<PAGE> 1
ANNUAL REPORT / DECEMBER 31 1999
AIM INCOME FUND
[COVER IMAGE]
[AIM LOGO APPEARS HERE]
<PAGE> 2
[COVER IMAGE]
------------------------------------
THE BOAT AT GIVERNY BY CLAUDE MONET
IN MONET'S CAPTIVATING PAINTING, THREE WOMEN GENTLY GUIDE A
SMALL BOAT OVER A TRANQUIL BODY OF WATER. SIMILARLY, AIM
INCOME FUND RELIES PRIMARILY ON THREE ASSET CLASSES--DOMESTIC
INVESTMENT-GRADE BONDS, HIGH-YIELD BONDS AND FOREIGN BONDS--
TO STEER IT TO ITS FINANCIAL DESTINATION.
------------------------------------
AIM Income Fund is for shareholders who seek a high level of current income
consistent with a reasonable concern for safety of principal by investing in a
portfolio consisting primarily of fixed-rate corporate debt and U.S. government
obligations.
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o AIM Income 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 its Class A shares due to different sales-charge structure and
expenses.
o During the fiscal year ended 12/31/99, the fund paid distribution of $0.552
per Class A share, and $0.486 per Class B and Class C share.
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 its holdings, net of all
expenses and annualized.
o The fund's annualized distribution rate reflects its most recent monthly
dividend distribution multiplied by 12 and divided by the most recent
month-end net asset value.
o Government securities, such as U.S. Treasury bills, notes and bonds, offer a
high degree of safety and are guaranteed as to the timely payment of
principal and interest if held to maturity. Fund shares are not insured, and
their value will vary with market conditions.
o International investing presents certain risks not associated with investing
solely in the United States. These include risks relating to fluctuations in
the value of the U.S. dollar relative to the values of other currencies, the
custody arrangements made for the fund's foreign holdings, differences in
accounting, political risks and the lesser degree of public information
required to be provided by non-U.S. companies.
o The fund invests 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 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 Aggregate Bond Index generally considered
representative of intermediate-and long-term government and investment-grade
corporate debt securities, is compiled by Lehman Brothers, a well-known
global investment bank.
o An investment cannot be made in an index. 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 INCOME FUND
<PAGE> 3
ANNUAL REPORT / CHAIRMAN'S LETTER
Dear Fellow Shareholder:
The fiscal year discussed in this report has reconfirmed our
[PHOTO OF faith in two long-established principles of investing:
Charles T. portfolio diversification and long-term thinking. We could
Bauer, title this report "What a Difference a Year Makes."
Chairman of An investor surveying conditions when the fiscal year
the Board of opened on January 1, 1999, would have seen a market
THE FUND dominated by large-capitalization stocks and high-quality
APPEARS HERE] bonds, especially U.S. Treasuries. During 1998, two
well-known indexes of large-capitalization U.S. companies,
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 INCOME FUND
<PAGE> 4
ANNUAL REPORT / MANAGER'S OVERVIEW
FUND CONTENDS WITH DIFFICULT
BOND MARKET
1999 WAS THE WORST YEAR FOR BONDS SINCE 1994. HOW DID AIM INCOME FUND PERFORM?
Despite a dismal bond market stemming from rising interest rates, the fund
continued to offer solid monthly income. As of December 31, 1999, the fund's
30-day distribution rates at net asset value were 7.27%, 6.41% and 6.42% for
Class A, Class B and Class C shares, respectively. The fund's 30-day SEC yields
at maximum offering price were 7.18% for Class A shares and 6.78% for both Class
B and Class C shares. By comparison, the yield of the 30-year Treasury bond was
6.48%.
Rising interest rates negatively affected most bond-market sectors, and this
trend detracted from the fund's total returns. Excluding sales charges, total
returns for Class A, Class B and Class C shares for the fiscal year ended
December 31, 1999, were -2.92%, -3.72% and -3.71%, respectively. However, the
fund's long-term performance remains solid as shown on the chart on page 4.
WHAT WERE THE KEY TRENDS IN THE DOMESTIC INVESTMENT-GRADE BOND MARKET?
The weakness in the bond market stemmed from investor concerns that strong
economic growth would prompt the Federal Reserve Board (the Fed) to raise
interest rates to keep inflation at bay. Ultimately, in three separate moves,
the central bank raised the key federal funds rate from 4.75% to 5.50%. The bond
market was also rattled by Y2K concerns, which largely proved to be unfounded,
and the decline in value of the U.S. dollar against the Japanese yen.
For much of the year, an overabundance of new issues hurt the performance of
investment-grade corporate bonds. Companies rushed to issue new bonds before Y2K
concerns became more pronounced toward the end of 1999. This oversupply was
generally met by weak demand until the fourth quarter of the fiscal year, when
rising yields made corporate bonds more attractive to investors. Corporate bonds
rallied, posting only modest losses for the year.
U.S. Treasury issues, on the other hand, endured their worst 12-month
performance in 22 years. The weakness in the Treasury market was reflected in
the yield of the benchmark 30-year Treasury bond, which rose from 5.09% at the
beginning of the fiscal year to 6.48% at its conclusion. At the end of the
reporting period, Treasury yields were at their highest levels in more than two
years. And because of rising Treasury yields, the yield spread between
Treasuries and investment-grade corporate bonds, while contracting toward the
end of the year, remained wide from a historical perspective.
HOW DID HIGH-YIELD BONDS PERFORM?
High-yield bonds were the second-best performing bond sector. After being in the
doldrums for much of the reporting period, high-yield bonds rallied in the
fourth quarter of 1999, posting modest gains for the year. Unlike other types of
bonds, high-yield securities tend to benefit from a vibrant economy. The issuers
of high-yield bonds are generally better able to meet their debt obligations
when the economy and corporate profits are strong. Because the value of
high-yield bonds is largely dependent on the ability of their issuers to meet
their debt obligations, these securities tend to be less sensitive to
interest-rate fluctuations.
HOW DID FOREIGN BONDS FARE?
Although the U.S. dollar weakened against the Japanese yen, it remained strong
against other major currencies, including the euro. The strength of the dollar
against most
------------------------------------
AFTER BEING IN THE DOLDRUMS
FOR MUCH OF THE REPORTING PERIOD,
HIGH-YIELD BONDS RALLIED
IN THE FOURTH QUARTER OF 1999
AND WOUND UP POSTING
MODEST GAINS FOR THE YEAR.
------------------------------------
[GRAPHIC APPEARS HERE]
PORTFOLIO COMPOSITION
TOP FIVE BOND HOLDINGS
As of 12/31/99, based on total net assets
================================================================================
% OF NET
COUPON MATURITY ASSETS
- --------------------------------------------------------------------------------
1. Time Warner, Inc. 9.15% 02/2023 1.51%
2. News America Holdings, Inc. 9.25 02/2013 1.16
3. Niagara Mohawk Power Corp. 8.50 07/2010 1.12
4. General Motors Corp. 8.80 03/2021 1.11
5. RSL Communications PLC 9.88 11/2009 1.08
The fund's portfolio is subject to change, and there is no assurance that the
fund will continue to hold any particular security.
================================================================================
See important fund and index disclosures inside front cover.
AIM INCOME FUND
2
<PAGE> 5
ANNUAL REPORT / MANAGERS' OVERVIEW
------------------------------------
IF ECONOMIC GROWTH MODERATES IN THE
NEAR TERM, INTEREST RATES COULD
LEVEL OFF, AND THAT COULD HAVE A
POSITIVE IMPACT ON THE BOND MARKET.
------------------------------------
other currencies hurt returns for U.S. investors in foreign bonds. We continued
to mitigate the effect of a strong dollar by selectively hedging our currency
exposure.
Even without taking currency factors into consideration, the performance of
foreign bonds (except for emerging-markets debt) was lackluster for the year.
Similar to domestic corporate bonds, foreign corporate bonds outperformed their
government counterparts. Rising interest rates around the world had a negative
impact on foreign as well as U.S. bonds.
Two of the better-performing bond markets were Canada and the United
Kingdom, and the fund benefited from its significant exposure to these markets.
In the United Kingdom, the bond market got a boost from low inflation and a Bank
of England that acted diligently to keep it in check. Bonds in the Euroland
region performed poorly in the face of a strengthening economy before showing
signs of recovering toward the end of the fiscal year as economic conditions
moderated.
GIVEN THE WEAKNESS OF THE BOND MARKET, WHAT STRATEGIES DID YOU EMPLOY?
The market downturn allowed us to buy attractive bonds at reduced prices.
Additionally, as a defensive measure, we reduced the fund's duration from 8.26
years to 6.01 years during the fiscal year. Over the same period, we lowered the
fund's weighted average maturity from 14.12 years to 10.85 years. The fund had
an average portfolio quality rating of BBB/Baa as measured by Standard & Poor's
and Moody's, two widely known credit-rating agencies. These ratings are
historical and are based on an analysis of the credit quality of the individual
securities in the fund's portfolio.
At the end of the reporting period, the fund's total assets were divided as
follows: domestic investment-grade bonds, 50.40%; domestic high-yield bonds,
24.88%; foreign bonds, 17.50% and other assets, 7.22%. The fund's corporate
holdings spanned a wide range of industries. We believe this diversified
investment strategy can reduce risk and enhance potential returns.
WHAT IS YOUR OUTLOOK?
In the United States, the near-term outlook for bonds will likely depend largely
on the strength of the economy. If the economy continues to grow at a blistering
pace, it could have a negative impact on the bond market. On February 2, after
the close of the fiscal year, the Fed raised the federal funds rate to 5.75% We
expect the Fed to raise interest rates again in the months ahead to slow
economic growth and forestall inflation. If economic growth moderates in the
near term, interest rates could level off, which could have a positive impact on
the bond market. And while past performance cannot guarantee comparable future
results, the U.S. bond market has seldom had two dismal years in a row.
Globally, there are encouraging signs. ~In Europe, for example, inflation
remains subdued. The introduction of the euro in 11 countries has stimulated the
development of the corporate bond market in Europe, giving the fund more
potential investment options. And Asia appears to be well on the road to
recovery from the economic crisis that had worldwide ramifications in 1997-98.
However, the global acceleration in economic growth could lead to higher
interest rates to keep inflation in check, which could affect bonds' total
returns.
Nevertheless, we will adhere to our strategy of primarily investing in
domestic investment-grade, high-yield and foreign corporate bonds. Normally,
these bonds tend to react differently to various economic and market conditions.
Over the long term, we believe this investment approach has the potential to
enhance income and returns while reducing risk.
[GRAPHIC APPEARS HERE]
[PIE CHART]
PERCENTAGE OF HOLDINGS
As of 12/31/99
================================================================================
Other 7.22%
Foreign Bonds, 17.50%
================================================================================
================================================================================
Domestic Domestic
High-Yield Investment-Grade
Bonds Bonds
24.88% 50.40%
================================================================================
See important fund and index disclosures inside front cover.
AIM INCOME FUND
3
<PAGE> 6
ANNUAL REPORT / PERFORMANCE HISTORY
YOUR FUND'S LONG-TERM PERFORMANCE
RESULTS OF A $10,000 INVESTMENT
AIM INCOME FUND VS. BENCHMARK INDEX
12/31/89-12/31/99
(in thousands)
[HYPO CHART]
================================================================================
AIM INCOME FUND, LEHMAN AGGREGATE
CLASS A SHARES BOND INDEX
- --------------------------------------------------------------------------------
12/89 9,524 10,000
12/90 9,871 10,896
12/91 11,649 12,640
12/92 12,497 13,575
12/93 14,419 14,899
12/94 13,317 14,464
12/95 16,349 17,136
12/96 17,752 17,759
12/97 19,868 19,473
12/98 20,851 21,165
12/99 20,241 20,991
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
This chart compares the performance of your fund's Class A shares to a benchmark
index over the period 12/31/89- 12/31/99. It is important to understand the
differences between your fund and an index. Your fund's total return is shown
with a sales charge, and its include fund expenses and management fees. An index
measures the performance of a hypothetical portfolio. A market index such as the
Lehman Aggregate 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.
AVERAGE ANNUAL TOTAL RETURNS
As of 12/31/99, including sales charges
================================================================================
CLASS A SHARES
10 years 7.31%
5 years 7.68
1 year -7.55*
* -2.92% excluding sales charges
CLASS B SHARES
Inception (9/7/93) 4.32%
5 years 7.58
1 year -8.25*
* -3.72% excluding CDSC
CLASS C SHARES
Inception (8/4/97) 2.17%
1 year -4.62*
* -3.71% excluding CDSC
================================================================================
Your fund's total return includes sales charges, expenses and management fees.
The performance of Class B and Class C shares will differ from that of Class A
shares due to differing fees and expenses. For performance calculations and
descriptions of the index cited on this page, please see the inside front cover.
AIM INCOME FUND
4
<PAGE> 7
SCHEDULE OF INVESTMENTS
December 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
U.S. DOLLAR DENOMINATED
CORPORATE BONDS & NOTES-75.54%
AIR FREIGHT-0.61%
Atlas Air, Inc., Sr. Unsec.
Notes, 10.75%, 08/01/05 $ 3,970,000 $ 4,089,100
- ---------------------------------------------------------------
AIRLINES-4.04%
Air 2 US-Series C, Equipment
Trust Ctfs., 10.13%, 10/01/20
(Acquired 10/28/99; Cost
$3,750,000)(b) 3,750,000 3,733,050
- ---------------------------------------------------------------
Airplanes Pass Through
Trust-Series D, Gtd. Sub.
Bonds, 10.88%, 03/15/19 1,810,000 1,592,800
- ---------------------------------------------------------------
Delta Air Lines, Inc., Deb.,
9.00%, 05/15/16 500,000 517,210
- ---------------------------------------------------------------
10.38%, 12/15/22 5,000,000 5,875,750
- ---------------------------------------------------------------
Delta Air Lines, Inc., Equipment
Trust Ctfs., 10.50%, 04/30/16 5,000,000 5,823,900
- ---------------------------------------------------------------
Dunlop Standard Aerospace
Holdings PLC (United Kingdom),
Sr. Unsec. Sub. Notes, 11.88%,
05/15/09 2,700,000 2,791,125
- ---------------------------------------------------------------
United Air Lines, Inc.,
Deb., 9.75%, 08/15/21
(Acquired 09/23/99; Cost
$4,205,475)(b) 3,750,000 4,107,525
- ---------------------------------------------------------------
Series 95A2, Pass Through
Ctfs., 9.56%, 10/19/18 2,325,000 2,483,867
- ---------------------------------------------------------------
26,925,227
- ---------------------------------------------------------------
AUTO PARTS & EQUIPMENT-0.72%
Advance Stores Co., Inc.-Series
B, Sr. Unsec. Gtd. Sub. Notes,
10.25%, 04/15/08 2,585,000 2,236,025
- ---------------------------------------------------------------
Exide Corp., Sr. Notes, 10.00%,
04/15/05 2,640,000 2,574,000
- ---------------------------------------------------------------
4,810,025
- ---------------------------------------------------------------
AUTOMOBILES-1.11%
General Motors Corp., Putable
Deb., 8.80%, 03/01/21 6,700,000 7,371,608
- ---------------------------------------------------------------
BANKS (MAJOR REGIONAL)-0.81%
Midland Bank PLC (United
Kingdom), Yankee Sub. Notes,
7.65%, 05/01/25 1,870,000 1,865,549
- ---------------------------------------------------------------
Regions Financial Corp., Putable
Sub. Notes, 7.75%, 09/15/24 3,650,000 3,525,133
- ---------------------------------------------------------------
5,390,682
- ---------------------------------------------------------------
BANKS (MONEY CENTER)-1.70%
First Union Corp., Putable Sub.
Deb., 7.50%, 04/15/35 5,000,000 4,991,250
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
BANKS (MONEY CENTER)-(CONTINUED)
Republic New York Corp.,
Sub. Notes, 9.70%, 02/01/09 $ 3,000,000 $ 3,310,680
- ---------------------------------------------------------------
Sub. Deb., 9.50%, 04/15/14 2,750,000 3,030,720
- ---------------------------------------------------------------
11,332,650
- ---------------------------------------------------------------
BANKS (REGIONAL)-1.40%
Mercantile Bancorp., Inc.,
Unsec. Sub. Notes, 7.30%,
06/15/07 6,000,000 5,874,900
- ---------------------------------------------------------------
Riggs Capital Trust II-Series C,
Gtd. Bonds, 8.88%, 03/15/27 3,800,000 3,466,295
- ---------------------------------------------------------------
9,341,195
- ---------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO
& CABLE)-5.59%
British Sky Broadcasting Group
PLC (United Kingdom), Sr.
Unsec. Gtd. Yankee Notes,
8.20%, 07/15/09 5,400,000 5,200,346
- ---------------------------------------------------------------
Charter Communications Holdings,
LLC/ Charter Communications
Holdings Capital Corp., Sr.
Unsec. Disc. Notes, 9.92%,
04/01/11(c) 5,000,000 2,956,250
- ---------------------------------------------------------------
Comcast Cable Communications,
Unsec. Notes, 8.50%, 05/01/27 3,000,000 3,185,160
- ---------------------------------------------------------------
CSC Holdings Inc., Sr. Unsec.
Deb.,
7.63%, 02/15/18 6,000,000 5,741,760
- ---------------------------------------------------------------
7.63%, 07/15/18 5,650,000 5,273,145
- ---------------------------------------------------------------
Fox Family Worldwide, Inc., Sr.
Unsec. Disc. Notes, 10.25%,
11/01/07(c) 5,680,000 3,748,800
- ---------------------------------------------------------------
Knology Holdings, Inc., Sr.
Disc. Notes, 11.88%,
10/15/07(c) 4,100,000 2,757,250
- ---------------------------------------------------------------
Lenfest Communications, Inc.,
Sr. Unsec. Sub. Notes, 8.25%,
02/15/08 5,000,000 5,025,000
- ---------------------------------------------------------------
United Pan-Europe Communications
N.V. (Netherlands), Sr. Disc.
Notes, 13.38%, 11/01/09(c)(d) 6,000,000 3,390,000
- ---------------------------------------------------------------
37,277,711
- ---------------------------------------------------------------
BUILDING MATERIALS-0.48%
Blount Inc., Sr. Sub Notes,
13.00%, 08/01/09(d) 3,000,000 3,180,000
- ---------------------------------------------------------------
CHEMICALS (DIVERSIFIED)-0.47%
Sterling Chemicals, Inc.-Series
B, Sr. Gtd. Sec. Sub. Notes,
12.38%, 07/15/06 3,000,000 3,120,000
- ---------------------------------------------------------------
CHEMICALS (SPECIALTY)-0.08%
Key Plastics Holdings,
Inc.-Series B, Sr. Unsec. Gtd.
Sub. Notes, 10.25%, 03/15/07 1,325,000 510,125
- ---------------------------------------------------------------
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
COMMUNICATIONS EQUIPMENT-0.31%
Dialog Corp. PLC-Series A
(United Kingdom), Sr. Sub.
Yankee Notes, 11.00%, 11/15/07 $ 1,500,000 $ 727,500
- ---------------------------------------------------------------
ProNet Inc., Sr. Sub. Notes,
11.88%, 06/15/05 1,940,000 1,328,900
- ---------------------------------------------------------------
2,056,400
- ---------------------------------------------------------------
COMPUTERS (HARDWARE)-0.83%
Candescent Technology Corp., Sr.
Conv. Sub. Deb., 7.00%,
05/01/03 (Acquired 04/20/98;
Cost $2,000,000)(b) 2,000,000 1,560,000
- ---------------------------------------------------------------
Lattice Semiconductor Corp.,
Conv. Notes, 4.75%, 11/01/06
(Acquired 12/03/99; Cost
$4,140,000)(b) 3,000,000 3,957,120
- ---------------------------------------------------------------
5,517,120
- ---------------------------------------------------------------
COMPUTERS (NETWORKING)-0.32%
Exodus Communications, Inc., Sr.
Unsec. Notes, 11.25%, 07/01/08 2,025,000 2,111,062
- ---------------------------------------------------------------
COMPUTERS (PERIPHERALS)-0.55%
Equinix Inc., Sr. Notes, 13.00%,
12/01/07(d)(e) 3,540,000 3,672,750
- ---------------------------------------------------------------
CONSUMER FINANCE-1.94%
Capital One Financial Corp.,
Unsec. Notes, 7.25%, 05/01/06 4,000,000 3,778,440
- ---------------------------------------------------------------
CitiFinancial Credit Co.,
Putable Notes, 7.88%, 02/01/25 1,400,000 1,362,480
- ---------------------------------------------------------------
Countrywide Capital III-Series
B, Gtd. Bonds, 8.05%, 06/15/27 2,650,000 2,440,571
- ---------------------------------------------------------------
MBNA Capital I-Series A, Gtd.
Bonds, 8.28%, 12/01/26 6,065,000 5,321,674
- ---------------------------------------------------------------
12,903,165
- ---------------------------------------------------------------
DISTRIBUTORS (FOOD &
HEALTH)-0.22%
Fleming Companies, Inc.-Series
B, Sr. Unsec. Gtd. Sub. Notes,
10.63%, 07/31/07 1,600,000 1,452,000
- ---------------------------------------------------------------
ELECTRIC COMPANIES-5.59%
Cleveland Electric Illuminating
Co. (The)- Series D, Sr. Sec.
Notes, 7.88%, 11/01/17 3,800,000 3,585,927
- ---------------------------------------------------------------
CMS Energy Corp., Sr. Unsec.
Notes, 8.13%, 05/15/02 850,000 847,050
- ---------------------------------------------------------------
El Paso Electric Co.-Series E,
Sec. First Mortgage Bonds,
9.40%, 05/01/11 4,600,000 4,873,378
- ---------------------------------------------------------------
Indiana Michigan Power
Co.-Series F, Sec. Lease
Obligation Bonds, 9.82%,
12/07/22 4,968,213 5,497,229
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
ELECTRIC COMPANIES-(CONTINUED)
Niagara Mohawk Power Corp.,
First Mortgage Notes, 7.75%,
05/15/06 $ 4,300,000 $ 4,354,137
- ---------------------------------------------------------------
Series H, Sr. Unsec. Disc.
Notes, 8.50%, 07/01/10(c) 10,000,000 7,491,200
- ---------------------------------------------------------------
Southern Energy, Inc., Sr.
Notes, 7.90%, 07/15/09
(Acquired 07/21/99-12/03/99;
Cost $5,978,820)(b) 6,000,000 5,784,960
- ---------------------------------------------------------------
Western Resources, Inc., Sr.
Unsec. Notes, 7.13%, 08/01/09 5,352,000 4,842,597
- ---------------------------------------------------------------
37,276,478
- ---------------------------------------------------------------
ENTERTAINMENT-2.33%
Time Warner Inc., Deb.,
9.13%, 01/15/13 5,000,000 5,492,350
- ---------------------------------------------------------------
9.15%, 02/01/23 9,000,000 10,049,040
- ---------------------------------------------------------------
15,541,390
- ---------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-1.26%
Heller Financial, Inc., Notes,
7.38%, 11/01/09 (Acquired
11/23/99; Cost $2,108,295)(b) 2,115,000 2,062,823
- ---------------------------------------------------------------
Source One Mortgage Services
Corp., Deb., 9.00%, 06/01/12 1,130,000 1,230,840
- ---------------------------------------------------------------
Sumitomo Bank International
Finance N.V. (Japan), Gtd.
Sub. Notes, 8.50%, 06/15/09 4,350,000 4,429,383
- ---------------------------------------------------------------
Sun Canada Financial Co., Gtd.
Sub. Notes, 6.63%, 12/15/07
(Acquired 10/14/99;
$655,145)(b) 700,000 655,457
- ---------------------------------------------------------------
8,378,503
- ---------------------------------------------------------------
FOODS-1.63%
ConAgra, Inc., Sr. Unsec.
Putable Notes, 7.13%, 10/01/26 6,100,000 5,910,961
- ---------------------------------------------------------------
Grand Metropolitan Investment,
Gtd. Bonds, 7.45%, 04/15/35 5,000,000 4,959,500
- ---------------------------------------------------------------
10,870,461
- ---------------------------------------------------------------
GAMING, LOTTERY & PARIMUTUEL
COMPANIES-0.46%
Venetian Casino Resort LLC, Sec.
Gtd. Mortgage Notes, 12.25%,
11/15/04 3,500,000 3,071,250
- ---------------------------------------------------------------
HEALTH CARE (SPECIALIZED
SERVICES)-0.42%
Team Health, Inc., Sr. Sub.
Notes, 12.00%, 03/15/09(d) 2,870,000 2,812,600
- ---------------------------------------------------------------
HOMEBUILDING-0.11%
D.R. Horton, Inc., Unsec. Gtd.
Sub. Notes, 10.00%, 04/15/06 745,000 763,625
- ---------------------------------------------------------------
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
HOUSEHOLD FURNISHING &
APPLIANCES-0.45%
O'Sullivan Industries Inc., Sr.
Sub. Notes, 13.38%,
10/15/09(d)(e) $ 3,000,000 $ 2,992,500
- ---------------------------------------------------------------
HOUSEHOLD PRODUCTS
(NON-DURABLES)-0.40%
Procter & Gamble Co. (The),
Putable Deb., 8.00%, 09/01/24 2,500,000 2,654,300
- ---------------------------------------------------------------
HOUSEWARES-0.30%
Decora Industries, Inc.-Series
B, Sr. Sec. Gtd. Notes,
11.00%, 05/01/05 2,500,000 2,012,500
- ---------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-1.68%
Americo Life, Inc., Sr. Sub.
Notes, 9.25%, 06/01/05 1,000,000 1,005,000
- ---------------------------------------------------------------
Conseco, Inc., Unsec. Notes,
6.80%, 06/15/05 1,600,000 1,494,736
- ---------------------------------------------------------------
9.00%, 10/15/06 1,500,000 1,543,845
- ---------------------------------------------------------------
Torchmark Corp., Notes, 7.88%,
05/15/23 8,000,000 7,150,640
- ---------------------------------------------------------------
11,194,221
- ---------------------------------------------------------------
INSURANCE
(PROPERTY-CASUALTY)-0.58%
Terra Nova Insurance PLC (United
Kingdom), Sr. Unsec. Gtd.
Yankee Notes, 7.20%, 08/15/07 2,200,000 2,059,618
- ---------------------------------------------------------------
Notes, 7.00%, 05/15/08 2,000,000 1,839,560
- ---------------------------------------------------------------
3,899,178
- ---------------------------------------------------------------
INVESTMENT
BANKING/BROKERAGE-1.57%
HSBC America Capital Trust II,
Gtd. Bonds, 8.38%, 05/15/27
(Acquired 08/12/99; Cost
$3,162,786)(b) 3,300,000 3,055,734
- ---------------------------------------------------------------
Lehman Brothers Holdings Inc.,
Notes, 7.38%, 01/15/07 3,585,000 3,481,035
- ---------------------------------------------------------------
Sr. Notes, 8.80%, 03/01/15 1,000,000 1,045,500
- ---------------------------------------------------------------
Notes, 8.50%, 08/01/15 2,790,000 2,858,662
- ---------------------------------------------------------------
10,440,931
- ---------------------------------------------------------------
IRON & STEEL-0.31%
Acme Metal Inc., Sr. Unsec. Gtd.
Notes, 10.88%, 12/15/07(f) 3,240,000 664,200
- ---------------------------------------------------------------
GS Technologies Operating Co.,
Inc., Sr. Gtd. Notes, 12.00%,
09/01/04 3,000,000 1,395,000
- ---------------------------------------------------------------
2,059,200
- ---------------------------------------------------------------
LEISURE TIME (PRODUCTS)-0.29%
Marvel Enterprises, Inc., Sr.
Unsec. Gtd. Sub. Notes,
12.00%, 06/15/09 2,075,000 1,940,125
- ---------------------------------------------------------------
LODGING-HOTELS-0.49%
John Q. Hammons Hotels, Inc.,
Sec. First Mortgage Notes,
9.75%, 10/01/05 2,000,000 1,850,000
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
LODGING-HOTELS-(CONTINUED)
Stena Line A.B. (Sweden), Sr.
Unsec. Yankee Notes, 10.63%,
06/01/08 $ 2,300,000 $ 1,391,500
- ---------------------------------------------------------------
3,241,500
- ---------------------------------------------------------------
MACHINERY (DIVERSIFIED)-0.84%
Caterpillar Inc., Deb., 9.38%,
08/15/11 5,000,000 5,628,850
- ---------------------------------------------------------------
MANUFACTURING
(DIVERSIFIED)-0.28%
Anthony Crane Rentals LP-Series
B, Sr. Unsec. Gtd. Sub. Notes,
10.38%, 08/01/08 1,500,000 1,267,500
- ---------------------------------------------------------------
Glenoit Corp., Sr. Unsec. Gtd.
Sub. Notes, 11.00%, 04/15/07 2,310,000 589,050
- ---------------------------------------------------------------
1,856,550
- ---------------------------------------------------------------
MANUFACTURING
(SPECIALIZED)-0.54%
Brand Scaffold Services, Inc.,
Sr. Unsec. Notes, 10.25%,
02/15/08 1,600,000 1,456,000
- ---------------------------------------------------------------
MMI Products, Inc.-Series B, Sr.
Unsec. Sub. Notes, 11.25%,
04/15/07 2,070,000 2,142,450
- ---------------------------------------------------------------
3,598,450
- ---------------------------------------------------------------
METALS MINING-0.86%
Centaur Mining and Exploration
Ltd. (Australia), Sr. Gtd.
Yankee Notes, 11.00%, 12/01/07 2,500,000 2,487,500
- ---------------------------------------------------------------
Rio Algom Ltd. (Canada), Unsec.
Yankee Deb., 7.05%, 11/01/05 3,500,000 3,276,805
- ---------------------------------------------------------------
5,764,305
- ---------------------------------------------------------------
NATURAL GAS-2.22%
Dynegy Inc., Sr. Unsec. Deb.,
7.13%, 05/15/18 4,000,000 3,563,680
- ---------------------------------------------------------------
Enron Corp., Sr. Sub. Deb.,
8.25%, 09/15/12 4,100,000 4,164,616
- ---------------------------------------------------------------
Nova Gas Transmission Ltd.
(Canada), Yankee Deb., 8.50%,
12/15/12 3,000,000 3,120,870
- ---------------------------------------------------------------
Sonat Inc., Unsec. Notes, 7.63%,
07/15/11 4,000,000 3,934,240
- ---------------------------------------------------------------
14,783,406
- ---------------------------------------------------------------
OIL & GAS (DRILLING &
EQUIPMENT)-0.47%
NRG Energy, Inc., Sr. Unsec.
Notes, 7.50%, 06/01/09 3,400,000 3,130,380
- ---------------------------------------------------------------
OIL & GAS (EXPLORATION &
PRODUCTION)-1.87%
Anadarko Petroleum Corp., Deb.,
7.25%, 03/15/25 5,395,000 5,422,299
- ---------------------------------------------------------------
ONEOK, Inc., Unsec. Notes,
7.75%, 08/15/06 3,500,000 3,464,965
- ---------------------------------------------------------------
</TABLE>
7
<PAGE> 10
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
OIL & GAS (EXPLORATION & PRODUCTION)-(CONTINUED)
Talisman Energy Inc. (Canada),
Yankee Deb., 7.13%, 06/01/07 $ 3,750,000 $ 3,603,563
- ---------------------------------------------------------------
12,490,827
- ---------------------------------------------------------------
OIL & GAS (REFINING &
MARKETING)-1.38%
Sunoco, Inc., Deb., 9.00%,
11/01/24 4,000,000 4,222,160
- ---------------------------------------------------------------
Texas Petrochemical Corp., Sr.
Unsec. Sub. Notes, 11.13%,
07/01/06 2,010,000 1,758,750
- ---------------------------------------------------------------
Tosco Corp., Unsec. Deb., 7.80%,
01/01/27 3,400,000 3,205,044
- ---------------------------------------------------------------
9,185,954
- ---------------------------------------------------------------
PERSONAL CARE-0.46%
American Tissue Inc., Sr. Sec.
Notes, 12.50%, 07/15/06(d) 3,000,000 3,067,500
- ---------------------------------------------------------------
PHOTOGRAPHY/IMAGING-0.33%
Polaroid Corp., Sr. Unsec.
Notes, 11.50%, 02/15/06 2,220,000 2,208,900
- ---------------------------------------------------------------
POWER PRODUCERS
(INDEPENDENT)-0.83%
Hydro-Quebec-Series
IO (Canada), Gtd. Yankee Bond,
8.05%, 07/07/24 610,000 640,146
- ---------------------------------------------------------------
B (Canada), Gtd. Medium Term
Notes, 8.62%, 12/15/11 2,000,000 2,158,840
- ---------------------------------------------------------------
Kincaid Generation LLC, Sec.
Bonds, 7.33%, 06/15/20
(Acquired 04/30/98; Cost
$2,004,940)(b) 2,000,000 1,768,774
- ---------------------------------------------------------------
Panda Funding Corp., Series A-1,
Pooled Project Bonds, 11.63%,
08/20/12 992,021 996,981
- ---------------------------------------------------------------
5,564,741
- ---------------------------------------------------------------
PUBLISHING (NEWSPAPERS)-1.77%
News America Holdings, Inc.,
Sr. Gtd. Deb., 9.25%, 02/01/13 7,100,000 7,738,290
- ---------------------------------------------------------------
Sr. Unsec. Gtd. Putable Bonds,
7.43%, 10/01/26 1,000,000 982,210
- ---------------------------------------------------------------
Putable Notes, 8.45%, 08/01/34 3,000,000 3,046,740
- ---------------------------------------------------------------
11,767,240
- ---------------------------------------------------------------
RAILROADS-1.92%
CSX Corp., Sr. Unsec. Putable
Deb.,
6.95%, 05/01/27 2,000,000 1,986,980
- ---------------------------------------------------------------
7.25%, 05/01/27 7,000,000 6,870,290
- ---------------------------------------------------------------
Norfolk Southern Corp., Notes,
7.05%, 05/01/37 4,000,000 3,920,920
- ---------------------------------------------------------------
12,778,190
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
REAL ESTATE INVESTMENT
TRUSTS-0.93%
Health Care REIT, Inc.,
Unsec. Notes, 7.57%, 04/15/00 $ 1,400,000 $ 1,393,476
- ---------------------------------------------------------------
Sr. Unsec. Notes, 7.63%,
03/15/08 1,500,000 1,241,985
- ---------------------------------------------------------------
Spieker Properties, Inc., Unsec.
Deb., 7.35%, 12/01/17 4,000,000 3,530,840
- ---------------------------------------------------------------
6,166,301
- ---------------------------------------------------------------
RETAIL (GENERAL
MERCHANDISE)-0.13%
Plainwell Inc.-Series B, Sr.
Unsec. Sub. Notes, 11.00%,
03/01/08 1,710,000 897,750
- ---------------------------------------------------------------
RETAIL (SPECIALTY)-1.68%
Amazon.com, Inc., Conv. Deb.,
4.75%, 02/01/09 (Acquired
01/29/99; Cost $2,507,500)(b) 2,500,000 2,840,625
- ---------------------------------------------------------------
CSK Auto Inc.-Series A, Sr. Gtd.
Sub. Deb, 11.00%, 11/01/06 715,000 729,300
- ---------------------------------------------------------------
Neff Corp., Sr. Unsec. Gtd. Sub.
Notes, 10.25%, 06/01/08 5,190,000 5,021,325
- ---------------------------------------------------------------
Rent-A-Center, Inc., Sr. Unsec.
Gtd. Sub. Notes, 11.00%,
08/15/08 2,500,000 2,581,250
- ---------------------------------------------------------------
11,172,500
- ---------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-0.40%
Big 5 Corp.-Series B, Sr. Unsec.
Notes, 10.88%, 11/15/07 1,625,000 1,608,750
- ---------------------------------------------------------------
J Crew Operating Corp., Sr. Sub.
Notes, 10.38%, 10/15/07 1,255,000 1,060,475
- ---------------------------------------------------------------
2,669,225
- ---------------------------------------------------------------
SAVINGS & LOAN COMPANIES-1.69%
Dime Capital Trust I-Series A,
Gtd. Bonds, 9.33%, 05/06/27 2,700,000 2,545,884
- ---------------------------------------------------------------
Sovereign Bancorp, Inc., Medium
Term Sub. Notes, 8.00%,
03/15/03 5,050,000 4,822,801
- ---------------------------------------------------------------
St. Paul Bancorp, Inc., Sr.
Unsec. Notes, 7.13%, 02/15/04 1,500,000 1,462,110
- ---------------------------------------------------------------
Washington Mutual, Inc.,
Notes, 7.50%, 08/15/06 1,015,000 1,010,199
- ---------------------------------------------------------------
Gtd. Bonds, 8.38%, 06/01/27 1,485,000 1,418,947
- ---------------------------------------------------------------
11,259,941
- ---------------------------------------------------------------
SERVICES (COMMERCIAL &
CONSUMER)-1.30%
Hydrochem Industrial Service
Co.-Series B, Sr. Gtd. Sub.
Notes, 10.38%, 08/01/07 920,000 793,500
- ---------------------------------------------------------------
Laidlaw Inc. (Canada),
Unsec. Yankee Notes, 7.65%,
05/15/06 3,000,000 2,787,150
- ---------------------------------------------------------------
Unsec. Yankee Deb., 6.70%,
05/01/08 4,000,000 3,404,680
- ---------------------------------------------------------------
Putable Yankee Deb., 6.72%,
10/01/27 2,000,000 1,701,400
- ---------------------------------------------------------------
8,686,730
- ---------------------------------------------------------------
</TABLE>
8
<PAGE> 11
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
SERVICES (EMPLOYMENT)-0.29%
MSX International, Inc., Sr.
Unsec. Gtd. Sub. Notes,
11.38%, 01/15/08 $ 1,980,000 $ 1,900,800
- ---------------------------------------------------------------
SHIPPING-0.35%
Hutchison Delta Finance
Ltd.-Series REGS (Cayman
Islands), Conv. Unsec. Notes,
7.00%, 11/25/01 2,000,000 2,320,000
- ---------------------------------------------------------------
SOVEREIGN DEBT-2.17%
Province of Manitoba-Series AZ
(Canada), Putable Yankee Deb.,
7.75%, 07/17/16 5,000,000 5,119,750
- ---------------------------------------------------------------
Province of Newfoundland
(Canada), Unsec. Yankee Deb.,
9.00%, 06/01/19 1,000,000 1,121,990
- ---------------------------------------------------------------
Province of Quebec-Series A
(Canada), Medium Term Putable
Yankee Notes,
5.74%, 03/02/26 3,500,000 3,470,670
- ---------------------------------------------------------------
6.29%, 03/06/26 4,800,000 4,719,552
- ---------------------------------------------------------------
14,431,962
- ---------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/
WIRELESS)-1.34%
Loral Space & Communications
Ltd., Sr. Gtd. Sub. Notes,
11.25%, 01/15/07(e) 2,000,000 1,510,000
- ---------------------------------------------------------------
Nextel Communications, Inc., Sr.
Unsec. Notes, 12.00%, 11/01/08 3,375,000 3,796,875
- ---------------------------------------------------------------
WebLink Wireless, Inc., Sr.
Disc. Sub. Notes, 11.25%,
02/01/08(c) 3,110,000 1,104,050
- ---------------------------------------------------------------
Worldwide Fiber Inc. (Canada),
Sr. Notes,
12.50%, 12/15/05 1,430,000 1,508,650
- ---------------------------------------------------------------
12.00%, 08/01/09(d) 1,000,000 1,037,500
- ---------------------------------------------------------------
8,957,075
- ---------------------------------------------------------------
TELECOMMUNICATIONS (LONG
DISTANCE)-4.30%
Destia Communications, Inc., Sr.
Unsec. Notes, 13.50%, 07/15/07 3,500,000 3,718,750
- ---------------------------------------------------------------
Esprit Telecom Group PLC (United
Kingdom), Sr. Unsec. Yankee
Notes, 11.50%, 12/15/07 1,500,000 1,530,000
- ---------------------------------------------------------------
MCI Communications Corp., Sr.
Unsec. Putable Deb., 7.13%,
06/15/27 5,500,000 5,526,400
- ---------------------------------------------------------------
Primus Telecommunications Group,
Inc.,
Sr. Unsec. Notes, 11.25%,
01/15/09 3,500,000 3,395,000
- ---------------------------------------------------------------
Notes, 12.75%, 10/15/09(d) 1,500,000 1,567,500
- ---------------------------------------------------------------
RSL Communications PLC (United
Kingdom), Sr. Unsec. Yankee
Gtd. Notes, 9.88%, 11/15/09 8,000,000 7,220,000
- ---------------------------------------------------------------
Sprint Corp., Putable Deb.,
9.00%, 10/15/19 3,800,000 4,210,286
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
TELECOMMUNICATIONS (LONG DISTANCE)-(CONTINUED)
Versatel Telecom International
N.V. (Netherlands), Sr. Notes,
13.25%, 05/15/08 $ 1,370,000 $ 1,465,900
- ---------------------------------------------------------------
28,633,836
- ---------------------------------------------------------------
TELEPHONE-4.41%
Alestra S.A. (Mexico), Sr.
Notes, 12.63%, 05/15/09(d) 3,000,000 3,030,000
- ---------------------------------------------------------------
AT&T Canada Inc. (Canada), Sr.
Unsec. Notes 7.65%, 09/15/06 2,800,000 2,791,387
- ---------------------------------------------------------------
AT&T Corp.-Liberty Media Group,
Bonds, 7.88%, 07/15/09
(Acquired 06/30/99; Cost
$2,982,120)(b) 3,000,000 2,991,345
- ---------------------------------------------------------------
Bell Atlantic Financial
Services, Inc.- Series REGS,
Conv. Bonds, 4.25%, 09/15/05 3,700,000 4,653,324
- ---------------------------------------------------------------
ICG Services, Inc., Sr. Unsec.
Disc. Notes, 10.00%,
02/15/08(c) 4,000,000 2,157,840
- ---------------------------------------------------------------
Logix Communications
Enterprises, Sr. Unsec. Notes,
12.25%, 06/15/08 1,000,000 782,500
- ---------------------------------------------------------------
SBC Communications, Inc., Deb.,
7.38%, 07/15/43 1,200,000 1,079,448
- ---------------------------------------------------------------
Telefonos de Mexico S.A.
(Mexico), Conv. Yankee Notes,
4.25%, 06/15/04 3,000,000 3,911,250
- ---------------------------------------------------------------
U.S. Xchange LLC, Sr. Unsec.
Notes, 15.00%, 07/01/08 5,000,000 4,812,500
- ---------------------------------------------------------------
Williams Communications Group,
Inc., Sr. Unsec. Notes,
10.70%, 10/01/07 3,000,000 3,157,500
- ---------------------------------------------------------------
29,367,094
- ---------------------------------------------------------------
TRUCKERS-0.33%
Travelcenters of America, Inc.,
Sr. Unsec. Gtd. Sub. Notes,
10.25%, 04/01/07 2,180,000 2,180,000
- ---------------------------------------------------------------
TRUCKS & PARTS-0.75%
North American Van Lines, Inc.,
Sr. Sub. Notes, 13.38%,
12/01/09(d) 5,000,000 5,025,000
- ---------------------------------------------------------------
WASTE MANAGEMENT-2.65%
Allied Waste North America Inc.,
Sr. Sub Notes, 10.00%,
08/01/09(d) 4,920,000 4,403,400
- ---------------------------------------------------------------
Browning-Ferris Industries,
Inc., Deb.,
9.25%, 05/01/21 2,570,000 2,325,850
- ---------------------------------------------------------------
7.40%, 09/15/35 1,200,000 870,000
- ---------------------------------------------------------------
Waste Management, Inc., Sr.
Unsec. Notes,
7.13%, 10/01/07 3,710,000 3,271,997
- ---------------------------------------------------------------
7.13%, 12/15/17 1,335,000 1,046,133
- ---------------------------------------------------------------
Unsec. Putable Notes, 7.10%,
08/01/26 6,170,000 5,722,181
- ---------------------------------------------------------------
17,639,561
- ---------------------------------------------------------------
Total U.S. Dollar
Denominated Corporate
Bonds & Notes (Cost
$529,967,761) 503,342,650
- ---------------------------------------------------------------
</TABLE>
9
<PAGE> 12
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(g) VALUE
<S> <C> <C>
NON-U.S. DOLLAR DENOMINATED
CORPORATE BONDS & NOTES-18.07%
AUSTRALIA-1.05%
New South Wales Treasury
Corp.-Series 4 (Sovereign
Debt), Gtd. Notes, 7.00%,
04/01/04 AUD 6,900,000 $ 4,555,259
- ---------------------------------------------------------------
State Bank New South
Wales-Series E (Banks-Major
Regional), Sr. Unsec. Gtd.
Medium Term Notes, 8.63%,
08/20/01 AUD 3,600,000 2,442,289
- ---------------------------------------------------------------
6,997,548
- ---------------------------------------------------------------
CANADA-4.18%
AT&T Canada Inc. (Telephone),
Sr. Unsec. Notes, 7.15%,
09/23/04 CAD 1,150,000 787,231
- ---------------------------------------------------------------
Bell Mobility Cellular Inc.
(Telecommunications-Cellular/Wireless),
Deb., 6.55%, 06/02/08 CAD 2,250,000 1,493,749
- ---------------------------------------------------------------
Canadian Pacific Ltd.-Series D
(Manufacturing-Diversified),
Unsec. Medium Term Notes,
5.85%, 03/30/09 (Acquired
3/24/99; Cost $2,149,715(b) CAD 3,250,000 2,079,725
- ---------------------------------------------------------------
Clearnet Communications Inc.
(Telecommunications-Cellular/Wireless),
Sr. Disc. Notes,
11.75%, 08/13/07 (Acquired
07/31/97-11/04/97; Cost
$4,341,891)(b)(c) CAD 8,200,000 4,033,811
- ---------------------------------------------------------------
10.40%, 05/15/08(c) CAD 9,050,000 3,981,674
- ---------------------------------------------------------------
Export Development Corp.
(Sovereign Debt), Sr. Unsub.
Notes, 6.50%, 12/21/04 NZD 2,150,000 1,064,578
- ---------------------------------------------------------------
Microcell Telecommunications
Inc.
(Telecommunications-Cellular/Wireless),
Sr. Disc. Notes, 11.13%,
10/15/07(c) CAD 3,500,000 1,630,811
- ---------------------------------------------------------------
Poco Petroleums Ltd. (Oil & Gas-
Exploration & Production),
Unsec. Deb., 6.60%,
09/11/07 CAD 4,150,000 2,721,265
- ---------------------------------------------------------------
Province of Ontario (Sovereign
Debt),
Deb. 6.25%, 01/13/04 DEM 790,000 422,570
- ---------------------------------------------------------------
Sr. Unsec. Unsub. Notes,
6.25%, 12/03/08 NZD 2,500,000 1,140,705
- ---------------------------------------------------------------
Province of Quebec (Sovereign
Debt), Unsec. Notes, 5.13%,
01/04/09 EUR 825,000 397,329
- ---------------------------------------------------------------
Rogers Cablesystems
(Broadcasting- Television,
Radio & Cable), Sr. Sec.
Second Priority Deb., 9.65%,
01/15/14 CAD 3,300,000 2,389,316
- ---------------------------------------------------------------
Teleglobe Canada Inc.
(Telephone), Unsec. Deb.,
8.35%, 06/20/03 CAD 5,000,000 3,547,114
- ---------------------------------------------------------------
TransCanada Pipelines-Series Q
(Natural Gas), Deb., 10.63%,
10/20/09 CAD 1,750,000 1,496,224
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(g) VALUE
<S> <C> <C>
CANADA-(CONTINUED)
Westcoast Energy Inc.-Series V
(Natural Gas), Unsec. Deb.,
6.45%, 12/18/06 (Acquired
12/03/96; Cost 739,416)(b) CAD 1,000,000 $ 679,166
- ---------------------------------------------------------------
27,865,268
- ---------------------------------------------------------------
CAYMAN ISLANDS-0.51%
Sutton Bridge Financial
Ltd.-Series REGS (Power
Producers-Independent), Gtd.
Eurobonds, 8.63%,
06/30/22(d) GBP 2,000,000 3,393,912
- ---------------------------------------------------------------
DENMARK-0.85%
Kingdom of Denmark (Sovereign
Debt), Bonds, 5.00%,
08/15/05 DKK 42,500,000 5,672,111
- ---------------------------------------------------------------
GERMANY-0.49%
Landesbank Baden-Wuerttemberg
(Banks- Major Regional), Sr.
Unsec. Unsub. Medium Term
Notes, 6.25%, 12/15/04 AUD 2,400,000 1,504,420
- ---------------------------------------------------------------
Treuhandanstalt (Sovereign
Debt), Gtd. Notes, 6.00%,
11/12/03 EUR 1,695,000 1,777,422
- ---------------------------------------------------------------
3,281,842
- ---------------------------------------------------------------
GREECE-0.72%
Hellenic Republic (Sovereign
Debt), Bonds, 6.60%,
01/15/04 GRD 1,570,000,000 4,816,376
- ---------------------------------------------------------------
LUXEMBOURG-0.64%
PTC International Finance II
S.A. (Telephone), Sr. Sub.
Gtd. Notes, 11.25%, 12/01/09
(Acquired 11/16/99; Cost
$4,145,603)(b) EUR 4,100,000 4,250,238
- ---------------------------------------------------------------
NETHERLANDS-3.18%
Dresdner Finance B.V.-Series 11
(Banks- Major Regional),
Floating Rate Gtd. Notes,
3.53%, 07/30/03(h) EUR 4,700,000 4,720,405
- ---------------------------------------------------------------
Hypovereins Finance N.V.-Series
E (Banks- Major Regional),
Gtd. Medium Term Notes, 6.00%,
03/12/07 DEM 1,485,000 766,182
- ---------------------------------------------------------------
KPNQwest N.V.-Series REGS
(Telecommunications-Long
Distance), Sr. Unsec. Notes,
7.13%, 06/01/09 EUR 4,325,000 4,336,995
- ---------------------------------------------------------------
Mannesmann Finance B.V.
(Machinery- Diversified),
Conv. Bonds, 1.00%,
10/13/04 EUR 2,000,000 2,463,286
- ---------------------------------------------------------------
Gtd. Unsec. Unsub. Notes,
4.75%, 05/27/09 EUR 1,890,000 1,677,251
- ---------------------------------------------------------------
SPT Telecom A.S.
(Telecommunications-Long
Distance), Gtd. Unsec. Unsub.
Notes, 5.13%, 05/07/03 DEM 2,750,000 1,402,567
- ---------------------------------------------------------------
Tecnost International Finance
N.V.-Series E (Telephone),
Medium Term Gtd. Notes, 6.13%,
07/30/09 EUR 2,050,000 1,986,830
- ---------------------------------------------------------------
</TABLE>
10
<PAGE> 13
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(g) VALUE
<S> <C> <C>
NETHERLANDS-(CONTINUED)
Tele1 Europe
(Telecommunications-Long
Distance), Sr. Notes, 11.88%,
12/01/09 (Acquired 12/08/99;
Cost $3,834,750)(b) EUR 3,750,000 $ 3,811,929
- ---------------------------------------------------------------
21,165,445
- ---------------------------------------------------------------
NEW ZEALAND-1.10%
Inter-American Development Bank
(Banks- Money Center), Unsec.
Bonds, 5.75%, 04/15/04 NZD 4,750,000 2,310,718
- ---------------------------------------------------------------
New Zealand Government-Series
302 (Sovereign Debt), Bonds,
10.00%, 03/15/02 NZD 4,575,000 2,551,735
- ---------------------------------------------------------------
404 (Sovereign Debt), Bonds,
8.00%, 04/15/04 NZD 4,580,000 2,472,597
- ---------------------------------------------------------------
7,335,050
- ---------------------------------------------------------------
SWEDEN-1.19%
Stadshypotek A.B.-Series 1562
(Banks- Regional), Bonds,
3.50%, 09/15/04 SEK 47,000,000 4,967,578
- ---------------------------------------------------------------
Swedish Government-Series 1035
(Sovereign Debt), Bonds,
6.00%, 02/09/05 SEK 24,800,000 2,983,912
- ---------------------------------------------------------------
7,951,490
- ---------------------------------------------------------------
UNITED KINGDOM-3.80%
Airtours PLC
(Services-Commercial &
Consumer), Conv. Sub. Notes,
5.75%, 01/05/04 (Acquired
12/09/98; Cost
$3,091,887)(b) GBP 1,869,000 3,040,508
- ---------------------------------------------------------------
Jazztel PLC
(Telecommunications-Cellular/
Wireless), Sr. Notes, 13.25%,
12/15/09 (Acquired 12/09/99;
Cost $2,319,212)(b) EUR 2,260,000 2,288,225
- ---------------------------------------------------------------
Lloyds Bank PLC-Series E
(Banks-Major Regional), Medium
Term Sub. Notes, 5.25%,
07/14/08 DEM 6,400,000 3,129,515
- ---------------------------------------------------------------
Merrill Lynch & Co., Inc.-Series
E (Investment
Banking/Brokerage), Sr. Unsec.
Unsub. Medium Term Notes,
7.38%, 12/17/07 GBP 1,770,000 2,897,880
- ---------------------------------------------------------------
National Power PLC (Electric
Companies), Sr. Unsec. Unsub.
Bonds, 8.00%, 02/21/07 AUD 5,000,000 3,245,777
- ---------------------------------------------------------------
National Westminster Bank
PLC-Series E (Banks-Money
Center), Unsec. Unsub. Medium
Term Bonds, 5.13%,
06/30/11 EUR 1,550,000 1,398,391
- ---------------------------------------------------------------
Scotia Holdings PLC-Series REGS
(Health Care-Drugs-Generic &
Other), Conv. Unsec. Unsub.
Notes, 8.50%, 03/26/02 GBP 1,000,000 1,243,821
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(g) VALUE
<S> <C> <C>
UNITED KINGDOM-(CONTINUED)
TeleWest Communications PLC
(Broadcasting-Television,
Radio & Cable), Sr. Unsec.
Conv. Notes, 5.25%,
02/19/07 GBP 2,530,000 $ 4,683,190
- ---------------------------------------------------------------
Union Bank of Switzerland London
(Banks-Major Regional), Unsec.
Sub. Notes, 8.00%, 01/08/07GBP 2,000,000 3,385,248
- ---------------------------------------------------------------
25,312,555
- ---------------------------------------------------------------
UNITED STATES OF AMERICA-0.36%
General Electric Capital
Corp.-Series E
(Financial-Diversified), Sr.
Unsec. Unsub. Medium Term
Notes, 6.00%, 07/27/01 GBP 1,500,000 2,383,794
- ---------------------------------------------------------------
Total Non-U.S. Dollar
Denominated Corporate
Bonds & Notes (Cost
$125,392,735) 120,425,629
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
COMMON STOCKS & OTHER EQUITY
INTERESTS-1.98%
BANKS (REGIONAL)-0.94%
First Republic Capital
Corp.-Series A-Pfd. (Acquired
05/26/99; Cost $3,500,000)(b) 3,500 3,220,000
- ---------------------------------------------------------------
Westpac Banking Corp., STRYPES
Trust- $3.135 Conv. Pfd 95,000 3,045,937
- ---------------------------------------------------------------
6,265,937
- ---------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO
& CABLE)-0.00%
Knology Inc.-Wts., expiring
10/22/07 (Acquired 03/12/98;
Cost $0)(b)(i) 4,100 11,275
- ---------------------------------------------------------------
Wireless One, Inc.-Wts.,
expiring 10/19/00(i) 2,670 0
- ---------------------------------------------------------------
11,275
- ---------------------------------------------------------------
COMPUTERS (SOFTWARE &
SERVICES)-0.35%
Microsoft Corp.(j) 20,291 2,368,974
- ---------------------------------------------------------------
ELECTRICAL EQUIPMENT-0.00%
Electronic Retailing Systems
International, Inc.-Wts.,
expiring 02/01/04(i) 3,630 3,630
- ---------------------------------------------------------------
FOODS-0.13%
Ralston Purina Group.-$4.34
Conv. Pfd. 23,000 840,937
- ---------------------------------------------------------------
IRON & STEEL-0.00%
Gulf States Steel, Inc.-Wts.,
expiring 04/15/03(i) 1,650 17
- ---------------------------------------------------------------
SERVICES (COMMERCIAL &
CONSUMER)-0.44%
Cendant Corp.-$3.75 Conv. PRIDES 78,000 2,915,250
- ---------------------------------------------------------------
</TABLE>
11
<PAGE> 14
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TELECOMMUNICATIONS (CELLULAR/
WIRELESS)-0.04%
Clearnet Communications
Inc.-Class A-ADR (Canada)(j) 5,874 $ 201,919
- ---------------------------------------------------------------
Loral Space & Communications
Ltd.(j) 2,059 50,059
- ---------------------------------------------------------------
251,978
- ---------------------------------------------------------------
TELECOMMUNICATIONS (LONG
DISTANCE)-0.08%
Versatel Telecom International
N.V.-Wts. (Netherlands),
expiring 05/15/08 (Acquired
05/20/98; Cost $0)(b)(i) 1,370 548,343
- ---------------------------------------------------------------
Total Common Stocks & Other
Equity Interests (Cost
$12,869,080) 13,206,341
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
U.S. TREASURY SECURITIES-1.52%
U.S. TREASURY NOTES-1.52%
5.50%, 08/31/01 $ 5,000,000 4,944,400
- ---------------------------------------------------------------
7.25%, 08/15/04 5,000,000 5,157,000
- ---------------------------------------------------------------
Total U.S. Treasury
Securities (Cost
$10,165,234) 10,101,400
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MONEY MARKET FUNDS-1.01%
STIC Liquid Assets Portfolio(k) 3,358,998 $ 3,358,998
- ---------------------------------------------------------------
STIC Prime Portfolio(k) 3,358,998 3,358,998
- ---------------------------------------------------------------
Total Money Market Funds
(Cost $6,717,996) 6,717,996
- ---------------------------------------------------------------
TOTAL INVESTMENTS-98.12% (Cost
$685,112,806) 653,794,016
- ---------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-1.88% 12,535,304
- ---------------------------------------------------------------
NET ASSETS-100.00% $666,329,320
===============================================================
</TABLE>
Abbreviations:
ADR - America Depositary Receipt
AUD - Australian Dollar
CAD - Canadian Dollar
Conv. - Convertible
Deb. - Debentures
DEM - German Deutsche Mark
Disc. - Discounted
DKK - Danish Krone
EUR - Euro
GBP - British Pound Sterling
GRD - Greek Drachma
Gtd. - Guaranteed
NZD - New Zealand Dollar
Pfd. - Preferred
PRIDES - Preferred Redeemable Increased Dividend Equity Security
REIT - Real Estate Investment Trusts
Sec. - Secured
SEK - Swedish Krona
Sr. - Senior
STRYPES - Structured Yield Product Exchangeable for Stock
Sub. - Subordinated
Unsec. - Unsecured
Unsub. - Unsubordinated
Wts. - Warrants
Notes to Schedule of Investments:
(a) Principal amount is in U.S. Dollars, except as indicated by note (g).
(b) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined in
accordance with procedures established by the Board of Trustees. The
aggregate market value of these securities at 12/31/99 was $56,480,633 which
represents 8.48% of the Fund's net assets.
(c) Discounted bond at purchase. The interest rate represents the coupon rate at
which the bond will accrue at a specified future date.
(d) 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.
(e) Consists of more than one class of securities traded together as a unit. In
addition to the debt obligations listed, each unit contains warrants that
enable the holder to purchase common stock in the issuer at a predetermined
price per share of common stock.
(f) Defaulted security. Currently, the issuer is partially in default with
respect to interest payments.
(g) Foreign denominated security. Par value and coupon rate are denominated in
currency indicated.
(h) The coupon rate shown on floating rate note represents rate at the period
end.
(i) Non-income producing security.
(j) Non-income producing security acquired as part of a unit with or in exchange
for other securities.
(k) The money market fund has the same investment advisor as the Fund.
See Notes to Financial Statements.
12
<PAGE> 15
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$685,112,806) $653,794,016
- ---------------------------------------------------------
Receivables for:
Investments sold 2,276,457
- ---------------------------------------------------------
Foreign currency contracts closed 73,961
- ---------------------------------------------------------
Fund shares sold 1,531,743
- ---------------------------------------------------------
Interest and dividends 13,711,495
- ---------------------------------------------------------
Foreign currency contracts outstanding 428,336
- ---------------------------------------------------------
Investment for deferred compensation plan 77,326
- ---------------------------------------------------------
Other assets 33,285
- ---------------------------------------------------------
Total assets 671,926,619
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 1,067,402
- ---------------------------------------------------------
Fund shares reacquired 1,966,181
- ---------------------------------------------------------
Dividends 746,263
- ---------------------------------------------------------
Deferred compensation plan 77,326
- ---------------------------------------------------------
Foreign currency contracts closed 10,560
- ---------------------------------------------------------
Foreign currency contracts outstanding 79,121
- ---------------------------------------------------------
Amount due to Custodian 686,784
- ---------------------------------------------------------
Accrued advisory fees 237,999
- ---------------------------------------------------------
Accrued distribution fees 570,288
- ---------------------------------------------------------
Accrued transfer agent fees 56,990
- ---------------------------------------------------------
Accrued operating expenses 98,385
- ---------------------------------------------------------
Total liabilities 5,597,299
- ---------------------------------------------------------
Net assets applicable to shares outstanding $666,329,320
=========================================================
NET ASSETS:
Class A $393,414,414
=========================================================
Class B $244,713,091
=========================================================
Class C $ 28,201,815
=========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 51,834,716
=========================================================
Class B 32,269,196
=========================================================
Class C 3,725,195
=========================================================
Class A:
Net asset value and redemption price per
share $ 7.59
- ---------------------------------------------------------
Offering price per share:
(Net asset value of $7.59 divided
by 95.25%) $ 7.97
=========================================================
Class B:
Net asset value and offering price per
share $ 7.58
=========================================================
Class C:
Net asset value and offering price per
share $ 7.57
=========================================================
</TABLE>
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 52,455,832
- ---------------------------------------------------------
Dividends (net of $1,419 foreign
withholding tax) 1,024,078
- ---------------------------------------------------------
Total investment income 53,479,910
- ---------------------------------------------------------
EXPENSES:
Advisory fees 2,785,338
- ---------------------------------------------------------
Administrative services fees 111,839
- ---------------------------------------------------------
Custodian fees 102,279
- ---------------------------------------------------------
Trustees' fees 10,727
- ---------------------------------------------------------
Distribution fees -- Class A 1,006,620
- ---------------------------------------------------------
Distribution fees -- Class B 2,401,345
- ---------------------------------------------------------
Distribution fees -- Class C 244,571
- ---------------------------------------------------------
Transfer agent fees -- Class A 649,179
- ---------------------------------------------------------
Transfer agent fees -- Class B 405,725
- ---------------------------------------------------------
Transfer agent fees -- Class C 41,321
- ---------------------------------------------------------
Other 306,728
- ---------------------------------------------------------
Total expenses 8,065,672
- ---------------------------------------------------------
Less: Expenses paid indirectly (12,978)
- ---------------------------------------------------------
Net expenses 8,052,694
- ---------------------------------------------------------
Net investment income 45,427,216
=========================================================
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN
CURRENCIES, FOREIGN CURRENCY CONTRACTS
AND FUTURES CONTRACTS:
Net realized gain (loss) from:
Investment securities (21,513,111)
- ---------------------------------------------------------
Foreign currencies (246,991)
- ---------------------------------------------------------
Foreign currency contracts 1,947,070
- ---------------------------------------------------------
Futures contracts (76,650)
- ---------------------------------------------------------
(19,889,682)
- ---------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of:
Investment securities (47,772,599)
- ---------------------------------------------------------
Foreign currencies (1,694)
- ---------------------------------------------------------
Foreign currency contracts (36,322)
- ---------------------------------------------------------
(47,810,615)
- ---------------------------------------------------------
Net gain (loss) from investment
securities, foreign currencies, foreign
currency contracts and futures
contracts (67,700,297)
- ---------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations $(22,273,081)
=========================================================
</TABLE>
13
<PAGE> 16
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 $ 45,427,216 $ 35,484,095
- ------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies, foreign currency contracts and
futures contracts (19,889,682) (2,670,536)
- ------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities, foreign currencies and foreign
currency contracts (47,810,615) (8,393,729)
- ------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations (22,273,081) 24,419,830
- ------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (27,905,932) (24,056,371)
- ------------------------------------------------------------------------------------------
Class B (14,665,005) (9,376,348)
- ------------------------------------------------------------------------------------------
Class C (1,497,538) (561,222)
- ------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A -- (2,510,957)
- ------------------------------------------------------------------------------------------
Class B -- (1,354,867)
- ------------------------------------------------------------------------------------------
Class C -- (120,997)
- ------------------------------------------------------------------------------------------
Share transactions-net:
Class A 33,756,872 67,975,662
- ------------------------------------------------------------------------------------------
Class B 49,567,754 97,469,590
- ------------------------------------------------------------------------------------------
Class C 11,280,738 17,151,361
- ------------------------------------------------------------------------------------------
Net increase in net assets 28,263,808 169,035,681
- ------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 638,065,512 469,029,831
- ------------------------------------------------------------------------------------------
End of period $666,329,320 $638,065,512
==========================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $719,086,161 $624,536,057
- ------------------------------------------------------------------------------------------
Undistributed net investment income (1,347,825) 68,804
- ------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities, foreign currencies, foreign currency
contracts and futures contracts (20,443,436) (3,384,384)
- ------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities, foreign currencies and foreign currency
contracts (30,965,580) 16,845,035
- ------------------------------------------------------------------------------------------
$666,329,320 $638,065,512
==========================================================================================
</TABLE>
See Notes to Financial Statements.
14
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Income 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 consistent with reasonable concern
for safety of principal by investing primarily in fixed-rate corporate debt and
U.S. Government obligations.
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 the ex-dividend date.
On December 31, 1999, undistributed net investment income was decreased by
$2,775,370, undistributed net realized gains increased by $2,830,630 and
paid-in capital decreased by $55,260 as a result of differing book/tax
treatment of foreign currency transactions and other reclassifications. Net
assets of the Fund were unaffected by the reclassifications.
C. Distributions -- It is the policy of the Fund to declare daily dividends
from net investment income. Such distributions are paid monthly.
Distributions from net realized capital gains, if any, are 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 $15,159,499 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. Foreign Currency Translations -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollar
amounts at date of valuation. Purchases and sales of portfolio securities and
income items denominated in foreign currencies are translated into
15
<PAGE> 18
U.S. dollar amounts on the respective dates of such transactions. The Fund
does not separately account for that portion of the results of operations
resulting from changes in foreign exchange rates on investments and the
fluctuations arising from changes in market prices of securities held. Such
fluctuations are included with the net realized and unrealized gain or loss
from investments.
F. Foreign Currency Contracts -- A foreign currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a foreign currency contract to attempt to
minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency contract
for the purchase or sale of a security denominated in a foreign currency in
order to "lock in" the U.S. dollar price of that security. The Fund could be
exposed to risk if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably.
Outstanding foreign currency contracts at December 31, 1999 were as follows:
<TABLE>
<CAPTION>
CONTRACT TO UNREALIZED
SETTLEMENT ------------------------ APPRECIATION
DATE CURRENCY DELIVER RECEIVE VALUE (DEPRECIATION)
--------------------- -------- ---------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C>
01/24/00 SEK 66,000,000 $ 8,134,891 $ 7,768,745 $366,146
--------------------- -------- ---------- ----------- ----------- --------------
02/04/00 CAD 1,500,000 1,023,053 1,040,168 (17,115)
--------------------- -------- ---------- ----------- ----------- --------------
02/28/00 EUR 1,000,000 1,038,500 1,011,046 27,454
--------------------- -------- ---------- ----------- ----------- --------------
02/28/00 GBP 4,500,000 7,301,250 7,266,514 34,736
--------------------- -------- ---------- ----------- ----------- --------------
02/28/00 NZD 5,500,000 2,814,460 2,876,466 (62,006)
--------------------- -------- ---------- ----------- ----------- --------------
78,500,000 $20,312,154 $19,962,939 $349,215
===================== ======== ========== =========== =========== ==============
</TABLE>
G. Futures Contracts -- The Fund may purchase or sell futures contracts as a
hedge against changes in market conditions. Initial margin deposits required
upon entering into futures contracts are satisfied by the segregation of
specific securities as collateral for the account of the broker (the Fund's
agent in acquiring the futures position). During the period the futures
contracts are open, changes in the value of the contracts are recognized as
unrealized gains or losses by "marking to market" on a daily basis to reflect
the market value of the contracts at the end of each day's trading. Variation
margin payments are made or received depending upon whether unrealized gains
or losses are incurred. When the contracts are closed, the Fund recognizes a
realized gain or loss equal to the difference between the proceeds from, or
cost of, the closing transaction and the Fund's basis in the contract. Risks
include the possibility of an illiquid market and that a change in value of
the contracts may not correlate with changes in the value of the securities
being hedged.
H. Bond Premiums -- It is the policy of the Fund not to amortize market premiums
on bonds for financial reporting purposes.
I. 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 investment advisory agreement,
the Fund pays an advisory fee to AIM at an annual rate of 0.50% on the first
$200 million of the Fund's average daily net assets, plus 0.40% on the next $300
million of the Fund's average daily net assets, plus 0.35% on the next $500
million of the Fund's average daily net assets, plus 0.30% 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 $111,839 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 $668,106 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 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 $1,006,620,
$2,401,345 and $244,571, respectively, as compensation under the Plans.
AIM Distributors received commissions of $358,051 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 $48,455 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 $4,426
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.
16
<PAGE> 19
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 $7,504 and $5,474, respectively, under expense offset arrangements. The
effect of the above arrangements resulted in a reduction of the Fund's total
expenses of $12,978 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
$602,560,607 and $501,931,451, 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 $ 8,639,591
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (40,003,123)
- ---------------------------------------------------------
Net unrealized appreciation (depreciation)
of investment securities $(31,363,532)
=========================================================
</TABLE>
Cost of investments for tax purposes is $685,157,548.
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 19,309,632 $ 154,855,498 18,358,462 $ 156,866,536
- -----------------------------------------------------------------------------------------------------------------------
Class B 14,308,868 114,665,985 15,156,529 128,945,810
- -----------------------------------------------------------------------------------------------------------------------
Class C 2,744,473 21,843,332 2,530,069 21,507,916
- -----------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 2,892,178 22,930,219 2,575,274 21,978,433
- -----------------------------------------------------------------------------------------------------------------------
Class B 1,404,212 11,107,962 956,975 8,134,643
- -----------------------------------------------------------------------------------------------------------------------
Class C 150,804 1,188,183 65,508 553,356
- -----------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (18,052,165) (144,028,845) (12,996,807) (110,869,307)
- -----------------------------------------------------------------------------------------------------------------------
Class B (9,612,004) (76,206,193) (4,664,899) (39,610,863)
- -----------------------------------------------------------------------------------------------------------------------
Class C (1,483,247) (11,750,777) (581,112) (4,909,911)
- -----------------------------------------------------------------------------------------------------------------------
11,662,751 $ 94,605,364 21,399,999 $ 182,596,613
=======================================================================================================================
</TABLE>
17
<PAGE> 20
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 $ 8.38 $ 8.57 $ 8.24 $ 8.17 $ 7.20
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.57 0.57 0.55 0.57 0.58
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Net gains (losses) on securities (both realized and
unrealized) (0.81) (0.16) 0.39 0.09 1.00
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Total from investment operations (0.24) 0.41 0.94 0.66 1.58
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.55) (0.55) (0.52) (0.59) (0.61)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Distributions from net realized gains -- (0.05) (0.09) -- --
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Total distributions (0.55) (0.60) (0.61) (0.59) (0.61)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Net asset value, end of period $ 7.59 $ 8.38 $ 8.57 $ 8.24 $ 8.17
============================================================ ======== ======== ======== ======== ========
Total return(a) (2.92)% 4.94% 11.92% 8.58% 22.77%
============================================================ ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $393,414 $399,701 $340,608 $286,183 $251,280
============================================================ ======== ======== ======== ======== ========
Ratio of expenses to average net assets 0.91%(b) 0.91% 0.94% 0.98% 0.98%
============================================================ ======== ======== ======== ======== ========
Ratio of net investment income to average net assets 7.11%(b) 6.69% 6.55% 7.13% 7.52%
============================================================ ======== ======== ======== ======== ========
Portfolio turnover rate 78% 41% 54% 80% 227%
============================================================ ======== ======== ======== ======== ========
</TABLE>
(a) Does not deduct sales charges.
(b) Ratios are based on average net assets of $402,647,801.
<TABLE>
<CAPTION>
CLASS B CLASS C
--------------------------------------------------- ---------------------------
1999 1998 1997 1996 1995 1999 1998 1997
-------- -------- -------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 8.37 $ 8.55 $ 8.23 $ 8.15 $ 7.18 $ 8.36 $ 8.54 $ 8.38
- --------------------------------------------- -------- -------- -------- ------- ------- ------- ------- -------
Income from investment operations:
Net investment income 0.50 0.50 0.48 0.50 0.53 0.50 0.50 0.19
- --------------------------------------------- -------- -------- -------- ------- ------- ------- ------- -------
Net gains (losses) on securities (both
realized and unrealized) (0.80) (0.15) 0.38 0.11 0.98 (0.80) (0.15) 0.22
- --------------------------------------------- -------- -------- -------- ------- ------- ------- ------- -------
Total from investment operations (0.30) 0.35 0.86 0.61 1.51 (0.30) 0.35 0.41
- --------------------------------------------- -------- -------- -------- ------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income (0.49) (0.48) (0.45) (0.53) (0.54) (0.49) (0.48) (0.16)
- --------------------------------------------- -------- -------- -------- ------- ------- ------- ------- -------
Distributions from net realized gains -- (0.05) (0.09) -- -- -- (0.05) (0.09)
- --------------------------------------------- -------- -------- -------- ------- ------- ------- ------- -------
Total distributions (0.49) (0.53) (0.54) (0.53) (0.54) (0.49) (0.53) (0.25)
- --------------------------------------------- -------- -------- -------- ------- ------- ------- ------- -------
Net asset value, end of period $ 7.58 $ 8.37 $ 8.55 $ 8.23 $ 8.15 $ 7.57 $ 8.36 $ 8.54
============================================= ======== ======== ======== ======= ======= ======= ======= =======
Total return(a) (3.72)% 4.20% 10.89% 7.87% 21.72% (3.71)% 4.21% 4.96%
============================================= ======== ======== ======== ======= ======= ======= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $244,713 $219,033 $125,871 $85,343 $44,304 $28,202 $19,332 $ 2,552
============================================= ======== ======== ======== ======= ======= ======= ======= =======
Ratio of expenses to average net assets 1.66%(b) 1.66% 1.69% 1.80% 1.79% 1.66%(b) 1.66% 1.69%(c)
============================================= ======== ======== ======== ======= ======= ======= ======= =======
Ratio of net investment income to average net
assets 6.36%(b) 5.94% 5.80% 6.30% 6.71% 6.36%(b) 5.94% 5.80%(c)
============================================= ======== ======== ======== ======= ======= ======= ======= =======
Portfolio turnover rate 78% 41% 54% 80% 227% 78% 41% 54%
============================================= ======== ======== ======== ======= ======= ======= ======= =======
</TABLE>
(a) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(b) Ratios are based on average net assets of $240,134,478 and $24,457,067 for
Class B and Class C, respectively.
(c) Annualized.
18
<PAGE> 21
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of
AIM Income Fund:
We have audited the accompanying statement of assets and
liabilities of AIM Income Fund (a portfolio of AIM Funds
Group), including the schedule of investments, as of
December 31, 1999, and the related statement of
operations for the year then ended, the statement of
changes in net assets for each of the years in the
two-year period then ended, and the financial highlights
for each of the years in the 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 and brokers. An audit
also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial 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
Income 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
19
<PAGE> 22
<TABLE>
<S> <C> <C>
BOARD OF TRUSTEES OFFICERS OFFICE OF THE FUND
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 Income Fund Class A, Class B, and Class C shares paid ordinary dividends in
the amount of $0.552, $0.486, and $0.486 per share, respectively, to
shareholders during its tax year ended December 31, 1999. Of these amounts 1.89%
is eligible for the dividends received deduction for corporations.
REQUIRED STATE INCOME TAX INFORMATION
Of the total ordinary dividends paid, 0.80% was derived from U.S. Treasury
obligations.
20
<PAGE> 23
------------------------------------
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24 HOURS A DAY.
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AIM INCOME FUND
<PAGE> 24
THE AIM FAMILY OF FUNDS--Registered Trademark--
<TABLE>
<S> <C> <C>
GROWTH FUNDS MONEY MARKET FUNDS A I M Management Group Inc. has provided
AIM Aggressive Growth Fund AIM Money Market Fund leadership in the mutual fund industry
AIM Blue Chip Fund AIM Tax-Exempt Cash Fund since 1976 and managed approximately
AIM Capital Development Fund $160 billion in assets for more than
AIM Constellation Fund(1) INTERNATIONAL GROWTH FUNDS 6.6 million shareholders, including
AIM Dent Demographic Trends Fund AIM Advisor International Value Fund individual investors, corporate clients
AIM Large Cap Growth Fund AIM Asian Growth Fund and financial institutions, as of
AIM Mid Cap Equity Fund AIM Developing Markets Fund December 31, 1999.
AIM Mid Cap Growth Fund AIM Euroland Growth Fund(4) The AIM Family of Funds--Registered
AIM Mid Cap Opportunities Fund AIM European Development Fund Trademark-- is distributed nationwide,
AIM Select Growth Fund AIM International Equity Fund and AIM today is the eighth-largest
AIM Small Cap Growth Fund(2) AIM Japan Growth Fund mutual fund complex in the United States
AIM Small Cap Opportunities Fund(3) AIM Latin American Growth Fund in assets under management, according
AIM Value Fund AIM New Pacific Growth Fund to Strategic Insight, an independent
AIM Weingarten Fund mutual fund monitor.
GROWTH & INCOME FUNDS GLOBAL GROWTH FUNDS
AIM Advisor Flex Fund AIM Global Aggressive Growth Fund
AIM Advisor Large Cap Value Fund AIM Global Growth Fund
AIM Advisor Real Estate Fund
AIM Balanced Fund GLOBAL GROWTH & INCOME FUNDS
AIM Basic Value Fund AIM Global Growth & Income Fund
AIM Charter Fund AIM Global Utilities Fund
INCOME FUNDS GLOBAL INCOME FUNDS
AIM Floating Rate Fund AIM Emerging Markets Debt Fund
AIM High Yield Fund AIM Global Government Income Fund
AIM High Yield Fund II AIM Global Income Fund
AIM Income Fund AIM Strategic Income Fund
AIM Intermediate Government Fund
AIM Limited Maturity Treasury Fund THEME FUNDS
AIM Global Consumer Products and Services Fund
TAX-FREE INCOME FUNDS AIM Global Financial Services Fund
AIM High Income Municipal Fund AIM Global Health Care Fund
AIM Municipal Bond Fund AIM Global Infrastructure Fund
AIM Tax-Exempt Bond Fund of Connecticut AIM Global Resources Fund
AIM Tax-Free Intermediate Fund AIM Global Telecommunications and Technology Fund(5)
AIM Global Trends Fund(6)
</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.
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