<PAGE> 1
AIM BALANCED FUND
[AIM LOGO APPEARS HERE] SEMIANNUAL REPORT JUNE 30, 1997
<PAGE> 2
-------------------------------------
AIM BALANCED FUND
For shareholders who
seek a high total return
consistent with
preservation of capital
by investing in
a broadly diversified portfolio
consisting of
stocks and bonds.
-------------------------------------
[COVER PHOTO
APPEARS HERE]
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o AIM Balanced Fund's performance figures are historical and reflect
reinvestment of all distributions and changes in net asset value. Unless
otherwise indicated, the Fund's performance is computed at net asset value
without a sales charge.
o When sales charges are included in performance figures, Class A share
performance reflects the maximum 4.75% sales charge, and Class B share
performance reflects the applicable contingent deferred sales charge (CDSC)
for the period involved. The CDSC on Class B shares declines from 5%
beginning at the time of purchase to 0% at the beginning of the seventh
year. The performance of the Fund's Class B shares will differ from that of
Class A shares due to differing fees and expenses.
o The Fund's investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
o Past performance cannot guarantee comparable future results.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o The Standard & Poor's 500 (S&P 500) is a group of unmanaged securities
widely regarded by investors to be representative of the stock market in
general.
o The Dow Jones Industrial Average is a price-weighted average of 30 actively
traded primarily industrial stocks.
o The Lipper Balanced Funds Index is a net asset value weighted index of the
30 largest funds within the balanced fund investment objective. It is
calculated daily with adjustments for distributions as of the ex-dividend
dates. It is compiled by Lipper Analytical Services, Inc., an independent
mutual fund performance monitor.
o An investment cannot be made in any index listed. Unless otherwise
indicated, index results include reinvested dividends and do not reflect
sales charges.
MUTUAL FUNDS, ANNUITIES, AND OTHER INVESTMENTS
ARE NOT INSURED BY THE FDIC OR ANY OTHER GOVERNMENT AGENCY;
ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF, OR GUARANTEED BY,
ANY BANK OR ANY AFFILIATE; AND ARE SUBJECT TO INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
This report may be distributed only to current shareholders
or to persons who have received a current prospectus of the Fund.
<PAGE> 3
The Chairman's Letter
Dear Fellow Shareholder:
As 1997 came to its midway point, stocks were again in record
territory and the market environment was ideal for
fixed-income investments. The course was not smooth; indeed,
markets fluctuated widely during the first six months of the
year amid concerns over vigorous economic growth and the
[PHOTO OF possibility of rising interest rates.
Charles T. The point we want to emphasize is that market volatility
Bauer, has become the norm rather than the exception. Those of you
Chairman of who are long-time investors, and those who are new
the Board of shareholders in The AIM Family of Funds --Registered
the Fund Trademark--, should recognize that periods of falling
APPEARS HERE] prices in both stock and bond markets are inevitable.
Indeed, we can learn important lessons about investing
in periods of market uncertainty.
That's why it's a good idea to reassess your financial
goals periodically with your financial consultant. Managing
your investments in changing markets can be challenging. But
your financial consultant knows a few time-tested investment
strategies that can help. Diversification, for example, can help you cushion
the effects of volatility and reduce your risk exposure in any one type of
security.
In our experience, we have observed that the best action to take is to stay
focused--not on the market, but on your own long-term goals. The market can
change from day to day. Those who try to "time" the market, over time, tend to
be less successful than those who continue to follow a disciplined investment
strategy.
It's also important to maintain realistic expectations about investing.
Short-term volatility in financial markets may tempt some investors to
liquidate investments regardless of their personal financial objectives.
Remember that time is the best medicine for uncertain markets. The market's
performance early in the year was driven by concerns about the possibility of
rising inflation. Yet, no evidence of inflation has materialized.
On the following pages, your Fund's portfolio management team discusses
market activity and how the Fund was affected. They also discuss the Fund's
portfolio strategy, why they believe the portfolio is well-positioned for
attractive current income and total return, and why they are confident that the
reasons for investing in the Fund remain as compelling as ever. These
discussions are offered to help you better understand the relative performance
of your Fund.
AIM/INVESCO MERGER FINALIZED
We are pleased to announce that the merger of A I M Management Group Inc. and
INVESCO PLC was concluded on February 28, 1997. AIM is now part of one of the
world's largest independent investment management groups with approximately
$177 billion in assets under management. The combined company, AMVESCAP PLC,
has the financial strength necessary to meet your needs in an increasingly
competitive financial services environment, both in the United States and
worldwide. The merger will not result in any change of portfolio management or
investment style of your AIM fund.
We appreciate the trust you have placed in us and we look forward to our
continued close association. If you have any questions or comments about this
report, we invite you to call Client Services at 800-959-4246 during normal
business hours. For automated account information 24 hours a day, call the AIM
Investor Line at 800-246-5463. We also invite you to visit AIM's Internet Web
site at www.aimfunds.com.
Sincerely,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
-------------------------------------
It is important
to maintain realistic expectations
about investment performance.
-------------------------------------
<PAGE> 4
The Managers' Overview
EQUITY/FIXED-INCOME MIX CONTINUES TO
PRODUCE IMPRESSIVE RETURNS
A roundtable discussion with the Fund management team for AIM Balanced Fund for
the six-month period ended June 30, 1997.
- --------------------------------------------------------------------------------
Q: HOW DID THE FUND PERFORM DURING THE REPORTING PERIOD?
A: The Fund continued its record of strong performance even in a volatile
market. Total return for the six months ended June 30 was 11.28% for Class
A shares, compared to the 11.19% return posted by the Lipper Balanced
Funds Index for the period. Total return for Class B shares during the
same period was 10.80%.
We are very pleased with the record this Fund is building. Performance
of the Fund's Class A shares made it the Number 1 balanced fund according
to Lipper Analytical Services, Inc. for the five-year period ended June
30.
================================================================================
GROWTH OF NET ASSETS OF THE FUND
- --------------------------------------------------------------------------------
$571.3 $859.1
MILLION MILLION
12/31/96 6/30/97
================================================================================
Q: WHAT WERE THE MARKET CONDITIONS DURING THE REPORTING PERIOD?
A: As 1996 closed, many observers were cautioning investors about inflated
expectations of double-digit equity returns for a third year in a row. Yet
just six months into 1997, both the S&P 500 and the narrower Dow were up
more than 20%. However, the market advance was narrow, with a
comparatively few large-company stocks driving the performance of the
market indexes.
Strong economic growth and concern about potentially rising inflation
caused interest rates to climb during the first quarter. In March, the
Federal Reserve Board raised the benchmark federal funds rate 25 basis
points in response to these forces.
In the second quarter, the pace of growth moderated, with inflationary
pressures subdued, allowing the Fed to leave short-term rates unchanged
the rest of re-porting period. By the end of June a bond market rally was
under way, with bond prices rising and their yields dropping.
Q: HOW DID YOU BALANCE THE PORTFOLIO DURING THIS VOLATILE PERIOD?
A: Our target asset allocation is 60% stocks and 40% fixed-income securities.
But that may change slightly during any reporting period. For instance,
when small-cap stocks were under-performing earlier in the year, we
invested in some we considered attractive and well-priced, and that raised
the equity portion somewhat.
Though we aim for 60%/40%, we don't consider a 5% tilt in either
direction very significant.
Q: HOW DID THE FUND'S EQUITY COMPONENT RESPOND UNDER SUCH CHANGEABLE
CONDITIONS?
A: The equity side of the portfolio is broadly diversified, which usually
helps cushion some of the market's volatility. However, because of the
narrowness of the market early in 1997, our broad diversification was
initially a disadvantage. The portfolio included some small- and mid-cap
stocks, for example, which were out of favor, and which did not begin to
participate in the current market rally until late April.
Maintaining our discipline, we held on to the stocks we were confident
about, and the performance of those stocks did improve when small- and
mid- cap stocks staged an impressive rally during the second quarter of
the year. We migrated toward large-caps when they were doing better early
in the year, and our positions in smaller companies have strengthened.
================================================================================
LIPPER 5-YEAR RANKING
- --------------------------------------------------------------------------------
As of 6/30/97
CLASS A SHARES
- --------------------------------------------------------------------------------
Funds in
Period AIM Fund Balanced Top %
Rank Category
1 Year 78 290 27%
3 Years 5 179 3
5 YEARS 1 84 2
10 Years 13 38 35
================================================================================
CLASS B SHARES
- --------------------------------------------------------------------------------
(Inception 10/18/93)
1 Year 103 290 36%
================================================================================
Fund percentage rankings are vs. all balanced mutual funds tracked by Lipper,
excluding sales charges and including fees and expenses.
================================================================================
AVERAGE ANNUAL TOTAL RETURN
- --------------------------------------------------------------------------------
As of 6/30/97, including sales charges
CLASS A SHARES
10 Years 11.21%
5 Years 16.65
1 Year 15.95
CLASS B SHARES
Inception (10/18/93) 12.83%
1 Year 15.67
================================================================================
Past performance cannot guarantee comparable future results. For Fund
performance calculations and descriptions of indexes cited on this page,
please refer to the inside front cover.
See important Fund & index disclosures inside front cover.
2
<PAGE> 5
Q: HOW DID YOU MANAGE HOLDINGS IN FINANCIAL STOCKS--YOUR LARGEST EMPHASIS?
A: We increased our holdings in financial companies during the reporting
period. As one example, we added to our position in Washington Mutual,
Inc., a savings and loan operating in Western states that has
significantly expanded its customer base through a series of strategic
mergers.
We own some of the big money-center banks, including BankAmerica,
Chase Manhattan, and Citicorp. Major U.S.banks have been reporting solid
earnings during 1997 as they benefit from the healthy economy.
We also raised our stakes in the insurance industry to more than 4% of
the portfolio, up from about 2% earlier in the year. Holdings include
major commercial insurers like Chubb and life insurers like Hartford Life
that offer increasingly popular retirement-planning services and annuity
products.
Q: DO YOU STILL OWN A LARGE NUMBER OF TECHNOLOGY STOCKS?
A: Approximately 7% of the portfolio's common stock holdings are in the
technology sector, mainly computer-oriented companies, including service
providers, personal computer makers, and semiconductor manufacturers. Many
tech firms reported excellent earnings for the first quarter of 1997, and
our stock-selection process found a number of attractive opportunities.
For example, we added Texas Instruments, whose operating profit was up
significantly this year. Like Intel, another semiconductor holding, Texas
Instruments illustrates the competitive advantage of high-value,
noncommodity semi-conductor products.
Q: WHAT DO YOU FIND ATTRACTIVE ABOUT COMPANIES IN THE ENERGY SECTOR?
A: Though oil and gas prices have been stable or falling lately, energy
demand remains strong worldwide. So energy stocks have been making a
comeback. Many companies are also benefiting from industry consolidation
and from development of cost-cutting technologies. Our common stock
holdings in various oil and gas industries--everything from exploration
companies to natural gas pipelines--rose during the reporting period, from
approximately 4% of the portfolio to about 6%.
Q: DID THE FUND BENEFIT FROM THE RALLY IN BONDS?
A: Yes, in two ways the bond portion of the portfolio helps moderate the
volatility of the equity markets, which has been substantial this year,
and it generates income. The Fund's bond holdings are generally investment
grade and average "A" quality. The bond segment maintains an intermediate
maturity structure to moderate price variability in response to interest
rate changes.
As of the close of the reporting period, the yield on the fixed-income
portion of the portfolio was approximately 7%. The Fund continued to pay
quarterly income distributions.
Q: WHAT IS YOUR OUTLOOK FOR THE MARKETS?
A: The economic underpinnings for strong stock and bond markets appear to be
in place. The Federal Reserve Board held interest rates steady when it met
in July after the reporting period closed. The rate of economic growth
seems to have slowed considerably, but there are no signs of a serious
downturn. And finally, corporate earnings continue to outstrip analysts'
forecasts. The unanswerable questions are whether this can continue and,
if so, for how long?
Some caution remains advisable. Any data hinting at an uptick in
inflation or a surge of unsustainable economic growth would induce
volatility in interest rates and equity market prices.
In such an environment, we believe AIM Balanced Fund's disciplined
pursuit of capital growth through equities and income with through fixed-
income securities remains a prudent and promising investment strategy.
PORTFOLIO COMPOSITION
Based on Total Net Assets as of 6/30/97
================================================================================
TOP TEN EQUITY HOLDINGS TOP TEN FIXED-INCOME HOLDINGS
- --------------------------------------------------------------------------------
Lilly (Eli) & Co. 0.57% U.S. Treasury Securities 9.09
Philip Morris Companies, Inc. 0.57 Time Warner, Inc. 0.81
Washington Mutual, Inc. 0.56 Delta Air Lines, Inc. 0.65
Medtronic, Inc. 0.54 Signet Banking Corp. 0.60
Bristol-Myers Squibb Co. 0.53 Pride Petroleum Services, Inc. 0.59
Warner-Lambert Co. 0.51 Sutton Bridge Financing Ltd. 0.58
Intel Corp. 0.50 Federal Nat'l Mortgage Assoc. 0.54
Westinghouse Electric Corp. 0.47 GMAC 0.53
Merck & Co., Inc. 0.46 El Paso Electric Co. 0.52
Frontier Financing Trust 0.44 United Air Lines, Inc. 0.50
Please keep in mind that the Fund's portfolio is subject to change and there is
no assurance the Fund will continue to hold any particular security.
================================================================================
-----------------------------------------
AIM Balanced Fund's disciplined
approach remains a prudent and
promising investment strategy.
-----------------------------------------
See important Fund & index disclosures inside front cover.
3
<PAGE> 6
For Consideration
AIM BALANCED FUND: DISCIPLINED,
CONSISTENT STOCK/BOND ALLOCATION
AIM Balanced Fund's target asset allocation is to stay as close as possible to
60% stocks/40% bonds. The equity side of the portfolio seeks capital growth;
the fixed-income side seeks income and tries to moderate the potential
volatility of equities.
The 60/40 stock-to-bond allocation is based on classic studies, published
during the 1950s, by Harry Markowitz of the University of Chicago. His studies
showed that, for portfolios including both stocks and bonds, this 60/40 mix is
squarely within the range of portfolio compositions that, over the long term,
can be expected to produce an optimal risk/return tradeoff.
We do not adjust the proportions of stocks and bonds in the portfolio as
predictions about the market change. The portfolio is rebalanced regularly to
stay within the 60/40 target range. The Fund is not an asset-allocation fund or
a vehicle for market timing.
In general, the Fund uses AIM's relatively aggressive, earnings-driven
approach to selecting equity securities; it uses AIM's relatively conservative
approach to fixed-income investing, stressing thorough research on securities
and investment-objective-oriented portfolio construction.
The equity side of the Fund can invest in all market capitalizations. A
shareholder is not tied to large-capitalization or small-capitalization stocks,
which often perform differently from each other. At the close of the reporting
period, 52% of the common stocks in the portfolio were of large-cap companies,
23% were mid-cap, and 25% were small-cap.
The Fund's bond holdings are a blend of government securities and high-
quality corporate bonds. They are typically intermediate maturities so the
value does not fluctuate excessively as interest rates change.
Another strategy we have used to advantage is investments in convertible
bonds, especially convertibles issued by smaller companies. These securities
provide some income and allow the Fund to participate in the potential growth
of a small firm with less volatility than a small-company stock might provide.
================================================================================
NUMBER OF HOLDINGS: 400
Based on Total Net Assets As of 6/30/97
- --------------------------------------------------------------------------------
The Fund's portfolio composition is subject to change.
Common Stock 56.35%
Convertible Preferred Stocks 4.95%
Convertible Bonds 5.93%
Corporate Bonds & Notes 22.89%
Government Bonds & Notes 9.09%
Cash 0.79%
================================================================================
4
<PAGE> 7
SCHEDULE OF INVESTMENTS
June 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
DOMESTIC BONDS & NOTES-22.22%
ADVERTISING/BROADCASTING-1.56%
News America Holdings, Inc., Sr.
Gtd. Putable Bonds, 7.43%,
10/01/26 $ 4,000,000 $ 4,014,240
- --------------------------------------------------------------
Time Warner, Inc.,
Notes, 8.18%. 08/15/07 925,000 970,963
- --------------------------------------------------------------
Deb., 9.125%, 01/15/13 6,290,000 6,956,866
- --------------------------------------------------------------
Unsec. Deb., 6.85%, 01/15/26 1,500,000 1,483,530
- --------------------------------------------------------------
13,425,599
- --------------------------------------------------------------
AIRLINES-1.90%
Airplanes Pass Through Trust, Sub.
Bonds, 10.875%, 03/15/19 500,000 580,315
- --------------------------------------------------------------
America West Airlines Inc., Pass
Through Ctf., 6.93%, 01/02/08 3,000,000 2,966,490
- --------------------------------------------------------------
Delta Air Lines, Inc.,
Deb., 9.00%, 05/15/16 5,000,000 5,618,750
- --------------------------------------------------------------
Medium Term Notes, 8.52%,
01/30/04 2,000,000 2,123,100
- --------------------------------------------------------------
Series 92-E Equipment Trust
Ctf., 8.54%, 01/02/07 649,425 688,949
- --------------------------------------------------------------
United Air Lines, Inc., Pass
Through Certificates, 9.56%,
10/19/18 3,750,000 4,311,112
- --------------------------------------------------------------
16,288,716
- --------------------------------------------------------------
AUTOMOBILES (MANUFACTURERS)-0.05%
General Motors Corp., Deb., 8.80%,
03/01/21 400,000 455,920
- --------------------------------------------------------------
455,920
- --------------------------------------------------------------
BANKING-3.03%
Bankers Trust New York Corp.,
Gtd. Notes, 7.875%, 02/25/27 3,000,000 2,907,420
- --------------------------------------------------------------
Sub. Notes, 7.50%, 11/15/15 3,000,000 2,952,900
- --------------------------------------------------------------
Deutsche Bank Financial, Gtd.
Unsec. Sub. Deb., 6.70%, 12/13/06 3,500,000 3,410,400
- --------------------------------------------------------------
First Union Corp.,
Sub. Deb., 7.50%, 04/15/35 3,000,000 3,093,480
- --------------------------------------------------------------
Sub. Notes, 6.75%, 01/15/06 800,000 744,704
- --------------------------------------------------------------
HSBC Americas Inc., Sub. Notes,
7.00%, 11/01/06 3,000,000 2,954,190
- --------------------------------------------------------------
Mercantile Bank, Sub. Notes,
6.375%, 01/15/04 700,000 675,955
- --------------------------------------------------------------
Signet Banking Corp., Sub. Notes,
7.80%, 09/15/06 5,000,000 5,165,600
- --------------------------------------------------------------
Sovereign Bancorp, Inc., Sub.
Notes, 8.00%, 03/15/03 3,325,000 3,405,565
- --------------------------------------------------------------
Wachovia Corp., Sub. Notes,
6.375%, 02/01/09 800,000 752,936
- --------------------------------------------------------------
26,063,150
- --------------------------------------------------------------
BEVERAGES (SOFT DRINKS)-0.33%
Coca-Cola Enterprises, Inc.,
Putable Notes, 7.24%, 06/20/20(a) 15,000,000 2,801,400
- --------------------------------------------------------------
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
BUSINESS SERVICES-0.40%
Career Horizons, Inc., Conv.
Bonds, 7.00%, 11/01/02
(acquired 10/16/95; cost
$250,000)(b) $ 250,000 $ 546,910
- --------------------------------------------------------------
Personnel Group of America, Inc.,
Conv. Sub. Notes, 5.75%,
07/01/04
(acquired 06/17/97; cost
$2,750,000)(b) 2,750,000 2,921,875
- --------------------------------------------------------------
3,468,785
- --------------------------------------------------------------
CABLE TELEVISION-0.51%
Comcast Cable Communications,
Notes, 8.50%, 05/01/27
(acquired 04/24/97; cost
$3,394,186)(b) 3,400,000 3,633,376
- --------------------------------------------------------------
Viacom, Inc., Sr. Notes, 7.75%,
06/01/05 750,000 752,430
- --------------------------------------------------------------
4,385,806
- --------------------------------------------------------------
CHEMICALS (SPECIALTY)-0.09%
Hexcel Corp., Conv. Sub. Notes,
7.00%, 08/01/03 600,000 765,750
- --------------------------------------------------------------
COMPUTER PERIPHERALS-0.13%
Sanmina Corp., Conv. Sub. Notes,
5.50%, 08/15/02
(acquired 08/10/95-04/16/96;
cost $560,525)(b) 500,000 1,157,305
- --------------------------------------------------------------
CONGLOMERATES-0.06%
General Electric Capital Corp.,
Deb., 8.30%, 09/20/09 500,000 554,015
- --------------------------------------------------------------
ELECTRIC POWER-1.37%
AES Corp., Sr. Sub. Notes, 10.25%,
07/15/06 1,000,000 1,100,000
- --------------------------------------------------------------
El Paso Electric Co.,
Series D Sec. 1st Mortgage
Bonds, 8.90%, 02/01/06 1,500,000 1,609,755
- --------------------------------------------------------------
Series E Sec. 1st Mortgage
Bonds, 9.40%, 05/01/11 4,000,000 4,427,960
- --------------------------------------------------------------
Indiana Michigan Power, Sec. Lease
Obligation Bonds, 9.82%, 12/07/22 1,357,687 1,625,191
- --------------------------------------------------------------
UtiliCorp United, Inc., Sr. Notes,
6.70%, 10/15/06 3,000,000 2,989,410
- --------------------------------------------------------------
11,752,316
- --------------------------------------------------------------
FINANCE (ASSET MANAGEMENT)-0.35%
JPM Capital Trust II, Bonds,
7.95%, 02/01/27 3,000,000 3,013,770
- --------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-2.65%
Associates Corp. of North America,
Series B Sr. Deb., 7.95%, 02/15/10 3,650,000 3,904,587
- --------------------------------------------------------------
Chrysler Financial Corp., Deb.,
8.50%, 02/01/18 150,000 156,265
- --------------------------------------------------------------
Commercial Credit Co., Putable
Notes, 7.875%, 02/01/25 4,000,000 4,268,560
- --------------------------------------------------------------
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
FINANCE (CONSUMER CREDIT)-(CONTINUED)
Countrywide Funding Corp., Sub.
Notes, 8.25%, 07/15/02 $ 500,000 $ 527,445
- --------------------------------------------------------------
Ford Motor Credit,
Notes, 6.125%, 01/09/06 1,500,000 1,410,105
- --------------------------------------------------------------
Notes, 6.75%, 08/15/08 800,000 773,272
- --------------------------------------------------------------
GMAC, Notes, 9.00%, 10/15/02 4,175,000 4,566,365
- --------------------------------------------------------------
Grand Metro Investment, Gtd.
Bonds, 7.45%, 04/15/35 4,000,000 4,184,120
- --------------------------------------------------------------
Household Finance Corp., Notes,
7.125%, 09/01/05 3,000,000 2,987,760
- --------------------------------------------------------------
22,778,479
- --------------------------------------------------------------
FOOD/PROCESSING-0.47%
ConAgra Inc., Sr. Unsec. Notes,
7.125%, 10/01/26 4,000,000 4,046,920
- --------------------------------------------------------------
GAS DISTRIBUTION-0.59%
Ferrellgas Partners, Series B Sr.
Sec. Gtd. Notes, 9.375%,
06/15/06 1,000,000 1,035,000
- --------------------------------------------------------------
Tennessee Gas Pipeline Co., Bonds,
7.00%, 03/15/27 4,000,000 3,993,880
- --------------------------------------------------------------
5,028,880
- --------------------------------------------------------------
HOTELS/MOTELS-0.16%
ITT Corp., Unsec. Gtd. Deb.,
7.375%, 11/15/15 750,000 696,142
- --------------------------------------------------------------
Prime Hospitality Corp., Conv.
Sub. Notes, 7.00%, 04/15/02 400,000 699,416
- --------------------------------------------------------------
1,395,558
- --------------------------------------------------------------
INSURANCE (LIFE & HEALTH)-0.46%
Torchmark Corp., Notes, 7.875%,
05/15/23 4,000,000 3,944,320
- --------------------------------------------------------------
MACHINERY (MISCELLANEOUS)-0.43%
American Residential Services,
Inc., Conv. Sub. Notes, 7.25%,
04/15/04
(acquired 03/27/97; cost
$1,500,000)(b) 1,500,000 1,668,750
- --------------------------------------------------------------
Thermo Electron Corp., Conv. Sub.
Deb., 4.25%, 01/01/03
(acquired 06/19/97; cost
$2,085,750)(b) 1,800,000 1,982,898
- --------------------------------------------------------------
3,651,648
- --------------------------------------------------------------
MEDICAL (PATIENT SERVICES)-0.71%
Sunrise Assisted Living, Inc.,
Conv. Sub. Notes, 5.50%,
06/15/02
(acquired 06/03/97; cost
$2,000,000)(b) 2,000,000 2,300,000
- --------------------------------------------------------------
Tenet Healthcare Corp., Sr. Notes,
8.00%, 01/15/05 3,750,000 3,787,500
- --------------------------------------------------------------
6,087,500
- --------------------------------------------------------------
NATURAL GAS PIPELINE-0.18%
Enron Corp., Sr. Sub. Deb., 6.75%,
07/01/05 800,000 783,704
- --------------------------------------------------------------
PanEnergy Corp., Notes, 7.875%,
08/15/04 750,000 787,912
- --------------------------------------------------------------
1,571,616
- --------------------------------------------------------------
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
OFFICE AUTOMATION-0.23%
Xerox Credit Corp., Conv. Series E
Medium Term Notes, 2.875%,
07/01/02 $ 2,000,000 $ 2,007,500
- --------------------------------------------------------------
OIL EQUIPMENT & SUPPLIES-0.93%
Diamond Offshore Drilling, Inc.,
Conv. Sub. Notes, 3.75%,
02/15/07 2,500,000 2,889,075
- --------------------------------------------------------------
Pride Petroleum Services, Inc.,
Conv. Sub. Deb., 6.25%, 02/15/06 2,500,000 5,057,925
- --------------------------------------------------------------
7,947,000
- --------------------------------------------------------------
POLLUTION CONTROL-1.08%
Thermo Ecotek Corp., Conv. Bonds,
4.875%, 04/15/04
(acquired 04/10/97; cost
$895,000)(b) 895,000 937,513
- --------------------------------------------------------------
United Waste Systems, Inc., Conv.
Sub. Notes, 4.50%, 06/01/01
(acquired 05/31/96-08/07/96;
cost $1,013,000)(b) 1,000,000 1,376,560
- --------------------------------------------------------------
4.50%, 06/01/01 2,500,000 3,441,400
- --------------------------------------------------------------
WMX Technologies, Inc., Unsec.
Notes, 7.10%, 08/01/26 3,500,000 3,535,455
- --------------------------------------------------------------
9,290,928
- --------------------------------------------------------------
PUBLISHING-0.12%
News America Holdings, Inc., Sr.
Gtd. Deb., 9.25%, 02/01/13 900,000 997,749
- --------------------------------------------------------------
RAILROADS-0.71%
Norfolk Southern Corp., Putable
Bonds, 7.05%, 05/01/37 3,000,000 3,054,750
- --------------------------------------------------------------
Union Pacific Corp., Notes, 7.25%,
11/01/08 3,000,000 3,005,310
- --------------------------------------------------------------
6,060,060
- --------------------------------------------------------------
REAL ESTATE-0.35%
Finova Capital Corp., Unsec.
Notes, 7.40%, 05/06/06 3,000,000 3,037,380
- --------------------------------------------------------------
REAL ESTATE INVESTMENT
TRUSTS-0.23%
Capstone Capital Corp., Conv. Sub.
Deb., 6.55%, 03/14/02 2,000,000 1,929,180
- --------------------------------------------------------------
RESTAURANTS-0.21%
Boston Chicken, Inc., Conv. Sub.
Deb., 7.75%, 05/01/04 1,985,000 1,801,249
- --------------------------------------------------------------
RETAIL (FOOD & DRUG)-0.10%
Einstein/Noah Bagel Corp., Conv.
Sub. Deb., 7.25%, 06/01/04
(acquired 05/22/97; cost
$1,000,000)(b) 1,000,000 867,720
- --------------------------------------------------------------
RETAIL (STORES)-0.97%
Federated Department Stores, Inc.,
Conv. Notes, 5.00%, 10/01/03 1,500,000 1,800,390
- --------------------------------------------------------------
Inacom Corp., Conv. Sub. Deb.,
6.00%, 06/15/06 2,000,000 2,943,540
- --------------------------------------------------------------
J.C. Penney Co., Inc., Notes,
6.50%, 06/15/02 2,015,000 1,982,156
- --------------------------------------------------------------
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
RETAIL (STORES)-(CONTINUED)
Pier 1 Imports, Inc., Conv. Sub.
Notes, 5.75%, 10/01/03 $ 1,000,000 $ 1,573,590
- --------------------------------------------------------------
8,299,676
- --------------------------------------------------------------
SEMICONDUCTORS-0.17%
Cirrus Logic, Inc., Conv. Sub.
Notes, 6.00%, 12/15/03
(acquired 12/12/96; cost
$2,000,000)(b) 2,000,000 1,474,380
- --------------------------------------------------------------
TELECOMMUNICATION-1.23%
MCI Communications Corp., Putable
Deb., 7.125%, 06/15/27 3,000,000 3,111,930
- --------------------------------------------------------------
TCI Communications Inc., Sr.
Notes, 8.00%, 08/01/05 1,000,000 1,017,820
- --------------------------------------------------------------
360 Communications Co.,
Sr. Unsec. Notes, 7.50%,
03/01/06 2,000,000 2,001,680
Sr. Notes, 7.60%, 04/01/09 2,000,000 2,000,280
- --------------------------------------------------------------
Union Pacific Resources Group
Inc., Deb., 7.50%, 10/15/26 2,500,000 2,469,350
- --------------------------------------------------------------
10,601,060
- --------------------------------------------------------------
TELEPHONE-0.46%
BellSouth Capital Funding, Deb.,
6.04%, 11/15/26 4,000,000 3,967,680
- --------------------------------------------------------------
Total Domestic Bonds & Notes 190,919,015
- --------------------------------------------------------------
<CAPTION>
SHARES
<S> <C> <C>
DOMESTIC COMMON STOCKS-51.84%
ADVERTISING/BROADCASTING-1.30%
Heftel Broadcasting Corp.(c) 40,000 2,210,000
- --------------------------------------------------------------
Meredith Corp. 26,000 754,000
- --------------------------------------------------------------
Metro Networks, Inc.(c) 43,100 1,045,175
- --------------------------------------------------------------
Outdoor Systems, Inc.(c) 77,400 2,960,550
- --------------------------------------------------------------
Telemundo Group, Inc.-Class A (c) 70,000 1,680,000
- --------------------------------------------------------------
Univision Communications, Inc.(c) 65,000 2,543,125
- --------------------------------------------------------------
11,192,850
- --------------------------------------------------------------
AEROSPACE/DEFENSE-0.46%
Boeing Co. (The) 30,000 1,591,875
- --------------------------------------------------------------
United Technologies Corp. 28,000 2,324,000
- --------------------------------------------------------------
3,915,875
- --------------------------------------------------------------
BANKING-0.52%
Banc One Corp. 20,444 990,259
- --------------------------------------------------------------
Southwest Bancorp. of Texas,
Inc.(c) 24,700 682,338
- --------------------------------------------------------------
Wells Fargo & Co. 10,500 2,829,750
- --------------------------------------------------------------
4,502,347
- --------------------------------------------------------------
BANKING (MONEY CENTER)-1.02%
BankAmerica Corp. 30,000 1,936,875
- --------------------------------------------------------------
Chase Manhattan Corp. 37,000 3,591,312
- --------------------------------------------------------------
Citicorp 27,000 3,255,187
- --------------------------------------------------------------
8,783,374
- --------------------------------------------------------------
<CAPTION>
SHARES
<S> <C> <C>
BEVERAGES (SOFT DRINKS)-0.24%
PepsiCo, Inc. 56,000 $ 2,103,500
- --------------------------------------------------------------
BUILDING MATERIALS-0.27%
Comfort Systems USA, Inc.(c) 149,200 2,331,250
- --------------------------------------------------------------
BUSINESS SERVICES-2.10%
Abacus Direct Corp.(c) 42,400 1,378,000
- --------------------------------------------------------------
AccuStaff, Inc.(c) 73,000 1,729,187
- --------------------------------------------------------------
Administaff, Inc.(c) 63,000 1,523,813
- --------------------------------------------------------------
CUC International, Inc. 80,000 2,065,000
- --------------------------------------------------------------
Diebold, Inc. 30,000 1,170,000
- --------------------------------------------------------------
Equifax, Inc. 52,000 1,933,750
- --------------------------------------------------------------
First Aviation Services, Inc.(c) 130,000 1,267,500
- --------------------------------------------------------------
Hertz Corp.-Class A(c) 50,500 1,818,000
- --------------------------------------------------------------
Learning Tree International,
Inc.(c) 49,050 2,176,594
- --------------------------------------------------------------
MAXIMUS, Inc.(c) 65,600 1,172,600
- --------------------------------------------------------------
Metzler Group, Inc.(c) 55,000 1,801,250
- --------------------------------------------------------------
18,035,694
- --------------------------------------------------------------
CHEMICALS-0.28%
Pioneer Hi-Bred International, Inc. 30,000 2,400,000
- --------------------------------------------------------------
COMPUTER MAINFRAMES-0.39%
International Business Machines
Corp. 37,000 3,336,937
- --------------------------------------------------------------
COMPUTER MINI/PCS-0.95%
Compaq Computer Corp.(c) 30,000 2,977,500
- --------------------------------------------------------------
Dell Computer Corp.(c) 20,000 2,348,750
- --------------------------------------------------------------
Micron Electronics, Inc.(c) 62,200 1,107,938
- --------------------------------------------------------------
Sun Microsystems, Inc.(c) 46,000 1,712,063
- --------------------------------------------------------------
8,146,251
- --------------------------------------------------------------
COMPUTER NETWORKING-1.06%
Ascend Communications, Inc.(c) 52,000 2,047,500
- --------------------------------------------------------------
Cabletron Systems, Inc.(c) 24,000 679,500
- --------------------------------------------------------------
Cisco Systems, Inc.(c) 13,500 906,187
- --------------------------------------------------------------
Comverse Technology, Inc.(c) 60,000 3,120,000
- --------------------------------------------------------------
3Com Corp.(c) 52,500 2,362,500
- --------------------------------------------------------------
9,115,687
- --------------------------------------------------------------
COMPUTER PERIPHERALS-0.64%
Adaptec, Inc.(c) 41,000 1,424,750
- --------------------------------------------------------------
EMC Corp.(c) 85,000 3,315,000
- --------------------------------------------------------------
NeoMagic Corp.(c) 33,600 751,800
- --------------------------------------------------------------
5,491,550
- --------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES-1.84%
Aris Corp.(c) 31,100 680,312
- --------------------------------------------------------------
Computer Associates International,
Inc. 33,000 1,837,688
- --------------------------------------------------------------
DST Systems, Inc.(c) 65,000 2,165,312
- --------------------------------------------------------------
HBO & Co. 40,000 2,755,000
- --------------------------------------------------------------
Industri-Matematik International
Corp.(c) 75,000 1,218,750
- --------------------------------------------------------------
Microsoft Corp.(c) 20,000 2,527,500
- --------------------------------------------------------------
</TABLE>
7
<PAGE> 10
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTER SOFTWARE/SERVICES-(CONTINUED)
Midway Games Inc.(c) 71,900 $ 1,545,850
- --------------------------------------------------------------
National Data Corp. 16,900 731,981
- --------------------------------------------------------------
Oracle Corp.(c) 24,000 1,209,000
- --------------------------------------------------------------
Sterling Commerce, Inc.(c) 35,000 1,150,625
- --------------------------------------------------------------
15,822,018
- --------------------------------------------------------------
CONGLOMERATES-0.14%
Textron, Inc. 18,000 1,194,750
- --------------------------------------------------------------
CONSUMER NON-DURABLES-0.21%
Blyth Industries, Inc.(c) 52,500 1,771,875
- --------------------------------------------------------------
COSMETICS & TOILETRIES-2.01%
Avon Products, Inc. 38,000 2,681,375
- --------------------------------------------------------------
Carson, Inc.(c) 60,000 645,000
- --------------------------------------------------------------
Colgate-Palmolive Co. 30,000 1,957,500
- --------------------------------------------------------------
Estee Lauder Companies-Class A 25,000 1,256,250
- --------------------------------------------------------------
French Fragrances, Inc.(c) 100,000 925,000
- --------------------------------------------------------------
Gillette Co. 15,000 1,421,250
- --------------------------------------------------------------
Kimberly-Clark Corp. 45,000 2,238,750
- --------------------------------------------------------------
Procter & Gamble Co. (The) 12,500 1,765,625
- --------------------------------------------------------------
Warner-Lambert Co. 35,000 4,348,750
- --------------------------------------------------------------
17,239,500
- --------------------------------------------------------------
ELECTRIC POWER-0.19%
AES Corp.(c) 23,000 1,627,260
- --------------------------------------------------------------
1,627,260
- --------------------------------------------------------------
ELECTRONIC COMPONENTS/MISCELLANEOUS-1.07%
SBS Technologies, Inc.(c) 75,000 1,734,375
- --------------------------------------------------------------
SCI Systems, Inc.(c) 29,000 1,848,750
- --------------------------------------------------------------
Thermo Instrument Systems, Inc.(c) 50,000 1,531,250
- --------------------------------------------------------------
Westinghouse Electric Corp. 175,000 4,046,875
- --------------------------------------------------------------
9,161,250
- --------------------------------------------------------------
ELECTRONICS/PC DISTRIBUTORS-0.11%
Ingram Micro, Inc.-Class A(c) 40,000 965,000
- --------------------------------------------------------------
ENERGY (ALTERNATE SOURCES)-0.12%
Calenergy, Inc.(c) 28,000 1,064,000
- --------------------------------------------------------------
FINANCE (ASSET MANAGEMENT)-0.55%
ARM Financial Group, Inc.-Class A(c) 84,400 1,688,000
- --------------------------------------------------------------
Merrill Lynch & Co., Inc. 40,000 2,385,000
- --------------------------------------------------------------
Ocwen Asset Investment Corp. 30,300 613,575
- --------------------------------------------------------------
4,686,575
- --------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-2.47%
American Express Co. 35,000 2,607,500
- --------------------------------------------------------------
Capital One Financial Corp. 20,000 755,000
- --------------------------------------------------------------
Consumer Portfolio Services, Inc.(c) 60,000 727,500
- --------------------------------------------------------------
Federal Home Loan Mortgage Corp. 68,000 2,337,500
- --------------------------------------------------------------
Federal National Mortgage
Association 40,000 1,745,000
- --------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FINANCE (CONSUMER CREDIT)-(CONTINUED)
Finova Group, Inc. 25,000 $ 1,912,500
- --------------------------------------------------------------
Green Tree Financial Corp. 50,000 1,781,250
- --------------------------------------------------------------
MBNA Corp. 47,500 1,739,687
- --------------------------------------------------------------
Medallion Financial Corp. 50,400 963,900
- --------------------------------------------------------------
Metris Companies Inc. 25,000 820,313
- --------------------------------------------------------------
Southern Pacific Funding Corp.(c) 100,000 1,662,500
- --------------------------------------------------------------
Student Loan Marketing Association 25,000 3,175,000
- --------------------------------------------------------------
SunAmerica, Inc. 20,000 975,000
- --------------------------------------------------------------
21,202,650
- --------------------------------------------------------------
FINANCE (SAVINGS & LOAN)-0.90%
TCF Financial Corp. 60,000 2,962,500
- --------------------------------------------------------------
Washington Mutual, Inc. 80,000 4,780,000
- --------------------------------------------------------------
7,742,500
- --------------------------------------------------------------
FOOD/PROCESSING-0.70%
ConAgra, Inc. 22,500 1,442,813
- --------------------------------------------------------------
Dean Foods Co. 39,000 1,574,625
- --------------------------------------------------------------
Ralston-Ralston Purina Group 36,000 2,958,750
- --------------------------------------------------------------
5,976,188
- --------------------------------------------------------------
FUNERAL SERVICES-0.13%
Service Corp. International 33,222 1,092,187
- --------------------------------------------------------------
FURNITURE-0.36%
Ethan Allen Interiors, Inc. 55,000 3,135,000
- --------------------------------------------------------------
GAS DISTRIBUTION-0.64%
Consolidated Natural Gas Co. 25,000 1,345,312
- --------------------------------------------------------------
KN Energy, Inc. 18,000 758,250
- --------------------------------------------------------------
MCN Corp. 45,000 1,378,125
- --------------------------------------------------------------
Public Service Company of North
Carolina, Inc. 106,000 2,033,875
- --------------------------------------------------------------
5,515,562
- --------------------------------------------------------------
HOTELS/MOTELS-0.69%
HFS, Inc.(c) 32,000 1,856,000
- --------------------------------------------------------------
Hilton Hotels Corp. 70,000 1,859,375
- --------------------------------------------------------------
Marriott International, Inc. 30,000 1,841,250
- --------------------------------------------------------------
U.S. Franchise Systems, Inc.(c) 40,000 395,000
- --------------------------------------------------------------
5,951,625
- --------------------------------------------------------------
INSURANCE (LIFE & HEALTH)-1.23%
Equitable Companies, Inc. 75,000 2,493,750
- --------------------------------------------------------------
Hartford Life, Inc.-Class A(c) 26,300 986,250
- --------------------------------------------------------------
Lincoln National Corp. 25,000 1,609,375
- --------------------------------------------------------------
Nationwide Financial Services,
Inc.-Class A 110,000 2,921,875
- --------------------------------------------------------------
ReliaStar Financial Corp. 35,000 2,559,375
- --------------------------------------------------------------
10,570,625
- --------------------------------------------------------------
INSURANCE (MULTI-LINE PROPERTY)-2.87%
Aetna Inc. 34,000 3,480,750
- --------------------------------------------------------------
AmerUs Life Holdings, Inc.-Class A 66,700 1,859,263
- --------------------------------------------------------------
Capital Re Corp. 20,000 1,070,000
- --------------------------------------------------------------
</TABLE>
8
<PAGE> 11
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
INSURANCE (MULTI-LINE PROPERTY)-(CONTINUED)
CapMAC Holdings, Inc. 73,500 $ 2,471,437
- --------------------------------------------------------------
Chubb Corp. 32,000 2,140,000
- --------------------------------------------------------------
CIGNA Corp. 18,000 3,195,000
- --------------------------------------------------------------
Everest Re Holdings, Inc. 70,000 2,773,750
- --------------------------------------------------------------
MGIC Investment Corp. 60,000 2,876,250
- --------------------------------------------------------------
Travelers Group, Inc. 41,333 2,606,562
- --------------------------------------------------------------
Travelers Property Casualty
Corp.-Class A 55,000 2,193,125
- --------------------------------------------------------------
24,666,137
- --------------------------------------------------------------
LEISURE & RECREATION-0.68%
Galoob Toys, Inc. 80,000 1,510,000
- --------------------------------------------------------------
Silverleaf Resorts, Inc.(c) 65,800 1,011,675
- --------------------------------------------------------------
Steinway Musical Instruments(c) 82,000 1,599,000
- --------------------------------------------------------------
Vail Resorts Inc.(c) 70,000 1,771,875
- --------------------------------------------------------------
5,892,550
- --------------------------------------------------------------
MACHINE TOOLS-0.08%
JLK Direct Distribution Inc.-Class A 25,800 661,125
- --------------------------------------------------------------
MACHINERY (HEAVY)-0.77%
Case Corp. 26,000 1,790,750
- --------------------------------------------------------------
Caterpillar Inc. 27,500 2,952,813
- --------------------------------------------------------------
Deere & Co. 34,000 1,865,750
- --------------------------------------------------------------
6,609,313
- --------------------------------------------------------------
MACHINERY (MISCELLANEOUS)-0.47%
Greenwich Air Services, Inc.-Class B(c) 62,000 1,801,875
- --------------------------------------------------------------
U.S. Rentals, Inc.(c) 87,700 2,219,906
- --------------------------------------------------------------
4,021,781
- --------------------------------------------------------------
MEDICAL (DRUGS)-3.61%
Abbott Laboratories 32,500 2,169,375
- --------------------------------------------------------------
American Home Products Corp. 30,000 2,295,000
- --------------------------------------------------------------
Bristol-Myers Squibb Co. 56,000 4,536,000
- --------------------------------------------------------------
Cardinal Health, Inc. 40,000 2,290,000
- --------------------------------------------------------------
Dura Pharmaceuticals, Inc.(c) 55,000 2,193,125
- --------------------------------------------------------------
Johnson & Johnson 43,000 2,768,125
- --------------------------------------------------------------
Lilly (Eli) & Co. 45,000 4,919,063
- --------------------------------------------------------------
Merck & Co., Inc. 38,500 3,984,750
- --------------------------------------------------------------
Pfizer, Inc. 27,000 3,226,500
- --------------------------------------------------------------
Schering-Plough Corp. 56,000 2,681,000
- --------------------------------------------------------------
31,062,938
- --------------------------------------------------------------
MEDICAL (PATIENT SERVICES)-1.66%
Columbia/HCA Healthcare Corp. 50,000 1,965,625
- --------------------------------------------------------------
MedPartners, Inc.(c) 75,000 1,621,875
- --------------------------------------------------------------
Oxford Health Plans, Inc.(c) 35,000 2,511,250
- --------------------------------------------------------------
PhyCor, Inc.(c) 25,000 860,937
- --------------------------------------------------------------
RoTech Medical Corp.(c) 60,000 1,203,750
- --------------------------------------------------------------
Sunrise Assisted Living, Inc.(c) 72,000 2,520,000
- --------------------------------------------------------------
Tenet Healthcare Corp.(c) 45,000 1,330,312
- --------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MEDICAL (PATIENT SERVICES)-(CONTINUED)
United Healthcare Corp.(c) 43,000 $ 2,236,000
- --------------------------------------------------------------
14,249,749
- --------------------------------------------------------------
MEDICAL INSTRUMENTS/PRODUCTS-1.43%
Baxter International Inc. 41,500 2,168,375
- --------------------------------------------------------------
Becton, Dickinson & Co. 30,000 1,518,750
- --------------------------------------------------------------
Medtronic, Inc. 55,000 4,637,188
- --------------------------------------------------------------
Omnicare, Inc. 43,000 1,349,125
- --------------------------------------------------------------
Quintiles Transnational Corp.(c) 20,000 1,392,500
- --------------------------------------------------------------
US Surgical Corp.(c) 33,355 1,242,474
- --------------------------------------------------------------
12,308,412
- --------------------------------------------------------------
NATURAL GAS PIPELINE-1.17%
Columbia Gas System, Inc. 25,000 1,631,250
- --------------------------------------------------------------
El Paso Natural Gas Co. 37,000 2,035,000
- --------------------------------------------------------------
Enron Corp. 40,000 1,632,500
- --------------------------------------------------------------
Sonat, Inc. 36,000 1,845,000
- --------------------------------------------------------------
Williams Companies, Inc. (The) 66,000 2,887,500
- --------------------------------------------------------------
10,031,250
- --------------------------------------------------------------
OIL & GAS (DRILLING)-0.51%
Costilla Energy, Inc. 102,000 1,313,250
- --------------------------------------------------------------
Patterson Energy, Inc.(c) 48,900 2,218,838
- --------------------------------------------------------------
Santa Fe International Corp.(c) 25,100 853,400
- --------------------------------------------------------------
4,385,488
- --------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION)-1.12%
Energen Corp. 42,900 1,445,194
- --------------------------------------------------------------
Houston Exploration Co. (The)(c) 33,200 516,675
- --------------------------------------------------------------
Nuevo Energy Co.(c) 40,000 1,640,000
- --------------------------------------------------------------
Pogo Producing Co. 24,300 940,106
- --------------------------------------------------------------
Swift Energy Co.(c) 60,000 1,432,500
- --------------------------------------------------------------
Titan Exploration, Inc.(c) 145,400 1,762,975
- --------------------------------------------------------------
Vintage Petroleum, Inc.(c) 62,000 1,906,500
- --------------------------------------------------------------
9,643,950
- --------------------------------------------------------------
OIL & GAS (REFINING/MARKETING)-0.14%
Tosco Corp. 40,000 1,197,500
- --------------------------------------------------------------
OIL & GAS (SERVICES)-1.39%
Exxon Corp. 26,000 1,599,000
- --------------------------------------------------------------
Halliburton Co.(c) 30,000 2,377,500
- --------------------------------------------------------------
Louisiana Land & Exploration Co. 30,000 1,713,750
- --------------------------------------------------------------
Mobil Corp. 27,000 1,886,625
- --------------------------------------------------------------
Newpark Resources, Inc.(c) 86,000 2,902,500
- --------------------------------------------------------------
SEACOR Holdings Inc.(c) 28,000 1,464,750
- --------------------------------------------------------------
11,944,125
- --------------------------------------------------------------
OIL EQUIPMENT & SUPPLIES-0.55%
Coastal Corp. (The) 42,000 2,233,875
- --------------------------------------------------------------
Nabors Industries, Inc.(c) 102,000 2,550,000
- --------------------------------------------------------------
4,783,875
- --------------------------------------------------------------
</TABLE>
9
<PAGE> 12
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
PAPER & FOREST PRODUCTS-0.12%
American Pad & Paper Co.(c) 60,000 $ 1,012,500
- --------------------------------------------------------------
POLLUTION CONTROL-0.24%
US Filter Corp. 75,000 2,043,750
- --------------------------------------------------------------
REAL ESTATE-0.90%
Boston Properties, Inc.(c) 115,000 3,162,500
- --------------------------------------------------------------
Cali Realty Corp. 60,000 2,040,000
- --------------------------------------------------------------
Crescent Operating, Inc.(c) 4,000 48,000
- --------------------------------------------------------------
Golf Trust of America, Inc. 37,700 1,048,531
- --------------------------------------------------------------
Kilroy Realty Corp. 56,400 1,424,100
- --------------------------------------------------------------
7,723,131
- --------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS-1.09%
Alexandria Real Estate Equities, Inc. 90,800 1,991,925
- --------------------------------------------------------------
Bay Apartment Communities, Inc. 40,000 1,480,000
- --------------------------------------------------------------
Crescent Real Estate Equities, Inc. 40,000 1,270,000
- --------------------------------------------------------------
FelCor Suite Hotels, Inc. 18,000 670,500
- --------------------------------------------------------------
OMEGA Healthcare Investors, Inc. 29,000 947,938
- --------------------------------------------------------------
Patriot American Hospitality, Inc. 58,000 1,479,000
- --------------------------------------------------------------
Starwood Lodging Trust 36,000 1,536,750
- --------------------------------------------------------------
9,376,113
- --------------------------------------------------------------
RESTAURANTS-0.20%
Cracker Barrel Old Country Store, Inc. 65,000 1,722,500
- --------------------------------------------------------------
RETAIL (FOOD & DRUG)-1.30%
American Stores Co. 33,500 1,654,062
- --------------------------------------------------------------
Dominick's Supermarkets, Inc.(c) 84,000 2,236,500
- --------------------------------------------------------------
Safeway, Inc.(c) 65,000 2,998,125
- --------------------------------------------------------------
Twinlab Corp.(c) 100,000 2,400,000
- --------------------------------------------------------------
Weider Nutrition International, Inc. 116,200 1,844,675
- --------------------------------------------------------------
11,133,362
- --------------------------------------------------------------
RETAIL (STORES)-1.49%
CompUSA, Inc.(c) 85,000 1,827,500
- --------------------------------------------------------------
Guitar Center Inc.(c) 50,000 843,750
- --------------------------------------------------------------
Kmart Corp.(c) 60,000 735,000
- --------------------------------------------------------------
Linens 'N Things, Inc.(c) 70,000 2,073,750
- --------------------------------------------------------------
Lowe's Companies, Inc. 35,000 1,299,375
- --------------------------------------------------------------
Ross Stores, Inc. 60,000 1,961,250
- --------------------------------------------------------------
Saks Holdings, Inc.(c) 80,500 2,012,500
- --------------------------------------------------------------
U.S. Office Products Co.(c) 68,000 2,078,250
- --------------------------------------------------------------
12,831,375
- --------------------------------------------------------------
SECURITY & SAFETY SERVICES-0.12%
Cornell Corrections, Inc.(c) 40,000 660,000
- --------------------------------------------------------------
O'Gara Co. (The)(c) 35,000 358,750
- --------------------------------------------------------------
1,018,750
- --------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SEMICONDUCTORS-1.88%
Analog Devices Inc.(c) 70,000 $ 1,859,375
- --------------------------------------------------------------
Applied Materials, Inc.(c) 40,000 2,832,500
- --------------------------------------------------------------
Intel Corp. 30,000 4,254,375
- --------------------------------------------------------------
LSI Logic Corp.(c) 61,224 1,959,168
- --------------------------------------------------------------
Motorola, Inc. 25,000 1,900,000
- --------------------------------------------------------------
Texas Instruments, Inc. 40,000 3,362,500
- --------------------------------------------------------------
16,167,918
- --------------------------------------------------------------
SHOES & RELATED APPAREL-0.65%
Nine West Group, Inc.(c) 60,000 2,291,250
- --------------------------------------------------------------
Polo Ralph Lauren Corp.(c) 120,000 3,285,000
- --------------------------------------------------------------
5,576,250
- --------------------------------------------------------------
TELECOMMUNICATIONS-2.69%
ADC Telecommunications, Inc.(c) 90,000 3,003,750
- --------------------------------------------------------------
Brooks Fiber Properties, Inc.(c) 80,000 2,700,000
- --------------------------------------------------------------
CellNet Data Systems Inc.(c) 36,100 448,994
- --------------------------------------------------------------
Iridium World Communications Ltd.(c) 55,100 998,687
- --------------------------------------------------------------
LCC International, Inc.-Class A(c) 45,000 708,750
- --------------------------------------------------------------
Lucent Technologies, Inc. 43,200 3,113,100
- --------------------------------------------------------------
McLeod, Inc.-Class A(c) 45,000 1,518,750
- --------------------------------------------------------------
Qwest Communications International
Inc.(c) 116,200 3,166,450
- --------------------------------------------------------------
Superior Telecom Inc.(c) 76,000 2,394,000
- --------------------------------------------------------------
Teleport Communications Group
Inc.-Class A(c) 40,000 1,365,000
- --------------------------------------------------------------
Tellabs, Inc.(c) 50,000 2,793,750
- --------------------------------------------------------------
West TeleServices Corp.(c) 60,000 885,000
- --------------------------------------------------------------
23,096,231
- --------------------------------------------------------------
TELEPHONE-0.73%
Ameritech Corp. 21,500 1,460,656
- --------------------------------------------------------------
Cincinnati Bell, Inc. 82,000 2,583,000
- --------------------------------------------------------------
GTE Corp. 23,000 1,009,125
- --------------------------------------------------------------
SBC Communications, Inc. 20,000 1,237,500
- --------------------------------------------------------------
6,290,281
- --------------------------------------------------------------
TEXTILES-0.15%
Liz Claiborne, Inc. 27,000 1,258,875
- --------------------------------------------------------------
TOBACCO-0.57%
Philip Morris Companies, Inc. 110,000 4,881,250
- --------------------------------------------------------------
TRANSPORTATION-0.48%
AirNet Systems, Inc. 80,100 1,311,638
- --------------------------------------------------------------
Coach USA, Inc. 105,000 2,789,062
- --------------------------------------------------------------
4,100,700
- --------------------------------------------------------------
</TABLE>
10
<PAGE> 13
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
WATER SUPPLY-0.19%
Waterlink, Inc.(c) 124,000 $ 1,612,000
- --------------------------------------------------------------
Total Domestic Common Stocks 445,377,059
- --------------------------------------------------------------
DOMESTIC CONVERTIBLE PREFERRED STOCKS-4.95%
ADVERTISING/BROADCASTING-0.09%
Time Warner Inc.-Series M, $102.50
PIK Conv. Pfd. 679 751,948
- --------------------------------------------------------------
AEROSPACE/DEFENSE-0.13%
Loral Space & Communications- $3.00
Conv. Pfd.
(acquired 11/01/96; cost
$1,117,500)(b) 22,350 1,119,914
- --------------------------------------------------------------
COSMETICS & TOILETRIES-0.16%
McKesson Corp.-$2.50 Conv. Pfd.
(acquired 02/13/97; cost
$1,105,000)(b) 22,100 1,374,355
- --------------------------------------------------------------
ELECTRIC POWER-0.20%
CalEnergy Co., Inc.-$3.125 Conv. Pfd.
(acquired 02/20/97; cost
$1,200,000)(b) 24,000 1,366,896
- --------------------------------------------------------------
Citizens Utilities Co.-$2.50 Conv. Pfd. 7,000 306,250
- --------------------------------------------------------------
1,673,146
- --------------------------------------------------------------
FINANCE (ASSET MANAGEMENT)-0.52%
AES Trust I-Series A-$2.69 Conv. Pfd. 33,000 1,942,875
- --------------------------------------------------------------
CNF Trust I-$2.50 Conv. Pfd. 45,000 2,520,000
- --------------------------------------------------------------
4,462,875
- --------------------------------------------------------------
FINANCE (CONSUMER CREDIT)-0.83%
Money Store, Inc. (The)-$1.72 Conv.
Pfd. 100,000 2,725,000
- --------------------------------------------------------------
Penncorp Financial Group,
Inc.-$3.50 Conv. Pfd.
(acquired 08/02/96-11/15/96; cost
$2,072,500)(b) 40,000 2,515,000
- --------------------------------------------------------------
SunAmerica, Inc.-Series E,
$3.10 Dep. Conv. Pfd. 18,000 1,930,500
- --------------------------------------------------------------
7,170,500
- --------------------------------------------------------------
GAS UTILITY-0.15%
MCN Corp.-$2.013 Conv. PRIDES 46,000 1,282,250
- --------------------------------------------------------------
HOTELS/MOTELS-0.20%
Host Marriott Financial
Trust-$3.375 Conv. Pfd.
(acquired 11/25/96; cost
$1,500,000)(b) 30,000 1,740,330
- --------------------------------------------------------------
INSURANCE (BROKER)-0.17%
American Bankers Insurance
Group-$3.125 Conv. Pfd. 20,000 1,440,000
- --------------------------------------------------------------
INSURANCE (LIFE & HEALTH)-0.12%
Conseco Inc.-$4.278 Conv. PRIDES 8,000 1,038,000
- --------------------------------------------------------------
INSURANCE (MULTI-LINE
PROPERTY)-0.53%
Allstate Corp.-$2.30 Conv. Pfd. 16,000 832,000
- --------------------------------------------------------------
Frontier Financing Trust-$3.125
Conv. Pfd.
(acquired 10/09/96; cost
$2,500,000)(b) 50,000 3,757,850
- --------------------------------------------------------------
4,589,850
- --------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
LEISURE & RECREATION-0.15%
Royal Caribbean Cruises Ltd.-$3.63
Conv. Pfd. 20,750 $ 1,281,312
- --------------------------------------------------------------
OIL & GAS
(REFINING/MARKETING)-0.13%
Tosco Financing Trust-$2.875 Conv. Pfd.
(acquired 12/10/96-12/11/96; cost
$1,003,625)(b) 20,000 1,111,000
- --------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS-0.25%
Vornado Realty Trust-$3.25 Conv. Pfd. 40,000 2,120,000
- --------------------------------------------------------------
RETAIL (STORES)-0.23%
AnnTaylor Finance Trust-$4.25 Conv. Pfd.
(acquired 04/18/96-04/29/96; cost
$999,000)(b) 20,000 1,199,240
- --------------------------------------------------------------
Kmart Financing-$3.875 Conv. Pfd. 14,000 768,250
- --------------------------------------------------------------
1,967,490
- --------------------------------------------------------------
TELECOMMUNICATIONS-0.41%
Qualcomm Financial Trust-$2.875
Conv. Pfd.
(acquired 02/19/97; cost
$3,750,000)(b) 75,000 3,562,500
- --------------------------------------------------------------
TELEPHONE-0.53%
Salomon Inc.-$3.48 Conv. Pfd. 14,600 932,575
- --------------------------------------------------------------
WorldCom, Inc.-$2.68 Conv. Dep. Pfd. 32,000 3,608,000
- --------------------------------------------------------------
4,540,575
- --------------------------------------------------------------
TRANSPORTATION-0.15%
Hvide Capital Trust-$3.25 Conv. Pfd.
(acquired 06/24/97; cost
$1,250,000)(b) 25,000 1,318,750
- --------------------------------------------------------------
Total Domestic Convertible Preferred Stocks 42,544,795
- --------------------------------------------------------------
</TABLE>
U.S. DOLLAR DENOMINATED FOREIGN BONDS
& NOTES-3.99%
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
CANADA-1.81%
Bell Canada (Telecommunications),
Yankee Deb., 9.50%, 10/15/10 $1,750,000 2,085,318
- --------------------------------------------------------------
Great Atlantic & Pacific Tea Co.,
Inc.(Retail-Food & Drug), Yankee
Gtd. Notes, 7.78%, 11/01/00
(acquired 10/18/95; cost
$500,000)(b) 500,000 512,440
- --------------------------------------------------------------
Husky Oil Ltd. (Oil &
Gas-Integrated), Sr. Yankee Notes
7.125%, 11/15/06 3,000,000 2,987,160
- --------------------------------------------------------------
Nova Chemicals Ltd. (Oil &
Gas-Specialty), Yankee Deb.,
7.00%, 08/15/26 4,000,000 4,009,840
- --------------------------------------------------------------
Province of Manitoba (Foreign
Government), Yankee Bonds, 7.75%,
07/17/16 1,500,000 1,574,865
- --------------------------------------------------------------
Royal Bank of Canada (Banking),
Yankee Sub. Notes, 6.75%,
10/24/11 3,000,000 2,912,220
- --------------------------------------------------------------
Talisman Energy, Inc. (Oil &
Gas-Exploration & Production),
Yankee Deb., 7.125%, 06/01/07 1,500,000 1,474,575
- --------------------------------------------------------------
15,556,418
- --------------------------------------------------------------
</TABLE>
11
<PAGE> 14
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
CHINA-0.38%
Shanghai Investment Holdings
(Finance-Asset Management), Conv.
Gtd. Notes, 1.00%, 06/12/02
(acquired 06/05/97; cost
$3,100,000)(b) $3,100,000 $ 3,270,500
- --------------------------------------------------------------
GERMANY-0.82%
Deutsche Bank Finance BV (Banking),
Conv. Gtd. Bonds, 3.80%, 02/12/17
(acquired 01/16/97; cost
$1,642,600)(a)(b) 4,000,000 1,840,840
- --------------------------------------------------------------
Dresdner Bank A.G. (Banking), Sub.
Bonds, 6.00%, 11/03/08 4,000,000 3,690,000
- --------------------------------------------------------------
Tarkett International (Textiles),
Yankee Sr. Sub. Notes, 9.00%,
03/01/02 1,500,000 1,548,750
- --------------------------------------------------------------
7,079,590
- --------------------------------------------------------------
NETHERLANDS-0.19%
Baan Co., N.V. (Computer
Software/Services), Conv. Sub.
Notes, 4.50%, 12/15/01
(acquired 12/12/96; cost
$1,000,000)(b) 1,000,000 1,597,480
- --------------------------------------------------------------
NORWAY-0.30%
Petroleum Geo-Services A.S.A. (Oil
& Gas-Services), Yankee Notes,
7.50%, 03/31/07 2,500,000 2,534,275
- --------------------------------------------------------------
SWITZERLAND-0.22%
Sandoz Capital BVI Ltd.
(Chemicals), Gtd. Deb., 2.00%,
10/06/02
(acquired 03/07/96-06/05/96; cost
$1,306,500)(b) 1,250,000 1,918,750
- --------------------------------------------------------------
UNITED KINGDOM-0.27%
Eidos PLC (Computer
Software/Services), Sr. Conv.
Bonds, 6.25%, 07/31/02
(acquired 03/14/97; cost
$1,000,000)(b) 1,000,000 920,000
- --------------------------------------------------------------
Royal Bank of Scotland PLC
(Banking), Yankee Sub. Notes,
6.375%, 02/01/11 1,500,000 1,372,845
- --------------------------------------------------------------
2,292,845
- --------------------------------------------------------------
Total U.S. Dollar Denominated
Foreign Bonds & Notes 34,249,858
- --------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED FOREIGN
BONDS & NOTES(d)-2.45%
CANADA-1.34%
Bank of Montreal (Finance-Asset
Management), Sub. Deb., 7.92%,
07/31/12 CAD 1,850,000 1,461,164
- --------------------------------------------------------------
Canadian Oil Debco Inc. (Oil &
Gas-Services), Deb., 11.00%,
10/31/00 1,500,000 1,246,316
- --------------------------------------------------------------
NAV Canada (Transportation), Bonds,
7.40%, 06/01/27 3,500,000 2,619,038
- --------------------------------------------------------------
Province of Ontario (Foreign
Government Securities), Sr.
Unsec. Unsub. Global Bonds,
8.00%, 03/11/03 2,300,000 1,824,794
- --------------------------------------------------------------
Teleglobe Canada, Inc.
(Telecommunications), Unsec.
Deb., 8.35%, 06/20/03 1,000,000 797,016
- --------------------------------------------------------------
Trans-Canada Pipelines (Oil &
Gas-Services), Series Q Deb.,
10.625%, 10/20/09 1,500,000 1,409,118
- --------------------------------------------------------------
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
CANADA-(CONTINUED)
Westcoast Energy Inc. (Electric
Power), Deb., 6.45%, 12/18/06
(acquired 12/03/96; cost
$2,217,508)(b) CAD 3,000,000 $ 2,140,048
- --------------------------------------------------------------
11,497,494
- --------------------------------------------------------------
UNITED KINGDOM-1.11%
Fannie Mae (Foreign Government
Securities), Sr. Unsec. Notes,
6.875%, 06/07/02 GBP 2,800,000 4,602,926
- --------------------------------------------------------------
Sutton Bridge Financing Ltd.
(Finance-Consumer Credit), Gtd.
Bonds 8.625%, 06/30/22
(acquired 05/29/97; cost
$4,890,565)(b) 3,000,000 4,974,046
- --------------------------------------------------------------
9,576,972
- --------------------------------------------------------------
Total Non-U.S. Dollar
Denominated Foreign Bonds &
Notes 21,074,466
- --------------------------------------------------------------
</TABLE>
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-4.51%
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
BRAZIL-0.48%
Telecomunicacoes Brasileiras
S.A.-Telebras-ADR
(Telecommunications) 10,500 1,593,375
- --------------------------------------------------------------
Uniao de Bancos Brasileiros
S.A.-GDR (Banking)(c) 68,300 2,535,638
- --------------------------------------------------------------
4,129,013
- --------------------------------------------------------------
CANADA-0.23%
Philip Services Corp. (Pollution
Control)(c) 125,000 1,984,375
- --------------------------------------------------------------
FINLAND-0.20%
Nokia Oy A.B.-Class A-ADR
(Telecommunications) 23,500 1,733,125
- --------------------------------------------------------------
FRANCE-0.15%
AXA-ADR (Insurance-Life & Health) 40,000 1,265,000
- --------------------------------------------------------------
GERMANY-0.07%
VEBA A.G. (Electric Power) 10,750 604,036
- --------------------------------------------------------------
ISRAEL-0.62%
ECI Telecommunications Ltd. Designs
(Computer Networking) 24,000 714,000
- --------------------------------------------------------------
Teva Pharmaceutical Industries
Ltd.-ADR (Medical-Drugs) 35,000 2,266,250
- --------------------------------------------------------------
TTI Team Telecom International Ltd.
(Telecommunications)(c) 109,000 504,125
- --------------------------------------------------------------
Zag Industries Ltd. (Consumer
Non-Durables)(c) 180,000 1,845,000
- --------------------------------------------------------------
5,329,375
- --------------------------------------------------------------
NETHERLANDS-0.74%
Gucci Group N.V.-ADR-New York
shares (Textiles) 40,000 2,575,000
- --------------------------------------------------------------
Koninklijke Ahold NV-ADR
(Retail-Food & Drug) 20,604 1,752,628
- --------------------------------------------------------------
New Holland N.V. (Machinery-Heavy) 75,000 2,053,125
- --------------------------------------------------------------
6,380,753
- --------------------------------------------------------------
</TABLE>
12
<PAGE> 15
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
NORWAY-0.41%
Petroleum Geo-Services ASA-ADR (Oil
& Gas-Services) 30,000 $ 1,466,250
- --------------------------------------------------------------
Stolt Comex Seaway, S.A. (Oil &
Gas-Services)(c) 80,000 2,030,000
- --------------------------------------------------------------
3,496,250
- --------------------------------------------------------------
PORTUGAL-0.10%
Telecel-Comunicacaoes Pessoais,
S.A. (Telecommunications)
(acquired 12/09/96; cost
$521,901)(b)(c) 10,300 852,325
- --------------------------------------------------------------
SPAIN-0.13%
Autopistas Concesionaria Espanola
S.A. (Engineering & Construction) 82,000 1,112,996
- --------------------------------------------------------------
SWEDEN-0.12%
Telefonaktiebolaget LM Ericsson-ADR
(Telecommunications) 25,000 984,375
- --------------------------------------------------------------
UNITED KINGDOM-1.26%
Avis Europe PLC (Transportation) 765,450 1,739,972
- --------------------------------------------------------------
Bass PLC (Beverages-Alcoholic) 64,350 785,498
- --------------------------------------------------------------
Danka Business Systems PLC-ADR
(Office Automation) 60,000 2,452,500
- --------------------------------------------------------------
Doncasters PLC-ADR
(Aerospace/Defense) 30,000 693,750
- --------------------------------------------------------------
Railtrack Group PLC (Railroads) 300,000 3,124,938
- --------------------------------------------------------------
SELECT Software Tools-ADR (Computer
Software/Services) 38,000 503,500
- --------------------------------------------------------------
SmithKline Beecham PLC-ADR
(Medical-Drugs) 17,000 1,557,625
- --------------------------------------------------------------
10,857,783
- --------------------------------------------------------------
Total Foreign Stocks & Other Equity
Interests 38,729,406
- --------------------------------------------------------------
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
U.S. TREASURY SECURITIES-8.62%
U.S. TREASURY NOTES & BONDS-8.62%
Notes, 7.125%, 02/29/00 $ 2,500,000 $ 2,555,950
- --------------------------------------------------------------
Notes, 6.375%, 03/31/01 5,000,000 5,009,100
- --------------------------------------------------------------
Notes, 6.50%, 05/31/01 17,000,000 17,096,730
- --------------------------------------------------------------
Notes, 6.625%, 06/30/01 10,000,000 10,098,400
- --------------------------------------------------------------
Notes, 7.25%, 08/15/04 2,500,000 2,606,325
- --------------------------------------------------------------
Notes, 7.50%, 02/15/05 3,000,000 3,175,110
- --------------------------------------------------------------
Notes, 6.50%, 10/15/06 12,000,000 11,954,040
- --------------------------------------------------------------
Notes, 6.25%, 02/15/07 10,000,000 9,788,500
- --------------------------------------------------------------
Bonds, 6.75%, 08/15/26 3,000,000 2,970,450
- --------------------------------------------------------------
Bonds, 6.625%, 02/15/27 9,000,000 8,808,930
- --------------------------------------------------------------
Total U.S. Treasury Securities 74,063,535
- --------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES-0.47%
Tennessee Valley Authority, Bonds,
5.98%, 04/01/36 4,000,000 4,023,250
- --------------------------------------------------------------
REPURCHASE AGREEMENT(e)-0.79%
UBS Securities Inc., 6.10%,
07/01/97(f) 6,800,758 6,800,758
- --------------------------------------------------------------
TOTAL INVESTMENTS-99.84% 857,782,142
- --------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-0.16% 1,348,202
- --------------------------------------------------------------
NET ASSETS-100.00% $859,130,344
==============================================================
</TABLE>
Notes to Schedule of Investments:
(a) Zero coupon bonds. The interest rate shown represents the rate of original
issue discount.
(b) Restricted Security. May be sold to qualified institutional buyers in
accordance with provisions of Rule 144A under the Securities Act of 1933, as
amended. The valuation of these securities has been determined in accordance
with procedures established by the Board of Trustees. The aggregate market
value of these securities at 06/30/97 was $55,959,552, which represented
6.51% of the Fund's net assets.
(c) Non-income producing security.
(d) Foreign denominated security. Par value and coupon rate are denominated in
currency of country indicated.
(e) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(f) Joint repurchase agreement entered into 06/30/97 with a maturing value of
$300,050,833. Collateralized by $320,816,334 U.S. Government obligations, 0%
to 13.25% due 07/14/97 to 04/01/27 with an aggregate market value at
06/30/97 of $306,003,435.
Abbreviations:
ACES - Automatic Convertible Exchange GDR - Global Depository Receipt
Security Pfd. - Preferred
ADR - American Depository Receipt PIK - Payment in Kind
CAD - Canadian Dollar PRIDES - Preferred Redeemable Increased
Conv. - Convertible Dividend Equity Securities
Ctf. - Certificates Sec. - Secured
Deb. - Debentures Sr. - Senior
Dep. - Depository Sub. - Subordinated
Exch. - Exchangeable Unsec. - Unsecured
Gtd. - Guaranteed Unsub. - Unsubordinated
GBP - British Pounds
See Notes to Financial Statements.
13
<PAGE> 16
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1997
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$730,002,570) $857,782,142
- ---------------------------------------------------------
Foreign currencies, at market value (cost
$326,819) 328,608
- ---------------------------------------------------------
Receivables for:
Investments sold 5,841,143
- ---------------------------------------------------------
Fund shares sold 4,478,202
- ---------------------------------------------------------
Interest and dividends 5,654,982
- ---------------------------------------------------------
Investment for deferred compensation plan 13,850
- ---------------------------------------------------------
Other assets 44,762
- ---------------------------------------------------------
Total assets 874,143,689
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 11,910,155
- ---------------------------------------------------------
Dividends 550,130
- ---------------------------------------------------------
Fund shares reacquired 1,203,526
- ---------------------------------------------------------
Options written 60,000
- ---------------------------------------------------------
Deferred compensation plan 13,850
- ---------------------------------------------------------
Accrued advisory fees 379,686
- ---------------------------------------------------------
Accrued administrative service fees 7,767
- ---------------------------------------------------------
Accrued distribution fees 624,916
- ---------------------------------------------------------
Accrued transfer agent fees 112,147
- ---------------------------------------------------------
Accrued trustees' fees 2,231
- ---------------------------------------------------------
Accrued operating expenses 148,937
- ---------------------------------------------------------
Total liabilities 15,013,345
- ---------------------------------------------------------
Net assets applicable to shares outstanding $859,130,344
=========================================================
NET ASSETS:
Class A $513,524,763
=========================================================
Class B $345,605,581
=========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 21,373,831
=========================================================
Class B 14,399,811
=========================================================
Class A:
Net asset value and redemption price per
share $ 24.03
=========================================================
Offering price per share:
(Net asset value of $24.03
divided by 95.25%) $ 25.23
=========================================================
Class B:
Net asset value and offering price per
share $ 24.00
=========================================================
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $10,336,379
- --------------------------------------------------------
Dividends (net of $33,466 foreign
withholding tax) 2,963,142
- --------------------------------------------------------
Total investment income 13,299,521
- --------------------------------------------------------
EXPENSES:
Advisory fees 2,013,408
- --------------------------------------------------------
Custodian fees 28,513
- --------------------------------------------------------
Distribution fees-Class A 557,522
- --------------------------------------------------------
Distribution fees-Class B 1,424,810
- --------------------------------------------------------
Administrative service fees 46,140
- --------------------------------------------------------
Trustees' fees 4,565
- --------------------------------------------------------
Transfer agent fees-Class A 229,221
- --------------------------------------------------------
Transfer agent fees-Class B 288,376
- --------------------------------------------------------
Other 189,719
- --------------------------------------------------------
Total expenses 4,782,274
- --------------------------------------------------------
Less: Expenses paid indirectly (11,964)
- --------------------------------------------------------
Net expenses 4,770,310
- --------------------------------------------------------
Net investment income 8,529,211
- --------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN
CURRENCIES, FUTURES AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities 6,111,610
- --------------------------------------------------------
Foreign currencies (197,685)
- --------------------------------------------------------
Futures contracts 2,033,875
- --------------------------------------------------------
7,947,800
- --------------------------------------------------------
Unrealized appreciation (depreciation) of:
Investment securities 66,570,100
- --------------------------------------------------------
Foreign currencies (27,506)
- --------------------------------------------------------
Option contracts 6,698
- --------------------------------------------------------
66,549,292
- --------------------------------------------------------
Net gain from investment securities,
foreign currencies futures and
option contracts 74,497,092
- --------------------------------------------------------
Net increase in net assets resulting from
operations $83,026,303
========================================================
</TABLE>
See Notes to Financial Statements.
14
<PAGE> 17
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
------------ --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 8,529,211 $ 9,321,617
- -------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies, futures and option contracts 7,947,800 12,716,582
- -------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies, futures and option contracts 66,549,292 41,965,393
- -------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 83,026,303 64,003,592
- -------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (5,407,129) (6,033,635)
- -------------------------------------------------------------------------------------------
Class B (2,401,721) (3,100,998)
- -------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on
investment securities:
Class A -- (6,912,890)
- -------------------------------------------------------------------------------------------
Class B -- (4,888,186)
- -------------------------------------------------------------------------------------------
Net equalization credits 4,217,855 7,707,610
- -------------------------------------------------------------------------------------------
Share transactions-net:
Class A 130,696,079 212,483,093
- -------------------------------------------------------------------------------------------
Class B 77,727,963 143,138,052
- -------------------------------------------------------------------------------------------
Net increase in net assets 287,859,350 406,396,638
- -------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 571,270,994 164,874,356
- -------------------------------------------------------------------------------------------
End of period $859,130,344 $571,270,994
===========================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $704,876,982 $496,452,940
- -------------------------------------------------------------------------------------------
Undistributed net investment income 15,397,797 10,459,581
- -------------------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities,
foreign currency transactions and futures contracts 11,066,701 3,118,901
- -------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities,
foreign currencies, option and futures contracts 127,788,864 61,239,572
- -------------------------------------------------------------------------------------------
$859,130,344 $571,270,994
===========================================================================================
</TABLE>
See Notes to Financial Statements.
15
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
(UNAUDITED)
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Balanced Fund (the "Fund") is a series portfolio of AIM Funds Group (the
"Trust"). The trust is a Delaware business trust registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end series
management investment company consisting of nine separate series portfolios,
each having an unlimited number of shares of beneficial interest. The Fund
currently offers two different classes of shares: the Class A shares and the
Class B shares. Class A shares are sold with a front-end sales charge. Class B
shares are sold with a contingent deferred sales charge. Matters affecting each
portfolio or class 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 objective is to achieve as high a total
return to investors as possible, consistent with preservation of capital, by
investing in a broadly diversified portfolio of high-yielding securities,
including common stocks, preferred stocks, convertible securities and bonds.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. Security Valuations -- 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 mean between the closing bid and asked prices
on that day. Each security traded in the over-the-counter market (but not
including securities reported on the NASDAQ National Market System) is valued
at the mean between the last bid and asked prices based upon quotes furnished
by market makers for such securities. If a mean is not available, as is the
case in some foreign markets, the closing bid will be used absent a last
sales price. 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 mean of the closing bid and asked prices. 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 at the mean between last bid and asked prices based upon
quotes furnished by independent sources. Securities for which market
quotations either are not readily available or are questionable are valued at
fair value as determined in good faith by or under the supervision of the
Trust's officers in a manner specifically authorized by the Board of
Trustees. Short-term obligations having 60 days or less to maturity are
valued at amortized cost which approximates market value. Generally, trading
in foreign securities is substantially completed each day at various times
prior to the close of the New York Stock Exchange. 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 New York Stock Exchange.
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 New York Stock Exchange which will 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.
C. Bond Premiums -- It is the policy of the Fund not to amortize market premiums
on bonds for financial reporting purposes.
D. Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income taxes
is recorded in the financial statements.
E. Equalization -- The Fund follows the accounting practice known as
equalization by which a portion of the proceeds from sales and the costs of
repurchases of Fund shares, equivalent on a per share basis to the amount of
undistributed net investment income, is credited or charged to undistributed
income when the transaction is recorded so the undistributed net investment
income per share is unaffected by sales or redemptions of Fund shares.
F. Expenses -- Operating expenses directly attributable to a class of shares are
charged to that class' operations. Expenses which are applicable to both
classes, e.g. advisory fees, are allocated between them.
G. 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.
16
<PAGE> 19
H. Foreign Currency Contracts -- A forward 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 forward 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 forward 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.
I. Stock Index Futures Contracts -- The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities as collateral for the account of
the broker (the Fund's agent in acquiring the futures position). During the
period the futures contracts are open, changes in the value of the contracts
are recognized as unrealized gains or losses by "marking to market" on a
daily basis to reflect the market value of the contracts at the end of each
day's trading. Variation margin payments are made or received depending upon
whether unrealized gains or losses are incurred. When the contracts are
closed, the Fund recognizes a realized gain or loss equal to the difference
between the proceeds from, or cost of, the closing transaction and the
Fund's basis in the contract. Risks include the possibility of an illiquid
market and the change in the value of the contracts may not correlate with
changes in the value of the Fund's portfolio being hedged.
J. Covered Call Options -- The Fund may write call options, but only on a
covered basis; that is, the Fund will own the underlying security. Options
written by the Fund normally will have expiration dates between three and
nine months from the date written. The exercise price of a call option may
be below, equal to, or above the current market value of the underlying
security at the time the option is written. When the Fund writes a covered
call option, an amount equal to the premium received by the Fund is recorded
as an asset and an equivalent liability. The amount of the liability is
subsequently "marked-to-market" to reflect the current market value of the
option written. The current market value of a written option is the mean
between the last bid and asked prices on that day. If a written call option
expires on the stipulated expiration date, or if the Fund enters into a
closing purchase transaction, the Fund realizes a gain (or a loss if the
closing purchase transaction exceeds the premium received when the option
was written) without regard to any unrealized gain or loss on the underlying
security, and the liability related to such option is extinguished. If a
written option is exercised, the Fund realizes a gain or a loss from the
sale of the underlying security and the proceeds of the sale are increased
by the premium originally received.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the
call option at any time during the option period. During the option period,
in return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has
retained the risk of loss should the price of the underlying security
decline. During the option period, the Fund may be required at any time to
deliver the underlying security against payment of the exercise price. This
obligation is terminated upon the expiration of the option period or at such
earlier time at which the Fund effects a closing purchase transaction by
purchasing (at a price which may be higher than that received when the call
option was written) a call option identical to the one originally written.
The Fund will not write a covered call option if, immediately thereafter,
the aggregate value of the securities underlying all such options,
determined as of the dates such options were written, would exceed 5% of the
net assets of the Fund.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays AIM an advisory fee at an annual rate of 0.75% of the
first $150 million of the Fund's average daily net assets, plus 0.50% of the
Fund's average daily net assets in excess of $150 million.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to reimburse AIM for certain administrative costs incurred in providing
accounting services to the Fund. During the six months ended June 30, 1997, AIM
was reimbursed $46,140 for such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. During the six months ended June 30, 1997, AFS
was paid $317,574 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 shares and the Class B shares of the Fund. The Trust has adopted Plans
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A
shares (the "Class A Plan") and with respect to the Fund's Class B shares (the
"Class B Plan")(collectively, the "Plans"). The Fund, pursuant to the Class A
Plan, pays AIM Distributors compensation at an annual rate of 0.25% of the
average daily net assets attributable to the Class A shares. The Class A Plan is
designed to compensate AIM Distributors for certain promotional and other sales
related costs and provides periodic payments to selected dealers and financial
institutions who furnish continuing personal shareholder services to their
customers who purchase and own Class A shares of the Fund. The Fund, pursuant to
the Class B Plan, pays AIM Distributors compensation at an annual rate of 1.00%
of the average daily net assets attributable to the Class B shares. Of this
amount, the Fund may pay a service fee of 0.25% of the average daily net assets
of the Class B shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
Class B shares of the Fund. Any amounts not paid as a service fee under such
Plans would constitute an asset-based sales charge. The Plans also impose a cap
on the total sales charges, including asset-based sales
17
<PAGE> 20
charges, that may be paid by the respective classes. AIM Distributors may,
from time to time, assign, transfer or pledge to one or more assignees, its
rights to all or a designated portion of (a) compensation received by AIM
Distributors from the Fund pursuant to the Class B Plan (but not AIM
Distributors' duties and obligations pursuant to the Class B Plan) and (b)
contingent deferred sales charges payable to AIM Distributors related to the
Class B shares. During the six months ended June 30, 1997, the Class A shares
and the Class B shares paid AIM Distributors $557,522 and $1,424,810,
respectively, as compensation under the Plans.
AIM Distributors received commissions of $304,851 from sales of the Class A
shares of the Fund during the six months ended June 30, 1997. Such commissions
are not an expense of the Fund. They are deducted from, and are not included in,
the proceeds from sales of Class A shares. During the six months ended June 30,
1997, AIM Distributors received $60,163 in contingent deferred sales charges
imposed on redemptions of Fund shares. Certain officers and trustees of the
Trust are officers and directors of AIM, AIM Distributors and AFS.
During the six months ended June 30, 1997, the Fund paid legal fees of $3,316
for services rendered by Kramer, Levin, Naftalis & Frankel as counsel to the
Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3-INDIRECT EXPENSES
AIM has directed certain portfolio trades to brokers who paid a portion of the
Fund's expenses related to pricing services used by the Fund. For the six months
ended June 30, 1997 the Fund's expenses were reduced by $271 and the Fund
received reductions in transfer agency fees from AFS (an affiliate of AIM) and
reductions in custodian fees of $4,769 and $6,924, respectively, under expense
offset arrangements. The effect of the above arrangements resulted in a
reduction of the Fund's total expenses of $11,964 during the six months ended
June 30, 1997.
NOTE 4-TRUSTEES' FEES
Trustees' fees represent remuneration paid or accrued to each trustee who is not
an "interested person" of AIM. The Trust may invest trustees' fees, if so
elected by a trustee, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 5-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $500,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
Prior to an amendment of the line of credit on July 15, 1997, the Fund was
limited to borrowing up to the lesser of (i) $325,000,000 or (ii) the limits set
by its prospectus for borrowings. During the six months ended June 30, 1997, the
Fund did not borrow under the line of credit agreement. The funds which are
parties to the line of credit are charged a commitment fee of 0.05% on the
unused balance of the committed line. The commitment fee is allocated among such
funds based on their respective average net assets for the period.
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the six months ended June 30, 1997 was
$463,353,739 and $230,707,687, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of June 30, 1997 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $135,378,671
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (7,606,686)
- ---------------------------------------------------------
Net unrealized appreciation of investment
securities $127,771,985
=========================================================
Cost of investments for tax purposes is $730,010,157.
</TABLE>
NOTE 7-OPTION CONTRACTS WRITTEN
Transactions in call options written during the six months ended June 30, 1997
are summarized as follows:
<TABLE>
<CAPTION>
OPTION CONTRACTS
----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- --------
<S> <C> <C>
Beginning of year -- --
- ------------------------------------------------------------------------------------
Written 200 $66,698
- ------------------------------------------------------------------------------------
Closed -- --
- ------------------------------------------------------------------------------------
Exercised -- --
- ------------------------------------------------------------------------------------
Expired -- --
- ------------------------------------------------------------------------------------
End of year 200 $66,698
- ------------------------------------------------------------------------------------
</TABLE>
Open call option contracts written at June 30, 1997 were as follows:
<TABLE>
<CAPTION>
JUNE 30,
CONTRACT STRIKE NUMBER OF PREMIUM 1997 UNREALIZED
ISSUE MONTH PRICE CONTRACTS RECEIVED MARKET VALUE APPRECIATION
- -------------------------------------------------- -------- ------ --------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Philip Morris Companies, Inc. Sep. 97 $45 200 $66,698 $60,000 $6,698
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
18
<PAGE> 21
NOTE 8-SHARE INFORMATION
Changes in shares outstanding during the six months ended June 30, 1997 and the
year ended December 31, 1996 were as follows:
<TABLE>
<CAPTION>
JUNE 30, 1997 DECEMBER 31, 1996
---------------------------- ----------------------------
SHARES VALUE SHARES VALUE
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Sold:
Class A 9,256,911 $200,906,522 11,936,333 $241,163,392
- ------------------------------------------------------- ----------- ------------ ----------- ------------
Class B 4,226,474 92,661,196 7,608,028 153,665,571
- ------------------------------------------------------- ----------- ------------ ----------- ------------
Issued as reinvestment of dividends:
Class A 214,596 4,841,945 571,269 11,884,617
- ------------------------------------------------------- ----------- ------------ ----------- ------------
Class B 89,241 2,019,130 347,628 7,257,995
- ------------------------------------------------------- ----------- ------------ ----------- ------------
Reacquired:
Class A (3,400,389) (75,052,388) (2,004,527) (40,564,916)
- ------------------------------------------------------- ----------- ------------ ----------- ------------
Class B (774,039) (16,952,363) (876,383) (17,785,514)
- ------------------------------------------------------- ----------- ------------ ----------- ------------
9,612,794 $208,424,042 17,582,348 $355,621,145
======================================================= =========== ============ =========== ============
</TABLE>
NOTE 9-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a Class A share outstanding during
the six months ended June 30, 1997, each of the years in the three-year period
ended December 31, 1996, the four months ended December 31, 1993 and each of the
years in the five-year period ended August 31, 1993 and for a Class B share
outstanding during the six months ended June 30, 1997 each of the years in the
three-year period ended December 31, 1996 and the period October 18, 1993 (date
sales commenced) through December 31, 1993. Prior to October 15, 1993, the Fund
was known as AIM Convertible Securities, Inc. and had a different investment
objective.
<TABLE>
<CAPTION>
DECEMBER 31, AUGUST 31,
JUNE 30, ---------------------------------------- -----------------
1997 1996 1995 1994 1993 1993 1992
CLASS A: -------- -------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 21.84 $ 19.22 $ 14.62 $ 16.10 $ 15.97 $ 12.77 $ 12.04
- ----------------------------------------------------- -------- -------- ------- ------- ------- ------- -------
Income from investment operations:
Net investment income 0.30 0.66 0.49 0.44 0.10 0.32 0.29
- ----------------------------------------------------- -------- -------- ------- ------- ------- ------- -------
Net gains (losses) on securities (both realized and
unrealized) 2.15 2.99 4.57 (1.31) 0.18 3.18 0.74
- ----------------------------------------------------- -------- -------- ------- ------- ------- ------- -------
Total from investment operations 2.45 3.65 5.06 (0.87) 0.28 3.50 1.03
- ----------------------------------------------------- -------- -------- ------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income (0.26) (0.55) (0.46) (0.39) (0.15) (0.30) (0.30)
- ----------------------------------------------------- -------- -------- ------- ------- ------- ------- -------
Distributions from net realized capital gains -- (0.48) -- (0.22) -- -- --
- ----------------------------------------------------- -------- -------- ------- ------- ------- ------- -------
Total distributions (0.26) (1.03) (0.46) (0.61) (0.15) (0.30) (0.30)
- ----------------------------------------------------- -------- -------- ------- ------- ------- ------- -------
Net asset value, end of period $ 24.03 $ 21.84 $ 19.22 $ 14.62 $ 16.10 $ 15.97 $ 12.77
===================================================== ======== ======== ======= ======= ======= ======= =======
Total return(a) 11.28% 19.25% 34.97% (5.44)% 1.76% 27.75% 8.66%
===================================================== ======== ======== ======= ======= ======= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $513,525 $334,189 $92,241 $37,572 $23,520 $19,497 $11,796
===================================================== ======== ======== ======= ======= ======= ======= =======
Ratio of expenses to average net assets 0.97%(b)(c) 1.15% 1.43%(d) 1.25%(d) 2.17%(f) 2.07% 2.12%
===================================================== ======== ======== ======= ======= ======= ======= =======
Ratio of net investment income to average net assets 2.67%(b) 2.97% 2.81%(e) 3.07%(e) 1.81%(f) 2.23% 2.32%
===================================================== ======== ======== ======= ======= ======= ======= =======
Portfolio turnover rate 33% 72% 77% 76% 233% 154% 166%
===================================================== ======== ======== ======= ======= ======= ======= =======
Average broker commission rate paid(g) $0.0571 $ 0.0558 N/A N/A N/A N/A N/A
===================================================== ======== ======== ======= ======= ======= ======= =======
Borrowings for the period:
Amount of debt outstanding at end of period -- -- -- -- -- -- --
===================================================== ======== ======== ======= ======= ======= ======= =======
Average amount of debt outstanding during the
period(h) -- -- -- -- -- -- --
===================================================== ======== ======== ======= ======= ======= ======= =======
Average number of shares outstanding during the
period (000s omitted)(h) 20,055 9,778 3,173 2,061 1,305 1,046 939
===================================================== ======== ======== ======= ======= ======= ======= =======
Average amount of debt per share during the period -- -- -- -- -- -- --
===================================================== ======== ======== ======= ======= ======= ======= =======
<CAPTION>
AUGUST 31,
-----------------------------
1991 1990 1989
CLASS A: ------- -------- --------
<S> <C> <C> <C>
Net asset value, beginning of period $ 9.73 $ 10.67 $ 9.08
- ----------------------------------------------------- ------- -------- --------
Income from investment operations:
Net investment income 0.28 0.32 0.39
- ----------------------------------------------------- ------- -------- --------
Net gains (losses) on securities (both realized and
unrealized) 2.33 (0.91) 1.63
- ----------------------------------------------------- ------- -------- --------
Total from investment operations 2.61 (0.59) 2.02
- ----------------------------------------------------- ------- -------- --------
Less distributions:
Dividends from net investment income (0.30) (0.35) (0.43)
- ----------------------------------------------------- ------- -------- --------
Distributions from net realized capital gains -- -- --
- ----------------------------------------------------- ------- -------- --------
Total distributions (0.30) (0.35) (0.43)
- ----------------------------------------------------- ------- -------- --------
Net asset value, end of period $ 12.04 $ 9.73 $ 10.67
===================================================== ======= ======== ========
Total return(a) 27.41% (5.67)% 22.96%
===================================================== ======= ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $11,750 $ 10,965 $ 14,405
===================================================== ======= ======== ========
Ratio of expenses to average net assets 2.39% 2.15% 1.94%
===================================================== ======= ======== ========
Ratio of net investment income to average net assets 2.74% 3.18% 3.99%
===================================================== ======= ======== ========
Portfolio turnover rate 208% 307% 149%
===================================================== ======= ======== ========
Average broker commission rate paid(g) N/A N/A N/A
===================================================== ======= ======== ========
Borrowings for the period:
Amount of debt outstanding at end of period -- -- $260,000
===================================================== ======= ======== ========
Average amount of debt outstanding during the
period(h) -- $138,181 $ 83,195
===================================================== ======= ======== ========
Average number of shares outstanding during the
period (000s omitted)(h) 1,051 1,238 1,589
===================================================== ======= ======== ========
Average amount of debt per share during the period -- $ 0.110 $ 0.052
===================================================== ======= ======== ========
</TABLE>
(a) Total returns do not deduct sales charges and are not
annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of
$449,713,960.
(c) Includes expenses paid indirectly. Excluding expenses paid
indirectly, the ratio of expenses to average net assets
would have remained the same.
(d) After fee waivers and/or expense reimbursements. Ratios of
expenses to average net assets prior to fee waivers and/or
expense reimbursements were 1.46% and 1.68% for 1995 and
1994, respectively.
(e) After fee waivers and/or expense reimbursements. Ratios of
net investment income to average net assets prior to fee
waivers and/or expense reimbursements were 2.78% and 2.64%
for 1995 and 1994, respectively.
(f) Annualized.
(g) Disclosure requirement beginning with the Fund's fiscal year
ended December 31, 1996.
(h) Averages computed on a daily basis.
19
<PAGE> 22
NOTE 8-FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, --------------------------------------------------
1997 1996 1995 1994 1993
CLASS B: -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 21.83 $ 19.22 $ 14.62 $ 16.11 $ 16.69
- -------------------------------------------------------- -------- -------- ------- ------- -------
Income from investment operations:
Net investment income 0.19 0.48 0.31 0.31 0.04
- -------------------------------------------------------- -------- -------- ------- ------- -------
Net gains (losses) on securities (both realized and
unrealized) 2.16 2.99 4.61 (1.31) (0.58)
- -------------------------------------------------------- -------- -------- ------- ------- -------
Total from investment operations 2.35 3.47 4.92 (1.00) (0.54)
- -------------------------------------------------------- -------- -------- ------- ------- -------
Less distributions:
Dividends from net investment income (0.18) (0.38) (0.32) (0.27) (0.04)
- -------------------------------------------------------- -------- -------- ------- ------- -------
Distributions from net realized capital gains -- (0.48) -- (0.22) --
- -------------------------------------------------------- -------- -------- ------- ------- -------
Total distributions (0.18) (0.86) (0.32) (0.49) (0.04)
- -------------------------------------------------------- -------- -------- ------- ------- -------
Net asset value, end of period $ 24.00 $ 21.83 $ 19.22 $ 14.62 $ 16.11
======================================================== ======== ======== ======= ======= =======
Total return(a) 10.80% 18.28% 33.93% (6.23)% (3.23)%
======================================================== ======== ======== ======= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $345,606 $237,082 $72,634 $20,245 $ 2,754
======================================================== ======== ======== ======= ======= =======
Ratio of expenses to average net assets 1.83%(b)(c) 1.97% 2.21%(d) 1.98%(d) 2.83%(f)
======================================================== ======== ======== ======= ======= =======
Ratio of net investment income to average net assets 1.81%(b) 2.15% 2.03%(e) 2.34%(e) 1.15%(f)
======================================================== ======== ======== ======= ======= =======
Portfolio turnover rate 33% 72% 77% 76% 233%
======================================================== ======== ======== ======= ======= =======
Average broker commission rate paid(g) $ 0.0571 $ 0.0558 N/A N/A N/A
======================================================== ======== ======== ======= ======= =======
</TABLE>
(a) Total returns do not deduct contingent deferred sales charges and are not
annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of $287,323,592.
(c) Includes expenses paid indirectly. Excluding expenses paid indirectly, the
ratio of expenses to average net assets would have remained the same.
(d) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
2.23% and 2.45% for 1995 and 1994, respectively.
(e) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 2.01% and 1.87% for 1995 and 1994, respectively.
(f) Annualized.
(g) Disclosure requirement beginning with the Fund's fiscal year ended December
31, 1996.
- --------------------------------------------------------------------------------
SUPPLEMENTAL PROXY INFORMATION -- SHAREHOLDER MEETING
- --------------------------------------------------------------------------------
The Annual Meeting of Shareholders of the Trust was held on February 7, 1997.
The meeting was held for the following purposes:
(1) To elect trustees as follows: Charles T. Bauer, Bruce L. Crockett, Owen Daly
II, Carl Frischling, Robert H. Graham, John F. Kroeger, Lewis F. Pennock,
Ian W. Robinson, and Louis S. Sklar.
(2) To approve a new Investment Advisory Agreement between the Trust and AIM.
(3) To approve the elimination of the fundamental investment policy prohibiting
or restricting investments in other investment companies and/or the
amendment of certain related fundamental investment policies.
(4) Ratification of KPMG Peat Marwick LLP as independent accountants for the
Trust's fiscal year ending December 31, 1997.
The following votes were cast with respect to each item:
<TABLE>
<CAPTION>
Votes
Trustee/Matter Votes For Against Abstentions
-------------- ----------- --------- -----------
<S> <C> <C> <C> <C>
(1) Charles T. Bauer............................................ 773,545,353 0 34,024,196
Bruce L. Crockett........................................... 774,171,487 0 33,398,062
Owen Daly II................................................ 773,623,278 0 33,946,271
Carl Frischling............................................. 773,902,641 0 33,666,908
Robert H. Graham............................................ 774,181,971 0 33,387,578
John F. Kroeger............................................. 773,713,539 0 33,856,010
Lewis F. Pennock............................................ 773,903,304 0 33,666,245
Ian W. Robinson............................................. 773,753,378 0 33,816,171
Louis S. Sklar.............................................. 773,993,581 0 33,575,968
(2) Approval of new Investment Advisory Agreement............... 13,293,344 195,245 526,166
(3) Elimination of policy restricting investments in other
companies (for AIM Balanced Fund only)...................... 9,587,365 427,359 566,860
(4) KPMG Peat Marwick LLP....................................... 763,580,956 7,014,082 36,974,511
</TABLE>
20
<PAGE> 23
Trustees & Officers
<TABLE>
<S> <C>
BOARD OF TRUSTEES OFFICERS OFFICE OF THE FUND
Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
Chairman Chairman Suite 100
A I M Management Group Inc. Houston, TX 77046
Robert H. Graham
Bruce L. Crockett President INVESTMENT ADVISOR
Formerly Director, President, and Chief
Executive Officer John J. Arthur A I M Advisors, Inc.
COMSAT Corporation Senior Vice President and Treasurer 11 Greenway Plaza
Suite 100
Owen Daly II Carol F. Relihan Houston, TX 77046
Director Senior Vice President
Cortland Trust Inc. and Secretary TRANSFER AGENT
Jack Fields Gary T. Crum A I M Fund Services, Inc.
Formerly Member of the Senior Vice President P.O. Box 4739
U.S. House of Representatives Houston, TX 77210-4739
Scott G. Lucas
Carl Frischling Senior Vice President CUSTODIAN
Partner
Kramer, Levin, Naftalis & Frankel Dana R. Sutton State Street Bank & Trust Company
Vice President and Assistant Treasurer 225 Franklin Street
Robert H. Graham Boston, MA 02110
President and Chief Executive Officer Robert G. Alley
A I M Management Group Inc. Vice President COUNSEL TO THE FUND
John F. Kroeger Stuart W. Coco Ballard Spahr
Formerly Consultant Vice President Andrews & Ingersoll
Wendell & Stockel Associates, Inc. 1735 Market Street
Melville B. Cox Philadelphia, PA 19103
Lewis F. Pennock Vice President
Attorney COUNSEL TO THE TRUSTEES
Karen Dunn Kelly
Ian W. Robinson Vice President Kramer, Levin, Naftalis & Frankel
Consultant; Formerly Executive 919 Third Avenue
Vice President and Jonathan C. Schoolar New York, NY 10022
Chief Financial Officer Vice President
Bell Atlantic Management DISTRIBUTOR
Services, Inc. P. Michelle Grace
Assistant Secretary A I M Distributors, Inc.
Louis S. Sklar 11 Greenway Plaza
Executive Vice President David L. Kite Suite 100
Hines Interests Assistant Secretary Houston, TX 77046
Limited Partnership
Nancy L. Martin
Assistant Secretary
Ofelia M. Mayo
Assistant Secretary
Kathleen J. Pflueger
Assistant Secretary
Samuel D. Sirko
Assistant Secretary
Stephen I. Winer
Assistant Secretary
Mary J. Benson
Assistant Treasurer
</TABLE>
<PAGE> 24
<TABLE>
<S> <C>
THE AIM FAMILY OF FUNDS--Registered Trademark--
AGGRESSIVE GROWTH
AIM Aggressive Growth Fund*
AIM Capital Development Fund
AIM Constellation Fund
AIM Global Aggressive Growth Fund
GROWTH
[PHOTO OF AIM Blue Chip Fund
11 GREENWAY PLAZA AIM Global Growth Fund
APPEARS HERE] AIM Growth Fund
AIM International Equity Fund
AIM Value Fund
AIM Weingarten Fund
GROWTH AND INCOME
AIM Balanced Fund
AIM Charter Fund
INCOME AND GROWTH
AIM Global Utilities Fund
HIGH CURRENT INCOME
AIM High Yield Fund
CURRENT INCOME
AIM Global Income Fund
AIM Income Fund
CURRENT TAX-FREE INCOME
AIM Municipal Bond Fund
AIM Tax-Exempt Bond Fund of CT
AIM Tax-Free Intermediate Shares
CURRENT INCOME AND HIGH DEGREE OF SAFETY
AIM Intermediate Government Fund
HIGH DEGREE OF SAFETY AND CURRENT INCOME
AIM Limited Maturity Treasury Shares
STABILITY, LIQUIDITY, AND CURRENT INCOME
AIM Money Market Fund
STABILITY, LIQUIDITY, AND CURRENT TAX-FREE INCOME
AIM Tax-Exempt Cash Fund
A I M Management Group Inc. has provided leadership in the *AIM Aggressive Growth Fund was closed to new investors on
mutual fund industry since 1976 and manages approximately June 5, 1997. For more complete information about any AIM
$72 billion in assets for more than 3.5 million shareholders, Fund(s), including sales charges and expenses, ask your
including individual investors, corporate clients, and financial financial consultant or securities dealer for a free
institutions as of June 30, 1997. The AIM Family of prospectus(es). Please read the prospectus(es) carefully
Funds--Registered Trademark-- is distributed nationwide, and before you invest or send money.
AIM today ranks among the nation's top 15 mutual fund
companies in assets under management, according to Lipper INVEST WITH DISCIPLINE-SM-
Analytical Services, Inc.
[AIM LOGO APPEARS HERE] -----------------
BULK RATE
A I M Distributors, Inc. U.S. POSTAGE
11 Greenway Plaza, Suite 100 PAID
Houston, TX 77046 HOUSTON, TX
Permit No. 1919
-----------------
</TABLE>
