<PAGE> 1
ANNUAL REPORT / DECEMBER 31 1999
AIM HIGH YIELD FUND
[COVER IMAGE]
[AIM LOGO APPEARS HERE]
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[COVER IMAGE]
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WHEAT FIELD WITH A LARK
BY VINCENT VAN GOGH (1853-1890, DUTCH)
GOOD TIMES ARE COMMONLY REPRESENTED BY A WHEAT SHEAF, CON-
NOTING 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 PER-
SEVERANCE 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's 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 using 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 unmanaged Lehman High Yield Bond Index, generally considered
representative of high-yield debt securities, is compiled by Lehman
Brothers, a well-known global investment bank.
o The unmanaged Lipper High Current Yield Fund Index represents an average of
the performance of the 30 largest high-yield funds charted by Lipper, Inc.,
an independent mutual fund performance monitor.
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.
AIM HIGH YIELD FUND
<PAGE> 3
ANNUAL REPORT / CHAIRMAN'S LETTER
Dear Fellow Shareholder:
The fiscal year discussed in this report has reconfirmed our
faith in two long-established principles of investing:
portfolio diversification and long-term thinking. We could
[PHOTO OF title this report "What a Difference a Year Makes."
Charles T. An investor surveying conditions when the fiscal year
Bauer, opened on January 1, 1999, would have seen a ~market
Chairman of dominated by large-capitalization stocks and high-quality
the Board of bonds, especially U.S. Treasuries. During 1998, two
THE FUND well-known indexes of large-capitalization U.S. companies,
APPEARS HERE] the S&P 500 and the Dow Jones Industrial Average, were up
28.60% and 18.15%, respectively. By contrast,
smaller-company stocks in the Russell 2000 had lost 2.55%.
Overseas, many markets were languishing, especially in Asia,
where so many financial difficulties had originated in 1997.
In bond markets as well, name-brand quality was the
place to be. The Lehman Government/Corporate Bond Index,
which follows sovereign issues and investment-grade debt, was up 9.47%, while
the Lehman High Yield Index, which tracks riskier "junk bonds," had risen only
1.60%.
It would be easy for an investor to conclude that blue-chip issues, whether
equity or fixed-income, were the place to be, that it was time to divest himself
of everything else and put all his eggs in the blue-chip ~basket. The investor,
of course, would be wrong.
MARKETS TURN
While large-capitalization stocks continued to do very well, during 1999 markets
broadened dramatically with many investment sectors performing a complete
turnaround. For example, the small-cap stocks in the Russell 2000 were up 21.26%
for calendar year 1999, and many Asian markets, particularly Japan, had staged a
comeback.
The same holds true of bonds. The higher-quality Lehman index was down 2.15%
during 1999 while the Lehman High Yield index was up 2.39%.
The point, at the risk of sounding repetitive to those of you who have
invested with us for a long time, is that this is why diversification is a
fundamental investing principle. Market sectors and asset classes go in and out
of favor, but over the long run--and the long run is several years--the markets'
overall trend has been upward. Selecting an asset class or a market sector on
the basis of a short-term snapshot of conditions is usually unwise, as is
concentrating your portfolio in one asset class. Staying fully invested in a
diversified ~portfolio remains a compelling strategy and one of your best
prospects for long-term gain. We also continue to remind you that the past few
years have seen extraordinary gains in some markets, and there is no assurance
that this trend will continue.
LOOKING AHEAD
As we look about at the close of this fiscal year, we are encouraged by multiple
signs of economic health in Europe and Asia, not to mention the prolonged U.S.
economic expansion. However, we are aware of how easily an investor could have
been misled by conditions just 12 months ago. For our shareholders, we therefore
reiterate our commitment to investing through a financial advisor. In addition
to helping you select investments appropriate to your time horizon and risk
tolerance, a financial advisor can keep you informed about how changing market
conditions affect you and your portfolio--and help ensure that when you do alter
your investments, there's a logical reason for doing so. AIM believes every
investor should be guided by a financial professional.
FUND MANAGERS COMMENT
In the pages that follow, your fund's portfolio managers discuss how they
managed your fund during the year ended December 31, how the markets behaved and
what they foresee for the near future. We trust you will find their discussion
informative. If you have any questions or comments, we invite you to contact us,
either at our Web site, aimfunds.com, or through our Client Services department
at 800-959-4246. Information about your account is also available through our
automated AIM Investor Line, 800-246-5463.
Thank you for your continued participation in The AIM Family of Funds
- --Registered Trademark--.
Sincerely,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman, A I M Advisors, Inc.
------------------------------------
STAYING FULLY
INVESTED IN A DIVERSIFIED
PORTFOLIO REMAINS
A COMPELLING STRATEGY
AND ONE OF YOUR
BEST PROSPECTS FOR
LONG-TERM GAIN.
------------------------------------
AIM HIGH YIELD FUND
<PAGE> 4
ANNUAL REPORT / MANAGERS' OVERVIEW
BOND MARKETS CONTINUE TO STRUGGLE ON
INTEREST RATE CONCERNS
HOW DID AIM HIGH YIELD FUND PERFORM DURING THE FISCAL YEAR?
Fixed-income markets continued to be plagued by a stubbornly strong U.S. economy
and higher interest rates. Given this difficult market environment, AIM High
Yield Fund posted a 2.08% total return for Class A shares and 1.46% for Class B
shares and Class C shares for the fiscal year ended December 31, 1999. These
returns are computed at net asset value, that is, without the effect of sales
charges. The fund underperformed the Lehman High Yield Bond Index, which
returned 2.39%, and the Lipper High Current Yield Fund Index, which gained 4.78%
during the same period.
Despite the poor market environment during 1999, the fund continued to
provide attractive current income. As of December 31, 1999, the fund's 30-day
SEC yield was 11.43%, 11.20% and 11.20% for Class A, Class B, and Class C
shares, respectively. By comparison, the yield on the benchmark 30-year U.S.
Treasury bond was 6.48%.
Net assets under management totaled $3.05 billion on December 31.
WHAT WERE THE MAJOR TRENDS IN BOND MARKETS DURING 1999?
This past year has been a challenging period for bond investors. Throughout
1999, downward pressure on bond prices came from the U.S. economy's continued
strong growth, improving global economies, rising long-term interest rates and
inflation fears. These factors contributed to a market environment in which
investors favored stocks over bonds. Against this backdrop, low unemployment and
rising commodity prices created fears of inflation. Bond investors are
particularly attuned to hints of higher prices because inflation erodes the
purchasing power of future interest and principal payments. For these reasons,
1999 was the worst calendar-year performance for bonds since 1994.
HOW DID HIGH-YIELD BONDS FARE IN THIS DIFFICULT MARKET ENVIRONMENT?
High-yield bonds were able to withstand some of the pressure of rising interest
rates to outperform most of the fixed-income market for 1999. Nonetheless, these
bonds continued to face other challenges. At midyear, a flood of new high-yield
issuance created an imbalance between supply and demand as Y2K concerns
suppressed demand for these bonds. This combination of oversupply and shrinking
demand pushed high-yield bond prices downward.
High-yield bond funds also suffered as a result of negative asset flows
during 1999. In contrast to the past several years, when high-yield bond funds
enjoyed record cash inflows, lower bond prices and greater market volatility
during the fiscal year eroded investor interest in this sector. Although
high-yield bonds enjoyed a rally early in 1999, tax-loss selling and Y2K
pressures in December caused more disappointments. These actions pushed the
average yield of high-yield bonds up to almost 12% at year-end--approximately
120 basis points over historical standards. (A basis point is one one-hundredth
of a percentage point.)
In light of the challenging market conditions faced by bond issuers, the
default rate for the high-yield bond sector continued to climb and is expected
to top 5% for the year. Fortunately, our credit research helped AIM High Yield
Fund avoid any defaults during 1999.
GIVEN CURRENT MARKET CONDITIONS, HOW DID YOU MANAGE THE FUND'S CREDIT QUALITY?
While yield spreads have come down from their 1998 levels, they still remained
high on a historical basis. As a result we have found opportunities for higher
yields in the lower-quality sectors of the high-yield market. We repositioned
the fund's portfolio to include more CCC and non-rated bonds in exchange for the
opportunity to achieve higher yields. Lower-quality sectors in the high-yield
bond market generally offer higher yields than most other issues as a way to
compensate investors for taking on more risks. On December 31, CCC and non-rated
bonds accounted for approximately 44% of the fund's net assets, up from 29.75% a
year ago.
On the other hand, due to its greater interest rate sensitivity, the BB
sector of the high-yield market underperformed as interest rates rose during
the year. Thus, we reduced our holdings in this sector from 7.83% of total net
assets as the fiscal year opened to 4.61% of total net assets at its close.
Overall, the fund has an average credit quality of B, as rated by Standard &
Poor's, a widely known credit-rating agency.
FUND PROVIDES HIGH INCOME
30-day SEC yield as of 12/31/99
================================================================================
Class Class Class 30-year
A shares B shares C shares U.S. Treasury
- --------------------------------------------------------------------------------
11.43% 11.20% 11.20% 6.48%
================================================================================
See important fund and index disclosures inside front cover.
AIM HIGH YIELD FUND
2
<PAGE> 5
ANNUAL REPORT / MANAGERS' OVERVIEW
WHAT CHANGES DID YOU MAKE TO THE FUND'S PORTFOLIO?
Holdings in AIM High Yield Fund continue to be well diversified among high-yield
issuers in both the United States and in developed foreign countries. The fund's
exposure to issuers in the telecommunications and telephone industries, which
together represented almost 30% of total net assets on December 31, helped fuel
fund performance. We continue to believe these industries offer attractive
opportunities.
During the fiscal year, we increased our allocation in developed foreign
countries to approximately 14%. Bonds issued by foreign telecommunications
companies accounted for the majority of the increase. The underpinnings of a
sustained global expansion make the telecommunications high-yield sector
attractive.
WHAT IS YOUR OUTLOOK FOR 2000?
The prospect of higher interest rates and further defaults will keep the level
of uncertainty and volatility high in the high-yield sector. As a result, a
recovery in the high-yield market may not occur until the second half of 2000.
Although the past year and a half has been a rough period for the high-yield
market, we believe that the worst may be behind us. In these uncertain market
conditions, we will continue to take advantage of attractively valued high-yield
credits, hoping to provide attractive income and total return opportunities for
our investors.
We also believe that the current high-yield environment represents an
excellent opportunity for investors for several reasons. First, on an absolute
yield basis, the yield on the average high-yield bond finished the year at
approximately 12%. When you compare that to the long-term yield average,
high-yield bonds seem cheap relative to other alternatives in the fixed-income
universe. On an interesting note, the average price for a high-yield bond over
the period 1992-99 was about 95% of par value. At the end of 1999, however, it
was 85% of par value. Thus, we believe that there are some built-in gains in the
difference between where prices are now and where they have been historically.
Aggressive investors who can take an extended view and withstand short-term
market volatility may be rewarded in the future.
PORTFOLIO COMPOSITION
As of 12/31/99, based on total net assets
<TABLE>
<CAPTION>
==========================================================================================================
TOP 10 INDUSTRIES TOP 10 HOLDINGS
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Telecommunications (Cellular/Wireless) 11.05% 1. Airplanes Pass Through Trust 1.81%
2. Telecommunications (Long Distance) 10.01 2. Allied Waste North American, Inc. 1.65
3. Telephone 7.77 3. ICG Services, Inc. 1.41
4. Manufacturing (Specialized) 5.24 4. Logix Communications 1.38
5. Broadcasting (Television, Radio & Cable) 3.37 5. US Xchange LLC 1.34
6. Airlines 3.22 6. Venetian Casino/Resort LLC 1.21
7. Oil & Gas (Exploration & Production) 3.13 7. Viatel, Inc. - 11.50% 1.12
8. Retail (Specialty) 2.93 8. Viatel, Inc. - 11.25% 1.11
9. Auto Parts & Equipment 2.40 9. Powertel, Inc. 1.11
10. Textiles (Apparel) 2.40 10. Nextel Communication, Inc. 1.07
The fund's portfolio is subject to change, and there is no assurance that the
fund will continue to hold any particular security.
=======================================================================================================
</TABLE>
See important fund and index disclosures inside front cover.
AIM HIGH YIELD FUND
3
<PAGE> 6
ANNUAL REPORT / PERFORMANCE HISTORY
YOUR FUND'S LONG-TERM PERFORMANCE
RESULTS OF A $10,000 INVESTMENT
AIM HIGH YIELD FUND VS. BENCHMARK INDEXES
12/31/89-12/31/99
in thousands
================================================================================
AIM High Yield Fund, Lehman High Lipper High Current
Class A Shares Yield Bond Index Yield Fund Index
- --------------------------------------------------------------------------------
12/89 9,521 10,000 10,000
12/90 8,660 9,041 8,888
12/91 12,314 13,216 12,463
12/92 14,605 15,298 14,751
12/93 17,292 17,917 17,679
12/94 17,002 17,732 17,028
12/95 19,869 21,132 19,989
12/96 22,936 23,531 22,583
12/97 25,806 26,535 25,558
12/98 24,491 27,030 25,539
12/99 26,259 27,677 26,762
Source: Lipper, Inc.
Past performance cannot guarantee comparable future results.
================================================================================
MARKET VOLATILITY CAN SIGNIFICANTLY IMPACT SHORT-TERM PERFORMANCE. RESULTS OF AN
INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL PERFORMANCE
SHOWN.
ABOUT THIS CHART
The chart compares your fund's Class A shares to benchmark indexes. It is
important to understand the differences between your fund and these indexes. An
index measures the performance of a hypothetical portfolio. A market index such
as the Lehman High Yield Bond Index is not managed, incurring no sales charges,
expenses or fees. If you could buy all the securities that make up a market
index, you would incur expenses that would affect your investment's return. An
index of funds such as the Lipper High Current Yield Fund Index includes a
number of mutual funds grouped by investment objective. Each of those funds
interprets that objective differently, and each employs a different management
style and investment strategy. Use of these indexes is intended to give you a
general idea of how your fund performed compared to these benchmarks.
AVERAGE ANNUAL TOTAL RETURNS
As of 12/31/99, including sales charges
================================================================================
CLASS A SHARES
10 Years 9.60%
5 Years 6.96
1 Year -2.80*
*2.08%, excluding sales charges
CLASS B SHARES
Since Inception (9/1/93) 5.90%
5 Years 6.96
1 Year -3.14*
*1.46%, excluding CDSC
CLASS C SHARES
Since Inception (8/4/97) -0.11%
1 Year 0.54*
*1.46%, excluding CDSC
================================================================================
Your fund's total return includes sales charges, expenses and management fees.
The performance of the fund's Class B and Class C shares will differ from that
of Class A shares due to differing fees and expenses. For fund performance
calculations and descriptions of the indexes cited on this page, please see the
inside front cover.
AIM HIGH YIELD FUND
4
<PAGE> 7
SCHEDULE OF INVESTMENTS
December 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
U.S. DOLLAR DENOMINATED CORPORATE
BONDS & NOTES-91.02%
AEROSPACE/DEFENSE-0.47%
Precision Partners, Inc., Sr. Sub.
Notes, 12.00%, 03/15/09(a) $18,925,000 $ 14,288,375
- ---------------------------------------------------------------
AIR FREIGHT-0.64%
Atlas Air, Inc., Sr. Unsec.
Notes, 10.75%, 08/01/05 18,897,000 19,463,910
- ---------------------------------------------------------------
AIRLINES-3.22%
Airplanes Pass Through
Trust-Series D, Gtd. Sub.
Bonds, 10.88%, 03/15/12 62,860,000 55,316,800
- ---------------------------------------------------------------
Amtran, Inc., Sr. Unsec. Gtd.
Notes, 10.50%, 08/01/04 24,250,000 24,371,250
- ---------------------------------------------------------------
Dunlop Standard Aerospace
Holdings PLC (United Kingdom),
Sr. Unsec. Sub. Yankee Notes,
11.88%, 05/15/09 17,960,000 18,566,150
- ---------------------------------------------------------------
98,254,200
- ---------------------------------------------------------------
AUTO PARTS & EQUIPMENT-2.40%
Advance Stores Co., Inc.-Series
B, Sr. Unsec. Gtd. Sub. Notes,
10.25%, 04/15/08 24,825,000 21,473,625
- ---------------------------------------------------------------
Exide Corp., Sr. Notes, 10.00%,
04/15/05 26,750,000 26,081,250
- ---------------------------------------------------------------
Venture Holdings Trust, Sr.
Unsec. Gtd. Sub. Notes,
11.00%, 06/01/07 20,250,000 19,743,750
- ---------------------------------------------------------------
12.00%, 06/01/09 6,750,000 6,108,750
- ---------------------------------------------------------------
73,407,375
- ---------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO &
CABLE)-3.18%
Charter Communications Holdings,
LLC/ Charter Communications
Holdings Capital Corp., Sr.
Unsec. Disc. Notes, 9.92%,
04/01/11(b) 21,120,000 12,487,200
- ---------------------------------------------------------------
Fox Family Worldwide, Inc., Sr.
Unsec. Disc. Notes, 10.25%,
11/01/07(b) 33,250,000 21,945,000
- ---------------------------------------------------------------
Knology Holdings, Inc., Sr. Disc.
Notes, 11.88%, 10/15/07(b) 39,305,000 26,432,612
- ---------------------------------------------------------------
Pegasus Communications
Corp.-Series A, Sr. Sub. Notes,
12.50%, 08/01/07(a) 17,500,000 19,162,500
- ---------------------------------------------------------------
United Pan-Europe Communications
N.V. (Netherlands), Sr. Disc.
Notes, 13.38%, 11/01/09(a)(b) 30,000,000 16,950,000
- ---------------------------------------------------------------
96,977,312
- ---------------------------------------------------------------
BUILDING MATERIALS-0.89%
Blount Inc., Sr. Sub Notes,
13.00%, 08/01/09(a) 22,000,000 23,320,000
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
BUILDING MATERIALS-(CONTINUED)
Imperial Home Decor Group-Series
B, Sr. Unsec. Gtd. Sub. Notes,
11.00%, 03/15/08(c) $19,100,000 $ 3,724,500
- ---------------------------------------------------------------
27,044,500
- ---------------------------------------------------------------
CHEMICALS (DIVERSIFIED)-1.57%
Sterling Chemicals, Inc.-Series
B, Sr. Gtd. Sec. Sub. Notes,
12.38%, 07/15/06 16,500,000 17,160,000
- ---------------------------------------------------------------
Texas Petrochemical Corp., Sr.
Unsec. Sub. Notes, 11.13%,
07/01/06 17,980,000 15,732,500
- ---------------------------------------------------------------
ZSC Specialty Chemicals PLC
(United Kingdom), Sr. Gtd.
Unsub. Notes, 11.00%,
07/01/09(a) 14,500,000 15,080,000
- ---------------------------------------------------------------
47,972,500
- ---------------------------------------------------------------
CHEMICALS (SPECIALTY)-1.03%
Key Plastics Holdings,
Inc.-Series B, Sr. Unsec. Gtd.
Sub. Notes, 10.25%, 03/15/07 23,770,000 9,151,450
- ---------------------------------------------------------------
Trans-Resources, Inc.-
Series B, Sr. Unsec. Disc.
Notes, 12.00%, 03/15/08(b) 11,750,000 5,463,750
- ---------------------------------------------------------------
Series B, Sr. Unsec. Notes,
10.75%, 03/15/08 19,000,000 17,005,000
- ---------------------------------------------------------------
31,620,200
- ---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-1.45%
Dialog Corp. PLC-Series A (United
Kingdom), Sr. Sub. Yankee
Notes, 11.00%, 11/15/07 26,250,000 12,731,250
- ---------------------------------------------------------------
GST Network Funding, Inc., Sr.
Sec. Disc. Notes, 10.50%,
05/01/08(b) 36,450,000 17,769,375
- ---------------------------------------------------------------
ProNet Inc., Sr. Sub. Notes,
11.88%, 06/15/05 20,000,000 13,700,000
- ---------------------------------------------------------------
44,200,625
- ---------------------------------------------------------------
COMPUTERS (NETWORKING)-1.46%
Convergent Communications-Series
B, Sr. Unsec. Notes, 13.00%,
04/01/08 33,500,000 25,292,500
- ---------------------------------------------------------------
Exodus Communications, Inc., Sr.
Unsec. Notes, 11.25%, 07/01/08 18,425,000 19,208,062
- ---------------------------------------------------------------
44,500,562
- ---------------------------------------------------------------
COMPUTERS (PERIPHERALS)-1.21%
Equinix Inc., Sr. Notes, 13.00%,
12/01/07(a)(d) 16,690,000 17,315,875
- ---------------------------------------------------------------
Metal Management, Inc., Sr.
Unsec. Gtd. Sub. Notes, 10.00%,
05/15/08 25,500,000 19,635,000
- ---------------------------------------------------------------
36,950,875
- ---------------------------------------------------------------
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
COMPUTERS (SOFTWARE &
SERVICES)-2.13%
Cybernet Internet Services
International, Inc.,
Conv. Unsec. Sub. Notes,
13.00%, 08/15/09(a)(b) $11,250,000 $ 6,215,625
- ---------------------------------------------------------------
Sr. Notes, 14.00%, 07/01/09 24,000,000 21,000,000
- ---------------------------------------------------------------
Earthwatch Inc.,
Sr. Disc. Notes, 13.00%,
07/15/07 (Acquired 07/07/99;
Cost $24,705,502)(b)(d)(e) 34,000,000 23,800,000
- ---------------------------------------------------------------
Sr. Notes, 12.50%, 03/01/05
(Acquired 03/14/97-09/01/99;
Cost $15,500,000)(e) 22,320,000 13,894,200
- ---------------------------------------------------------------
64,909,825
- ---------------------------------------------------------------
CONSTRUCTION (CEMENT &
AGGREGATES)-0.50%
Schuff Steel Co., Sr. Unsec. Gtd.
Sub. Notes, 10.50%, 06/01/08 18,550,000 15,211,000
- ---------------------------------------------------------------
DISTRIBUTORS (FOOD &
HEALTH)-0.85%
Fleming Companies, Inc.-Series B,
Sr. Unsec. Gtd. Sub. Notes,
10.63%, 07/31/07 28,700,000 26,045,250
- ---------------------------------------------------------------
FOODS-1.35%
Vlasic Foods International
Inc.-Series B, Sr. Unsec. Sub.
Notes, 10.25%, 07/01/09 23,500,000 22,501,250
- ---------------------------------------------------------------
Volume Services America Inc., Sr.
Unsec. Gtd. Sub. Notes, 11.25%,
03/01/09 19,000,000 18,810,000
- ---------------------------------------------------------------
41,311,250
- ---------------------------------------------------------------
GAMING, LOTTERY & PARIMUTUEL
COMPANIES-1.96%
Resort at Summerlin LP-Series B,
Sr. Unsec. Sub. Notes, 13.00%,
12/15/07 32,609,000 22,989,345
- ---------------------------------------------------------------
Venetian Casino Resort LLC, Sec.
Gtd. Mortgage Notes, 12.25%,
11/15/04 42,200,000 37,030,500
- ---------------------------------------------------------------
60,019,845
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC &
OTHER)-1.27%
Biovail Corp. International, Sr.
Notes, 10.88%, 11/15/05 16,875,000 17,803,125
- ---------------------------------------------------------------
King Pharmaceuticals, Inc., Sr.
Unsec. Gtd. Sub. Notes, 10.75%,
02/15/09 19,570,000 20,842,050
- ---------------------------------------------------------------
38,645,175
- ---------------------------------------------------------------
HEALTH CARE (HOSPITAL
MANAGEMENT)-0.62%
Triad Hospitals Holdings
Inc.-Series B, Sr. Unsec. Gtd.
Sub. Notes, 11.00%, 05/15/09 18,320,000 19,052,800
- ---------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-0.58%
DJ Orthopedics, Corp., Sr. Unsec.
Gtd. Sub. Notes, 12.63%,
06/15/09 18,000,000 17,730,000
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
HEALTH CARE (SPECIALIZED
SERVICES)-0.54%
Team Health, Inc., Sr. Sub.
Notes, 12.00%, 03/15/09(a) $16,930,000 $ 16,591,400
- ---------------------------------------------------------------
HOMEBUILDING-0.54%
D.R. Horton, Inc., Unsec. Gtd.
Sub. Notes, 10.00%, 04/15/06 16,105,000 16,507,625
- ---------------------------------------------------------------
HOUSEHOLD FURNISHING &
APPLIANCES-2.10%
Falcon Products, Inc.-Series B,
Sr. Unsec. Gtd. Sub. Notes,
11.38%, 06/15/09 22,500,000 21,712,500
- ---------------------------------------------------------------
O'Sullivan Industries Inc., Sr.
Sub. Notes, 13.38%,
10/15/09(a)(d) 21,000,000 20,947,500
- ---------------------------------------------------------------
Winsloew Furniture, Inc., Sr.
Sub. Notes, 12.75%, 08/15/07(a) 23,870,000 21,483,000
- ---------------------------------------------------------------
64,143,000
- ---------------------------------------------------------------
HOUSEWARES-0.56%
Decora Industries, Inc.-Series B,
Sr. Sec. Gtd. Notes, 11.00%,
05/01/05 21,370,000 17,202,850
- ---------------------------------------------------------------
IRON & STEEL-1.06%
Acme Metal Inc., Sr. Unsec. Gtd.
Notes, 10.88%, 12/15/07(c) 28,939,000 5,932,495
- ---------------------------------------------------------------
GS Technologies Operating Co.,
Inc., Sr. Gtd. Notes, 12.00%,
09/01/04 21,755,000 10,116,075
- ---------------------------------------------------------------
Sheffield Steel Corp.-Series B,
First Mortgage Notes, 11.50%,
12/01/05 19,100,000 16,330,500
- ---------------------------------------------------------------
32,379,070
- ---------------------------------------------------------------
LEISURE TIME (PRODUCTS)-0.90%
Marvel Enterprises, Inc., Sr.
Unsec. Gtd. Sub. Notes, 12.00%,
06/15/09 29,375,000 27,465,625
- ---------------------------------------------------------------
LODGING-HOTELS-0.37%
Stena Line A.B. (Sweden), Sr.
Unsec. Yankee Notes, 10.63%,
06/01/08 18,680,000 11,301,400
- ---------------------------------------------------------------
MACHINERY (DIVERSIFIED)-0.66%
National Equipment
Services-Series B, Sr. Unsec.
Sub. Notes, 10.00%, 11/30/04 20,000,000 20,150,000
- ---------------------------------------------------------------
MANUFACTURING (DIVERSIFIED)-1.47%
Anthony Crane Rentals LP-Series
B, Sr. Unsec. Gtd. Sub. Notes,
10.38%, 08/01/08 21,085,000 17,816,825
- ---------------------------------------------------------------
Glenoit Corp., Sr. Unsec. Gtd.
Sub. Notes, 11.00%, 04/15/07 24,915,000 6,353,325
- ---------------------------------------------------------------
Jordan Industries, Inc.-Series D,
Sr. Unsec. Notes, 10.38%,
08/01/07 20,500,000 20,602,500
- ---------------------------------------------------------------
44,772,650
- ---------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-5.24%
Berry Plastics Corp.,
Sr. Gtd. Sub. Notes, 12.25%,
04/15/04(d) 13,000,000 13,390,000
- ---------------------------------------------------------------
Series B, Sr. Sub. Notes,
12.25%, 04/15/04(a) 4,750,000 4,892,500
- ---------------------------------------------------------------
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
MANUFACTURING (SPECIALIZED)-(CONTINUED)
Brand Scaffold Services, Inc.,
Sr. Unsec. Notes, 10.25%,
02/15/08 $22,800,000 $ 20,748,000
- ---------------------------------------------------------------
Derby Cycle Corp. (The), Sr.
Unsec. Notes, 10.00%, 05/15/08 18,955,000 10,899,125
- ---------------------------------------------------------------
First Wave Marine, Inc., Sr.
Unsec. Gtd. Sub. Notes, 11.00%,
02/01/08 22,835,000 15,870,325
- ---------------------------------------------------------------
Globe Manufacturing Corp.-Series
B, Sr. Unsec. Gtd. Sub. Notes,
10.00%, 08/01/08 17,050,000 8,269,250
- ---------------------------------------------------------------
Knowles Electronics, Inc., Sr.
Sub. Notes, 13.13%, 10/15/09(a) 25,000,000 24,375,000
- ---------------------------------------------------------------
MMI Products, Inc.-Series B, Sr.
Unsec. Sub. Notes, 11.25%,
04/15/07 19,140,000 19,809,900
- ---------------------------------------------------------------
Neenah Corp.
Series B, Sr. Sub. Notes,
11.13%, 05/01/07 4,000,000 3,720,000
- ---------------------------------------------------------------
Series D, Sr. Sub. Notes,
11.13%, 05/01/07 15,000,000 13,950,000
- ---------------------------------------------------------------
Omega Cabinets, Sr. Sub. Notes,
10.50%, 06/15/07 23,990,000 23,990,000
- ---------------------------------------------------------------
159,914,100
- ---------------------------------------------------------------
METALS MINING-1.59%
Centaur Mining and Exploration
Ltd. (Australia), Sr. Gtd.
Yankee Notes, 11.00%, 12/01/07 28,800,000 28,656,000
- ---------------------------------------------------------------
Doe Run Resources Corp.
(The)-Series B, Sr. Unsec. Gtd.
Notes, 11.25%, 03/15/05 21,000,000 19,845,000
- ---------------------------------------------------------------
48,501,000
- ---------------------------------------------------------------
NATURAL GAS-0.40%
Western Gas Resources, Inc., Sr.
Unsec. Gtd. Sub. Notes, 10.00%,
06/15/09 12,000,000 12,360,000
- ---------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES-0.76%
Global Imaging Systems, Inc., Sr.
Unsec. Gtd. Sub. Notes, 10.75%,
02/15/07 23,800,000 23,086,000
- ---------------------------------------------------------------
OIL & GAS (DRILLING &
EQUIPMENT)-0.50%
Pride International, Inc., Sr.
Unsec. Notes, 10.00%, 06/01/09 14,735,000 15,287,562
- ---------------------------------------------------------------
OIL & GAS (EXPLORATION &
PRODUCTION)-3.10%
Abraxas Petroleum Corp.,
Sr. Unsec. Gtd. Notes, 11.50%,
11/01/04 8,644,300 7,823,092
- ---------------------------------------------------------------
Series B, Sr. Sec. Gtd. Notes,
12.88%, 03/15/03 14,000,000 14,560,000
- ---------------------------------------------------------------
Comstock Resources, Inc., Sr.
Unsec. Gtd. Sub. Notes, 11.25%,
05/01/07 18,775,000 19,338,250
- ---------------------------------------------------------------
Frontier Oil Corp., Sr. Unsec.
Notes, 11.75%, 11/15/09 28,000,000 27,720,000
- ---------------------------------------------------------------
Pogo Producing Co.-Series B, Sr.
Unsec. Sub. Notes, 10.38%,
02/15/09 18,335,000 18,976,725
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
OIL & GAS (EXPLORATION &
PRODUCTION)-(CONTINUED)
Queen Sand Resources, Inc., Sr.
Unsec. Gtd. Sub. Notes, 12.50%,
07/01/08 $13,145,000 $ 6,375,325
- ---------------------------------------------------------------
94,793,392
- ---------------------------------------------------------------
PERSONAL CARE-0.67%
American Tissue Inc., Sr. Sec.
Notes, 12.50%, 07/15/06(a) 20,150,000 20,603,375
- ---------------------------------------------------------------
PHOTOGRAPHY/IMAGING-0.66%
Polaroid Corp., Sr. Unsec. Notes,
11.50%, 02/15/06 20,120,000 20,019,400
- ---------------------------------------------------------------
POWER PRODUCERS
(INDEPENDENT)-0.68%
Panda Funding Corp., Series A-1,
Pooled Project Bonds, 11.63%,
08/20/12 20,566,149 20,668,980
- ---------------------------------------------------------------
RAILROADS-1.80%
RailWorks Corp., Sr. Unsec. Gtd.
Sub. Notes, 11.50%, 04/15/09 25,500,000 25,946,250
- ---------------------------------------------------------------
TFM S.A. de C.V. (Mexico), Sr.
Yankee Gtd. Disc. Notes,
11.75%, 06/15/09(b) 45,000,000 29,025,000
- ---------------------------------------------------------------
54,971,250
- ---------------------------------------------------------------
RESTAURANTS-0.56%
AFC Enterprises, Sr. Unsec. Sub.
Notes, 10.25%, 05/15/07 16,990,000 17,159,900
- ---------------------------------------------------------------
RETAIL (FOOD CHAINS)-1.22%
Cumberland Farms, Inc.-Series
11A, Sec. Notes, 10.50%,
10/01/03 16,207,000 15,923,378
- ---------------------------------------------------------------
Stater Brothers Holdings Inc.,
Sr. Notes, 10.75%, 08/15/06 21,000,000 21,367,500
- ---------------------------------------------------------------
37,290,878
- ---------------------------------------------------------------
RETAIL (GENERAL
MERCHANDISE)-0.43%
Plainwell Inc.-Series B, Sr.
Unsec. Sub. Notes, 11.00%,
03/01/08 24,905,000 13,075,125
- ---------------------------------------------------------------
RETAIL (SPECIALTY)-2.93%
Cabot Safety Corp., Sr. Sub.
Notes, 12.50%, 07/15/05 14,975,000 15,349,375
- ---------------------------------------------------------------
CSK Auto Inc.-Series A, Sr. Gtd.
Sub. Deb, 11.00%, 11/01/06 15,245,000 15,549,900
- ---------------------------------------------------------------
Neff Corp., Sr. Unsec. Gtd. Sub.
Notes, 10.25%, 06/01/08 27,650,000 26,712,625
- ---------------------------------------------------------------
Rent-A-Center, Inc., Sr. Unsec.
Gtd. Sub. Notes, 11.00%,
08/15/08 23,060,000 23,809,450
- ---------------------------------------------------------------
Vista Eyecare, Inc.-Series B, Sr.
Unsec. Gtd. Sub. Notes, 12.75%,
10/15/05 19,700,000 7,978,500
- ---------------------------------------------------------------
89,399,850
- ---------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-1.27%
Big 5 Corp.-Series B, Sr. Unsec.
Notes, 10.88%, 11/15/07 17,315,000 17,141,850
- ---------------------------------------------------------------
GFSI Holdings, Inc.-Series B, Sr.
Disc. Notes, 11.38%,
09/15/09(b) 20,000,000 6,100,000
- ---------------------------------------------------------------
</TABLE>
7
<PAGE> 10
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
RETAIL (SPECIALTY-APPAREL)-(CONTINUED)
J Crew Operating Corp., Sr. Sub.
Notes, 10.38%, 10/15/07 $18,245,000 $ 15,417,025
- ---------------------------------------------------------------
38,658,875
- ---------------------------------------------------------------
SERVICES
(ADVERTISING/MARKETING)-1.00%
Dimac Corp., Sr. Sub. Notes,
12.50%, 10/01/08(a) 25,000,000 9,375,000
- ---------------------------------------------------------------
MDC Communications Corp.
(Canada), Sr. Unsec. Sub.
Yankee Notes, 10.50%, 12/01/06 21,470,000 21,308,975
- ---------------------------------------------------------------
30,683,975
- ---------------------------------------------------------------
SERVICES (COMMERCIAL &
CONSUMER)-1.88%
Avis Rent A Car, Inc., Sr. Unsec.
Gtd. Sub. Notes, 11.00%,
05/01/09 21,150,000 22,313,250
- ---------------------------------------------------------------
Coinmach Corp.-Series D, Sr.
Unsec. Notes, 11.75%, 11/15/05 22,185,000 22,961,475
- ---------------------------------------------------------------
Hydrochem Industrial Service
Co.-Series B, Sr. Gtd. Sub.
Notes, 10.38%, 08/01/07 14,055,000 12,122,438
- ---------------------------------------------------------------
57,397,163
- ---------------------------------------------------------------
SERVICES (EMPLOYMENT)-0.66%
MSX International, Inc., Sr.
Unsec. Gtd. Sub. Notes, 11.38%,
01/15/08 21,130,000 20,284,800
- ---------------------------------------------------------------
SHIPPING-0.37%
Millenium Seacarriers, Sr. Sec.
Gtd. Mortgage Notes, 12.00%,
07/15/05 19,900,000 11,442,500
- ---------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/
WIRELESS)-8.53%
Clearnet Communications, Inc.
(Canada), Sr. Unsec. Disc.
Yankee Notes, 14.75%,
12/15/05(b)(d) 18,860,000 18,671,400
- ---------------------------------------------------------------
Crown Castle International Corp.,
Sr. Unsec. Disc. Notes, 10.63%,
11/15/07(b) 22,844,000 17,475,660
- ---------------------------------------------------------------
KMC Telecom Holdings, Inc., Sr.
Notes, 13.50%, 05/15/09(a) 18,000,000 18,090,000
- ---------------------------------------------------------------
Loral Space & Communications
Ltd., Sr. Gtd. Sub. Notes,
11.25%, 01/15/07(d) 23,000,000 17,365,000
- ---------------------------------------------------------------
Microcell Telecommunications,
Inc.- Series B, (Canada), Sr.
Disc. Yankee Notes, 14.00%,
06/01/06(b) 29,530,000 26,281,700
- ---------------------------------------------------------------
Nextel Communications, Inc.,
Sr. Unsec. Notes, 12.00%,
11/01/08 29,040,000 32,670,000
- ---------------------------------------------------------------
Sr. Unsec. Disc. Notes, 12.13%,
04/15/08(b) 37,500,000 22,297,875
- ---------------------------------------------------------------
Powertel, Inc., Sr. Unsec. Disc.
Notes, 12.00%, 05/01/06(b) 38,000,000 33,751,220
- ---------------------------------------------------------------
Spectrasite Holdings, Inc.,
Sr. Disc. Notes, 12.00%,
07/15/08(b) 30,300,000 18,180,000
- ---------------------------------------------------------------
Sr. Unsec. Disc. Notes, 11.25%,
04/15/09(b) 21,230,000 11,464,200
- ---------------------------------------------------------------
WebLink Wireless, Inc., Sr. Disc.
Sub. Notes, 11.25%, 02/01/08(b) 38,640,000 13,717,200
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
TELECOMMUNICATIONS
(CELLULAR/WIRELESS)-(CONTINUED)
Worldwide Fiber Inc. (Canada),
Sr. Notes,
12.50%, 12/15/05(a) $12,065,000 $ 12,728,575
- ---------------------------------------------------------------
12.00%, 08/01/09(a) 17,210,000 17,855,375
- ---------------------------------------------------------------
260,548,205
- ---------------------------------------------------------------
TELECOMMUNICATIONS (LONG
DISTANCE)-8.22%
Destia Communications, Inc., Sr.
Unsec. Notes, 13.50%, 07/15/07 20,200,000 21,462,500
- ---------------------------------------------------------------
Esprit Telecom Group PLC (United
Kingdom), Sr. Unsec. Yankee
Notes, 11.50%, 12/15/07 19,500,000 19,890,000
- ---------------------------------------------------------------
FirstCom Corp., Sr. Notes,
14.00%, 10/27/07 30,990,000 31,997,175
- ---------------------------------------------------------------
Long Distance International,
Inc., Sr. Unsec. Notes, 12.25%,
04/15/08 26,290,000 15,313,925
- ---------------------------------------------------------------
Primus Telecommunications Group,
Inc., Sr. Sec. Notes, 11.75%,
08/01/04(d) 20,000,000 20,300,000
- ---------------------------------------------------------------
RSL Communications PLC (United
Kingdom),
Sr. Unsec. Gtd. Yankee Notes,
12.00%, 11/01/08 14,500,000 14,681,250
- ---------------------------------------------------------------
Sr. Unsec. Yankee Gtd. Notes,
9.88%, 11/15/09 7,000,000 6,317,500
- ---------------------------------------------------------------
Sr. Yankee Gtd. Notes, 12.25%,
11/15/06 15,134,000 15,512,350
- ---------------------------------------------------------------
Versatel Telecom International
N.V. (Netherlands),
Sr. Notes, 13.25%, 05/15/08 20,250,000 21,667,500
- ---------------------------------------------------------------
Sr. Unsec. Notes, 13.25%,
05/15/08 14,810,000 15,846,700
- ---------------------------------------------------------------
Viatel, Inc.,
Sr. Notes, 11.50%, 03/15/09(a) 33,417,680 34,086,034
- ---------------------------------------------------------------
Sr. Sec. Notes, 11.25%,
04/15/08 33,500,000 33,835,000
- ---------------------------------------------------------------
250,909,934
- ---------------------------------------------------------------
TELEPHONE-7.52%
AirGate PCS Inc., Sr. Sub. Notes,
13.50%, 10/01/09(b)(d) 28,400,000 15,904,000
- ---------------------------------------------------------------
Alestra S.A. (Mexico), Sr. Notes,
12.13%, 05/15/06(a) 15,000,000 15,187,500
- ---------------------------------------------------------------
12.63%, 05/15/09(a) 9,500,000 9,595,000
- ---------------------------------------------------------------
Esat Telecom Group PLC (Ireland),
Sr. Yankee Notes, 12.50%,
02/01/07(b) 25,530,000 21,828,150
- ---------------------------------------------------------------
ICG Services, Inc., Sr. Unsec.
Disc. Notes, 10.00%,
02/15/08(b) 79,650,000 42,967,989
- ---------------------------------------------------------------
Logix Communications Enterprises,
Sr. Unsec. Notes, 12.25%,
06/15/08 53,750,000 42,059,375
- ---------------------------------------------------------------
NEXTLINK Communications, Inc.,
Sr. Disc. Notes, 12.13%,
12/01/09(a)(b) 23,500,000 13,806,250
- ---------------------------------------------------------------
Sr. Unsec. Disc. Notes, 12.25%,
06/01/09(b) 25,855,000 16,030,100
- ---------------------------------------------------------------
PTC International Finance II SA
(Luxembourg), Sr. Gtd. Sub.
Notes, 11.25%, 12/01/09
(Acquired 11/16/99; Cost
$11,232,192)(e) 11,400,000 11,457,000
- ---------------------------------------------------------------
U.S. Xchange LLC, Sr. Unsec.
Notes, 15.00%, 07/01/08 42,500,000 40,906,250
- ---------------------------------------------------------------
229,741,614
- ---------------------------------------------------------------
</TABLE>
8
<PAGE> 11
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
TEXTILES (APPAREL)-2.40%
Cherokee International LCC-Series
B, Sr. Unsec. Sub. Notes,
10.50%, 05/01/09 $22,600,000 $ 20,001,000
- ---------------------------------------------------------------
Panolam Industries International,
Sr. Sub. Notes, 11.50%,
02/15/09(a) 18,330,000 18,834,075
- ---------------------------------------------------------------
Perry Ellis International,
Inc.-Series B, Sr. Unsec. Gtd.
Sub. Notes, 12.25%, 04/01/06 22,550,000 22,662,750
- ---------------------------------------------------------------
St. John Knits International,
Inc., Sr. Sub. Notes, 12.50%,
07/01/09(a) 13,400,000 11,892,500
- ---------------------------------------------------------------
73,390,325
- ---------------------------------------------------------------
TRUCKERS-0.51%
Travelcenters of America, Inc.,
Sr. Unsec. Gtd. Sub. Notes,
10.25%, 04/01/07 15,530,000 15,530,000
- ---------------------------------------------------------------
TRUCKS & PARTS-1.49%
FleetPride Inc., Sr. Unsec. Gtd.
Sub. Notes, 12.00%, 08/01/05 22,400,000 20,496,000
- ---------------------------------------------------------------
North American Van Lines, Inc.,
Sr. Sub. Notes, 13.38%,
12/01/09(a) 25,000,000 25,125,000
- ---------------------------------------------------------------
45,621,000
- ---------------------------------------------------------------
WASTE MANAGEMENT-1.65%
Allied Waste North America Inc.,
Sr. Sub Notes, 10.00%,
08/01/09(a) 56,250,000 50,343,750
- ---------------------------------------------------------------
Total U.S. Dollar Denominated
Corporate Bonds & Notes
(Cost $3,091,978,086) 2,779,802,152
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
COMMON STOCKS & OTHER EQUITY
INTERESTS-2.62%
BROADCASTING (TELEVISION, RADIO &
CABLE)-0.19%
UnitedGlobalCom Inc.-Class A(f) 83,896 5,925,155
- ---------------------------------------------------------------
COMPUTERS (NETWORKING)-0.09%
Convergent Communications,
Inc.(f) 179,280 2,846,070
- ---------------------------------------------------------------
OIL & GAS (EXPLORATION &
PRODUCTION)-0.02%
Abraxas Petroleum Corp.(f) 736,228 690,213
- ---------------------------------------------------------------
REAL ESTATE INVESTMENT
TRUSTS-0.02%
Meditrust Cos. 89,907 494,488
- ---------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/
WIRELESS)-0.86%
Celcaribe S.A., Ordinary Trust
Ctfs. (Acquired
05/17/94-01/23/97; Cost
$0)(e)(f) 2,276,400 3,983,700
- ---------------------------------------------------------------
Clearnet Communications
Inc.-Class A-ADR (Canada)(f) 100,716 3,462,112
- ---------------------------------------------------------------
Loral Space & Communications Ltd. 21,676 526,998
- ---------------------------------------------------------------
Microcell Telecommunications,
Inc. (Canada)(f) 253,257 8,325,824
- ---------------------------------------------------------------
Nextel Communications, Inc.-Class
A(f) 52,195 5,382,609
- ---------------------------------------------------------------
Powertel, Inc.(f) 45,663 4,583,424
- ---------------------------------------------------------------
26,264,667
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TELECOMMUNICATIONS (LONG
DISTANCE)-1.33%
FirstCom Corp.(f) 804,650 $ 29,570,888
- ---------------------------------------------------------------
Primus Telecommunications Group,
Inc.(f) 34,902 1,335,002
- ---------------------------------------------------------------
RSL Communications PLC-Class A
(United Kingdom)(f) 179,445 3,072,989
- ---------------------------------------------------------------
Viatel, Inc.(f) 121,387 6,509,378
- ---------------------------------------------------------------
40,488,257
- ---------------------------------------------------------------
TELEPHONE-0.11%
ICG Communications, Inc.(f) 39,600 742,500
- ---------------------------------------------------------------
Intermedia Communications Inc.(f) 69,657 2,703,562
- ---------------------------------------------------------------
3,446,062
- ---------------------------------------------------------------
Total Common Stocks & Other
Equity Interests (Cost
$11,155,019) 80,154,912
- ---------------------------------------------------------------
PREFERRED STOCKS-1.76%
COMPUTERS (SOFTWARE &
SERVICES)-0.06%
Earthwatch Inc.-Series C, $1.20
Conv. Pfd. (Acquired 03/14/97;
Cost $4,824)(e) 103,236 1,884,057
- ---------------------------------------------------------------
SHIPPING-0.05%
Pegasus Shipping Hellas Co.-Pfd.
(Bermuda) (Acquired 06/24/98;
Cost $7,461,000)(e) 15,000 1,425,000
- ---------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/
WIRELESS)-1.65%
Dobson Communications
Corp.-$122.50 PIK Pfd. 21,435 21,702,598
- ---------------------------------------------------------------
Nextel Communications,
Inc.-Series E, $111.25 PIK Pfd. 28,493 28,777,930
- ---------------------------------------------------------------
50,480,528
- ---------------------------------------------------------------
Total Preferred Stocks (Cost
$49,098,015) 53,789,585
- ---------------------------------------------------------------
RIGHTS & WARRANTS-0.74%
BROADCASTING (TELEVISION, RADIO &
CABLE)-0.01%
Knology Inc., expiring 10/22/07
(Acquired 03/12/98; Cost
$0)(e)(g) 47,250 129,938
- ---------------------------------------------------------------
Wireless One, Inc., expiring
10/19/00(g) 37,560 0
- ---------------------------------------------------------------
129,938
- ---------------------------------------------------------------
CHEMICALS (DIVERSIFIED)-0.01%
Sterling Chemicals Holdings,
expiring 08/15/08(g) 7,500 120,000
- ---------------------------------------------------------------
COMPUTERS (SOFTWARE &
SERVICES)-0.06%
Cybernet Internet Services
International, Inc., expiring
07/01/09 (Acquired 10/18/99;
Cost $0)(e)(g) 23,000 1,845,750
- ---------------------------------------------------------------
ELECTRICAL EQUIPMENT-0.00%
Electronic Retailing Systems
International, Inc., expiring
02/01/04(g) 18,802 18,802
- ---------------------------------------------------------------
</TABLE>
9
<PAGE> 12
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
GAMING, LOTTERY & PARIMUTUEL
COMPANIES-0.00%
Resort At Summerlin LP, expiring
12/15/07(g) 26,889 $ 269
- ---------------------------------------------------------------
HEALTH CARE (HOSPITAL
MANAGEMENT)-0.01%
Republic Health Corp., expiring
04/03/00(g) 17,500 315,000
- ---------------------------------------------------------------
HOUSEHOLD FURNISHING &
APPLIANCES-0.04%
Winsloew Furniture, Inc.,
expiring 08/15/07 (Acquired
12/06/99; Cost $0)(e)(g) 23,870 1,193,500
- ---------------------------------------------------------------
IRON & STEEL-0.00%
Bar Technologies, Inc., expiring
04/01/01(g) 6,000 120,000
- ---------------------------------------------------------------
METAL FABRICATORS-0.00%
Gulf States Steel, Inc., expiring
04/15/03(g) 15,990 160
- ---------------------------------------------------------------
OIL & GAS (EXPLORATION &
PRODUCTION)-0.00%
Abraxas Petroleum Corp.-Rts.(g) 736,228 0
- ---------------------------------------------------------------
SHIPPING-0.00%
Millenium Seacarriers, expiring
07/15/03(g) 19,900 24,875
- ---------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/
WIRELESS)-0.01%
Cellnet Data System, expiring
10/01/07 (Acquired
09/24/97-10/15/97; Cost
$0)(e)(g) 10,000 2,600
- ---------------------------------------------------------------
Nextel International, Inc.,
expiring 04/15/07(g) 39,500 325,875
- ---------------------------------------------------------------
328,475
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TELECOMMUNICATIONS (LONG
DISTANCE)-0.46%
Long Distance International,
Inc., expiring 04/13/08(g) 25,610 $ 64,025
- ---------------------------------------------------------------
Versatel Telecom International
N.V. (Netherlands), expiring
05/15/08 (Acquired
05/20/98-05/24/99; Cost
$1,654)(e)(g) 35,060 14,032,765
- ---------------------------------------------------------------
14,096,790
- ---------------------------------------------------------------
TELEPHONE-0.14%
AirGate PCS Inc., expiring
10/01/09(g) 28,400 2,485,000
- ---------------------------------------------------------------
Esat Telecom Group PLC (Ireland),
expiring 02/01/07 (Acquired
06/16/97; Cost $0)(e)(g) 25,530 1,850,925
- ---------------------------------------------------------------
4,335,925
- ---------------------------------------------------------------
Total Rights & Warrants (Cost
$711,621) 22,529,484
- ---------------------------------------------------------------
MONEY MARKET FUNDS-2.12%
STIC Liquid Assets Portfolio(h) 32,367,437 32,367,437
- ---------------------------------------------------------------
STIC Prime Portfolio(h) 32,367,437 32,367,437
- ---------------------------------------------------------------
Total Money Market Funds
(Cost $64,734,875) 64,734,874
- ---------------------------------------------------------------
TOTAL INVESTMENTS-98.26% (Cost
$3,217,677,616) 3,001,011,007
- ---------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-1.74% 53,028,747
- ---------------------------------------------------------------
NET ASSETS-100.00% $3,054,039,754
===============================================================
</TABLE>
Investment Abbreviations:
ADR - American Depositary Receipt
Conv. - Convertible
Ctfs. - Certificates
Disc. - Discounted
Gtd. - Guaranteed
Pfd. - Preferred
PIK - Payment in Kind
Rts. - Rights
Sec. - Secured
Sr. - Senior
Sub. - Subordinated
Unsec. - Unsecured
Notes to Schedule of Investments:
(a) Represents a security sold under Rule 144A, which is exempt from
registration and may be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1993, as amended.
(b) Step Bond issued at a discount. The interest rate represents the coupon rate
at which the bond will accrue at a specified future date.
(c) Defaulted security. Currently, the issuer is in default with respect to a
portion of interest payments.
(d) Consists of more than one class of securities traded together as a unit. In
addition to the security listed, each unit represents shares of the issuer.
(e) 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 12/31/99 was $75,499,435 which
represents 2.47% of the Fund's net assets.
(f) Non-income producing security.
(g) Non-income producing security acquired as part of a unit with or in exchange
for other securities.
(h) The money market fund has the same investment advisor as the Fund.
See Notes to Financial Statements.
10
<PAGE> 13
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value
(cost $3,217,677,616) $3,001,011,007
- ----------------------------------------------------------
Cash 498,337
- ----------------------------------------------------------
Receivables for:
Fund shares sold 10,262,404
- ----------------------------------------------------------
Dividends and interest 72,951,666
- ----------------------------------------------------------
Investment for deferred compensation plan 86,639
- ----------------------------------------------------------
Other assets 77,473
- ----------------------------------------------------------
Total assets 3,084,887,526
- ----------------------------------------------------------
LIABILITIES:
Payables for:
Fund shares reacquired 13,289,236
- ----------------------------------------------------------
Dividends 12,542,033
- ----------------------------------------------------------
Deferred compensation plan 86,639
- ----------------------------------------------------------
Accrued advisory fees 1,268,054
- ----------------------------------------------------------
Accrued distribution fees 2,995,847
- ----------------------------------------------------------
Accrued operating expenses 665,963
- ----------------------------------------------------------
Total liabilities 30,847,772
- ----------------------------------------------------------
Net assets applicable to shares
outstanding $3,054,039,754
==========================================================
NET ASSETS:
Class A $1,364,501,549
==========================================================
Class B $1,559,863,535
==========================================================
Class C $ 129,674,670
==========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 169,182,889
==========================================================
Class B 193,343,459
==========================================================
Class C 16,110,440
==========================================================
Class A:
Net asset value and redemption price per
share $ 8.07
- ----------------------------------------------------------
Offering price per share:
(Net asset value of $8.07 divided
by 95.25%) $ 8.47
==========================================================
Class B:
Net asset value and offering price per
share $ 8.07
==========================================================
Class C:
Net asset value and offering price per
share $ 8.05
==========================================================
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 375,366,595
- ---------------------------------------------------------
Dividends 2,393,402
- ---------------------------------------------------------
Total investment income 377,759,997
- ---------------------------------------------------------
EXPENSES:
Advisory fees 16,396,698
- ---------------------------------------------------------
Administrative services fees 177,468
- ---------------------------------------------------------
Transfer agent fees -- Class A 2,097,314
- ---------------------------------------------------------
Transfer agent fees -- Class B 2,604,737
- ---------------------------------------------------------
Transfer agent fees -- Class C 193,682
- ---------------------------------------------------------
Trustees' fees 27,921
- ---------------------------------------------------------
Distribution fees -- Class A 3,885,854
- ---------------------------------------------------------
Distribution fees -- Class B 17,586,035
- ---------------------------------------------------------
Distribution fees -- Class C 1,307,654
- ---------------------------------------------------------
Other 1,526,312
- ---------------------------------------------------------
Total expenses 45,803,675
- ---------------------------------------------------------
Less: Expenses paid indirectly (175,176)
- ---------------------------------------------------------
Net expenses 45,628,499
- ---------------------------------------------------------
Net investment income 332,131,498
- ---------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES:
Net realized gain (loss) from investment
securities (269,838,431)
- ---------------------------------------------------------
Change in net unrealized appreciation of
investment securities 1,279,047
- ---------------------------------------------------------
Net gain (loss) from investment
securities (268,559,384)
- ---------------------------------------------------------
Net increase in net assets resulting from
operations $ 63,572,114
=========================================================
</TABLE>
See Notes to Financial Statements.
11
<PAGE> 14
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 332,131,498 $ 336,256,233
- ----------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities and
foreign currencies (269,838,431) (188,887,632)
- ----------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities 1,279,047 (359,473,146)
- ----------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 63,572,114 (212,104,545)
- ----------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (159,655,684) (170,021,135)
- ----------------------------------------------------------------------------------------------
Class B (165,609,472) (158,792,161)
- ----------------------------------------------------------------------------------------------
Class C (12,356,480) (6,792,770)
- ----------------------------------------------------------------------------------------------
Distributions in excess of net investment income:
Class A (520,904) --
- ----------------------------------------------------------------------------------------------
Class B (589,357) --
- ----------------------------------------------------------------------------------------------
Class C (43,823) --
- ----------------------------------------------------------------------------------------------
Return of capital:
Class A (2,837,931) --
- ----------------------------------------------------------------------------------------------
Class B (3,209,458) --
- ----------------------------------------------------------------------------------------------
Class C (239,296) --
- ----------------------------------------------------------------------------------------------
Share transactions-net:
Class A (181,118,609) 142,435,247
- ----------------------------------------------------------------------------------------------
Class B (116,020,002) 448,570,951
- ----------------------------------------------------------------------------------------------
Class C 27,659,521 101,384,122
- ----------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (550,969,381) 144,679,709
- ----------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 3,605,009,135 3,460,329,426
- ----------------------------------------------------------------------------------------------
End of period $3,054,039,754 $3,605,009,135
==============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $3,735,858,478 $4,011,736,919
- ----------------------------------------------------------------------------------------------
Undistributed net investment income (100,711) 5,490,138
- ----------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities and foreign currencies (465,051,403) (194,272,265)
- ----------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities (216,666,610) (217,945,657)
- ----------------------------------------------------------------------------------------------
$3,054,039,754 $3,605,009,135
==============================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
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 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
shares and Class C shares are sold with a contingent deferred sales charge.
Matters affecting each portfolio or class will be 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 investment 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 higher rated debt securities. High yield
bonds may be more susceptible to real
12
<PAGE> 15
or perceived adverse economic 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 the significant accounting policies followed by the
Fund in the preparation of its financial statements.
A. Security Valuations -- A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular day,
the security is valued at the closing bid price on that day. Each security
reported on 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. Debt obligations (including convertible bonds) are valued on the basis
of prices provided by an independent pricing service. Prices provided by the
pricing service may be determined without exclusive reliance on quoted
prices, and may reflect appropriate factors such as yield, type of issue,
coupon rate and maturity date. Securities for which market prices are not
provided by any of the above methods are valued based upon quotes furnished
by independent sources and are valued at the last bid price in the case of
equity securities and in the case of debt obligations, the mean between the
last bid and asked prices. Securities for which market quotations are not
readily available or are questionable are valued at fair value as determined
in good faith by or under the supervision of the 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. For purposes of determining net asset value per
share, futures and option contracts generally will be valued 15 minutes after
the close of trading of the New York Stock Exchange ("NYSE").
Generally, trading in foreign securities is substantially completed each day
at various times prior to the close of the NYSE. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the NYSE
which would not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such securities occur
during such period, then these securities will be valued at their fair value
as determined in good faith by or under the supervision of the Board of
Trustees.
B. Securities Transactions and Investment Income -- 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 ex-dividend date. On
December 31, 1999, undistributed net investment income was increased by
$7,340,058, undistributed net realized gains decreased by $940,707 and
paid-in capital was decreased by $6,399,351 as a result of differing book/tax
treatment of market discount and other reclassifications. Net assets of the
Fund were unaffected by the reclassifications.
C. Distributions -- Distributions from income are recorded on ex-dividend date,
and are declared and paid monthly. Distributions from net realized capital
gains, if any, are generally paid annually and recorded on ex-dividend date.
The Fund may elect to use a portion of the proceeds of fund share redemptions
as distributions for federal income tax purposes.
D. 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 $416,097,836 as of December 31, 1999 which may be carried
forward to offset future taxable gains, if any, which expires in varying
increments, if not previously utilized, in the year 2007.
E. Expenses -- Distribution expenses 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% on
the first $200 million of the Fund's average daily net assets, plus 0.55% on the
next $300 million of the Fund's average daily net assets, plus 0.50% on the next
$500 million of the Fund's average daily net assets, plus 0.45% on 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. For the year ended December 31, 1999, AIM was
paid $177,468 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. For the year ended December 31, 1999, AFS was
paid $2,941,102 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 plans
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A
shares, Class B shares and Class C shares (collectively the "Plans"). The Fund,
pursuant
13
<PAGE> 16
to the Plans, pays AIM Distributors compensation at the annual rate of 0.25% of
the Fund's average daily net assets of Class A shares and 1.00% of the average
daily net assets of Class B and C 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. For the year ended December 31,
1999, the Class A, Class B and Class C shares paid AIM Distributors $3,885,854,
$17,586,035 and $1,307,654, respectively, as compensation under the Plans.
AIM Distributors received commissions of $800,330 from sales of the Class A
shares of the Fund during the year ended December 31, 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 year ended December 31, 1999,
AIM Distributors received $423,986 in contingent deferred sales charges imposed
on redemptions of Fund shares.
Certain officers and trustees of the Trust are officers and directors of AIM,
AFS and AIM Distributors.
During the year ended December 31, 1999, the Fund paid legal fees of $9,734
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3-INDIRECT EXPENSES
During the year ended December 31, 1999, the Fund received reductions in
transfer agency fees from AFS (an affiliate of AIM) and reductions in custodian
fees of $39,420 and $135,756, respectively, under expense offset arrangements.
The effect of the above arrangements resulted in a reduction of the Fund's total
expenses of $175,176 during the year ended December 31, 1999.
NOTE 4-TRUSTEES' FEES
Trustees' fees represent remuneration paid to trustees who are not an
"interested person" of AIM. The Trust invests 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) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. During the year
ended December 31, 1999, the Fund did not borrow under the line of credit
agreement. The funds which are party to the line of credit are charged a
commitment fee of 0.09% on the unused balance of the committed line. Prior to
May 28, 1999, the commitment fee rate was 0.05%. The commitment fee is allocated
among the funds based on their respective average net assets for the period.
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended December 31, 1999 was
$2,588,655,750 and $2,726,847,749, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of December 31, 1999 was as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $ 146,029,538
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (368,443,665)
- ---------------------------------------------------------
Net unrealized appreciation (depreciation)
of investment securities $(222,414,127)
=========================================================
</TABLE>
Cost of investments for tax purposes is $3,223,425,134.
NOTE 7-SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 1999 and 1998
were as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------------ ------------------------------
SHARES AMOUNT SHARES AMOUNT
------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C>
Sold:
Class A 87,500,179 $ 744,553,292 113,312,954 $ 1,099,027,598
- --------------------------------------------------------------------------------------
Class B 46,805,949 400,392,138 81,983,594 793,346,240
- --------------------------------------------------------------------------------------
Class C 10,550,688 89,612,238 31,084,188 309,774,327
- --------------------------------------------------------------------------------------
Issued as
reinvestment of
dividends:
Class A 12,419,332 104,772,227 11,706,241 112,173,341
- --------------------------------------------------------------------------------------
Class B 10,055,937 84,833,641 8,418,057 80,427,189
- --------------------------------------------------------------------------------------
Class C 975,391 8,192,752 480,845 4,500,556
- --------------------------------------------------------------------------------------
Reacquired:
Class A (121,294,314) (1,030,444,128) (110,296,515) (1,068,765,692)
- --------------------------------------------------------------------------------------
Class B (71,318,813) (601,245,781) (44,848,230) (425,202,478)
- --------------------------------------------------------------------------------------
Class C (8,365,761) (70,145,469) (21,196,339) (212,890,761)
- --------------------------------------------------------------------------------------
(32,671,412) $ (269,479,090) 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 each of the years in the five-year period ended
December 31, 1999, and for a share of Class C outstanding during each of the
years in the two-year period ended December 31, 1999 and the period August 4,
1997 (date sales commenced) through December 31, 1997.
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.77 $ 10.16 $ 9.88 $ 9.43 $ 8.93
- ----------------------------------------------------------- ---------- ---------- ---------- ---------- --------
Income from investment operations:
Net investment income 0.85 0.92 0.90 0.92 0.93
- ----------------------------------------------------------- ---------- ---------- ---------- ---------- --------
Net gains (losses) on securities (both realized and
unrealized) (0.66) (1.40) 0.28 0.46 0.52
- ----------------------------------------------------------- ---------- ---------- ---------- ---------- --------
Total from investment operations 0.19 (0.48) 1.18 1.38 1.45
- ----------------------------------------------------------- ---------- ---------- ---------- ---------- --------
Less distributions:
Dividends from net investment income (0.87) (0.91) (0.90) (0.93) (0.95)
- ----------------------------------------------------------- ---------- ---------- ---------- ---------- --------
Return of capital (0.02) -- -- -- --
- ----------------------------------------------------------- ---------- ---------- ---------- ---------- --------
Total distributions (0.89) (0.91) (0.90) (0.93) (0.95)
- ----------------------------------------------------------- ---------- ---------- ---------- ---------- --------
Net asset value, end of period $ 8.07 $ 8.77 $ 10.16 $ 9.88 $ 9.43
=========================================================== ========== ========== ========== ========== ========
Total return(a) 2.21% (5.10)% 12.52% 15.44% 16.86%
=========================================================== ========== ========== ========== ========== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,364,502 $1,670,863 $1,786,352 $1,272,974 $886,106
=========================================================== ========== ========== ========== ========== ========
Ratio of expenses to average net assets 0.92%(b) 0.85% 0.90% 0.97% 0.96%
=========================================================== ========== ========== ========== ========== ========
Ratio of net investment income to average net assets 10.06%(b) 9.45% 9.08% 9.67% 9.95%
=========================================================== ========== ========== ========== ========== ========
Portfolio turnover rate 79% 76% 80% 77% 61%
=========================================================== ========== ========== ========== ========== ========
</TABLE>
(a) Does not deduct sales charges.
(b) Ratios are based on average net assets of $1,554,341,715.
<TABLE>
<CAPTION>
CLASS B CLASS C
---------------------------------------------------------------- -------------------------------
1999 1998 1997 1996 1995 1999 1998(A) 1997
---------- ---------- ---------- ---------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $ 8.76 $ 10.16 $ 9.88 $ 9.42 $ 8.92 $ 8.74 $ 10.14 $ 10.04
- --------------------------- ---------- ---------- ---------- ---------- -------- -------- -------- -------
Income from investment
operations:
Net investment income 0.79 0.84 0.83 0.85 0.85 0.78 0.82 0.35
- --------------------------- ---------- ---------- ---------- ---------- -------- -------- -------- -------
Net gains (losses) on
securities (both
realized and unrealized) (0.66) (1.40) 0.28 0.47 0.52 (0.65) (1.38) 0.10
- --------------------------- ---------- ---------- ---------- ---------- -------- -------- -------- -------
Total from investment
operations 0.13 (0.56) 1.11 1.32 1.37 0.13 (0.56) 0.45
- --------------------------- ---------- ---------- ---------- ---------- -------- -------- -------- -------
Less distributions:
Dividends from net
investment income (0.80) (0.84) (0.83) (0.86) (0.87) (0.80) (0.84) (0.35)
- --------------------------- ---------- ---------- ---------- ---------- -------- -------- -------- -------
Return of capital (0.02) -- -- -- -- (0.02) -- --
- --------------------------- ---------- ---------- ---------- ---------- -------- -------- -------- -------
Total distributions (0.82) (0.84) (0.83) (0.86) (0.87) (0.82) (0.84) (0.35)
- --------------------------- ---------- ---------- ---------- ---------- -------- -------- -------- -------
Net asset value, end of
period $ 8.07 $ 8.76 $ 10.16 $ 9.88 $ 9.42 $ 8.05 $ 8.74 $ 10.14
=========================== ========== ========== ========== ========== ======== ======== ======== =======
Total return(b) 1.46% (5.90)% 11.71% 14.68% 15.91% 1.46% (5.92)% 4.49%
=========================== ========== ========== ========== ========== ======== ======== ======== =======
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $1,559,864 $1,820,899 $1,647,801 $1,068,060 $557,926 $129,675 $113,246 $26,177
=========================== ========== ========== ========== ========== ======== ======== ======== =======
Ratio of expenses to
average net assets 1.68%(c) 1.61% 1.65% 1.68% 1.73% 1.68%(c) 1.61% 1.68%(d)
=========================== ========== ========== ========== ========== ======== ======== ======== =======
Ratio of net investment
income to average net
assets 9.30%(c) 8.69% 8.33% 8.95% 9.18% 9.30%(c) 8.69% 8.30%(d)
=========================== ========== ========== ========== ========== ======== ======== ======== =======
Portfolio turnover rate 79% 76% 80% 77% 61% 79% 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 based on average net assets of $1,758,603,534 and $130,765,409
for Class B and Class C, respectively.
(d) Annualized.
15
<PAGE> 18
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of
AIM High Yield Fund:
We have audited the accompanying statement of assets and
liabilities of AIM High Yield Fund (a portfolio of AIM
Funds Group), including the schedule of investments, as
of December 31, 1999, the related statement of operations
for the year then ended, and the statement of changes in
its net assets for each of the years in the two-year
period then ended and the financial highlights for each
of the years in the five-year period then ended. These
financial statements and financial highlights are the
responsibility of the Fund's management. Our
responsibility is to express an opinion on these
financial statements and financial highlights based on
our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of
securities owned as of December 31, 1999, by
correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all
material respects, the financial position of AIM High
Yield Fund as of December 31, 1999, the results of its
operations for the year then ended, the changes in its
net assets for each of the years in the two-year period
then ended and the financial highlights for each of the
years in the five-year period then ended, in conformity
with generally accepted accounting principles.
KPMG LLP
February 4, 2000
Houston, Texas
16
<PAGE> 19
<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 4739
Edward K. Dunn Jr. Robert G. Alley Houston, TX 77210-4739
Chairman, Mercantile Mortgage Corp.; Vice President
Formerly Vice Chairman, President CUSTODIAN
and Chief Operating Officer, Stuart W. Coco
Mercantile-Safe Deposit & Trust Co.; and Vice President State Street Bank and Trust Company
President, Mercantile Bankshares 225 Franklin Street
Melville B. Cox Boston, MA 02110
Jack Fields Vice President
Chief Executive Officer COUNSEL TO THE FUND
Texana Global, Inc.; Karen Dunn Kelley
Formerly Member Vice President Ballard Spahr
of the U.S. House of Representatives Andrews & Ingersoll, LLP
Edgar M. Larsen 1735 Market Street
Carl Frischling Vice President Philadelphia, PA 19103
Partner
Kramer, Levin, Naftalis & Frankel LLP Mary J. Benson COUNSEL TO THE TRUSTEES
Assistant Vice President and
Robert H. Graham Assistant Treasurer Kramer, Levin, Naftalis & Frankel
President and Chief Executive Officer 919 Third Avenue
A I M Management Group Inc. Sheri Morris New York, NY 10022
Assistant Vice President and
Prema Mathai-Davis Assistant Treasurer DISTRIBUTOR
Chief Executive Officer, YWCA of the U.S.A.
Renee A. Friedli A I M Distributors, Inc.
Lewis F. Pennock Assistant Secretary 11 Greenway Plaza
Attorney Suite 100
P. Michelle Grace Houston, TX 77046
Louis S. Sklar Assistant Secretary
Executive Vice President AUDITORS
Hines Interests Nancy L. Martin
Limited Partnership Assistant Secretary KPMG LLP
700 Louisiana
Ofelia M. Mayo Houston, TX 77002
Assistant Secretary
Lisa A. Moss
Assistant Secretary
Kathleen J. Pflueger
Assistant Secretary
Samuel D. Sirko
Assistant Secretary
Stephen I. Winer
Assistant Secretary
</TABLE>
(UNAUDITED)
REQUIRED FEDERAL INCOME TAX INFORMATION
AIM High Yield Fund Class A, Class B, and Class C shares paid ordinary dividends
in the amount of $0.8724, $0.8004, and $0.8004 per share, respectively, to
shareholders during its tax year ended December 31, 1999. Of these amounts,
0.42% is eligible for the dividends received deduction for corporations.
REQUIRED STATE INCOME TAX INFORMATION
Of the total ordinary dividends paid, 0.32% was derived from U.S. Treasury
obligations.
17
<PAGE> 20
THE AIM FAMILY OF FUNDS--Registered Trademark--
<TABLE>
<S> <C> <C>
GROWTH FUNDS INTERNATIONAL GROWTH FUNDS A I M Management Group Inc. has provided
AIM Aggressive Growth Fund AIM Advisor International Value Fund leadership in the mutual fund industry
AIM Blue Chip Fund AIM Asian Growth Fund since 1976 and managed approximately
AIM Capital Development Fund AIM Developing Markets Fund $160 billion in assets for more than 6.6
AIM Constellation Fund(1) AIM Euroland Growth Fund(4) million shareholders, including
AIM Dent Demographic Trends Fund AIM European Development Fund individual investors, corporate clients
AIM Large Cap Growth Fund AIM International Equity Fund and financial institutions, as of
AIM Mid Cap Equity Fund AIM Japan Growth Fund December 31, 1999.
AIM Mid Cap Growth Fund AIM Latin American Growth Fund The AIM Family of Funds--Registered
AIM Mid Cap Opportunities Fund AIM New Pacific Growth Fund Trademark-- is distributed nationwide,
AIM Select Growth Fund and AIM today is the eighth-largest
AIM Small Cap Growth Fund(2) GLOBAL GROWTH FUNDS mutual fund complex in the United States
AIM Small Cap Opportunities Fund(3) AIM Global Aggressive Growth Fund in assets under management, according to
AIM Value Fund AIM Weingarten Fund AIM Global Growth Fund Strategic Insight, an independent
mutual~fund monitor.
GROWTH & INCOME FUNDS GLOBAL GROWTH & INCOME FUNDS
AIM Advisor Flex Fund AIM Global Growth & Income Fund
AIM Advisor Large Cap Value Fund AIM Global Utilities Fund
AIM Advisor Real Estate Fund
AIM Balanced Fund GLOBAL INCOME FUNDS
AIM Basic Value Fund AIM Emerging Markets Debt Fund
AIM Charter Fund AIM Global Government Income Fund
AIM Global Income Fund
INCOME FUNDS AIM Strategic Income Fund
AIM Floating Rate Fund
AIM High Yield Fund THEME FUNDS
AIM High Yield Fund II AIM Global Consumer Products and Services Fund
AIM Income Fund AIM Global Financial Services Fund
AIM Intermediate Government Fund AIM Global Health Care Fund
AIM Limited Maturity Treasury Fund AIM Global Infrastructure Fund
AIM Global Resources Fund
TAX-FREE INCOME FUNDS AIM Global Telecommunications and Technology Fund(5)
AIM High Income Municipal Fund AIM Global Trends Fund(6)
AIM Municipal Bond Fund
AIM Tax-Exempt Bond Fund of Connecticut
AIM Tax-Free Intermediate Fund
MONEY MARKET FUNDS
AIM Money Market Fund
AIM Tax-Exempt Cash Fund
</TABLE>
(1) Effective December 1, 1999, AIM Constellation Fund's investment strategy
broadened to allow investments across all market capitalizations. (2) AIM Small
Cap Growth Fund closed to new investors on November 8, 1999. (3) AIM Small Cap
Opportunities Fund closed to new investors on November 4, 1999. (4) On September
1, 1999, AIM Europe Growth Fund was renamed AIM Euroland Growth Fund. Previously
the fund invested in all size companies in most areas of Europe. The fund now
seeks to invest at least 65% of its assets in large-cap companies within
countries using the euro as their currency (EMU-member countries). (5) On June
1, 1999, AIM Global Telecommunications Fund was renamed AIM Global
Telecommunications and Technology Fund. (6) Effective August 27, 1999,
AIM Global Trends Fund was restructured to operate as a traditional mutual fund.
Before that date, the fund operated as a fund of funds. For more complete
information about any AIM fund(s), including sales charges and expenses, ask
your financial advisor or securities dealer for a free prospectus(es). Please
read the prospectus(es) carefully before you invest or send money. If used as
sales material after April 20, 2000, this report must be accompanied by a
current Quarterly Review of Performance for AIM Funds.
[AIM LOGO APPEARS HERE]
INVEST WITH DISCIPLINE
--Registered Trademark--
[DALBAR LOGO APPEARS HERE]
AIM Distributors, Inc. HYL-AR-1
