<PAGE> 1
ANNUAL REPORT / OCTOBER 31 1999
AIM STRATEGIC INCOME FUND
[COVER IMAGE]
[AIM LOGO APPEARS HERE]
<PAGE> 2
[COVER IMAGE]
-------------------------------------
THE CHESS GAME BY ALICE KENT STODDARD
CHESS IS LARGELY VIEWED AS A GAME OF STRATEGY, WHERE PLANNING
THE MOVES OF EACH PIECE ON THE BOARD LEADS TO THE ULTIMATE
GOAL OF WINNING THE GAME. LIKE A THOUGHTFUL CHESS PLAYER, THIS
FUND'S MANAGEMENT TEAM CAREFULLY WEIGHS ITS OPTIONS AND
CHOOSES SECURITIES FOR THE PORTFOLIO THAT WILL HELP THE FUND
REACH ITS OBJECTIVE.
-------------------------------------
AIM Strategic Income Fund is for shareholders who seek high current income and,
secondarily, growth of capital by investing mainly in debt securities of issuers
in the United States, developed foreign countries and emerging markets.
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o AIM Strategic Income Fund performance figures are historical and reflect
reinvestment of all distributions and changes in net asset value.
o When sales charges are included in performance figures, Class A share
performance reflects the maximum 4.75% sales charge, and Class B and Class C
share performance reflects the applicable contingent deferred sales charge
(CDSC) for the period involved. The CDSC on Class B shares declines from 5%
beginning at the time of purchase to 0% at the beginning of the seventh
year. The CDSC on Class C shares is 1% for the first year after purchase.
The performance of the fund's Class B and Class C shares will differ from
that of Class A shares due to differences in sales charge structure and
expenses.
o The fund's average annual total returns, including sales charges, for
periods ended 9/30/99 (the most recent calendar quarter end), are as
follows: for Class A shares, one year, -4.36%; five years, 5.06%; 10 years,
7.63%. For Class B shares, one year, -4.90%; five years, 5.11%; inception
(10/22/92), 6.65%. Class C shares produced a cumulative total return of
-2.46% from their inception (3/1/99) through 9/30/99. For Advisor Class
shares, one year, 0.79%; inception (6/1/95), 7.50%.
o Beginning 3/1/99, Advisor Class shares were closed to new investors.
o The 30-day yield is calculated on the basis of a formula defined by the SEC.
The formula is based on the portfolio's potential earnings from dividends,
interest, yield-to-maturity or yield-to-call of its holdings, net of all
expenses and expressed on an annualized basis.
o The fund's annualized distribution rate reflects the fund's most recent
monthly dividend distribution multiplied by 12 and divided by the most
recent month-end maximum offering price. The fund's distribution rate and
30-day SEC yield will differ.
o During the year ended 10/31/99, the fund paid distributions of $0.6900 per
share for Class A shares, $0.6170 per share for Class B shares, $0.3430 per
share for Class C shares and $0.7320 per share for Advisor Class shares.
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 and yield 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 Higher-yielding, lower-rated corporate bonds, commonly known as "junk
bonds," have a greater risk of price fluctuation and loss of principal and
income than U.S. Treasury securities, which offer a government guarantee as
to the repayment of principal and interest if held to maturity. Purchasers
should carefully assess the risks associated with an investment in this
fund.
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 J.P. Morgan Global Government Bond Index is a market value-weighted
average of government bonds from 13 major developed bond markets. It
includes the effect of reinvested coupons and is measured in U.S. dollars.
o The unmanaged Lehman Aggregate Bond Index is generally considered
representative of the performance of corporate debt securities. It is
compiled by Lehman Brothers, a well-known global investment bank.
o Lipper, Inc. is an independent mutual fund performance monitor.
o An investment cannot be made in any index listed. Unless otherwise
indicated, index results include reinvested dividends and do not reflect
sales charges.
AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OF A BANK AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY. THERE IS A RISK THAT YOU COULD LOSE SOME OR ALL OF YOUR MONEY.
This report may be distributed only to current shareholders or to persons
who have received a current prospectus of the fund.
AIM STRATEGIC INCOME FUND
<PAGE> 3
ANNUAL REPORT / CHAIRMAN'S LETTER
Dear Fellow Shareholder:
The fiscal year discussed in this report 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 October 31, 1998, saw a market dominated by
THE FUND large-capitalization stocks and high-quality bonds,
APPEARS HERE] especially U.S. Treasuries. Ten months into 1998, two
well-known indexes of large-capitalization U.S. company
stocks, the S&P 500 and the Dow Jones Industrial Average,
were up by double digits, but the smaller-company stocks in
the Russell 2000 had lost 12.80%. Overseas, many markets
were languishing, especially in Asia, where many financial
difficulties originated in 1997.
In bond markets also, name-brand quality was the place
to be. The Lehman Corporate/Government Bond Index, which follows intermediate
and long-term government and investment-grade debt, was up 8.56%, while the
Lehman High Yield Index, which tracks riskier "junk bonds," had dropped 2.30%.
It would be easy for an investor to conclude that blue chips, whether equity or
fixed-income, were the only place to be. That investor, of course, would be
wrong.
MARKETS TURN
While large-capitalization stocks continue to do very well, during 1999 markets
broadened considerably, with many investment sectors performing a complete
turnaround. Year to date by October 31, 1999, the small-cap stocks in the
Russell 2000 were back in positive territory, and the many Asian markets had
staged a comeback. The same holds true for bonds. The higher-quality Lehman
index is down 1.49% year to date through October 31, 1999, while high-yield
bonds have moved into positive returns.
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.
LOOKING AHEAD
As we look about at the close of this fiscal year, we are encouraged by 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 can help assure 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 October 31, 1999, 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 STRATEGIC INCOME FUND
<PAGE> 4
ANNUAL REPORT / MANAGERS' OVERVIEW
AIM STRATEGIC INCOME FUND STANDS POISED
FOR NEW OPPORTUNITIES
IT WAS A VOLATILE ENVIRONMENT FOR BONDS. HOW DID THE FUND PERFORM DURING THE
REPORTING PERIOD?
The volatility was principally experienced in U.S. corporate bonds, as well as
non-U.S. government bonds. For the fiscal year ended October 31, 1999, the fund
posted a total return of 0.06% for Class A shares and -0.52% for Class B shares.
Advisor Class shares returned 0.55%. Class C shares commenced sales March 1,
1999, and produced cumulative total return of -1.80% through the end of the
fiscal year. These returns are at net asset value, excluding sales charges.
Comparatively, the Lehman Aggregate Bond Index had a return of 0.53% for the
same period.
The fund's 30-day SEC yield at net asset value was 7.00% for Class A
shares, 6.71% for Class B shares and Class C shares and 7.66% for Advisor Class
shares as of October 31, 1999.
TO WHAT DO YOU ATTRIBUTE THE VOLATILITY?
The year has largely been characterized by fear--fears about interest rates and
Y2K. There was concern that continued strong economic growth in the United
States would prompt the Federal Reserve Board (the Fed) to raise interest rates
to keep inflation under control, which had an unsettling effect on the bond
market.
The bond market was also rattled by the potential impact of the need to
reprogram older computers to recognize the year 2000 (Y2K). Some investors who
fear the potential impact of Y2K have moved their money out of risky bonds. As a
result, liquidity in the bond market has narrowed considerably.
HOW DID VARIOUS SECTORS OF THE BOND MARKET PERFORM DURING THE REPORTING PERIOD?
Evidence of the bond market's marginal performance can be seen in the total
returns of three components of the Lehman Aggregate Bond Index. According to
Lehman, corporate bonds etched out a return of 1.50% while government bonds
dropped to -6.10%. On a positive note, high-yield bonds returned 4.34% as of
October 31, 1999.
High-yield bonds spent the beginning of the fiscal year in the doldrums,
rallied midway through the reporting period, and for a time were market leaders.
However, the performance of high-yield bonds took a sudden downturn amid
concerns about interest rates, inflation and a growing default rate. Toward the
end of the fiscal year, the default rate for the issuers of high-yield bonds
rose to approximately 4%, its highest level since 1991.
WHAT SIGNIFICANT ACTIONS DID THE FED TAKE THIS YEAR?
In two separate moves, the Fed raised the key federal funds rate from 4.75% to
5.25%. At the end of the fiscal year, the Fed was maintaining a tightening bias,
but investors were uncertain whether the central bank would raise rates further.
Shortly after the fiscal year closed, the Fed raised rates again.
The uncertainty over interest rates and the direction of Fed policy has
created a high level of caution among fixed-income investors this year. As a
result, yield spreads among mortgages, investment-grade corporate bonds and
high-yield bonds have remained wide this year.
HAVE YOU MADE ANY CHANGES IN COUNTRY HOLDINGS DURING THE REPORTING PERIOD?
Our U.S. allocation has increased significantly, from 40% to over 70%. This is
consistent given changes in the benchmark and our outlook for a stable economic
backdrop in the United States.
WHAT CHANGES HAVE YOU MADE TO MAKE THE FUND MORE COMPETITIVE IN THE FIXED-INCOME
MARKET?
HISTORICALLY, THIS FUND HAD 50% OF ITS ASSETS INVESTED IN EMERGING-MARKETS DEBT
AND 50% IN GLOBAL BONDS. OVER THE PAST YEAR, WE HAVE INCREMENTALLY REDUCED BOTH
THE GLOBAL GOVERNMENT AND EMERGING-MARKETS DEBT ALLOCATIONS TO 10% EACH AND
INCREASED THE HIGH-YIELD ALLOCATION TO 45%. THE FUND NOW ALSO HAS APPROXIMATELY
5% IN CONVERTIBLE BONDS TO PROVIDE LIMITED EXPOSURE TO THE EQUITY MARKETS.
The goal of the restructuring is to position the fund as a multi-sector
bond fund with a broader and less volatile range of asset classes. The fund will
be able to maintain more diversified holdings that include Treasuries, agency,
mortgage, non-U.S. government bonds, and emerging-markets debt bonds. Invest-
-------------------------------------
BONDS ARE MOST ATTRACTIVE
WHEN INFLATIONARY PRESSURES
ARE LOW AND WHEN YIELDS
EXCEED ECONOMIC GROWTH RATES.
-------------------------------------
See important fund and index disclosures inside front cover.
AIM STRATEGIC INCOME FUND
2
<PAGE> 5
ANNUAL REPORT / MANAGERS' OVERVIEW
ment-grade and below-investment-grade corporate bonds are also viable investment
options. The restructuring should help minimize the fund's exposure to
individual sectors and maximize shareholders' income and total returns.
WHAT HAS BEEN THE IMPACT OF RESTRUCTURING ON THE FUND?
Ties between currency losses and income caused the dividend to decline. We
expect approximately a 7% return of capital this year. These unfavorable effects
can be attributed to timing and are expected to be temporary. Going forward, the
restructuring should provide the fund with a more stable net asset value for
potentially better risk-adjusted returns.
WHY HAS THE FUND'S BENCHMARK INDEX CHANGED?
The fund's benchmark has changed to the Lehman Aggregate Bond Index to better
reflect the fund's true nature as a multi-sector fund. Previously, the
benchmark was the J.P. Morgan Global Government Bond Index.
The new benchmark is a well-diversified index that incorporates domestic
fixed-income securities, including U.S. Treasuries, corporate issues and
mortgage- and asset-backed securities. The Lehman Aggregate Bond Index more
closely represents the objectives of the fund and its revised investment
strategies.
WHAT IS YOUR OUTLOOK FOR THE NEXT FEW MONTHS?
We believe the prospects for bonds are brighter in the months ahead. The global
economy continues to improve, with low inflation in Europe, and we anxiously
await a full recovery for Asia. In the United States, we expect inflation to
remain subdued and interest rate increases to be limited. This provides a very
favorable environment for the fund's current asset allocation and an excellent
backdrop for the fixed-income market.
We remain optimistic concerning the risk/reward tradeoff of the fund's
restructuring. The asset allocation shifts may help reduce volatility and
position the fund for more stable appreciation in the future. Bonds are most
attractive when inflationary pressures are low and when yields exceed economic
growth rates. We will continue to hold true to our investment discipline; when
momentum returns in the bond market, we expect to thrive.
PORTFOLIO COMPOSITION
As of 10/31/99, based on total net assets
================================================================================
TOP HOLDINGS COUPON MATURITY %
- --------------------------------------------------------------------------------
1. FNMA, Pass Through Certificates 7.50% 1/29 7.45
2. Bundesrepublik Deutschland Bonds 6.50 7/27 3.54
3. Fingerhut 5.88 2/07 2.31
4. GreenTree Home Equity Loan Trust 7.88 9/30 2.28
5. U.S. Treasury Bond 5.63 5/08 2.20
================================================================================
================================================================================
TOP COUNTRIES
- --------------------------------------------------------------------------------
1. United States 70.54%
2. Germany 5.35
3. United Kingdom 4.29
4. Canada 1.97
5. Brazil 1.96
The fund's portfolio is subject to change, and there is no assurance that the
fund will continue to hold any particular security.
================================================================================
GEOGRAPHIC ALLOCATION
================================================================================
Pie Chart
- --------------------------------------------------------------------------------
North America And Other 80.7%
Europe 12.09
South America 3.37
Asia 1.94
Australia 1.9
================================================================================
See important fund and index disclosures inside front cover.
AIM STRATEGIC INCOME FUND
3
<PAGE> 6
ANNUAL REPORT / PERFORMANCE HISTORY
YOUR FUND'S LONG-TERM PERFORMANCE
RESULTS OF A $10,000 INVESTMENT
AIM STRATEGIC INCOME FUND VS. BENCHMARK INDEXES
3/29/88-10/31/99
in thousands
Mountain Chart
================================================================================
AIM Fund J.P. Morgan Lehman Aggregate
- --------------------------------------------------------------------------------
3/88 9525 10000 9946
10/88 9705 10264 10514
10/89 10366 10770 11764
10/90 11229 11942 12507
10/91 12095 13284 14485
10/92 13440 14955 15909
10/93 18410 16600 17798
10/94 16489 17036 17144
10/95 16993 19651 19827
10/96 20901 20851 20986
10/97 22866 21578 22853
10/98 22086 24379 24986
10/99 22100 23658 25119
Source: Lipper, Inc.
Past performance cannot guarantee comparable future results.
================================================================================
ABOUT THIS CHART
The chart compares your fund to two benchmark indexes. It is intended to
give you a general idea of how your fund performed compared to the bond market
over the period 10/3/89-10/31/99. (Please note that index performance figures
are for the period 9/30/89-10/31/99.) It is important to understand the
difference between your fund and an index. Your fund's total return is shown
with a sales charge and includes fund expenses and management fees. An index
measures the performance of a hypothetical portfolio. Unlike your fund, the
index is not managed; therefore, there are no sales charges, expenses or fees.
If you could buy all the securities that make up a particular index, you would
incur expenses that would affect the return of your investment.
Since the last reporting period, AIM Strategic Income Fund has elected to
use the Lehman Aggregate Bond Index as its benchmark instead of the J.P. Morgan
Global Government Bond Index. The new index more closely resembles the
securities in which the fund invests. The fund will no longer measure its
performance against the J.P. Morgan Global Government Bond Index, the index
published in previous reports to shareholders. Because this is the first
reporting period since we have adopted the new index, SEC guidelines require
that we compare the fund's performance to both the old and the new index.
AVERAGE ANNUAL TOTAL RETURNS
As of 10/31/99, including sales charges
================================================================================
CLASS A SHARES
- --------------------------------------------------------------------------------
10 years 7.34%
5 years 5.01
1 year -4.71
CLASS B SHARES
- --------------------------------------------------------------------------------
Inception (10/22/92) 6.52%
5 years 5.07
1 year -5.22
CLASS C SHARES
- --------------------------------------------------------------------------------
Inception (3/1/99) -2.75%*
* Total return provided is cumulative and has not been annualized.
ADVISOR CLASS SHARES*
- --------------------------------------------------------------------------------
Inception (6/1/95) 7.30%
1 year 0.55*
* Beginning 3/1/99, Advisor Class Shares were closed to new investors.
================================================================================
Your fund's total return includes sales charges, expenses and management fees.
The performance of the fund's Class B and C shares will differ from Class A
shares due to differing fees and expenses. For fund performance calculations and
descriptions of indexes cited on this page, please refer to the inside front
cover.
MARKET VOLATILITY CAN SIGNIFICANTLY IMPACT SHORT-TERM PERFORMANCE. RESULTS
OF AN INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL
PERFORMANCE SHOWN.
AIM STRATEGIC INCOME FUND
4
<PAGE> 7
SCHEDULE OF INVESTMENTS
October 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
U.S. DOLLAR DENOMINATED
NON-CONVERTIBLE BONDS &
NOTES-54.60%
AEROSPACE/DEFENSE-0.73%
Sequa Corp.-Class A, Sr. Unsec.
Notes, 9.00%, 08/01/09 $ 1,400,000 $ 1,368,500
- --------------------------------------------------------------
AIRLINES-0.47%
Northwest Airlines Corp., Unsec.
Gtd. Notes, 7.875%, 03/15/08 1,000,000 885,550
- --------------------------------------------------------------
AUTO PARTS & EQUIPMENT-1.25%
American Axle & Manufacturing,
Inc., Sr. Unsec. Gtd. Sub.
Notes, 9.75%, 03/01/09 1,400,000 1,386,000
- --------------------------------------------------------------
Gentek, Inc., Sr. Gtd. Sub.
Notes, 11.00%, 08/01/09
(Acquired 08/03/99; Cost
$950,000)(b) 950,000 959,500
- --------------------------------------------------------------
2,345,500
- --------------------------------------------------------------
BANKS (MONEY CENTER)-3.07%
Chase Manhattan Corp., Unsec.
Sub. Notes, 6.25%, 01/15/06 2,835,000 2,713,676
- --------------------------------------------------------------
Sanwa Finance Aruba AEC (Aruba),
Unsec. Gtd. Unsub. Notes,
8.35%, 07/15/09 3,000,000 3,053,160
- --------------------------------------------------------------
5,766,836
- --------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO &
CABLE)-3.46%
Comcast Cable Communications,
Unsec. Unsub. Notes, 6.20%,
11/15/08(o) 4,200,000 3,889,452
- --------------------------------------------------------------
Lenfest Communications, Inc., Sr.
Unsec. Sub. Notes, 8.25%,
02/15/08 1,850,000 1,859,250
- --------------------------------------------------------------
LIN Television Corp., Sr. Unsec.
Gtd. Sub. Notes, 8.375%,
03/01/08 800,000 748,000
- --------------------------------------------------------------
6,496,702
- --------------------------------------------------------------
BUILDING MATERIALS-0.55%
Blount Inc., Sr. Sub Notes,
13.00%, 08/01/09(c) 1,000,000 1,032,500
- --------------------------------------------------------------
CHEMICALS-0.75%
Lyondell Chemical Co., Sr. Gtd.
Sub. Notes, 10.875%, 05/01/09 1,400,000 1,400,000
- --------------------------------------------------------------
CHEMICALS (DIVERSIFIED)-1.52%
Huntsman ICI Chemicals LLC, Sr.
Unsec. Sub. Notes, 10.125%,
07/01/09 (Acquired 06/22/99;
Cost $1,750,000)(b) 1,750,000 1,758,750
- --------------------------------------------------------------
ZSC Specialty Chemicals PLC
(United Kingdom), Sr. Gtd.
Unsub. Notes, 11.00%,
07/01/09(c) 1,100,000 1,105,500
- --------------------------------------------------------------
2,864,250
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
COMMUNICATIONS EQUIPMENT-0.55%
Williams Communications Group,
Inc., Sr. Unsec. Notes,
10.875%, 10/01/09 $ 1,000,000 $ 1,030,000
- --------------------------------------------------------------
COMPUTERS (HARDWARE)-0.53%
Chippac International Ltd., Sr.
Unsec. Gtd. Sub. Notes, 12.75%,
08/01/09 (Acquired 07/23/99;
Cost $1,000,000)(b) 1,000,000 995,000
- --------------------------------------------------------------
COMPUTERS (NETWORKING)-0.45%
Intersil Corp., 13.25%, 08/15/09
(Acquired 08/06/99; Cost
$800,000)(b)(d) 800 852,000
- --------------------------------------------------------------
COMPUTERS (SOFTWARE &
SERVICES)-1.30%
PSINet Inc., Sr. Notes, 11.00%,
08/01/09 (Acquired 07/16/99;
Cost $1,000,000)(b) 1,000,000 1,030,000
- --------------------------------------------------------------
Rythms NetConnections Inc., Sr.
Unsec. Notes, 12.75%, 04/15/09 1,575,000 1,405,687
- --------------------------------------------------------------
2,435,687
- --------------------------------------------------------------
CONSUMER FINANCE-1.94%
AmeriCredit Corp., Sr. Gtd. Sub.
Notes, 9.875%, 04/15/06 1,000,000 995,000
- --------------------------------------------------------------
General Motors Acceptance Corp.,
Unsec. Notes, 6.625%, 10/15/05 2,700,000 2,643,921
- --------------------------------------------------------------
3,638,921
- --------------------------------------------------------------
ELECTRONICS (COMPONENT
DISTRIBUTORS)-0.43%
Viasystems Group, Inc., Sr. Sub
Unsec. Notes, 9.75%, 06/01/07 1,000,000 805,000
- --------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-0.51%
Lodgian Financing Corp., Sr.
Unsec. Gtd. Sub. Notes, 12.25%,
07/15/09(c) 1,000,000 965,000
- --------------------------------------------------------------
FOODS-1.44%
Eagle Family Foods-Series B,
Unsec. Gtd. Notes, 8.75%,
01/15/08 1,735,000 1,344,625
- --------------------------------------------------------------
Vlasic Foods International
Inc.-Series B, Sr. Unsec. Sub.
Notes, 10.25%, 07/01/09 1,450,000 1,370,250
- --------------------------------------------------------------
2,714,875
- --------------------------------------------------------------
GAMING, LOTTERY & PARIMUTUEL
COMPANIES-4.63%
Hollywood Casino Corp., Sr. Sec.
Gtd. Sub. Notes, 11.25%,
05/01/07 3,000,000 3,022,500
- --------------------------------------------------------------
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
GAMING, LOTTERY & PARIMUTUEL
COMPANIES-(CONTINUED)
Hollywood Casino Corp.-Class A,
1st Mortgage, 13.00%, 08/01/06(c) $ 1,000,000 $ 1,040,000
- --------------------------------------------------------------
Hollywood Park, Inc.-Series B,
Sr. Gtd. Unsec. Sub. Notes,
9.25%, 02/15/07(o) 750,000 728,437
- --------------------------------------------------------------
Horseshoe Gaming Holding Corp.,
Sr. Unsec. Gtd. Notes, 8.675%,
05/15/09 1,350,000 1,299,375
- --------------------------------------------------------------
Isle of Capri Casinos, Inc.,
Unsec. Gtd. Sub. Notes, 8.75%,
04/15/09 1,500,000 1,361,250
- --------------------------------------------------------------
Mandalay Resort Group, Sr. Sub.
Notes, 9.25%, 12/01/05 1,250,000 1,256,250
- --------------------------------------------------------------
8,707,812
- --------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC & OTHER)-0.49%
ICN Pharmaceuticals, Inc., Sr.
Notes, 8.75%, 11/15/08
(Acquired 07/15/99; Cost
$969,900)(b) 1,000,000 917,500
- --------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT)-0.52%
Triad Hospitals Holdings Inc.,
Sr. Sub. Notes, 11.00%,
05/15/09(c) 1,000,000 982,500
- --------------------------------------------------------------
HEALTH CARE (MANAGED CARE)-0.53%
Express Scripts, Inc.-Class A,
Sr. Gtd. Sub. Notes, 9.625%,
06/15/09 1,000,000 1,005,000
- --------------------------------------------------------------
HOMEBUILDING-0.93%
Engle Homes, Inc.-Series C, Sr.
Unsec. Gtd. Notes, 9.25%,
02/01/08 2,000,000 1,750,000
- --------------------------------------------------------------
HOUSEHOLD FURNISHING & APPLIANCES-0.38%
Winsloew Furniture, Inc., 12.75%,
08/15/07(c)(d) 750 718,125
- --------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE-0.62%
Goldman Sachs Group, Inc. (The),
Medium Term Notes, 2.00%,
07/01/06 1,100,000 1,167,375
- --------------------------------------------------------------
IRON & STEEL-0.51%
Acme Metal, Inc., Sr. Unsec. Gtd.
Deb., 10.875%, 12/15/07(e) 780,000 167,700
- --------------------------------------------------------------
Republic Technologies International
LLC/RTI Capital Corp., 13.75%,
07/15/09 (Acquired 08/06/99;
Cost $839,035)(b)(d) 850 790,500
- --------------------------------------------------------------
958,200
- --------------------------------------------------------------
LEISURE TIME (PRODUCTS)-2.06%
Boca Resorts, Inc.-Class A, Sr.
Gtd. Sub Notes, 9.875%, 04/15/09 2,050,000 1,937,250
- --------------------------------------------------------------
Premier Parks Inc., Sr. Notes,
9.75%, 06/15/07 1,150,000 1,135,625
- --------------------------------------------------------------
Riddell Sports Inc., Sr. Unsec.
Gtd. Notes, 10.50%, 07/15/07 950,000 793,250
- --------------------------------------------------------------
3,866,125
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
MACHINERY (DIVERSIFIED)-1.06%
SCG Holding Corp./Semiconductor
Components Industries LLC, Sr.
Sub. Notes, 12.00%, 08/01/09
(Acquired 08/03/99; Cost
$1,010,000)(b) $ 1,000,000 $ 1,025,000
- --------------------------------------------------------------
Wec Co., Sr. Notes, 12.00%,
07/15/09 (Acquired 07/23/99;
Cost $1,000,000)(b) 1,000,000 975,000
- --------------------------------------------------------------
2,000,000
- --------------------------------------------------------------
MANUFACTURING (DIVERSIFIED)-1.22%
TeleCorp PCS, Inc., Sr. Disc.
Sub. Notes, 11.625%, 04/15/09
(Acquired 04/20/99; Cost
$1,906,254)(b)(f) 3,250,000 2,006,875
- --------------------------------------------------------------
Mechala Group (Jamaica) Series B,
Sr. Gtd. Sub. Notes, 12.75%,
12/30/99 719,000 282,208
- --------------------------------------------------------------
2,289,083
- --------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-1.48%
Fairchild Corp. (The)-Class A,
Sr. Unsec. Gtd. Sub. Notes,
10.75%, 04/15/09 1,000,000 865,000
- --------------------------------------------------------------
Fairchild Semiconductor Corp.,
Sr. Unsec. Gtd. Sub. Notes,
10.375%, 10/01/07 975,000 976,219
- --------------------------------------------------------------
Fisher Scientific International
Inc., Sr. Unsec. Sub. Notes,
9.00%, 02/01/08 1,000,000 945,000
- --------------------------------------------------------------
2,786,219
- --------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES-0.49%
United Stationers Supply Co., Sr.
Unsec. Gtd. Sub. Notes, 8.375%,
04/15/08 1,000,000 912,500
- --------------------------------------------------------------
OIL & GAS (EXPLORATION &
PRODUCTION)-0.41%
Vintage Petroleum, Inc., Sr.
Unsec. Sub. Notes, 9.75%,
06/30/09 750,000 761,250
- --------------------------------------------------------------
PERSONAL CARE-1.27%
Chattem, Inc.-Series B, Sr.
Unsec. Gtd. Sub. Notes, 8.875%,
04/01/08 1,500,000 1,342,500
- --------------------------------------------------------------
Drypers Corp.-Series B, Sr.
Notes, 10.25%, 06/15/07 1,300,000 1,046,500
- --------------------------------------------------------------
2,389,000
- --------------------------------------------------------------
PHOTOGRAPHY/IMAGING-0.56%
Polaroid Corp., Sr. Unsec. Notes,
11.50%, 02/15/06 1,050,000 1,055,250
- --------------------------------------------------------------
RETAIL (DISCOUNTERS)-0.82%
Ames Department Stores, Inc., Sr.
Gtd. Sub. Notes, 10.00%,
04/15/06 1,575,000 1,543,500
- --------------------------------------------------------------
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
RETAIL (DRUG STORES)-0.57%
Duane Reade, Inc., Sr. Unsec.
Gtd. Sub. Notes, 9.25%,
02/15/08 $ 1,100,000 $ 1,078,000
- --------------------------------------------------------------
RETAIL (FOOD CHAINS)-0.46%
Stater Brothers Holdings Inc.,
Sr. Notes, 10.75%, 08/15/06 850,000 869,125
- --------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING)-0.73%
Metris Cos., Inc., Sr. Notes,
10.125%, 07/15/06 (Acquired
08/13/99; Cost $1,441,804)(b) 1,500,000 1,368,750
- --------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-0.38%
Willis Corroon Corp., Sr. Gtd.
Sub. Notes, 9.00%, 02/01/09 800,000 712,000
- --------------------------------------------------------------
SERVICES (FACILITIES & ENVIRONMENTAL)-1.46%
American Plumbing & Mechanical
Inc., Sr. Gtd. Sub. Notes,
11.625%, 10/15/08(c)(o) 3,000,000 2,748,750
- --------------------------------------------------------------
SOVEREIGN DEBT-7.37%
Bank of Foreign Economic Affairs
(Vnesheconombank) (Russia),
Interest in Arrears Notes,
6.06%, 12/15/15(e)(g) 278,770 32,407
- --------------------------------------------------------------
Principal Loans, 6.06%,
12/15/20(e)(g) 16,555,492 1,541,813
- --------------------------------------------------------------
Government of Venezuela
(Venezuela), Unsec. Bonds,
9.25%, 09/15/27 183,000 123,525
- --------------------------------------------------------------
Republic of Argentina (Argentina),
Unsec. Unsub. Notes, 11.75%,
04/07/09 1,500,000 1,479,375
- --------------------------------------------------------------
Unsec. Unsub. Bonds, 11.375%,
01/30/17 208,000 199,160
- --------------------------------------------------------------
Republic of Brazil (Brazil),
Bonds, 11.625%, 04/15/04 1,228,000 1,177,345
- --------------------------------------------------------------
Notes, 14.50%, 10/15/09 2,404,000 2,496,554
- --------------------------------------------------------------
Gtd. Floating Rate Bonds,
7.00%, 04/15/12(g) 18,000 11,942
- --------------------------------------------------------------
Republic of Bulgaria (Bulgaria),
Floating Rate PDI Deb., 6.50%,
07/28/11(g) 190,000 145,200
- --------------------------------------------------------------
Series A, Gtd. Bonds, 2.75%,
07/28/12(g) 205,000 138,552
- --------------------------------------------------------------
Series A, Gtd. Floating Rate
Sec. Bonds, 6.50%, 07/28/24(g) 198,000 147,778
- --------------------------------------------------------------
Republic of Columbia (Columbia),
Unsub. Notes, 9.75%, 04/23/09 264,000 240,900
- --------------------------------------------------------------
Republic of Kazakhstan (Kazakhstan),
Bonds, 13.625%, 10/18/04
(Acquired 09/28/99; Cost $59,322)(b) 60,000 59,400
- --------------------------------------------------------------
Republic of Korea (Korea), Unsub.
Unsec. Notes, 8.875%, 04/15/08 990,000 1,031,870
- --------------------------------------------------------------
Republic of Malaysia (Malaysia),
Bonds, 8.75%, 06/01/09 720,000 742,190
- --------------------------------------------------------------
Republic of Panama (Panama),
Bonds, 8.875%, 09/30/27 304,000 247,651
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
SOVEREIGN DEBT-(CONTINUED)
Republic of Turkey (Turkey),
Notes, 12.00%, 12/15/08 $ 240,000 $ 243,000
- --------------------------------------------------------------
Republic of Venezuela
(Venezuela), Unsec. Bonds,
9.25%, 09/15/27 817,000 554,477
- --------------------------------------------------------------
United Mexican States (Mexico),
Bonds, 11.375%, 09/15/16 391,000 418,859
- --------------------------------------------------------------
11.50%, 05/15/26 2,500,000 2,825,353
- --------------------------------------------------------------
13,857,351
- --------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/
WIRELESS)-2.22%
Crown Castle International Corp.,
Sr. Disc. Notes, 10.375%,
05/15/11(f) 1,600,000 952,000
- --------------------------------------------------------------
Insight Midwest LP/Insight
Capital Inc., Sr. Notes, 9.75%,
10/01/09 (Acquired 09/28/99;
Cost $500,000)(b) 500,000 516,250
- --------------------------------------------------------------
Level 3 Communications, Inc., Sr.
Unsec. Notes, 9.125%, 05/01/08 1,500,000 1,406,250
- --------------------------------------------------------------
Omnipoint Corp., Sr. Notes,
11.50%, 09/15/09 (Acquired
09/17/99; Cost $750,000)(b) 750,000 787,500
- --------------------------------------------------------------
Worldwide Fiber, Inc. (Canada),
Sr. Notes, 12.00%, 08/01/09(c) 500,000 502,500
- --------------------------------------------------------------
4,164,500
- --------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-1.32%
Primus Telecommunications Group,
Inc., Sr. Notes, 11.25%, 01/15/09 1,600,000 1,480,000
- --------------------------------------------------------------
Tele1 Europe B.V. (Netherlands),
Sr. Unsec. Notes, 13.00%,
05/15/09(c) 1,000,000 995,000
- --------------------------------------------------------------
2,475,000
- --------------------------------------------------------------
TELEPHONE-0.93%
Intermedia Communications
Inc.-Series B, Sr. Unsec.
Notes, 9.50%, 03/01/09 1,900,000 1,752,750
- --------------------------------------------------------------
TEXTILES (APPAREL)-0.47%
St. John Knits International,
Inc., Sr. Sub. Notes, 12.50%,
07/01/09 (Acquired 07/01/99;
Cost $986,160)(b) 1,000,000 875,000
- --------------------------------------------------------------
TEXTILES (HOME FURNISHINGS)-0.26%
Pillowtex Corp., Sr. Sec. Gtd.
Sub. Notes, 10.00%, 11/15/06 1,325,000 483,625
- --------------------------------------------------------------
WASTE MANAGEMENT-1.50%
Allied Waste North America Inc.,
Sr. Sub. Notes, 10.00%,
08/01/09(c) 3,300,000 2,821,500
- --------------------------------------------------------------
Total U.S. Dollar Denominated
Non-Convertible Bonds &
Notes (Cost $114,669,327) 102,612,111
- --------------------------------------------------------------
</TABLE>
7
<PAGE> 10
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
U.S. DOLLAR DENOMINATED
CONVERTIBLE BONDS & NOTES-3.88%
LODGING-HOTELS-0.47%
Hilton Hotels Corp., Conv. Sub.
Notes, 5.00%, 05/15/06 $ 1,125,000 $ 885,937
- --------------------------------------------------------------
RETAIL (DRUG STORES)-1.23%
Rite Aid Corp., Conv. Unsec. Sub.
Notes, 5.25%, 09/15/02 3,320,000 2,307,400
- --------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING)-0.69%
Interpublic Group of Companies,
Inc. (The), Conv. Notes, 1.87%,
06/01/06 (Acquired 05/26/99;
Cost $1,176,106)(b) 1,400,000 1,298,500
- --------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-0.86%
CUC International, Inc., Conv.
Sub. Notes, 3.00%, 02/15/02 1,799,000 1,623,598
- --------------------------------------------------------------
WASTE MANAGEMENT-0.63%
WMX Technologies, Conv. Sub.
Notes, 2.00%, 01/24/05 1,445,000 1,186,706
- --------------------------------------------------------------
Total U.S. Dollar Denominated
Convertible Bonds & Notes
(Cost $8,877,848) 7,302,141
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT(h)
<S> <C> <C>
NON-U.S. DOLLAR DENOMINATED
GOVERNMENT BONDS & NOTES-11.60%
CANADA-1.97%
Canadian Government, Bonds,
Series H63, 10.75%,
10/01/09 CAD 4,065,000 3,702,317
- --------------------------------------------------------------
GERMANY-5.35%
Bundesrepublik Deutschland, Bonds
8.25%, 09/20/01 EUR 3,000,000 3,395,989
- --------------------------------------------------------------
6.50%, 07/04/27 EUR 5,800,000 6,651,676
- --------------------------------------------------------------
10,047,665
- --------------------------------------------------------------
GREECE-1.50%
Republic of Hellenic, Bonds
9.20%, 03/21/02 GRD 650,000,000 2,124,676
- --------------------------------------------------------------
8.80%, 06/19/07 GRD 200,000,000 696,135
- --------------------------------------------------------------
2,820,811
- --------------------------------------------------------------
ITALY-0.88%
Buoni Poliennali del Tesoro,
Deb., 8.50%, 01/01/04 EUR 1,400,000 1,665,613
- --------------------------------------------------------------
NEW ZEALAND-1.90%
Fannie Mae, Notes, 7.25%,
06/20/02 NZD 7,000,000 3,572,815
- --------------------------------------------------------------
Total Non-U.S. Dollar
Denominated Government
Bonds & Notes (Cost
$24,770,532) 21,809,221
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(h) VALUE
<S> <C> <C>
NON-U.S. DOLLAR DENOMINATED
NON-CONVERTIBLE BONDS & NOTES-4.17%
AUSTRIA-0.14%
Head Holding GMBH (Manufacturing-
Specialized), Sr. Notes,
10.75%, 07/15/06 EUR 250,000 $ 265,157
- --------------------------------------------------------------
FRANCE-0.15%
Remy Cointreau S.A.
(Beverages-Alcoholic), Sr.
Notes, 10.00%, 07/30/05 EUR 250,000 285,027
- --------------------------------------------------------------
LUXEMBOURG-0.09%
Carrier1 International S.A.
(Communications Equipment),
13.25%, 02/15/09 (Acquired
08/05/99; Cost
$180,103)(b)(d) EUR 150,000 160,964
- --------------------------------------------------------------
NETHERLANDS-0.09%
Impress Metal Packaging Holding
(Containers-Metal & Glass), Sr.
Sub. Notes, 9.875%,
05/29/07 DEM 300,000 168,011
- --------------------------------------------------------------
UNITED KINGDOM-3.70%
Clubhaus PLC (Entertainment), Sr.
Unsec. Notes, 12.875%,
06/01/09 GBP 150,000 257,903
- --------------------------------------------------------------
Colt Telecom Group PLC-Series
DBC (Telephone), Sr. Notes,
7.625%, 07/31/08 DEM 1,600,000 856,899
- --------------------------------------------------------------
ECO-BAT Technologies PLC
(Building Materials), Unsec.
Gtd. Sub. Notes, 9.125%,
06/27/07 GBP 150,000 242,755
- --------------------------------------------------------------
Energis PLC
(Telecommunications-Long
Distance), Unsec. Notes,
9.50%, 06/15/09 GBP 200,000 340,688
- --------------------------------------------------------------
HMV Media Group PLC
(Retail-General Merchandise),
Sr. Sub. Notes, 10.875%,
05/15/08 GBP 200,000 314,666
- --------------------------------------------------------------
Hurst Group PLC
(Broadcasting-Television, Radio
& Cable), Unsec. Unsub. Notes,
11.125%, 08/06/08 (Acquired
07/30/99; Cost $240,818(b) GBP 150,000 241,848
- --------------------------------------------------------------
Jazztel PLC
(Telecommunications-Long
Distance), Sr. Notes, 14.00%,
04/01/09 EUR 300,000 334,126
- --------------------------------------------------------------
Leica Geosystems Finance PLC
(Financial-Diversified), Sr.
Unsec. Gtd. Unsub. Notes,
9.875%, 12/15/08 EUR 250,000 266,217
- --------------------------------------------------------------
London International Exhibition
Center-Series BBR (Land
Development), Sec. Bonds,
7.71%, 11/25/16 GBP 1,730,000 2,299,326
- --------------------------------------------------------------
Ono Finance PLC-Series REGS
(Financial-Diversified), Sr.
Gtd. Sub. Notes, 13.00%,
05/01/09 EUR 300,000 336,514
- --------------------------------------------------------------
Orange PLC
(Telecommunications-Cellular/
Wireless), Sr. Notes, 7.625%,
08/01/08 EUR 1,000,000 1,108,395
- --------------------------------------------------------------
</TABLE>
8
<PAGE> 11
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(h) VALUE
<S> <C> <C>
UNITED KINGDOM-(CONTINUED)
Premier International Foods PLC
(Distributors-Food & Health), Sr.
Notes, 12.25%, 09/01/09 GBP 60,000 $ 98,898
- --------------------------------------------------------------
William Hill Finance PLC
(Financial-Diversified), Gtd.
Notes, 10.625%, 04/30/08 GBP 150,000 254,442
- --------------------------------------------------------------
6,952,677
- --------------------------------------------------------------
Total Non-U.S. Dollar
Denominated Non-Convertible
Bonds & Notes (Cost
$7,930,529) 7,831,836
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
COMMON STOCKS & OTHER EQUITY
INTERESTS-1.76%
PUBLISHING (NEWSPAPERS)-0.71%
Tribune Company, $3.14 Conv. Pfd. 9,900 1,341,450
- --------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-0.88%
Cendant Corp.(i) 100,000 1,650,000
- --------------------------------------------------------------
SOVEREIGN DEBT-0.13%
Republic of Argentina Wts.
(Argentina),
expiring 12/03/99(j) 2,510 2,824
- --------------------------------------------------------------
expiring 02/25/00(j) 2,370 53,621
- --------------------------------------------------------------
United Mexican States Wts.
(Mexico), expiring 12/18/00(j) 2,662 178,687
- --------------------------------------------------------------
235,132
- --------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-0.04%
Tele1 Europe B.V. Wts. (Netherlands),
expiring 05/15/09(j) 1,000 80,250
- --------------------------------------------------------------
Total Common Stocks & Other
Equity Interests (Cost
$3,197,511) 3,306,832
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
ASSET-BACKED SECURITIES-6.49%
CONSUMER FINANCE-2.28%
Green Tree Home Equity Loan
Trust- Series 1999-D-Class A5,
7.88%, 09/15/30 $ 4,200,000 4,273,101
- --------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS-1.16%
Contimortgage Home Equity Loan
Trust, Sub. Series 1999-2-Class
B Notes, 8.50%, 04/25/29 2,400,000 2,182,125
- --------------------------------------------------------------
RETAIL (HOME SHOPPING)-2.31%
Fingerhut Master Trust, Sub.
Series 1998-2-Class C Floating
Rate Note, 5.88%, 02/15/07(g) 4,500,000 4,339,642
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
SERVICES (COMMERCIAL & CONSUMER)-0.74%
Aircraft Finance Trust-Series
1999-1A-Class A, Sub. Bonds,
8.00%, 05/15/24 $ 1,500,000 $ 1,396,943
- --------------------------------------------------------------
Total Asset-Backed Securities
(Cost $12,311,800) 12,191,811
- --------------------------------------------------------------
SENIOR SECURED FLOATING RATE
INTERESTS LOANS-3.04%(k)(1)
Pacifica Papers Inc.,
8.937%, 03/12/06 1,492,500 1,491,567
- --------------------------------------------------------------
Packaging Corp. of America,
8.687%, 04/12/07 25,620 25,671
- --------------------------------------------------------------
8.75%, 04/12/07 4,132 4,140
- --------------------------------------------------------------
9.187%, 04/12/07 250,000 250,500
- --------------------------------------------------------------
9.25%, 04/12/07 82,645 82,810
- --------------------------------------------------------------
8.937%, 04/12/08 25,620 25,668
- --------------------------------------------------------------
9.00%, 04/12/08 4,132 4,140
- --------------------------------------------------------------
9.437%, 04/12/08 250,000 250,469
- --------------------------------------------------------------
9.50%, 04/12/08 82,645 82,800
- --------------------------------------------------------------
Starwood Hotels & Resorts
Worldwide, Inc., 9.132%,
02/23/03 1,000,000 999,583
- --------------------------------------------------------------
Wyndham International, Inc.,
9.187%, 06/30/06 2,500,000 2,493,750
- --------------------------------------------------------------
Total Senior Secured Floating
Rate Interests Loans (Cost
$5,715,597) 5,711,098
- --------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES-7.45%
FEDERAL NATIONAL MORTGAGE
ASSOCIATION ("FNMA")-7.45%
Pass Through Certificates-TBA,
7.498%, 01/24/29 (Cost
$14,000,000)(m) 14,000,000 14,004,340
- --------------------------------------------------------------
U.S. TREASURY SECURITIES-3.75%
U.S. TREASURY BILLS-0.14%
4.68%, 11/04/99(n) 260,000 259,832
- --------------------------------------------------------------
U.S. TREASURY BONDS-1.41%
6.375%, 08/15/27(o) 2,650,000 2,642,792
- --------------------------------------------------------------
U.S. TREASURY NOTES-2.20%
5.63%, 05/15/08(o) 4,290,000 4,140,751
- --------------------------------------------------------------
Total U.S. Treasury Securities
(Cost $7,928,981) 7,043,375
- --------------------------------------------------------------
</TABLE>
9
<PAGE> 12
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MONEY MARKET FUNDS-9.22%
STIC Liquid Assets Portfolio(p) 8,661,739 $ 8,661,739
- --------------------------------------------------------------
STIC Prime Portfolio(p) 8,661,739 8,661,739
- --------------------------------------------------------------
Total Money Market Funds
(Cost $17,323,478) 17,323,478
- --------------------------------------------------------------
TOTAL INVESTMENTS-105.96% 199,136,243
- --------------------------------------------------------------
LIABILITIES LESS OTHER
ASSETS-(5.96%) (11,201,990)
- --------------------------------------------------------------
NET ASSETS-100.00% $187,934,253
==============================================================
</TABLE>
Abbreviations:
CAD - Canadian Dollar
DEM - German Deutschmark
EUR - Euro
FRF - French Franc
GPB - British Pound Sterling
GRD - Greek Drachma
NZD - New Zealand Dollar
Conv. - Convertible
Deb. - Debentures
Disc. - Discounted
Gtd. - Guaranteed
Pfd. - Preferred
Sec. - Secured
Sr. - Senior
Sub. - Subordinated
TBA - To Be Announced
Unsec. - Unsecured
Unsub. - Unsubordinated
Wts. - Warrants
Notes to Schedule of Investments:
(a) Principal amount is in U.S. Dollars, except as indicated by note (h).
(b) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144 under the Securities Act of 1933,
as amended. The valuation of these securities has been determined in
accordance with procedures established by the Board of Trustees. The
aggregate market value of these securities at 10/31/99 was $16,618,337 which
represented 8.84% of the Fund's net assets.
(c) 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.
(d) Consists of more than one class of securities traded together as a unit. In
addition to the security listed, each unit represents common or preferred
shares of the issuer.
(e) Defaulted security. Currently, the issuer is partially in default with
respect to interest payments.
(f) The coupon rate shown on step up coupon bond represents the rate at period
end.
(g) The coupon rate shown on floating rate note represents rate at period end.
(h) Foreign denominated security. Par value and coupon rate are denominated in
currency of country indicated.
(i) Non-income producing security.
(j) Non-income producing security acquired as part of a unit with or in exchange
for other securities.
(k) Senior secured corporate loans and senior secured debt securities in the
Fund's portfolio generally have variable rates which adjust to a base, such
as the London Inter-Bank Offered Rate ("LIBOR"), on set dates, typically
every 30 days but not greater than one year; and/or have interest rates that
float at a margin above a widely recognized base lending rate such as the
Prime rate of a designated U.S. bank. Senior secured floating rate interests
are, at present, not readily marketable and may be subject to restrictions
on resale.
(l) Senior secured floating rate interests often require prepayments from excess
cash flow or permit the borrower to repay at its election. The degree to
which borrowers repay, whether as a contractual requirement or at their
election, cannot be predicted with accuracy. As a result, the actual
remaining maturity may be substantially less than the stated maturities
shown. However, it is anticipated that the senior secured floating rate
interests will have a expected average life of three to five years.
(m) Security purchased on forward commitment basis. These securities are subject
to dollar roll transactions. See Note 1 Section H.
(n) A portion of the principal balance was pledged as collateral to cover margin
requirements for open futures contracts. See Note 7.
(o) The principal balance was pledged as collateral to cover securities
purchased on a forward commitment basis.
(p) The security shares the same investment advisor as the Fund.
See Notes to Financial Statements.
10
<PAGE> 13
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at value (cost $216,727,766) $199,136,243
- ------------------------------------------------------------
Cash 9,051
- ------------------------------------------------------------
Foreign currencies, at value (cost $13,173) 12,998
- ------------------------------------------------------------
Receivables for:
Investments sold 325,471
- ------------------------------------------------------------
Fund shares sold 137,308
- ------------------------------------------------------------
Dividends and Interest 3,539,187
- ------------------------------------------------------------
Other assets 25,768
- ------------------------------------------------------------
Total assets 203,186,026
- ------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 14,040,833
- ------------------------------------------------------------
Fund shares reacquired 814,231
- ------------------------------------------------------------
Forward contracts 7,228
- ------------------------------------------------------------
Variation margin 53,019
- ------------------------------------------------------------
Accrued advisory fees 115,750
- ------------------------------------------------------------
Accrued distribution fees 144,295
- ------------------------------------------------------------
Accrued accounting services fees 4,110
- ------------------------------------------------------------
Accrued transfer agent fees 19,261
- ------------------------------------------------------------
Accrued trustees' fees 4,314
- ------------------------------------------------------------
Accrued operating expenses 48,732
- ------------------------------------------------------------
Total liabilities 15,251,773
- ------------------------------------------------------------
Net assets applicable to shares outstanding $187,934,253
============================================================
NET ASSETS:
Class A $ 68,674,962
============================================================
Class B $118,903,697
============================================================
Class C $ 250,621
============================================================
Advisor Class $ 104,973
============================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER SHARE:
Class A 6,776,585
============================================================
Class B 11,716,082
============================================================
Class C 24,712
============================================================
Advisor Class 10,320
============================================================
Class A:
Net asset value and redemption price per
share $ 10.13
- ------------------------------------------------------------
Offering price per share:
(Net asset value of $10.13 divided by
95.25%) $ 10.64
============================================================
Class B:
Net asset value and offering price per share $ 10.15
============================================================
Class C:
Net asset value and offering price per share $ 10.14
============================================================
Advisor Class:
Net asset value, redemption and offering
price per share $ 10.17
============================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended October 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends $ 25,765
- ------------------------------------------------------------
Interest 18,906,781
- ------------------------------------------------------------
Securities lending 37,491
- ------------------------------------------------------------
Total investment income 18,970,037
- ------------------------------------------------------------
EXPENSES:
Advisory and administrative fees 1,749,758
- ------------------------------------------------------------
Accounting services fees 70,274
- ------------------------------------------------------------
Interest expense (Note 4) 48,328
- ------------------------------------------------------------
Distribution fees -- Class A 302,618
- ------------------------------------------------------------
Distribution fees -- Class B 1,552,007
- ------------------------------------------------------------
Distribution fees -- Class C 356
- ------------------------------------------------------------
Trustees' fees 21,973
- ------------------------------------------------------------
Transfer agent fees -- Class A 125,789
- ------------------------------------------------------------
Transfer agent fees -- Class B & C 226,541
- ------------------------------------------------------------
Transfer agent fees -- Advisor Class 219
- ------------------------------------------------------------
Printing fees 204,970
- ------------------------------------------------------------
Other 116,621
- ------------------------------------------------------------
Total expenses 4,419,454
- ------------------------------------------------------------
Less: Expenses paid indirectly (14,544)
- ------------------------------------------------------------
Net Expense 4,404,910
- ------------------------------------------------------------
Net investment income 14,565,127
- ------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN CURRENCIES,
FORWARD CURRENCY CONTRACTS, SWAP AGREEMENTS
AND FUTURES CONTRACTS:
Net realized gain (loss) from:
Investment securities (14,437,294)
- ------------------------------------------------------------
Foreign currencies (2,620,411)
- ------------------------------------------------------------
Forward contracts 1,245,609
- ------------------------------------------------------------
Swap agreements (344,840)
- ------------------------------------------------------------
Futures contracts (59,818)
- ------------------------------------------------------------
(16,216,754)
- ------------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of:
Investment securities 3,083,204
- ------------------------------------------------------------
Foreign currencies (124,399)
- ------------------------------------------------------------
Forward contracts 59,566
- ------------------------------------------------------------
Futures contracts (65,179)
- ------------------------------------------------------------
2,953,192
- ------------------------------------------------------------
Net gain (loss) from investment securities,
foreign currencies, forward currency
contracts, swap agreements and futures
contracts (13,263,562)
- ------------------------------------------------------------
Net increase in net assets resulting from
operations $ 1,301,565
============================================================
</TABLE>
See Notes to Financial Statements.
11
<PAGE> 14
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended October 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------ -------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 14,565,127 $ 27,101,409
- -------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies, forward currency contracts, swap
agreements and future contracts (16,216,754) (9,817,521)
- -------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities, foreign currencies, futures
contracts and forward currency contracts 2,953,192 (28,381,099)
- -------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations 1,301,565 (11,097,211)
- -------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Class A (5,310,549) (7,063,735)
- -------------------------------------------------------------------------------------------
Class B (8,423,847) (12,380,012)
- -------------------------------------------------------------------------------------------
Class C (2,176) --
- -------------------------------------------------------------------------------------------
Advisor Class (14,345) (44,834)
- -------------------------------------------------------------------------------------------
RETURN OF CAPITAL DISTRIBUTION:
Class A (313,916) (1,864,318)
- -------------------------------------------------------------------------------------------
Class B (557,789) (3,267,432)
- -------------------------------------------------------------------------------------------
Class C (193) (11,833)
- -------------------------------------------------------------------------------------------
Advisor Class (640) --
- -------------------------------------------------------------------------------------------
SHARE TRANSACTIONS-NET:
Class A (28,748,300) (23,886,355)
- -------------------------------------------------------------------------------------------
Class B (61,297,148) (69,589,947)
- -------------------------------------------------------------------------------------------
Class C 254,116 --
- -------------------------------------------------------------------------------------------
Advisor Class (739,856) 369,213
- -------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (103,853,078) (128,836,464)
- -------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 291,787,331 420,623,795
- -------------------------------------------------------------------------------------------
End of period $187,934,253 $ 291,787,331
===========================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $295,698,026 $ 387,101,752
- -------------------------------------------------------------------------------------------
Undistributed net investment income (809,500) (122)
- -------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities, foreign currencies, forward currency
contracts, swap agreements and futures contracts (89,286,279) (74,693,113)
- -------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities, foreign currencies, forward currency
contracts and futures contracts (17,667,994) (20,621,186)
- -------------------------------------------------------------------------------------------
$187,934,253 $ 291,787,331
===========================================================================================
</TABLE>
See Notes to Financial Statements.
12
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS
October 31, 1999
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Strategic Income Fund (the "Fund") is a separate series of AIM Investment
Funds (the "Trust"). The Trust is organized as a Delaware business trust and is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of twelve
separate series portfolios, each having an unlimited number of shares of
beneficial interest. The Fund consists of four different classes of shares:
Class A shares, Class B shares, Class C shares and Advisor Class 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. Advisor Class shares were sold
without a 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 high current income, and its secondary
investment objective is growth of capital.
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 options 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, Investment Income and Distributions--Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date. Such distributions are
declared and paid monthly. The Fund may elect to use a portion of the
proceeds of fund share redemptions as distributions for Federal income tax
purposes. Distributions from net realized capital gains, if any, are
generally paid annually and recorded on ex-dividend date.
On October 31, 1999, undistributed net investment income was decreased by
$751,050, undistributed net realized gains were increased by $1,623,588 and
paid-in capital decreased by $872,538 as a result of differing book/tax
treatment of foreign currency transactions and net operating loss
reclassifications in order to comply with the requirements of the American
Institute of Certified Public Accountants Statement of Position 93-2. Net
assets of the Fund were unaffected by the reclassification discussed above.
C. Federal Income Taxes--The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements. The Fund has a capital loss
carryforward of $87,556,284 as of October 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.
D. 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
13
<PAGE> 16
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.
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 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 forward currency contracts at October 31, 1999 were as follows:
<TABLE>
<CAPTION>
UNREALIZED
SETTLEMENT CONTRACT TO CONTRACT TO APPRECIATION
DATE DELIVER RECEIVE VALUE (DEPRECIATION)
- ---------- ----------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C>
01/24/00 CAD (2,850,000) $1,940,743 $1,933,514 $(7,228)
---------- ---------- -------
</TABLE>
G. Swap Agreements--The Fund may enter into interest rate swap agreements to
preserve a return or spread on a particular investment or portion of its
portfolio, to protect against currency fluctuations, as a technique for
managing their respective portfolio's duration (i.e., price sensitivity to
changes in interest rates) or to protect against any increase in the price
of securities the Fund anticipates purchasing at a later date. Interest rate
swap agreements involve the exchange by the Fund with another party of their
respective commitments to pay or receive interest, e.g., an exchange of
floating rate payments for fixed rate payments with respect to a notional
amount of principal. Swaps are marked to market daily based upon quotations
from market makers and the change, if any, is recorded as unrealized gain or
loss in the Statement of Operations. Payments received or made at the end of
the measurement period are recorded as realized gain or loss in the
Statement of Operations. Net payments of interest rate swap agreements are
recorded as interest income. Entering into these agreements involves, to
varying degrees, elements of credit and market risk in excess of the amounts
recognized on the Statement of Assets and Liabilities. Such risks involve
the possibility that there will be no liquid market for these agreements,
that the counterparty to the agreements may default on its obligations to
perform and that there may be unfavorable changes in the fluctuation of
interest rates.
H. Mortgage Dollar Rolls--The Fund may engage in dollar roll transactions
with respect to mortgage backed securities issued by GNMA, FNMA and FHLMC.
In a dollar roll transaction, the Fund sells a mortgage backed security held
in the Fund to a financial institution such as a bank or broker-dealer, and
simultaneously agrees to repurchase a substantially similar security (same
type, coupon and maturity) from the institution at a later date at an agreed
upon price. The mortgage backed securities that are repurchased will bear
the same interest rate as those sold, but generally will be collateralized
by different pools of mortgages with prepayment histories. During the period
between the sale and repurchase, the Fund will not be entitled to receive
interest and principal payments on securities sold. Proceeds of the sale
will be invested in short-term instruments, and the income from these
investments, together with any additional fee income received on the sale,
could generate income for the Fund exceeding the yield on the security sold.
Dollar roll transactions involve the risk that the market value of the
securities retained by the Fund may decline below the price of the
securities that the Fund has sold but is obligated to repurchase under the
agreement. In the event the buyer of securities in a dollar roll transaction
files for bankruptcy or becomes insolvent, the Fund's use of the proceeds
from the sale of the securities may be restricted pending a determination by
the other party, or its trustee or receiver, whether to enforce the Fund's
obligation to repurchase the securities.
I. Expenses--Distribution 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.
J. Foreign Securities--There are certain additional considerations and risks
associated with investing in foreign securities and currency transactions
that are not inherent in investments of domestic origin. The Fund's
investment in emerging market countries may involve greater risks than
investments in more developed markets and the price of such investments may
be volatile. These risks of investing in foreign and emerging markets may
include foreign currency exchange fluctuations, perceived credit risk,
adverse political and economic developments and possible adverse foreign
government intervention.
K. Indexed Securities--The Fund may invest in indexed securities whose value
is linked either directly or indirectly to changes in foreign currencies,
interest rates, equities, indices, or other reference instruments. Indexed
securities may be more volatile than the reference instrument itself, but
any loss is limited to the amount of the original investment.
14
<PAGE> 17
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
A I M Advisors, Inc. ("AIM") is the Fund's investment manager and administrator.
INVESCO (NY), Inc. is the Fund's subadvisor. The Fund pays AIM investment
management and administration fees at an annual rate of 0.725% on the first $500
million of the Fund's average daily net assets, plus 0.70% on the next $1
billion of the Fund's average daily net assets, plus 0.675% on the next $1
billion of the Fund's average daily net assets, plus 0.65% on the Fund's average
daily net assets exceeding $2.5 billion. AIM has contractually agreed to limit
the Fund's expenses (exclusive of brokerage commissions, taxes, interest and
extraordinary expenses) to the maximum annual rate of 1.75%, 2.40%, 2.40% and
1.40% of the average daily net assets of the Fund's Class A, Class B, Class C
and Advisor Class shares, respectively.
Effective July 1, 1999, the Trust entered into a master administrative
services agreement with AIM, replacing the prior pricing and accounting
agreement. The Fund, pursuant to the master administrative services agreement
with AIM, has agreed to pay AIM for certain administrative costs incurred in
providing accounting services to the Fund. Prior to July 1, 1999, AIM was the
pricing and accounting agent for the Fund. The monthly fee for these services
paid to AIM was a percentage, not to exceed 0.03% annually, of a Fund's average
daily net assets. The annual fee rate was derived based on the aggregate net
assets of the funds which comprised the following investment companies: AIM
Growth Series, AIM Investment Funds, AIM Series Trust, G.T. Global Variable
Investment Series and G.T. Global Variable Investment Trust. The fee was
calculated at the rate of 0.03% of the first $5 billion of assets and 0.02% to
the assets in excess of $5 billion. An amount is allocated to and paid by each
such fund based on its relative average daily net assets. For the year ended
October 31, 1999, AIM was paid $70,274 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. For the year ended October 31, 1999, AFS was
paid $115,750 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, Class C and Advisor Class shares of the Fund. The Trust has
adopted a plan 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 0.35% 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 October 31, 1999, the Class A, Class B and Class C
shares paid AIM Distributors $302,618, $1,552,007 and $356, respectively, as
compensation under the Plans.
AIM Distributors received commissions of $10,612 from sales of the Class A
shares of the Fund during the year ended October 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 October 31, 1999,
AIM Distributors received $1,132 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.
NOTE 3-INDIRECT EXPENSES
During the year ended October 31, 1999, the Fund received reductions in
custodian fees of $14,544 under expense offset arrangements. The effect of the
above arrangements resulted in a reduction of the Fund's total expenses of
$14,544 during the year ended October 31, 1999.
NOTE 4-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $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. 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. The commitment fee is allocated among the
funds based on their respective average net assets for the period. Prior to May
28, 1999, the Fund, along with certain other funds advised and/or administered
by AIM, had a line of credit with BankBoston and State Street Bank & Trust
Company. The arrangements with the banks allowed the Fund and certain other
funds to borrow, on a first come, first served basis, an aggregate maximum
amount of $250,000,000.
During the year ended October 31, 1999, the average outstanding daily balance
of bank loans for the Fund was $597,260 with a weighted average interest rate of
5.64%. Interest expense for the Fund for the year ended October 31, 1999 was
$48,328.
NOTE 5-PORTFOLIO SECURITIES LOANED
At October 31, 1999, there were no securities on loan to brokers. For the year
ended October 31, 1999, the Fund received fees of $37,491 for securities
lending.
For international securities, cash collateral is received by the Fund against
loaned securities in an amount at least equal to 105% of the market value of the
loaned securities at the inception of each loan. This collateral must be
maintained at not less than 103% of the market value of the loaned securities
during the period of the loan. For domestic securities, cash collateral is
received by the Fund against loaned securities in the amount at least equal to
102% of the market value of the loaned securities at the inception of each loan.
This collateral must be maintained at not less than 100% of the market value of
the loaned securities during the period of the loan. The cash collateral is
invested in a securities lending trust which consists of a portfolio of high
quality short duration securities whose average effective duration is restricted
to 120 days or less.
15
<PAGE> 18
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended October 31, 1999 was
$556,428,352 and $643,701,169, respectively.
The amount of unrealized appreciation of investment securities, for tax
purposes, as of October 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $ 1,665,165
- --------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (20,986,683)
- --------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities $(19,321,518)
==========================================================================
</TABLE>
Cost of investments for tax purposes is $218,457,761
NOTE 7-FUTURES CONTRACTS
On October 31, 1999, $260,000 principal amount of U.S. Treasury obligations were
pledged as collateral to cover margin requirements for open futures contracts.
Open futures contracts were as follows:
<TABLE>
<CAPTION>
NO. OF MONTH/ UNREALIZED
CONTRACT CONTRACTS COMMITMENT DEPRECIATION
- -------- ---------- ----------- -------------
<S> <C> <C> <C>
Euro-Bundes Obligation-Short 150 Dec. 99 $(53,019)
- --------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 8-SHARE INFORMATION
Changes in shares outstanding during the years ended October 31, 1999 and 1998
were as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------------ ------------------------------
SHARES AMOUNT SHARES AMOUNT
------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C>
Sold:
Class A 3,735,185 $ 40,211,400 11,087,862 $ 132,840,707
- -----------------------------------------------------------------------------------------------------------------------------
Class B 570,671 6,113,002 2,712,341 32,431,379
- -----------------------------------------------------------------------------------------------------------------------------
Class C* 25,089 258,028 -- --
- -----------------------------------------------------------------------------------------------------------------------------
Advisor Class 18,917 210,688 396,726 4,766,864
- -----------------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 412,050 4,409,344 520,006 6,103,698
- -----------------------------------------------------------------------------------------------------------------------------
Class B 544,054 5,826,667 752,045 8,848,630
- -----------------------------------------------------------------------------------------------------------------------------
Class C* 196 2,004 -- --
- -----------------------------------------------------------------------------------------------------------------------------
Advisor Class 1,153 12,565 4,186 50,201
- -----------------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (6,845,161) (73,369,044) (13,690,399) (162,830,760)
- -----------------------------------------------------------------------------------------------------------------------------
Class B (6,857,590) (73,236,817) (9,428,771) (110,869,956)
- -----------------------------------------------------------------------------------------------------------------------------
Class C* (573) (5,916) -- --
- -----------------------------------------------------------------------------------------------------------------------------
Advisor Class (87,987) (963,109) (367,030) (4,447,852)
- -----------------------------------------------------------------------------------------------------------------------------
(8,483,996) $ (90,531,188) (8,013,034) $ (93,107,089)
=============================================================================================================================
</TABLE>
* Class C shares commenced sales on March 1, 1999.
16
<PAGE> 19
NOTE 9-FINANCIAL HIGHLIGHTS
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------
YEAR ENDED OCTOBER 31,
-------------------------------------------------------
1999 1998(a) 1997 1996(a) 1995(a)
------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.80 $ 12.00 $ 11.76 $ 10.32 $ 10.88
- ------------------------------------------------------------ ------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.68 0.91(b) 0.74 0.89 0.97
- ------------------------------------------------------------ ------- -------- -------- -------- --------
Net realized and unrealized gain (loss) on investments and
foreign currencies (0.66) (1.27) 0.34 1.44 (0.69)
- ------------------------------------------------------------ ------- -------- -------- -------- --------
Net increase (decrease) from investment operations 0.02 (0.36) 1.08 2.33 0.28
- ------------------------------------------------------------ ------- -------- -------- -------- --------
Distributions to shareholders:
From net investment income (0.65) (0.65) (0.78) (0.82) (0.80)
- ------------------------------------------------------------ ------- -------- -------- -------- --------
In excess of net investment income -- -- (0.06) (0.07) --
- ------------------------------------------------------------ ------- -------- -------- -------- --------
Return of capital (0.04) (0.19) -- -- (0.04)
- ------------------------------------------------------------ ------- -------- -------- -------- --------
Total distributions (0.69) (0.84) (0.84) (0.89) (0.84)
- ------------------------------------------------------------ ------- -------- -------- -------- --------
Net asset value, end of period $ 10.13 $ 10.80 $ 12.00 $ 11.76 $ 10.32
============================================================ ======= ======== ======== ======== ========
Total return(c) 0.06% (3.41)% 9.40% 23.00% 3.06%
============================================================ ======= ======== ======== ======== ========
Ratios and supplemental data:
Net assets, end of period (in 000's) $68,675 $102,280 $138,715 $185,126 $188,165
============================================================ ======= ======== ======== ======== ========
Ratio of net investment income to average net assets 6.44%(d) 7.73% 6.18% 8.09% 9.64%
============================================================ ======= ======== ======== ======== ========
Ratio of expenses to average net assets excluding interest
expense: 1.39%(d) 1.56% 1.44% 1.40% 1.45%
============================================================ ======= ======== ======== ======== ========
Ratio of interest expenses to average net assets 0.02% N/A N/A N/A N/A
============================================================ ======= ======== ======== ======== ========
Portfolio turnover rate 235% 306% 149% 177% 238%
============================================================ ======= ======== ======== ======== ========
</TABLE>
(a) These selected per share data were calculated based upon average shares
outstanding during the period.
(b) Net investment income per share reflects an interest payment received from
the conversion of Vnesheconombank loan agreements of $0.11 per share.
(c) Total return does not include sales charges and is not annualized for
periods less than one year.
(d) Ratios are based on average net assets of $86,462,180.
17
<PAGE> 20
NOTE 9-FINANCIAL HIGHLIGHTS (CONTINUED)
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS B
-----------------------------------------------------------------
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------
1999 1998(a) 1997 1996(a) 1995(a)
--------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.81 $ 12.01 $ 11.77 $ 10.33 $ 10.88
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.62 0.84(b) 0.67 0.82 0.91
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Net realized and unrealized gain (loss) on investments and
foreign currencies (0.66) (1.28) 0.33 1.44 (0.69)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Net increase (decrease) from investment operations (0.04) (0.44) 1.00 2.26 0.22
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Distributions to shareholders:
From net investment income (0.58) (0.57) (0.71) (0.75) (0.73)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
In excess of net investment income -- -- (0.05) (0.07) --
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Return of capital (0.04) (0.19) -- -- (0.04)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Total distributions (0.62) (0.76) (0.76) (0.82) (0.77)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Net asset value, end of period $ 10.15 $ 10.81 $ 12.01 $ 11.77 $ 10.33
============================================================ ======== ======== ======== ======== ========
Total return(c) (0.52)% (4.04)% 8.70% 22.15% 2.48%
============================================================ ======== ======== ======== ======== ========
Ratios and supplemental data:
Net assets, end of period (in 000's) $118,904 $188,660 $281,376 $333,178 $357,852
============================================================ ======== ======== ======== ======== ========
Ratio of net investment income to average net assets 5.78%(d) 7.08% 5.53% 7.44% 8.99%
============================================================ ======== ======== ======== ======== ========
Ratio of expenses to average net assets excluding interest
expense: 2.05%(d) 2.21% 2.09% 2.05% 2.10%
============================================================ ======== ======== ======== ======== ========
Ratio of interest expense to average net assets 0.02% N/A N/A N/A N/A
============================================================ ======== ======== ======== ======== ========
Portfolio turnover rate 235% 306% 149% 177% 238%
============================================================ ======== ======== ======== ======== ========
</TABLE>
(a) These selected per share data were calculated based upon average shares
outstanding during the period.
(b) Net investment income per share reflects an interest payment received from
the conversion of Vnesheconombank loan agreements of $0.11 per share.
(c) Total investment return does not include sales charges and is not
annualized for periods less than one year.
(d) Ratios are based on average net assets of $155,200,726.
18
<PAGE> 21
NOTE 9-FINANCIAL HIGHLIGHTS (CONTINUED)
Contained below is per share operating performance data for a share outstanding
throughout each period, total investment return, ratios and supplemental data.
This information has been derived from information provided in the financial
statements.
<TABLE>
<CAPTION>
CLASS C ADVISOR CLASS
---------------- -----------------------------------------------------------------
MARCH 1, 1999 YEAR ENDED OCTOBER 31, JUNE 1, 1995
TO ----------------------------------------- TO
OCTOBER 31, 1999 1999(a) 1998(a) 1997 1996(a) OCTOBER 31, 1995(a)
---------------- --------- ------- ------ ------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.78 $10.83 $12.02 $11.77 $10.33 $10.32
- ------------------------------------------- ------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment income 0.33 0.76 0.95(b) 0.79 0.93 0.41
- ------------------------------------------- ------ ------ ------ ------ ------ ------
Net realized and unrealized gain (loss)
on investments and foreign currencies (0.63) (0.69) (1.26) 0.34 1.44 (0.04)
- ------------------------------------------- ------ ------ ------ ------ ------ ------
Net increase (decrease) from investment
operations (0.30) 0.07 (0.31) 1.13 2.37 0.37
- ------------------------------------------- ------ ------ ------ ------ ------ ------
Distributions to shareholders:
From net investment income (0.31) (0.69) (0.69) (0.82) (0.86) (0.34)
- ------------------------------------------- ------ ------ ------ ------ ------ ------
In excess of net investment income -- -- -- (0.06) (0.07) --
- ------------------------------------------- ------ ------ ------ ------ ------ ------
Return of capital (0.03) (0.04) (0.19) -- -- (0.02)
- ------------------------------------------- ------ ------ ------ ------ ------ ------
Total distributions (0.34) (0.73) (0.88) (0.88) (0.93) (0.36)
- ------------------------------------------- ------ ------ ------ ------ ------ ------
Net asset value, end of period $10.14 $10.17 $10.83 $12.02 $11.77 $10.33
=========================================== ====== ====== ====== ====== ====== ======
Total return(c) (1.80)% 0.55% (2.97)% 9.86% 23.39% 3.72%
=========================================== ====== ====== ====== ====== ====== ======
Ratios and supplemental data:
Net assets, end of period (in 000's) $ 251 $ 105 $ 847 $ 533 $ 479 $ 443
=========================================== ====== ====== ====== ====== ====== ======
Ratio of net investment income to average
net assets 5.78%(d) 6.78%(e) 8.08% 6.53% 8.44% 9.99%(f)
=========================================== ====== ====== ====== ====== ====== ======
Ratio of expenses to average net assets
excluding interest expense: 2.05%(d) 1.05%(e) 1.21% 1.09% 1.05% 1.10%(f)
=========================================== ====== ====== ====== ====== ====== ======
Ratio of interest expense to average net
assets 0.02% 0.02% N/A N/A N/A N/A
=========================================== ====== ====== ====== ====== ====== ======
Portfolio turnover rate 235% 235% 306% 149% 177% 238%
=========================================== ====== ====== ====== ====== ====== ======
</TABLE>
(a) These selected per share data were calculated based upon the average shares
outstanding during the period.
(b) Net investment income per share reflects an interest payment received from
the conversion of Vnesheconombank loan agreements of $0.11 per share.
(c) Total investment return does not include sales charges and is not
annualized for periods less than one year.
(d) Ratios are annualized and based on average net assets of $53,046.
(e) Ratios are based on average net assets of $233,208.
(f) Annualized.
NOTE 10-SUBSEQUENT EVENT
On November 3, 1999, the Board of Trustees approved the conversion of Advisor
Class Shares into Class A Shares. The proposed effective date of this conversion
is February 11, 2000.
19
<PAGE> 22
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of AIM Strategic Income Fund
and Board of Trustees of AIM Investment Funds:
In our opinion, the accompanying statement of assets and
liabilities, including the schedule of investments, and
the related statements of operations and of changes in
net assets and the financial highlights present fairly,
in all material respects, the financial position of the
AIM Strategic Income Fund at October 31, 1999, and the
results of its operations, the changes in its net assets
and the financial highlights for the periods indicated
therein, in conformity with generally accepted accounting
principles. These financial statements and financial
highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion
on these financial statements based on our audits. We
conducted our audits of these financial statements in
accordance with generally accepted auditing standards
which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant
estimates made by management, and evaluating the overall
financial statement presentation. We believe that our
audits, which included confirmation of securities at
October 31, 1999 by correspondence with the custodian and
brokers, provide a reasonable basis for the opinion
expressed above.
PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
December 23, 1999
20
<PAGE> 23
<TABLE>
<CAPTION>
BOARD OF TRUSTEES OFFICERS OFFICE OF THE FUND
<S> <C> <C>
C. Derek Anderson Robert H. Graham 11 Greenway Plaza
President, Plantagenet Capital Chairman and President Suite 100
Management, LLC (an investment Houston, TX 77046
partnership); Chief Executive Officer, Dana R. Sutton
Plantagenet Holdings, Ltd. Vice President and Treasurer INVESTMENT MANAGER
(an investment banking firm)
Samuel D. Sirko A I M Advisors, Inc.
Frank S. Bayley Vice President and Secretary 11 Greenway Plaza
Partner, law firm of Suite 100
Baker & McKenzie Melville B. Cox Houston, TX 77046
Vice President
Robert H. Graham SUB-ADVISOR
President and Chief Executive Officer, Gary T. Crum
A I M Management Group Inc. Vice President INVESCO (NY), Inc.
1166 Avenue of the Americas
Ruth H. Quigley Carol F. Relihan New York, NY 10036
Private Investor Vice President
TRANSFER AGENT
Mary J. Benson
Assistant Vice President and A I M Fund Services, Inc.
Assistant Treasurer P.O. Box 4739
Houston, TX 77210-4739
Sheri Morris
Assistant Vice President and CUSTODIAN
Assistant Treasurer
State Street Bank and Trust Company
Nancy L. Martin 225 Franklin Street
Assistant Secretary Boston, MA 02110
Ofelia M. Mayo COUNSEL TO THE FUND
Assistant Secretary
Kirkpatrick & Lockhart LLP
Kathleen J. Pflueger 1800 Massachusetts Avenue, N.W.
Assistant Secretary Washington, D.C. 20036-1800
COUNSEL TO THE TRUSTEES
Paul, Hastings, Janofsky & Walker LLP
Twenty Third Floor
555 South Flower Street
Los Angeles, CA 90071
DISTRIBUTOR
A I M Distributors, Inc.
11 Greenway Plaza
Suite 100
Houston, TX 77046
AUDITORS
PricewaterhouseCoopers LLP
160 Federal St.
Boston, MA 02110
</TABLE>
REQUIRED FEDERAL INCOME TAX INFORMATION--UNAUDITED
AIM Strategic Income Fund paid ordinary dividends in the amount of $0.650,
$0.577, $0.315, and $0.692 per share to Class A, Class B, Class C, and Advisor
Class shareholders, respectively during its tax year ended October 31, 1999. Of
this amount, 0.02% is eligible for the dividends received deduction for
corporations.
STATE TAX INFORMATION
Of the total ordinary dividends paid, 12% for Class A, Class B, Class C, and
Advisor Class shares were derived from U.S. Treasury obligations.
<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(1) AIM Money Market Fund leadership in the mutual fund industry since
AIM Blue Chip Fund AIM Tax-Exempt Cash Fund 1976 and managed approximately $120 billion
AIM Capital Development Fund in assets for more than 6.4 million
AIM Constellation Fund INTERNATIONAL GROWTH FUNDS shareholders, including individual
AIM Dent Demographic Trends Fund AIM Advisor International Value Fund investors, corporate clients and financial
AIM Large Cap Growth Fund AIM Asian Growth Fund institutions, as of September 30, 1999.
AIM Mid Cap Equity Fund AIM Developing Markets Fund The AIM Family of Funds--Registered
AIM Mid Cap Growth Fund AIM Euroland Growth Fund(4) Trademark-- is distributed nationwide, and
AIM Mid Cap Opportunities Fund AIM European Development Fund AIM today is the 10th-largest mutual fund
AIM Select Growth Fund AIM International Equity Fund complex in the United States in assets under
AIM Small Cap Growth Fund(2) AIM Japan Growth Fund management, according to Strategic Insight,
AIM Small Cap Opportunities Fund(3) AIM Latin American Growth Fund an independent mutual fund monitor.
AIM Value Fund AIM New Pacific Growth Fund
AIM Weingarten Fund
GLOBAL GROWTH FUNDS
GROWTH & INCOME FUNDS AIM Global Aggressive Growth Fund
AIM Advisor Flex Fund AIM Global Growth Fund
AIM Advisor Large Cap Value Fund
AIM Advisor Real Estate Fund GLOBAL GROWTH & INCOME FUNDS
AIM Balanced Fund AIM Global Growth & Income Fund
AIM Basic Value Fund AIM Global Utilities Fund
AIM Charter Fund
GLOBAL INCOME FUNDS
INCOME FUNDS AIM Emerging Markets Debt Fund
AIM Floating Rate Fund AIM Global Government Income Fund
AIM High Yield Fund AIM Global Income Fund
AIM High Yield Fund II AIM Strategic Income Fund
AIM Income Fund
AIM Intermediate Government Fund THEME FUNDS
AIM Limited Maturity Treasury Fund AIM Global Consumer Products and Services Fund
AIM Global Financial Services Fund
TAX-FREE INCOME FUNDS AIM Global Health Care Fund
AIM High Income Municipal Fund AIM Global Infrastructure Fund
AIM Municipal Bond Fund AIM Global Resources Fund
AIM Tax-Exempt Bond Fund of Connecticut AIM Global Telecommunications and Technology Fund(5)
AIM Tax-Free Intermediate Fund AIM Global Trends Fund(6)
</TABLE>
(1) AIM Aggressive Growth Fund reopened to new investors on November 16, 1998.
(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 January 20, 2000, this report must be accompanied by a
current Quarterly Review of Performance for AIM Funds.
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INVEST WITH DISCIPLINE
--Registered Trademark--
EDF-AR-1
