment
operations (0.56) 0.45
- -------------------------------- -------- --------
Less distributions:
Dividends from net investment
income (0.84) (0.35)
- -------------------------------- -------- --------
Net asset value, end of period $ 8.74 $ 10.14
================================ ======== ========
Total return(b) (5.92)% 4.49%
================================ ======== ========
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $113,246 $ 26,177
================================ ======== ========
Ratio of expenses to average net
assets 1.61% 1.68%(d)
================================ ======== ========
Ratio of net investment income
to average net assets 8.69% 8.30%(d)
================================ ======== ========
Portfolio turnover rate 76% 80%
================================ ======== ========
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct contingent deferred sales charges and for periods less than
one year is not annualized.
(c) Ratios are annualized and based on average net assets of $1,843,234,413 and
$128,369,667 for Class B and Class C, respectively.
(d) Annualized.
15
<PAGE> 18
<TABLE>
<CAPTION>
BOARD OF TRUSTEES OFFICERS OFFICE OF THE FUND
<S> <C> <C>
Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
Chairman Chairman Suite 100
A I M Management Group Inc. Houston, TX 77046
Robert H. Graham
Bruce L. Crockett President INVESTMENT ADVISOR
Director
ACE Limited; Carol F. Relihan A I M Advisors, Inc.
Formerly Director, President, and Senior Vice President and Secretary 11 Greenway Plaza
Chief Executive Officer Suite 100
COMSAT Corporation Gary T. Crum Houston, TX 77046
Senior Vice President
Owen Daly II TRANSFER AGENT
Director Dana R. Sutton
Cortland Trust Inc. Vice President and Treasurer A I M Fund Services, Inc.
P.O. Box
Edward K. Dunn Jr. Robert G. Alley Houston, TX 77210-4739
Chairman, Mercantile Mortgage Corp.; Vice President
Formerly Vice Chairman and President, CUSTODIAN
Mercantile-Safe Deposit & Trust Co.; and Stuart W. Coco
President, Mercantile Bankshares Vice President State Street Bank and Trust Company
225 Franklin Street
Jack Fields Melville B. Cox Boston, MA 02110
Chief Executive Officer Vice President
Texana Global, Inc.; COUNSEL TO THE FUND
Formerly Member Karen Dunn Kelley
of the U.S. House of Representatives Vice President Ballard Spahr
Andrews & Ingersoll, LLP
Carl Frischling Edgar M. Larsen 1735 Market Street
Partner Vice President Philadelphia, PA 19103
Kramer, Levin, Naftalis & Frankel LLP
Mary J. Benson COUNSEL TO THE TRUSTEES
Robert H. Graham Assistant Vice President and
President and Chief Executive Officer Assistant Treasurer Kramer, Levin, Naftalis & Frankel LLP
A I M Management Group Inc. 919 Third Avenue
Sheri Morris New York, NY 10022
Prema Mathai-Davis Assistant Vice President and
Chief Executive Officer, YWCA of the U.S.A.; Assistant Treasurer DISTRIBUTOR
Commissioner, New York City Dept. for
the Aging; and member of the Board of Directors, Renee A. Friedli A I M Distributors, Inc.
Metropolitan Transportation Authority of Assistant Secretary 11 Greenway Plaza
New York State Suite 100
P. Michelle Grace Houston, TX 77046
Lewis F. Pennock Assistant Secretary
Attorney
Jeffrey H. Kupor
Louis S. Sklar Assistant Secretary
Executive Vice President
Hines Interests Nancy L. Martin
Limited Partnership Assistant Secretary
Ofelia M. Mayo
Assistant Secretary
Lisa A. Moss
Assistant Secretary
Kathleen J. Pflueger
Assistant Secretary
Samuel D. Sirko
Assistant Secretary
Stephen I. Winer
Assistant Secretary
</TABLE>
16
<PAGE> 19
AIM FUNDS(SM) KEEPS YOU POSTED ON YOUR INVESTMENT
We inform our shareholders about their investments with regular mailings
throughout the year. Here is a description of the documents you will receive
concerning your account and fund.
o DAILY CONFIRMATION STATEMENTS. A record of the transactions you initiate.
For example, if you transfer part or all of your investment from one AIM
fund to another, you will receive a statement confirming that the
transaction took place.
o QUARTERLY STATEMENTS. These show you how your account has performed over the
fiscal quarter and provide information on any applicable dividend payments.
Statement inserts that sometimes accompany these mailings may give specific
information about your fund or may contain educational information of
general interest.
o PROXY. As a shareholder of an AIM fund, you have the right to vote on any
change to a fund's published bylaws or objectives. If the fund's board of
directors proposes such a change, AIM will send a proxy to the shareholders.
The proxy allows you to direct an authorized person to cast your vote
according to your instructions. You can vote your proxy by mail, phone or
e-mail.
o PROSPECTUS. AIM sends you an updated version of your fund's prospectus every
year. Your prospectus contains valuable information about your fund's
objectives, risks, management and fees. Because this information is
important, you should keep your prospectus with your other fund records.
o ANNUAL AND SEMIANNUAL REPORTS. AIM fund reports are sent to you twice a
year, the semi-annual covering the first six months of the fiscal year for a
fund and the annual covering the entire fiscal year. These reports give you
an idea of how your fund performed compared to the market in general. The
reports also give you information about the holdings in your fund's
portfolio and how market conditions and management decisions have affected
your fund.
o YEAR-END TAX INFORMATION. This includes your year-end account statement,
cost-basis statement and any tax forms pertinent to your AIM account. The
tax forms report distributions you have received from your AIM funds,
redemptions or exchanges you have made and any contributions you have made
to tax-advantaged retirement accounts. It is important to retain the latter,
IRS Form 5498, if you need to track deductible vs. nondeductible IRA
contributions. The cost-basis statements are also important to retain
because they can be very useful for calculating capital gains or losses if
you use the "average basis single category" method of calculating cost
basis. Year-end tax information will be accompanied by tax communications
from AIM to help you fill out your tax forms. Your tax advisor can assist
you in sorting through your year-end statements and other tax
communications.
-------------------------------------
WE INFORM
OUR SHAREHOLDERS ABOUT
THEIR INVESTMENTS
WITH REGULAR MAILINGS
THROUGHOUT THE YEAR.
-------------------------------------
AIM HIGH YIELD FUND
<PAGE> 20
THE AIM FAMILY OF FUNDS--Registered Trademark--
<TABLE>
<CAPTION>
<S> <C> <C>
GROWTH FUNDS MONEY MARKET FUNDS A I M Management Group Inc. has provided
AIM Aggressive Growth Fund(1) AIM Money Market Fund leadership in the mutual-fund industry since
AIM Blue Chip Fund AIM Tax-Exempt Cash Fund 1976 and managed approximately $121 billion
AIM Capital Development Fund in assets for more than 6.3 million
AIM Constellation Fund INTERNATIONAL GROWTH FUNDS shareholders, including individual investors,
AIM Dent Demographic Trends Fund AIM Advisor International Value Fund corporate clients and Financial institutions,
AIM Large Cap Growth Fund AIM Asian Growth Fund as of June 30, 1999.
AIM Mid Cap Equity Fund(A) AIM Developing Markets Fund The AIM Family of Funds--Registered
AIM Select Growth Fund AIM Europe Growth Fund Trademark-- is distributed nationwide, and
AIM Small Cap Growth Fund(B) AIM European Development Fund AIM today is the 10th-largest mutual-fund
AIM Small Cap Opportunities Fund AIM International Equity Fund complex in the United States in assets under
AIM Value Fund AIM Japan Growth Fund management, according to Strategic Insight,
AIM Weingarten Fund AIM Latin American Growth Fund an independent mutual-fund monitor.
AIM New Pacific Growth Fund
GROWTH & INCOME FUNDS
AIM Advisor Flex Fund GLOBAL GROWTH FUNDS
AIM Advisor Large Cap Value Fund AIM Global Aggressive Growth Fund
AIM Advisor Real Estate Fund AIM Global Growth Fund
AIM Balanced Fund
AIM Basic Value Fund(C) GLOBAL GROWTH & INCOME FUNDS
AIM Charter Fund AIM Global Growth & Income Fund
AIM Global Utilities Fund
INCOME FUNDS
AIM Floating Rate Fund GLOBAL INCOME FUNDS
AIM High Yield Fund AIM Emerging Markets Debt Fund(D)
AIM High Yield Fund II AIM Global Government Income Fund
AIM Income Fund AIM Global Income Fund
AIM Intermediate Government Fund AIM Strategic Income Fund
AIM Limited Maturity Treasury Fund
THEME FUNDS
TAX-FREE INCOME FUNDS AIM Global Consumer Products and Services Fund
AIM High Income Municipal Fund AIM Global Financial Services Fund
AIM Municipal Bond Fund AIM Global Health Care Fund
AIM Tax-Exempt Bond Fund of Connecticut AIM Global Infrastructure Fund
AIM Tax-Free Intermediate Fund AIM Global Resources Fund
AIM Global Telecommunications and Technology Fund(E)
AIM Global Trends Fund(F)
</TABLE>
(1) A I M Aggressive Growth Fund reopened to new investors November 16, 1998.
(A) On September 8, 1998, AIM Mid Cap Growth Fund was renamed AIM Mid Cap Equity
Fund. (B) On September 8, 1998, AIM Small Cap Equity Fund was renamed AIM Small
Cap Growth Fund. (C) On September 8, 1998, AIM America Value Fund was renamed
AIM Basic Value Fund. (D) On September 8, 1998, AIM Global High Income Fund was
renamed AIM Emerging Markets Debt Fund. (E) On June 1, 1999, AIM Global
Telecommunications Fund was renamed AIM Global Telecommunications and Technology
Fund. (F) On September 8, 1998, AIM New Dimension Fund was renamed AIM Global
Trends Fund. For more complete information about any AIM Fund(s), including
sales charges and expenses, ask your financial consultant or securities dealer
for a free prospectus(es). Please read the prospectus(es) carefully before you
invest or send money.
[AIM LOGO APPEARS HERE]
INVEST WITH DISCIPLINE--Registered Trademark--
