<PAGE> 1
AIM BALANCED FUND
[AIM LOGO APPEARS HERE] SEMIANNUAL REPORT JUNE 30, 1998
<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.
---------------------------------------------
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 and Class C
share performance reflects the applicable contingent deferred sales charge
(CDSC) for the period involved. The CDSC on Class B shares declines from 5%
beginning at the time of purchase to 0% at the beginning of the seventh
year. The CDSC on Class C shares is 1% for the first year after purchase.
The performance of the Fund's Class B and Class C shares will differ from
that of Class A shares due to differing fees and expenses.
o Because Class C shares have been offered for less than one year (since
8/4/97), all total return figures for Class C shares reflect cumulative
total return that has not been annualized.
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 Dow Jones Industrial Average (DJIA) is a price-weighted average of 30
actively traded primarily industrial stocks.
o Lipper Analytical Services, Inc. is an independent mutual fund performance
monitor.
o An investment cannot be made in any index listed. Unless otherwise
indicated, index results include reinvested dividends and do not reflect
sales charges.
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:
When we last reported to you, for the fiscal year ended
[PHOTO OF December 31, 1997, equity markets worldwide were still shaken
Charles T. by the financial crisis in Asia. By June 30, 1998, the end of
Bauer, this six-month reporting period, most markets had recovered
Chairman of nicely, with domestic equities producing generous returns and
the Board of European markets outpacing the U.S. Only Asian markets
THE FUND remained in the doldrums. High-quality bonds have turned in a
APPEARS HERE] solid performance with generous real returns.
Good economic news has been arriving almost daily.
Inflation and joblessness in the U.S. have been at their
lowest levels in decades, consumer confidence at its highest.
The economic fundamentals in the U.S. appear sound, and we at
AIM remain cautiously optimistic that the current economic
expansion may continue for the foreseeable future although
market valuations are high compared to historical standards.
By the close of this reporting period, markets had become
less ebullient. Equities had declined slightly from the heights reached earlier
in the period. Many participants in the U.S. equity markets voiced concern about
prices that continued rising despite slowing earnings growth, especially for
larger companies. The performance of European markets had exceeded everyone's
expectations. Asia's economic woes, especially the continuing recession in
Japan, which markets had shrugged off for a while, seemed more troublesome as
the reporting period closed.
In the face of such uncertainty, the best course for investors is to remain
realistic. We are now in the fourth year of unprecedented market advances. Even
accounting for the steep drop in equities in early August, after the close of
this reporting period, equities still have the potential to produce returns
above 30% again for the full year. We have never experienced this before, and it
may have fostered unrealistic expectations among investors, who would do well to
remember that the long-term average return for equities is closer to 10% per
year.
A well-diversified portfolio is still one of the most effective tools for
coping with market shifts because different asset classes and different national
markets tend to move independently of one another. Your financial consultant
remains your best source of information about how to allocate your investments
based on your goals and situation. AIM Further Diversifies Its Offerings Shortly
before the close of the reporting period, AIM broadened its offerings to
shareholders through the addition of the GT Global group of mutual funds. During
the next few months you will be receiving more details about this transaction
and the products it adds to The AIM Family of Funds(R).
This transaction gives you, our shareholders, access to a greater variety of
investment choices. A complete list of the funds now included in The AIM Family
of Funds(R) appears on the back cover of this report. We encourage you to
discuss with your financial consultant how these funds may fit into your
portfolio.
The transaction also helps strengthen AIM's position as a major participant
in the money-management industry worldwide. Such strength will enable us to
continue enlarging both the scope of our fund offerings and our menu of services
for our shareholders. AIM continuously reviews its products and services with a
view to enhancing our ability to help shareholders meet their investment goals.
Your Fund Managers Comment On the pages that follow, the managers of your AIM
Fund discuss how the Fund performed during the six months covered by this report
and give their near-term market outlook. We hope you will find their discussion
informative.
We are pleased to send you this report on your Fund. If you have any
questions or comments, please contact our Client Services department at
800-959-4246 or visit our Web site at www.aimfunds.com. You can access
information about your account on our Web site and also on our automated AIM
Investor Line, 800-246-5463.
Thank you for your continued participation in The AIM Family of Funds(R).
Sincerely,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
-------------------------------------
A well-diversified portfolio
is still one of the most
effective tools for coping with
market shifts because
different asset classes and
different national markets tend
to move independently
of one another.
-------------------------------------
<PAGE> 4
ANOTHER SOLID PERFORMANCE FROM AIM
BALANCED FUND
A roundtable discussion with the Fund management team for AIM Balanced Fund for
the six months ended June 30, 1998.
- --------------------------------------------------------------------------------
Q. HOW DID THE FUND PERFORM DURING THE SIX MONTHS ENDED JUNE 30?
A. The Fund maintained consistently competitive performance. Total return,
including quarterly income distributions, was 8.84% for Class A shares,
8.45% for Class B shares, and 8.44% for Class C shares.
The Fund's long-term consistency has earned it high rankings compared to
its peers, as shown in the table below.
Assets under management continued
================================================================================
LIPPER RANKINGS
- --------------------------------------------------------------------------------
As of 6/30/98
CLASS A SHARES
FUNDS IN
AIM FUND BALANCED
PERIOD RANK CATEGORY TOP %
10 Years 2 51 4%
5 Years 7 131 6%
3 Years 5 256 2%
1 Year 58 373 16%
CLASS B SHARES (Inception 10/18/93)
3 Year 13 256 6%
1 Years 84 373 23%
Fund percentage rankings are vs. all balanced mutual funds tracked by Lipper,
excluding sales charges and including fees and expenses. Class C shares
commenced sales on August 4, 1997.
================================================================================
================================================================================
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
As of 6/30/98, Including Maximum Applicable Sales Charge
CLASS A SHARES
1 Year 15.90%
5 Years 15.88
10 Years 14.49
CLASS B SHARES
1 Year 15.80%
Inception (10/18/93) 14.69
CLASS C SHARES
Inception (8/4/97) 12.51%*
*Total return provided is cumulative total return that has not been annualized.
================================================================================
to grow during the reporting period, from $1.2 billion to $1.8 billion.
Q. WHAT EXPLAINS THE CONSISTENCY OF THE FUND'S PERFORMANCE?
A. We stick to our strategy, keeping the mix of holdings to roughly 60%
equities/40% fixed-income securities. As we have explained in previous
reports, over time this 60/40 split tends to produce the optimum risk/return
tradeoff for investors. In the extended bull market of the 1990s, it could
be tempting to put more assets into the stock market--especially the blue
chips that have risen dramatically the past few years--but we are committed
to managing the Fund according to the strategy we have articulated.
We also broadly diversify our equity and fixed-income holdings, making
no big bets on one or a few holdings. As of June 30, for example, our
largest equity holding represented just 0.57% of net assets, and the
portfolio held 310 equity securities.
Q. WERE MARKETS BULLISH DURING THIS REPORTING PERIOD?
A. Though there were some uncertain moments, on balance it was a good period
for investors. Early in the reporting period, market participants were
pessimistic about the worldwide impact of Asia's currency and market crises.
This dampened stock performance and increased volatility. The widely
followed Dow Jones Industrial Average dropped 222 points (2.8%) on
January 9.
But as the new year unfolded, the markets shrugged off these
difficulties for a while, and the Dow proceeded to new highs.
Toward the end of the period, a more cautious climate prevailed as it
became obvious that economies in Asia were not going to recover quickly and
that the slowdown in Japan, that region's major economy, could be prolonged.
Markets worldwide became more volatile and uncertain.
Q. HOW DID THESE SENTIMENT SHIFTS AFFECT THE FUND?
A. Though markets broadened somewhat when concern about the so-called "Asian
flu" first declined, overall for the six months covered by this report,
markets continued to favor well-known, widely traded stocks--a phenomenon
known as "flight to quality." Performance of some of the smaller stocks in
the portfolio lagged, but we are confident in the growth potential and the
valuations of the smaller stocks the Fund owns.
A flight to quality also is good for the Fund's fixed-income securities.
A significant portion of these are U.S. Treasury and agency securities,
traditional havens of stability when markets are uncertain. As investors
flocked into high-quality bonds, pushing their prices higher, yields on
long-term U.S. Treasuries fell to historic lows.
Q. HOW DID YOU MANAGE THE FIXED-INCOME PORTION OF THE PORTFOLIO?
A. We want the fixed-income side to provide relative stability and a steady
income stream, and it has consistently done that. As of June 30, the average
quality rating of the Fund's fixed-income holdings was "A." We keep to an
intermediate maturity structure--a duration range of five to seven and
one-half years. That means our fixed-income holdings don't swing too widely
in value as the market moves up and down. And as on the equity side, we
broadly diversify our holdings, making no big bets: there were
<PAGE> 5
176 fixed-income securities in the portfolio at the close of the reporting
period.
Q. WERE THERE ANY MAJOR CHANGES IN YOUR EQUITY HOLDINGS?
A. A newcomer to our top 10 industry list is the long-distance
telecommunications industry, including a holding new during the reporting
period, WorldCom, Inc. In an industry undergoing a wave of mergers and
acquisitions, WorldCom is involved in one of the largest on the table, its
proposed acquisition of MCI Communications, Inc.
Technical changes and the growth of new services, especially wireless
services, characterize the entire communications sector. We added small
positions in three cellular/wireless service providers during the reporting
period.
PORTFOLIO COMPOSITION
As of 6/30/98, based on total net assets
<TABLE>
<CAPTION>
===================================================================================================
TOP TEN EQUITY HOLDINGS TOP TEN FIXED-INCOME HOLDINGS
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Qwest Communications International Inc. 0.57% 1. U.S. Treasury Securities 7.24%
2. Sunrise Assisted Living, Inc. 0.49 2. U.S. Government Agency 1.63
3. WinStar Communications, Inc. 0.48 3. Enron Corp. 0.50
4. Warner-Lambert Co. 0.48 4. Time Warner, Inc. 0.49
5. SLM Holding Corp. 0.42 5. SBC Communications, Inc. 0.46
6. Ethan Allen Interiors, Inc. 0.41 6. US Bancorp 0.46
7. WorldCom, Inc. 0.41 7. Tosco Corp. 0.44
8. Dell Computer Corp. 0.41 8. Candescent Technology Corp. 0.44
9. Outdoor Systems, Inc. 0.40 9. Mercantile Bancorp Inc. 0.44
10. Washington Mutual, Inc. 0.39 10. Florida Windstorm-MBIA 0.43
Other
2.79%
-----------------------
Convertible NUMBER OF HOLDINGS: 486
Bonds -----------------------
3.74%
Convertible
Preferred Stocks
5.34%
Government
Bonds & Notes
8.87%
Corporate
Bonds & Notes
28.76%
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.
===================================================================================================
</TABLE>
Since our last report, we have significantly reduced our energy-sector
holdings, especially in oil and gas exploration and production. The price of
crude oil has fallen about 30 percent in the past year, pressured by a
combination of economic slowdown in Asia and a glut of crude on world
markets.
Q. WHAT ASPECTS OF THE PORTFOLIO REMAINED THE SAME?
A. At approximately 25% of net assets, financial companies again represented
the largest sector weighting in the portfolio.
With financial markets buoyant, interest rates stable, and the trend
toward globalization and consolidation unabated, financial stocks have been
performing very well, often at reasonable valuations.
Emblematic of that theme is the announced merger of insurance giant
Travelers Group, Inc. and money-center bank Citicorp--two stocks in the
Fund's portfolio. This largest proposed corporate merger to date aims to
meld two financial-services leaders that reported solid earnings for the
first quarter of 1998. A major impetus behind this and other mergers of
financial companies is the effort to expand the client base with a variety
of products and to cut costs simultaneously.
Q. WHAT IS YOUR MARKET OUTLOOK?
A. Domestically, inflation seems likely to remain contained as global
competition and lower energy costs offset the inflationary potential of
tight labor markets. The Federal Reserve Board has left rates unchanged for
more than a year, and the flat yield curve, in which yields on 30-year
Treasuries are only slightly higher than yields on much shorter-term issues,
means investors do not anticipate a surge in inflation. This is an
excellent environment for fixed-income securities.
In equities, earnings growth has slowed, but earnings disappointments
have tended to be company specific and not widespread. The worst storm
clouds looming at the end of the reporting period were in Asia, especially
the seemingly intractable economic slump in Japan. Concern was increasing
about the contraction of Asian economies becoming a significant drag on
economic activity worldwide. Markets lost much of their upward momentum
late in the reporting period.
Q. AND WHAT DO YOU FORESEE FOR THE FUND?
A. We intend to stick to our knitting: the 60/40 split between equities and
fixed-income securities. As usual, the emphasis on the equity side will be
on growth, and on the fixed-income side, it will be on steady income with
lower volatility. We also will continue to take advantage of our ability to
move about among the market capitalization sectors as corporate earnings and
stock valuations warrant.
3
<PAGE> 6
For Consideration
AIM PREPARES FOR THE YEAR 2000
THE YEAR 2000. THE WORDS STIR THE IMAGINATION, MAKING US WONDER WHAT THE NEXT
MILLENNIUM WILL BRING. BUT THE WORDS ARE ALSO STARTING TO MAKE SOME PEOPLE
WORRY, SINCE THERE'S BEEN SO MUCH TALK LATELY ABOUT A COMPUTER GLITCH CALLED
"THE YEAR 2000 PROBLEM." BECAUSE THIS IS A PROBLEM THAT COULD AFFECT MOST
AMERICAN INDUSTRIES, INCLUDING THE MUTUAL FUND INDUSTRY, WE WANT TO BRING YOU
THIS UPDATE TO LET YOU KNOW HOW AIM IS GETTING READY.
THE YEAR 2000 PROBLEM
It has to do with the way that computers understand dates. Most computers were
programmed to recognize only the last two digits of a four-digit date ("98" for
1998). When the year 2000 hits, the computer will read "00"-- but it may
interpret that as the year 1900. So, if the computer makes a calculation
involving a date of January 1, 2000, or later, it could be processed
incorrectly. Date-sensitive calculations are found in all kinds of places-- from
elevators to air traffic control systems-- but they are especially prevalent in
the financial services industry.
AIM'S YEAR 2000 COMPLIANCE
AIM's technology team has been addressing Year 2000 issues for some time now.
Our internal team, together with an independent technology consultant, are
implementing a comprehensive Year 2000 Compliance Project for AIM Management
Group Inc. and its subsidiaries.
So far, we've inventoried all software applications that we rely on, and
we've identified the applications that might need adjustments to function
properly when the Year 2000 arrives. We are now in the final phase of the
project, making corrections and testing applications that need adjustment. We
plan to complete this phase during the fourth quarter of 1998.
AN INDUSTRY-WIDE TEST
In the spring of 1999, AIM will be participating in industry-wide testing that
will simulate the arrival of the Year 2000. this will allow mutual fund
companies, banks, exchanges, and other players in the financial community to
test various kinds of transactions and to determine if any further adjustments
need to be made before the end of the year.
We believe our plans are quite comprehensive, and we're committed to
monitoring all software applications through the critical period, extending as
far as needed into the 21st century.
<PAGE> 7
SCHEDULE OF INVESTMENTS
June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
DOMESTIC BONDS & NOTES-25.73%
AIRLINES-1.57%
Airplanes Pass Through Trust,
Sub. Bonds, 10.875%, 03/15/19 $ 500,000 $ 551,565
- ---------------------------------------------------------------
America West Airlines, Inc., Pass
Through Ctfs., 6.86%, 07/02/04 5,989,758 5,957,832
- ---------------------------------------------------------------
American Airlines, Equipment
Trust, 9.90%, 01/15/11 2,955,000 3,796,170
- ---------------------------------------------------------------
Delta Air Lines, Inc., Deb.,
9.00%, 05/15/16 5,000,000 6,133,000
- ---------------------------------------------------------------
Medium Term Notes, 8.52%,
01/30/04 2,000,000 2,190,500
- ---------------------------------------------------------------
Northwest Airlines Corp., Pass
Through Ctfs., 7.248%, 07/02/14 4,958,039 5,007,619
- ---------------------------------------------------------------
United Air Lines, Inc., Pass
Through Ctfs., 9.56%, 10/19/18 3,750,000 4,740,338
- ---------------------------------------------------------------
28,377,024
- ---------------------------------------------------------------
AUTOMOBILES-0.30%
General Motors Corp., Deb.,
8.80%, 03/01/21 400,000 503,008
- ---------------------------------------------------------------
Rocs Series CHR-1998-I,
Collateral Trust, 6.50%,
08/01/18(a)
(Acquired 05/19/98; Cost
$4,949,750) 5,000,000 4,970,350
- ---------------------------------------------------------------
5,473,358
- ---------------------------------------------------------------
BANKS (MAJOR REGIONAL)-0.04%
Wachovia Corp., Sub. Notes,
6.375%, 02/01/09 800,000 807,240
- ---------------------------------------------------------------
BANKS (MONEY CENTER)-1.14%
Bankers Trust New York Corp.,
Gtd. Notes, 7.875%, 02/25/27 3,000,000 3,166,530
- ---------------------------------------------------------------
Sub. Notes, 7.50%, 11/15/15 3,000,000 3,229,770
- ---------------------------------------------------------------
Chase Manhattan Corp., Unsec.
Sub. Notes, 6.375%, 04/01/08 4,400,000 4,418,172
- ---------------------------------------------------------------
Commercial Credit Co., Notes,
6.625%, 06/01/15 2,000,000 2,049,040
- ---------------------------------------------------------------
Deutsche Bank Financial, Gtd.
Unsec. Sub. Deb., 6.70%,
12/13/06 3,500,000 3,587,430
- ---------------------------------------------------------------
First Union Bancorp, Sub. Deb.,
7.50%, 04/15/35 3,000,000 3,473,250
- ---------------------------------------------------------------
First Union Corp., Sub. Notes,
6.375%, 01/15/09 800,000 802,864
- ---------------------------------------------------------------
20,727,056
- ---------------------------------------------------------------
BANKS (REGIONAL)-2.05%
HSBC Americas Inc., Sub. Notes,
7.00%, 11/01/06 5,000,000 5,183,250
- ---------------------------------------------------------------
Marshall & Ilsley -- Series D,
Medium Term Notes, 6.43%,
10/15/02 4,000,000 4,077,080
- ---------------------------------------------------------------
Mercantile Bancorp Inc.,
Sub. Notes, 6.375%, 01/15/04 700,000 706,034
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
BANKS (REGIONAL)--(CONTINUED)
Unsec. Sub. Notes, 7.30%,
06/15/07 $ 7,500,000 $ 7,983,450
- ---------------------------------------------------------------
Signet Banking Corp., Sub. Notes,
7.80%, 09/15/06 5,000,000 5,516,450
- ---------------------------------------------------------------
Swiss Bank Corp.-NY, Sub. Deb.,
7.375%, 07/15/15 5,000,000 5,454,950
- ---------------------------------------------------------------
US Bancorp, Sub. Deb., 7.50%,
06/01/26 7,500,000 8,392,800
- ---------------------------------------------------------------
37,314,014
- ---------------------------------------------------------------
BEVERAGES (NON-ALCOHOLIC)-0.20%
Coca-Cola Enterprises, Inc.,
Putable Notes, 8.35%,
06/20/20(b) 15,000,000 3,636,450
- ---------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE)-0.59%
Comcast Cable Communications,
Notes, 8.50%, 05/01/27 3,400,000 4,127,736
- ---------------------------------------------------------------
CSC Holdings, Inc., Sr. Notes,
7.875%, 12/15/07 4,200,000 4,452,000
- ---------------------------------------------------------------
TCI Communications Inc., Sr.
Notes, 8.00%, 08/01/05 2,000,000 2,189,740
- ---------------------------------------------------------------
10,769,476
- ---------------------------------------------------------------
CHEMICALS-0.60%
Solutia Inc., Bonds, 6.72%,
10/15/37 4,150,000 4,239,100
- ---------------------------------------------------------------
Union Carbide Corp., Deb., 6.79%,
06/01/25 6,500,000 6,666,400
- ---------------------------------------------------------------
10,905,500
- ---------------------------------------------------------------
CHEMICALS (SPECIALTY)-0.28%
Millennium America Inc., Co.
Guaranty Notes, 7.00%, 11/15/06 5,000,000 5,061,600
- ---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-0.22%
Comverse Technology Inc., Conv.
Sub. Notes, 4.50%, 07/01/05(a)
(Acquired 06/25/98; Cost
$4,000,000) 4,000,000 4,075,000
- ---------------------------------------------------------------
COMPUTERS (HARDWARE)-0.44%
Candescent Technology Corp.,
Conv. Sr. Sub. Deb., 7.00%,
05/01/03(a) (Acquired 04/17/98;
Cost $8,000,000) 8,000,000 8,000,000
- ---------------------------------------------------------------
CONSUMER FINANCE-0.94%
Bell Atlantic Financial Services,
Conv. Bonds, 5.75%, 04/01/03(a)
(Acquired 02/12/98; Cost
$1,700,000) 1,700,000 1,741,446
- ---------------------------------------------------------------
Commercial Credit Co., Putable
Notes, 7.875%, 02/01/25 4,000,000 4,786,920
- ---------------------------------------------------------------
Countrywide Funding Corp., Sub.
Notes, 8.25%, 07/15/02 500,000 535,425
- ---------------------------------------------------------------
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
CONSUMER FINANCE-(CONTINUED)
Ford Motor Credit,
Notes, 6.125%, 01/09/06 $ 1,500,000 $ 1,494,105
- ---------------------------------------------------------------
Notes, 6.75%, 08/15/08 800,000 828,536
- ---------------------------------------------------------------
GMAC, Notes, 9.00%, 10/15/02 4,175,000 4,632,497
- ---------------------------------------------------------------
Household Finance Corp., Notes,
7.125%, 09/01/05 3,000,000 3,129,270
- ---------------------------------------------------------------
17,148,199
- ---------------------------------------------------------------
ELECTRIC COMPANIES-2.71%
Arizona Public Service Co.,
Notes, 6.25%, 01/15/05 5,000,000 4,971,600
- ---------------------------------------------------------------
CMS Energy Corp., Sr. Unsec.
Notes, 7.375%, 11/15/00 3,500,000 3,538,885
- ---------------------------------------------------------------
Commonwealth Edison Co., First
Mortgage Notes, 7.50%, 07/01/13 5,300,000 5,843,250
- ---------------------------------------------------------------
El Paso Electric Co.,
Series D Sec. First Mortgage
Bonds, 8.90%, 02/01/06 4,750,000 5,357,668
- ---------------------------------------------------------------
Series E Sec. First Mortgage
Bonds, 9.40%, 05/01/11 4,000,000 4,625,080
- ---------------------------------------------------------------
Niagara Mohawk Power Corp.,
First Mortgage Notes, 9.25%,
10/01/01 3,630,000 3,933,976
- ---------------------------------------------------------------
First Mortgage Notes, 6.625%,
07/01/05 7,200,000 7,244,064
- ---------------------------------------------------------------
Sr. Unsec. Notes, 7.75%,
10/01/08 4,300,000 4,434,504
- ---------------------------------------------------------------
UtiliCorp United, Inc., Sr.
Notes, 6.70%, 10/15/06 3,000,000 3,074,070
- ---------------------------------------------------------------
Western Resources Inc., Sr.
Notes, 7.125%, 08/01/09 6,000,000 6,275,400
- ---------------------------------------------------------------
49,298,497
- ---------------------------------------------------------------
ELECTRONICS (DEFENSE)-0.06%
Raytheon Co., Deb., 7.20%,
08/15/27 1,000,000 1,072,460
- ---------------------------------------------------------------
ELECTRONICS
(SEMICONDUCTORS)-0.25%
Amkor Technology, Inc., Conv.
Sub. Notes, 5.75%, 05/01/03 5,000,000 4,642,000
- ---------------------------------------------------------------
ENGINEERING & CONSTRUCTION-0.16%
EMCOR Group, Inc., Unsec. Conv.
Sub. Notes, 5.75%, 04/01/05 3,000,000 2,865,000
- ---------------------------------------------------------------
ENTERTAINMENT-0.98%
Time Warner, Inc.,
Deb., 9.125%, 01/15/13 7,245,000 8,940,040
- ---------------------------------------------------------------
Notes, 8.18%, 08/15/07 2,075,000 2,312,068
- ---------------------------------------------------------------
Unsec. Deb., 6.85%, 01/15/26 2,500,000 2,548,525
- ---------------------------------------------------------------
Viacom, Inc., Sr. Notes, 7.75%,
06/01/05 3,750,000 4,004,213
- ---------------------------------------------------------------
17,804,846
- ---------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-0.85%
Associates Corp. of North
America, Series B Sr. Deb.,
7.95%, 02/15/10 5,900,000 6,630,243
- ---------------------------------------------------------------
BellSouth Capital Funding, Deb.,
6.04%, 11/15/26 4,000,000 4,125,240
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
FINANCIAL (DIVERSIFIED)-(CONTINUED)
Chrysler Financial Corp., Deb.,
8.50%, 02/01/18 $ 150,000 $ 155,850
- ---------------------------------------------------------------
Finova Capital Corp., Unsec.
Notes, 7.40%, 05/06/06 3,750,000 4,013,063
- ---------------------------------------------------------------
General Electric Capital Corp.,
Deb., 8.30%, 09/20/09 500,000 588,410
- ---------------------------------------------------------------
15,512,806
- ---------------------------------------------------------------
FOODS-0.65%
ConAgra Inc., Sr. Unsec. Notes,
7.125%, 10/01/26 7,000,000 7,479,010
- ---------------------------------------------------------------
Grand Metro Investment, Gtd.
Bonds, 7.45%, 04/15/35 4,000,000 4,426,560
- ---------------------------------------------------------------
11,905,570
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC & OTHER)-0.28%
Atrix Labs Inc., Conv. Sub.
Notes, 7.00%, 12/01/04(a)
(Acquired 11/21/97-03/03/98;
Cost $3,055,000) 3,000,000 2,925,000
- ---------------------------------------------------------------
Nexstar Pharmaceuticals, Conv.
Sub. Deb., 6.25%, 08/01/04(a)
(Acquired 07/28/97; Cost
$2,500,000) 2,500,000 2,139,675
- ---------------------------------------------------------------
5,064,675
- ---------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT)-0.21%
Tenet Healthcare Corp., Sr.
Notes, 8.00%, 01/15/05 3,750,000 3,861,638
- ---------------------------------------------------------------
HEALTH CARE (MANAGED CARE)-0.31%
Alternative Living Services,
Conv. Sub. Deb., 5.25%,
12/15/02 5,000,000 5,593,750
- ---------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES)-0.11%
Boston Scientific, Unsec. Notes,
6.625%, 03/15/05 2,000,000 2,025,520
- ---------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES)-0.39%
Omnicare, Inc., Conv. Sub. Deb.,
5.00%, 12/01/07(a)
(Acquired 12/04/97; Cost
$3,500,000) 3,500,000 4,090,625
- ---------------------------------------------------------------
Res-Care Inc., Conv. Sub. Notes,
6.00%, 12/01/04(a)
(Acquired 11/18/97; Cost
$1,500,000) 1,500,000 1,728,750
- ---------------------------------------------------------------
Sabratek Corp., Conv. Unsec.
Notes, 6.00%, 04/15/05(a)
(Acquired 04/08/98; Cost
$1,500,000) 1,500,000 1,295,625
- ---------------------------------------------------------------
7,115,000
- ---------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-0.24%
Torchmark Corp., Notes, 7.875%,
05/15/23 4,000,000 4,358,280
- ---------------------------------------------------------------
INSURANCE (MULTI-LINE)-0.27%
Travelers Group, Inc., Deb.,
6.625%, 01/15/28 5,000,000 5,017,750
- ---------------------------------------------------------------
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
INSURANCE
(PROPERTY-CASUALTY)-0.74%
Florida Windstorm, Sr. Notes,
6.85%, 08/25/07(a)
(Acquired 09/05/97; Cost
$7,498,875) $ 7,500,000 $ 7,827,375
- ---------------------------------------------------------------
USF&G Corp., Gtd. Bonds, 8.47%,
01/10/27 5,000,000 5,728,850
- ---------------------------------------------------------------
13,556,225
- ---------------------------------------------------------------
INVESTMENT MANAGEMENT-0.18%
JPM Capital Trust II, Bonds,
7.95%, 02/01/27 3,000,000 3,260,340
- ---------------------------------------------------------------
LODGING-HOTELS-0.31%
Hilton Hotels Corp., Notes,
7.20%, 12/15/09 5,000,000 4,870,250
- ---------------------------------------------------------------
ITT Corp., Unsec. Gtd. Deb.,
7.375%, 11/15/15 750,000 707,670
- ---------------------------------------------------------------
5,577,920
- ---------------------------------------------------------------
NATURAL GAS-0.65%
Enron Corp.,
Notes, 6.75%, 08/01/09 8,900,000 9,147,420
- ---------------------------------------------------------------
Sr. Sub. Deb., 6.75%, 07/01/05 800,000 814,776
- ---------------------------------------------------------------
Ferrellgas Partners, Series B Sr.
Sec. Gtd. Notes, 9.375%,
06/15/06 1,000,000 1,035,000
- ---------------------------------------------------------------
PanEnergy Corp., Notes, 7.875%,
08/15/04 750,000 814,605
- ---------------------------------------------------------------
11,811,801
- ---------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT)-0.36%
Pride International, Inc., Unsec.
Sub. Deb., 6.25%, 02/15/06 2,000,000 2,895,520
- ---------------------------------------------------------------
R&B Falcon Corp., Sr. Notes,
7.375%, 04/15/18(a)
(Acquired 06/04/98; Cost
$3,544,415) 3,500,000 3,629,080
- ---------------------------------------------------------------
6,524,600
- ---------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION)-0.66%
Louis Dreyfus National Gas,
Notes, 6.875%, 12/01/07 5,000,000 5,040,550
- ---------------------------------------------------------------
Tennessee Gas Pipeline Co.,
Bonds, 7.00%, 03/15/27 4,000,000 4,270,840
- ---------------------------------------------------------------
Union Pacific Resources Group
Inc., Deb., 7.50%, 10/15/26 2,500,000 2,687,375
- ---------------------------------------------------------------
11,998,765
- ---------------------------------------------------------------
OIL & GAS (REFINING & MARKETING)-0.60%
Quaker State Corp., Notes,
6.625%, 10/15/05 2,840,000 2,883,026
- ---------------------------------------------------------------
Tosco Corp., Deb., 7.80%,
01/01/27 7,250,000 8,025,895
- ---------------------------------------------------------------
10,908,921
- ---------------------------------------------------------------
PERSONAL CARE-0.22%
Alberto-Culver Corp., Notes,
6.375%, 06/15/28 4,000,000 4,009,080
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
POWER PRODUCERS
(INDEPENDENT)-0.52%
AES Corp.,
Sr. Sub. Notes, 10.25%,
07/15/06 $ 1,000,000 $ 1,090,000
- ---------------------------------------------------------------
Sr. Sub. Notes, 8.375%,
08/15/07 3,000,000 3,045,000
- ---------------------------------------------------------------
Indiana Michigan Power, Sec.
Lease Obligation Bonds, 9.82%,
12/07/22 1,357,467 1,791,177
- ---------------------------------------------------------------
Kincaid Generation LLC, Sec.
Bonds, 7.33%, 06/15/20(a)
(Acquired 04/30/98; Cost
$3,508,645) 3,500,000 3,554,688
- ---------------------------------------------------------------
9,480,865
- ---------------------------------------------------------------
PUBLISHING (NEWSPAPERS)-0.64%
News America Holdings, Inc.,
Sr. Gtd. Deb., 9.25%, 02/01/13 4,900,000 6,009,850
- ---------------------------------------------------------------
Sr. Gtd. Putable Bonds, 7.43%,
10/01/26 5,450,000 5,728,168
- ---------------------------------------------------------------
11,738,018
- ---------------------------------------------------------------
RAILROADS-0.35%
Norfolk Southern Corp., Putable
Bonds, 7.05%, 05/01/37 3,000,000 3,234,210
- ---------------------------------------------------------------
Union Pacific Corp., Notes,
7.25%, 11/01/08 3,000,000 3,176,280
- ---------------------------------------------------------------
6,410,490
- ---------------------------------------------------------------
REAL ESTATE INVESTMENT
TRUSTS-0.42%
Health Care Reit, Inc., Sr.
Unsec. Notes, 7.625%, 03/15/08 2,300,000 2,318,285
- ---------------------------------------------------------------
Spieker Properties LP, Unsec.
Deb., 7.35%, 12/01/17 5,250,000 5,422,200
- ---------------------------------------------------------------
7,740,485
- ---------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS)-0.23%
Ingram Micro Inc., Conv. Deb.,
5.375%, 06/09/18(a)(b)
(Acquired 06/04/98; Cost
$3,981,070) 11,500,000 4,183,125
- ---------------------------------------------------------------
RETAIL (DEPARTMENT STORES)-0.11%
J.C. Penney Co., Inc., Notes,
6.50%, 06/15/02 2,015,000 2,048,852
- ---------------------------------------------------------------
SAVINGS & LOAN COMPANIES-0.31%
Sovereign Bancorp, Inc., Sub.
Notes, 8.00%, 03/15/03 5,330,000 5,593,622
- ---------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-0.50%
Atria Communities Inc., Conv.
Sub. Notes, 5.00%, 10/15/02(a)
(Acquired 10/10/97-03/30/98;
Cost $4,657,500) 4,500,000 4,415,625
- ---------------------------------------------------------------
Choice Hotels International,
Inc., Notes, 7.125%,
05/01/08(a)
(Acquired 04/28/98; Cost
$1,987,080) 2,000,000 2,031,180
- ---------------------------------------------------------------
Equity Corp. International, Conv.
Sub. Deb., 4.50%, 12/31/04(a)
(Acquired 02/19/98-02/20/98;
Cost $2,501,250) 2,500,000 2,742,975
- ---------------------------------------------------------------
9,189,780
- ---------------------------------------------------------------
</TABLE>
7
<PAGE> 10
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
SERVICES (DATA PROCESSING)-0.44%
Affiliated Computer Services,
Conv. Sub. Notes, 4.00%,
03/15/05(a)
(Acquired 03/17/98; Cost
$3,507,000) $ 3,500,000 $ 3,882,830
- ---------------------------------------------------------------
May & Speh, Inc., Sub. Notes,
5.25%, 04/01/03 3,000,000 4,217,490
- ---------------------------------------------------------------
8,100,320
- ---------------------------------------------------------------
SERVICES (EMPLOYMENT)-0.31%
Data Processing Resource, Unsec.
Sub. Notes, 5.25%, 04/01/05(a)
(Acquired 03/19/98; Cost
$2,000,000) 2,000,000 2,162,500
- ---------------------------------------------------------------
Personnel Group of America, Inc.,
Conv. Sub. Notes, 5.75%,
07/01/04(a)
(Acquired 06/17/97; Cost
$2,750,000) 2,750,000 3,458,125
- ---------------------------------------------------------------
5,620,625
- ---------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-0.37%
360 Communications Co.,
Sr. Notes, 7.60%, 04/01/09 4,250,000 4,603,855
- ---------------------------------------------------------------
Sr. Unsec. Notes, 7.50%,
03/01/06 2,000,000 2,138,560
- ---------------------------------------------------------------
6,742,415
- ---------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-0.84%
Global Telesystems Group, Sr.
Conv. Sub. Notes, 8.75%,
06/30/00 2,050,000 5,066,061
- ---------------------------------------------------------------
MCI Communications Corp.,
Sr. Unsec. Notes 6.50%,
04/15/10 5,000,000 5,023,350
- ---------------------------------------------------------------
Putable Deb., 7.125%, 06/15/27 5,000,000 5,289,500
- ---------------------------------------------------------------
15,378,911
- ---------------------------------------------------------------
TELEPHONE-0.73%
GTE Florida, Inc., Deb., 6.86%,
02/01/28 4,750,000 4,876,303
- ---------------------------------------------------------------
SBC Communications, Inc., Deb.,
7.375%, 07/15/43 7,930,000 8,400,883
- ---------------------------------------------------------------
13,277,186
- ---------------------------------------------------------------
WASTE MANAGEMENT-0.40%
Thermo Instrument System, Conv.
Sub. Unsec. Notes, 4.00%,
01/15/05 3,000,000 2,983,140
- ---------------------------------------------------------------
WMX Technologies, Inc., Unsec.
Notes, 7.10%, 08/01/26 4,200,000 4,339,230
- ---------------------------------------------------------------
7,322,370
- ---------------------------------------------------------------
Total Domestic Bonds & Notes
(Cost $449,506,579) 468,907,425
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
AMOUNT VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS-47.65%
AEROSPACE/DEFENSE-0.23%
Hawk Corp.(c) 72,800 1,283,100
- ---------------------------------------------------------------
TriStar Aerospace Co.(c) 184,300 2,856,650
- ---------------------------------------------------------------
4,139,750
- ---------------------------------------------------------------
AIR FREIGHT-0.25%
Airborne Freight Corporation 130,000 4,541,875
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
AUTOMOBILES-0.31%
Chrysler Corp. 100,000 $ 5,637,500
- ---------------------------------------------------------------
BANKS (MONEY CENTER)-1.16%
BankAmerica Corp. 30,000 2,593,125
- ---------------------------------------------------------------
Chase Manhattan Corp. (The) 90,000 6,795,000
- ---------------------------------------------------------------
Citicorp 30,000 4,477,500
- ---------------------------------------------------------------
First Union Corp. 53,830 3,135,598
- ---------------------------------------------------------------
NationsBank Corp. 55,000 4,207,500
- ---------------------------------------------------------------
21,208,723
- ---------------------------------------------------------------
BANKS (REGIONAL)-0.99%
Bank United Corp.-Class A 90,000 4,308,750
- ---------------------------------------------------------------
Citizens National Bank of Texas 137,500 2,079,688
- ---------------------------------------------------------------
Colorado Business Bankshares,
Inc.(c) 150,000 2,400,000
- ---------------------------------------------------------------
Republic Banking Corp. of Florida 27,600 441,600
- ---------------------------------------------------------------
Southwest Bancorp. of Texas,
Inc.(c) 265,600 4,996,600
- ---------------------------------------------------------------
TCF Financial Corp. 130,000 3,835,000
- ---------------------------------------------------------------
18,061,638
- ---------------------------------------------------------------
BEVERAGES (NON-ALCOHOLIC)-0.13%
PepsiCo, Inc. 56,000 2,306,500
- ---------------------------------------------------------------
BIOTECHNOLOGY-0.52%
Biogen, Inc.(c) 75,000 3,675,000
- ---------------------------------------------------------------
Genzyme Corp.(c) 225,000 5,751,563
- ---------------------------------------------------------------
9,426,563
- ---------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE)-1.14%
Capstar Broadcasting Corp.-Class
A(c) 178,300 4,479,788
- ---------------------------------------------------------------
CBS Corp.(c) 175,000 5,556,250
- ---------------------------------------------------------------
Heftel Broadcasting Corp.(c) 90,000 4,027,500
- ---------------------------------------------------------------
Univision Communications Inc.(c) 180,000 6,705,000
- ---------------------------------------------------------------
20,768,538
- ---------------------------------------------------------------
BUILDING MATERIALS-0.25%
Group Maintenance America
Corp.(c) 200,000 3,600,000
- ---------------------------------------------------------------
Pentacon, Inc.(c) 84,500 1,003,438
- ---------------------------------------------------------------
4,603,438
- ---------------------------------------------------------------
CHEMICALS-0.16%
IMC Global, Inc. 95,000 2,861,875
- ---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-1.96%
ADC Telecommunications, Inc.(c) 140,000 5,114,375
- ---------------------------------------------------------------
Brightpoint, Inc.(c) 220,000 3,190,000
- ---------------------------------------------------------------
Comverse Technology, Inc.(c) 60,000 3,112,500
- ---------------------------------------------------------------
Corsair Communications, Inc.(c) 26,800 249,575
- ---------------------------------------------------------------
Lucent Technologies, Inc. 65,000 5,407,188
- ---------------------------------------------------------------
NEXTLINK Communications,
Inc.-Class A(c) 64,900 2,458,087
- ---------------------------------------------------------------
Qwest Communications
International Inc.(c) 300,000 10,462,500
- ---------------------------------------------------------------
Tellabs, Inc.(c) 55,000 3,939,374
- ---------------------------------------------------------------
</TABLE>
8
<PAGE> 11
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMUNICATIONS EQUIPMENT-(CONTINUED)
US LEC Corp. Class A(c) 87,000 $ 1,816,125
- ---------------------------------------------------------------
35,749,724
- ---------------------------------------------------------------
COMPUTERS (HARDWARE)-1.10%
Compaq Computer Corp. 200,000 5,675,000
- ---------------------------------------------------------------
Dell Computer Corp.(c) 80,000 7,425,000
- ---------------------------------------------------------------
International Business Machines
Corp. 37,000 4,248,063
- ---------------------------------------------------------------
Sun Microsystems, Inc.(c) 46,000 1,998,125
- ---------------------------------------------------------------
Visual Networks, Inc.(c) 19,700 721,512
- ---------------------------------------------------------------
20,067,700
- ---------------------------------------------------------------
COMPUTERS (NETWORKING)-0.50%
Ascend Communications, Inc.(c) 100,000 4,956,250
- ---------------------------------------------------------------
Cisco Systems, Inc.(c) 45,000 4,142,813
- ---------------------------------------------------------------
9,099,063
- ---------------------------------------------------------------
COMPUTERS (PERIPHERALS)-0.30%
EMC Corp.(c) 120,000 5,377,500
- ---------------------------------------------------------------
COMPUTERS (SOFTWARE &
SERVICES)-2.76%
BrightStar Information Technology
Group, Inc.(c) 55,600 771,450
- ---------------------------------------------------------------
Computer Associates
International, Inc. 75,000 4,167,185
- ---------------------------------------------------------------
Engineering Animation, Inc.(c) 65,600 4,001,600
- ---------------------------------------------------------------
Evolving Systems, Inc.(c) 18,400 203,550
- ---------------------------------------------------------------
HBO & Co. 200,000 7,050,000
- ---------------------------------------------------------------
HNC Software Inc.(c) 75,000 3,060,938
- ---------------------------------------------------------------
ISS Group, Inc.(c) 9,100 342,388
- ---------------------------------------------------------------
J.D. Edwards & Co.(c) 52,900 2,271,394
- ---------------------------------------------------------------
Microsoft Corp.(c) 40,000 4,335,000
- ---------------------------------------------------------------
Mobius Management Systems,
Inc.(c) 16,200 243,000
- ---------------------------------------------------------------
Network Associates, Inc.(c) 75,000 3,590,625
- ---------------------------------------------------------------
Oracle Corp.(c) 55,000 1,350,938
- ---------------------------------------------------------------
Platinum Technology, Inc.(c) 150,000 4,284,375
- ---------------------------------------------------------------
Remedy Corp.(c) 175,000 2,975,000
- ---------------------------------------------------------------
Sterling Commerce, Inc.(c) 35,000 1,697,500
- ---------------------------------------------------------------
USWeb Corp.(c) 250,000 5,921,875
- ---------------------------------------------------------------
Veritas Software Corp.(c) 97,500 4,034,063
- ---------------------------------------------------------------
50,300,881
- ---------------------------------------------------------------
CONSUMER (JEWELRY, NOVELTIES & GIFTS)-0.18%
Action Performance Companies,
Inc.(c) 50,000 1,609,375
- ---------------------------------------------------------------
Blyth Industries, Inc.(c) 52,500 1,745,625
- ---------------------------------------------------------------
3,355,000
- ---------------------------------------------------------------
CONSUMER FINANCE-0.55%
MBNA Corp. 71,250 2,351,250
- ---------------------------------------------------------------
SLM Holding Corp. 155,000 7,595,000
- ---------------------------------------------------------------
9,946,250
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DISTRIBUTORS (FOOD &
HEALTH)-0.33%
Cardinal Health, Inc. 40,000 $ 3,750,000
- ---------------------------------------------------------------
Owens & Minor, Inc. Holding Co. 220,000 2,200,000
- ---------------------------------------------------------------
5,950,000
- ---------------------------------------------------------------
ELECTRICAL EQUIPMENT-0.44%
General Electric Co. 40,000 3,640,000
- ---------------------------------------------------------------
ONIX Systems, Inc.(c) 129,400 1,666,025
- ---------------------------------------------------------------
RELTEC Corp.(c) 9,000 405,000
- ---------------------------------------------------------------
SCI Systems, Inc.(c) 58,000 2,182,250
- ---------------------------------------------------------------
Sensormatic Electronics(a)
(Acquired 06/30/98; Cost
$60,000) 4,392 61,495
- ---------------------------------------------------------------
7,954,770
- ---------------------------------------------------------------
ELECTRONICS (COMPONENT DISTRIBUTORS)-0.08%
OSI Systems, Inc.(c) 150,000 1,500,000
- ---------------------------------------------------------------
ELECTRONICS
(INSTRUMENTATION)-0.21%
Quanta Services, Inc.(c) 255,000 3,745,313
- ---------------------------------------------------------------
ELECTRONICS
(SEMICONDUCTORS)-0.34%
Analog Devices, Inc.(c) 70,000 1,719,375
- ---------------------------------------------------------------
Intel Corp. 60,000 4,447,500
- ---------------------------------------------------------------
6,166,875
- ---------------------------------------------------------------
ENTERTAINMENT-0.23%
Walt Disney Co. (The)(d) 40,000 4,202,500
- ---------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR)-0.13%
Applied Materials, Inc.(c) 80,000 2,360,000
- ---------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-2.21%
American Express Co. 35,000 3,990,000
- ---------------------------------------------------------------
CIT Group, Inc. (The) 93,700 3,513,750
- ---------------------------------------------------------------
Fannie Mae 100,000 6,075,000
- ---------------------------------------------------------------
FINOVA Group, Inc. 50,000 2,831,250
- ---------------------------------------------------------------
Franchise Mortgage Acceptance Co.
LLC(c) 155,000 4,039,687
- ---------------------------------------------------------------
Freddie Mac 130,000 6,118,125
- ---------------------------------------------------------------
Heller Financial, Inc.(c) 130,000 3,900,000
- ---------------------------------------------------------------
Medallion Financial Corp. 200,000 5,500,000
- ---------------------------------------------------------------
MGIC Investment Corp. 75,000 4,279,687
- ---------------------------------------------------------------
40,247,499
- ---------------------------------------------------------------
FOODS-0.82%
Balance Bar Co.(c) 180,000 2,587,500
- ---------------------------------------------------------------
ConAgra, Inc. 100,000 3,168,750
- ---------------------------------------------------------------
Keebler Foods Co.(c) 84,500 2,323,750
- ---------------------------------------------------------------
Omega Protein Corp. (Foods)(c) 161,000 2,576,000
- ---------------------------------------------------------------
Ralston-Ralston Purina Group 36,000 4,205,250
- ---------------------------------------------------------------
14,861,250
- ---------------------------------------------------------------
HEALTH CARE (DIVERSIFIED)-1.45%
Abbott Laboratories 65,000 2,656,875
- ---------------------------------------------------------------
</TABLE>
9
<PAGE> 12
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HEALTH CARE (DIVERSIFIED)-(CONTINUED)
American Home Products Corp. 106,000 $ 5,485,500
- ---------------------------------------------------------------
Bristol-Myers Squibb Co. 56,000 6,436,500
- ---------------------------------------------------------------
Johnson & Johnson 43,000 3,171,250
- ---------------------------------------------------------------
Warner-Lambert Co.(d) 125,000 8,671,875
- ---------------------------------------------------------------
26,422,000
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC & OTHER)-0.55%
Barr Laboratories, Inc.(c) 81,100 3,223,725
- ---------------------------------------------------------------
Forest Laboratories, Inc.(c) 130,000 4,647,500
- ---------------------------------------------------------------
Spiros Development Corp. II(c) 137,000 2,209,125
- ---------------------------------------------------------------
10,080,350
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR
PHARMACEUTICALS)-1.16%
Lilly (Eli) & Co. 90,000 5,945,625
- ---------------------------------------------------------------
Merck & Co., Inc. 43,000 5,751,250
- ---------------------------------------------------------------
Pfizer Inc. 40,000 4,347,500
- ---------------------------------------------------------------
Schering-Plough Corp. 56,000 5,131,000
- ---------------------------------------------------------------
21,175,375
- ---------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT)-0.14%
Province Healthcare Co.(c) 15,900 440,231
- ---------------------------------------------------------------
Tenet Healthcare Corp.(c) 65,000 2,031,250
- ---------------------------------------------------------------
2,471,481
- ---------------------------------------------------------------
HEALTH CARE (LONG TERM CARE)-0.82%
Assisted Living Concepts, Inc.(c) 350,000 6,037,500
- ---------------------------------------------------------------
Sunrise Assisted Living, Inc.(c) 260,000 8,937,500
- ---------------------------------------------------------------
14,975,000
- ---------------------------------------------------------------
HEALTH CARE (MANAGED CARE)-0.19%
Alternative Living Services,
Inc.(c) 28,000 756,000
- ---------------------------------------------------------------
United Healthcare Corp. 43,000 2,730,500
- ---------------------------------------------------------------
3,486,500
- ---------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-1.36%
Arterial Vascular Engineering,
Inc.(c) 120,000 4,290,000
- ---------------------------------------------------------------
Baxter International Inc. 65,000 3,497,813
- ---------------------------------------------------------------
Becton, Dickinson & Co. 30,000 2,328,750
- ---------------------------------------------------------------
Boston Scientific Corp.(c) 80,000 5,730,000
- ---------------------------------------------------------------
Guidant Corp. 40,000 2,852,500
- ---------------------------------------------------------------
Medtronic, Inc. 95,000 6,056,250
- ---------------------------------------------------------------
24,755,313
- ---------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES)-0.71%
AmeriPath, Inc.(c) 68,400 807,975
- ---------------------------------------------------------------
Boron, LePore & Associates,
Inc.(c) 100,000 3,800,000
- ---------------------------------------------------------------
MAXIMUS, Inc.(c) 90,000 2,626,875
- ---------------------------------------------------------------
Pentegra Dental Group, Inc.(c) 420,000 2,887,500
- ---------------------------------------------------------------
Quintiles Transnational Corp.(c) 56,000 2,754,500
- ---------------------------------------------------------------
12,876,850
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HOUSEHOLD FURNITURE & APPLIANCES-0.41%
Ethan Allen Interiors, Inc. 150,900 $ 7,535,569
- ---------------------------------------------------------------
HOUSEHOLD PRODUCTS (NON-DURABLES)-0.32%
Colgate-Palmolive Co. 40,000 3,520,000
- ---------------------------------------------------------------
Procter & Gamble Co. (The) 25,000 2,276,563
- ---------------------------------------------------------------
5,796,563
- ---------------------------------------------------------------
HOUSEWARES-0.03%
Sunbeam Corp. 50,000 518,750
- ---------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-1.43%
AmerUs Life Holdings, Inc.-Class
A 66,700 2,159,412
- ---------------------------------------------------------------
Equitable Companies, Inc. 85,000 6,369,687
- ---------------------------------------------------------------
Hartford Life, Inc.-Class A 80,000 4,555,000
- ---------------------------------------------------------------
Nationwide Financial Services,
Inc.-Class A 140,000 7,140,000
- ---------------------------------------------------------------
PAULA Financial 85,000 1,710,625
- ---------------------------------------------------------------
ReliaStar Financial Corp. 85,000 4,080,000
- ---------------------------------------------------------------
26,014,724
- ---------------------------------------------------------------
INSURANCE (MULTI-LINE)-0.54%
American Bankers Insurance Group,
Inc. 39,948 2,401,874
- ---------------------------------------------------------------
CIGNA Corp. 54,000 3,726,000
- ---------------------------------------------------------------
Travelers Group, Inc. 61,999 3,758,689
- ---------------------------------------------------------------
9,886,563
- ---------------------------------------------------------------
INSURANCE (PROPERTY-CASUALTY)-0.76%
Allstate Corp. (The) 30,000 2,746,875
- ---------------------------------------------------------------
Chubb Corp. 32,000 2,572,000
- ---------------------------------------------------------------
Everest Reinsurance Holdings,
Inc. 135,000 5,189,063
- ---------------------------------------------------------------
Executive Risk Inc. 12,800 944,000
- ---------------------------------------------------------------
Travelers Property Casualty
Corp.-Class A 55,000 2,358,125
- ---------------------------------------------------------------
13,810,063
- ---------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE-0.24%
Freedom Securities Corp.(c) 34,700 628,938
- ---------------------------------------------------------------
Merrill Lynch & Co., Inc. 40,000 3,690,000
- ---------------------------------------------------------------
4,318,938
- ---------------------------------------------------------------
INVESTMENT MANAGEMENT-0.33%
Charles River Associates Inc.(c) 17,100 427,500
- ---------------------------------------------------------------
Federated Investors, Inc.-Class
B(c) 206,400 3,818,400
- ---------------------------------------------------------------
Waddell & Reed Financial, Inc. 74,100 1,773,769
- ---------------------------------------------------------------
6,019,669
- ---------------------------------------------------------------
INVESTMENTS-0.08%
Security Capital Group Inc.-Class
B(c) 55,700 1,483,012
- ---------------------------------------------------------------
LAND DEVELOPMENT-0.34%
Silverleaf Resorts, Inc.(c) 300,000 4,575,000
- ---------------------------------------------------------------
Trendwest Resorts, Inc.(c) 130,000 1,649,375
- ---------------------------------------------------------------
6,224,375
- ---------------------------------------------------------------
</TABLE>
10
<PAGE> 13
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
LEISURE TIME (PRODUCTS)-0.38%
Coach USA, Inc.(c) 120,000 $ 5,475,000
- ---------------------------------------------------------------
Florida Panthers Holdings,
Inc.(c) 70,000 1,378,132
- ---------------------------------------------------------------
6,853,132
- ---------------------------------------------------------------
LODGING-HOTELS-0.28%
Cavanaughs Hospitality Corp.(c) 75,500 986,219
- ---------------------------------------------------------------
Host Marriott Corp.(c) 125,000 2,226,561
- ---------------------------------------------------------------
Marriott International,
Inc.-Class A 60,000 1,942,500
- ---------------------------------------------------------------
5,155,280
- ---------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-0.39%
Superior TeleCom Inc. 172,000 7,159,500
- ---------------------------------------------------------------
METAL FABRICATORS-0.22%
Metals USA(c) 229,000 3,950,250
- ---------------------------------------------------------------
NATURAL GAS-1.31%
Coastal Corp. (The) 42,000 2,932,125
- ---------------------------------------------------------------
Columbia Energy Group 37,500 2,085,938
- ---------------------------------------------------------------
Consolidated Natural Gas Co. 25,000 1,471,875
- ---------------------------------------------------------------
Energen Corp. 137,800 2,773,225
- ---------------------------------------------------------------
KN Energy, Inc. 68,000 3,684,750
- ---------------------------------------------------------------
MCN Corp. 45,000 1,119,375
- ---------------------------------------------------------------
Sonat, Inc. 72,000 2,781,000
- ---------------------------------------------------------------
Williams Companies, Inc. (The) 207,000 6,986,250
- ---------------------------------------------------------------
23,834,538
- ---------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES-0.10%
CompX(c) 74,700 1,615,388
- ---------------------------------------------------------------
School Specialty, Inc.(c) 8,700 142,459
- ---------------------------------------------------------------
1,757,847
- ---------------------------------------------------------------
OIL (INTERNATIONAL INTEGRATED)-0.37%
Exxon Corp. 65,000 4,635,313
- ---------------------------------------------------------------
Mobil Corp. 27,000 2,068,875
- ---------------------------------------------------------------
6,704,188
- ---------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT)-1.17%
Cooper Cameron Corp.(c) 48,000 2,448,000
- ---------------------------------------------------------------
Diamond Offshore Drilling, Inc. 60,000 2,400,000
- ---------------------------------------------------------------
EVI Weatherford, Inc.(c) 45,000 1,670,625
- ---------------------------------------------------------------
Halliburton Co. 60,000 2,673,750
- ---------------------------------------------------------------
Horizon Offshore, Inc.(c) 100,000 981,250
- ---------------------------------------------------------------
Nabors Industries, Inc.(c) 102,000 2,020,875
- ---------------------------------------------------------------
Newpark Resources, Inc.(c) 220,000 2,447,500
- ---------------------------------------------------------------
Patterson Energy, Inc.(c) 195,600 1,913,213
- ---------------------------------------------------------------
Pride International, Inc.(c) 50,000 846,875
- ---------------------------------------------------------------
Santa Fe International Corp. 50,000 1,512,500
- ---------------------------------------------------------------
Willbros Group, Inc.(c) 150,000 2,343,750
- ---------------------------------------------------------------
21,258,338
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
OIL & GAS (EXPLORATION & PRODUCTION)-0.52%
Burlington Resources, Inc. 45,750 $ 1,970,109
- ---------------------------------------------------------------
Carrizo Oil & Gas, Inc.(c) 28,500 156,750
- ---------------------------------------------------------------
Enron Oil & Gas Co 120,000 2,430,000
- ---------------------------------------------------------------
Nuevo Energy Co.(c) 60,000 1,927,500
- ---------------------------------------------------------------
Swift Energy Co.(c) 44,000 701,250
- ---------------------------------------------------------------
Vintage Petroleum, Inc. 124,000 2,340,500
- ---------------------------------------------------------------
9,526,109
- ---------------------------------------------------------------
PERSONAL CARE-0.67%
Avon Products, Inc. 54,000 4,185,000
- ---------------------------------------------------------------
Estee Lauder Cos.-Class A 25,000 1,742,188
- ---------------------------------------------------------------
Gillette Co. 110,000 6,235,625
- ---------------------------------------------------------------
12,162,813
- ---------------------------------------------------------------
POWER PRODUCERS
(INDEPENDENT)-0.35%
AES Corp.(c) 46,000 2,417,875
- ---------------------------------------------------------------
CalEnergy Co., Inc.(c) 130,000 3,908,125
- ---------------------------------------------------------------
6,326,000
- ---------------------------------------------------------------
PUBLISHING-0.40%
Meredith Corp. 63,100 2,961,755
- ---------------------------------------------------------------
Petersen Companies, Inc.
(The)-Class A(c) 58,900 1,509,313
- ---------------------------------------------------------------
Ziff-Davis, Inc.(c) 198,500 2,754,188
- ---------------------------------------------------------------
7,225,256
- ---------------------------------------------------------------
REAL ESTATE INVESTMENT
TRUSTS-3.03%
Alexandria Real Estate Equities,
Inc. 180,000 5,388,750
- ---------------------------------------------------------------
Anthracite Mortgage Capital Inc. 125,000 1,734,375
- ---------------------------------------------------------------
Boston Properties, Inc. 145,000 5,002,500
- ---------------------------------------------------------------
CCA Prison Realty Trust 136,200 4,171,125
- ---------------------------------------------------------------
Corporate Office Properties
Trust, Inc. 500,000 4,437,500
- ---------------------------------------------------------------
Correctional Properties Trust(c) 51,000 1,032,750
- ---------------------------------------------------------------
Crescent Real Estate Equities,
Co. 154,000 5,178,250
- ---------------------------------------------------------------
CRIIMI MAE, Inc. 300,000 4,162,500
- ---------------------------------------------------------------
Entertainment Properties Trust 83,200 1,518,400
- ---------------------------------------------------------------
Golf Trust of America, Inc. 55,500 1,907,813
- ---------------------------------------------------------------
Mack-Cali Realty Corp. 80,000 2,750,000
- ---------------------------------------------------------------
Meditrust Corp. 80,000 2,235,000
- ---------------------------------------------------------------
Mid-Atlantic Realty Trust 175,900 2,165,769
- ---------------------------------------------------------------
Patriot American Hospitality,
Inc. 175,000 4,189,060
- ---------------------------------------------------------------
Starwood Hotels & Resorts 110,000 5,314,375
- ---------------------------------------------------------------
Vornado Realty Trust 100,000 3,968,750
- ---------------------------------------------------------------
55,156,917
- ---------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS)-0.15%
Ingram Micro, Inc.-Class A(c) 60,000 2,655,000
- ---------------------------------------------------------------
RETAIL (DISCOUNTERS)-0.14%
Ross Stores, Inc. 60,000 2,580,000
- ---------------------------------------------------------------
</TABLE>
11
<PAGE> 14
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (FOOD CHAINS)-0.49%
American Stores Co. 100,000 $ 2,418,750
- ---------------------------------------------------------------
Safeway, Inc.(c) 160,000 6,510,000
- ---------------------------------------------------------------
8,928,750
- ---------------------------------------------------------------
RETAIL (GENERAL
MERCHANDISE)-0.29%
Dayton Hudson Corp. 110,000 5,335,000
- ---------------------------------------------------------------
RETAIL (SPECIALTY)-0.88%
Inacom Corp.(c) 75,000 2,381,255
- ---------------------------------------------------------------
Linens 'N Things, Inc.(c) 140,000 4,278,750
- ---------------------------------------------------------------
Musicland Stores Corp.(c) 100,000 1,400,000
- ---------------------------------------------------------------
Pier 1 Imports, Inc. 175,000 4,178,125
- ---------------------------------------------------------------
Polo Ralph Lauren Corp.(c) 120,000 3,360,000
- ---------------------------------------------------------------
U.S. Office Products Co.(c) 19,575 381,710
- ---------------------------------------------------------------
15,979,840
- ---------------------------------------------------------------
SAVINGS & LOAN COMPANIES-0.39%
Washington Mutual, Inc. 165,000 7,167,187
- ---------------------------------------------------------------
SERVICES
(ADVERTISING/MARKETING)-0.70%
Abacus Direct Corp.(c) 42,400 2,202,150
- ---------------------------------------------------------------
Outdoor Systems, Inc.(c) 261,225 7,314,300
- ---------------------------------------------------------------
Young & Rubicam, Inc.(c) 102,300 3,273,600
- ---------------------------------------------------------------
12,790,050
- ---------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-1.77%
Avis Rent A Car, Inc.(c) 118,300 2,927,925
- ---------------------------------------------------------------
Cendant Corp.(c) 148,992 3,110,208
- ---------------------------------------------------------------
Comfort Systems USA, Inc.(c) 149,200 3,487,550
- ---------------------------------------------------------------
Computer Learning Centers,
Inc.(c) 70,000 1,741,250
- ---------------------------------------------------------------
Hertz Corp.-Class A 50,500 2,237,781
- ---------------------------------------------------------------
INSpire Insurance Solutions,
Inc.(c) 100,000 3,325,000
- ---------------------------------------------------------------
Metzler Group, Inc.(c) 166,800 6,109,050
- ---------------------------------------------------------------
Service Corp. International 33,222 1,424,393
- ---------------------------------------------------------------
Steven Myers & Associates,
Inc.(c) 165,000 3,176,250
- ---------------------------------------------------------------
Trammell Crow Co.(c) 35,400 1,183,688
- ---------------------------------------------------------------
U.S. Rentals, Inc.(c) 87,700 3,458,669
- ---------------------------------------------------------------
32,181,764
- ---------------------------------------------------------------
SERVICES (DATA PROCESSING)-0.37%
Billing Concepts Corp.(c) 75,000 1,162,500
- ---------------------------------------------------------------
DST Systems, Inc.(c) 65,000 3,640,000
- ---------------------------------------------------------------
Equifax, Inc. 52,000 1,888,250
- ---------------------------------------------------------------
6,690,750
- ---------------------------------------------------------------
SERVICES (EMPLOYMENT)-0.67%
AccuStaff, Inc.(c) 150,000 4,687,500
- ---------------------------------------------------------------
Administaff, Inc.(c) 63,000 2,905,875
- ---------------------------------------------------------------
Hall, Kinion & Associates,
Inc.(c) 165,000 1,103,438
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SERVICES (EMPLOYMENT)-(CONTINUED)
Metamor Worldwide, Inc.(c) 100,000 $ 3,518,750
- ---------------------------------------------------------------
12,215,563
- ---------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS)-0.26%
Hyperion Telecommunications,
Inc.(c) 242,500 3,804,219
- ---------------------------------------------------------------
LCC International, Inc.-Class
A(c) 55,000 1,017,500
- ---------------------------------------------------------------
4,821,719
- ---------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-1.57%
IXC Communications, Inc.(c) 130,000 6,305,000
- ---------------------------------------------------------------
Pacific Gateway Exchange, Inc.(c) 150,000 6,009,375
- ---------------------------------------------------------------
WinStar Communications, Inc.(c) 205,000 8,802,188
- ---------------------------------------------------------------
WorldCom, Inc.(c) 154,923 7,504,081
- ---------------------------------------------------------------
28,620,644
- ---------------------------------------------------------------
TELEPHONE-1.44%
Advanced Communications Group,
Inc.(c) 104,400 724,275
- ---------------------------------------------------------------
Bell Atlantic Corp. 100,000 4,562,500
- ---------------------------------------------------------------
Cincinnati Bell, Inc. 40,000 1,145,000
- ---------------------------------------------------------------
Electric Lightwave, Inc.-Class
A(c) 250,000 2,765,625
- ---------------------------------------------------------------
Intermedia Communications Inc.(c) 100,000 4,193,750
- ---------------------------------------------------------------
McLeodUSA Inc.-Class A(c) 55,000 2,138,125
- ---------------------------------------------------------------
SCC Communications Corp.(c) 229,900 2,816,275
- ---------------------------------------------------------------
Teleport Communications Group
Inc.-Class A(c) 70,000 3,797,500
- ---------------------------------------------------------------
US West, Inc. 90,000 4,230,000
- ---------------------------------------------------------------
26,373,050
- ---------------------------------------------------------------
TEXTILES (APPAREL)-0.07%
Liz Claiborne, Inc. 27,000 1,410,750
- ---------------------------------------------------------------
TOBACCO-0.31%
Philip Morris Companies, Inc. 150,000 5,906,250
- ---------------------------------------------------------------
TRUCKERS-0.24%
C.H. Robinson Worlwide, Inc. 122,300 3,042,212
- ---------------------------------------------------------------
Jevic Transportation, Inc.(c) 131,700 1,498,088
- ---------------------------------------------------------------
4,540,300
- ---------------------------------------------------------------
WASTE MANAGEMENT-0.58%
Allied Waste Industries, Inc.(c) 175,000 4,200,000
- ---------------------------------------------------------------
Denali Inc.(c) 314,000 4,906,250
- ---------------------------------------------------------------
Thermo Instrument Systems Inc.(c) 62,500 1,640,625
- ---------------------------------------------------------------
10,746,875
- ---------------------------------------------------------------
Total Domestic Common Stocks
(Cost $630,530,835) 868,305,480
- ---------------------------------------------------------------
DOMESTIC CONVERTIBLE PREFERRED STOCKS-4.87%
AEROSPACE/DEFENSE-0.16%
Coltec Capital Trust-$2.625 Conv.
Pfd.(a)(Acquired 04/07/98; Cost
$3,000,000) 60,000 2,809,260
- ---------------------------------------------------------------
</TABLE>
12
<PAGE> 15
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
AIR FREIGHT-0.16%
CNF Trust I-$2.50 Series A Gtd.
Conv. Pfd. 45,000 $ 2,857,500
- ---------------------------------------------------------------
BANKS (REGIONAL)-0.16%
WBK STRYPES Trust-$3.135 Conv.
Pfd. 95,000 2,867,813
- ---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-0.24%
NEXTLINK Communications-$3.25
Conv. Pfd.()(a) (Acquired
03/26/98-06/02/98; Cost
$4,185,188) 85,000 4,345,115
- ---------------------------------------------------------------
CONTAINERS (METAL & GLASS)-0.46%
Owens-Illinois, Inc., $2.375
Conv. Pfd. 90,000 4,691,250
- ---------------------------------------------------------------
Peak Trends Trust, $1.42 Conv.
Pfd. 267,500 3,778,438
- ---------------------------------------------------------------
8,469,688
- ---------------------------------------------------------------
ENTERTAINMENT-0.04%
Time Warner Inc., Series
M-$102.50 PIK Conv. Pfd. 715 799,905
- ---------------------------------------------------------------
HEALTH CARE (MANAGED CARE)-0.09%
Medpartners Inc.-$1.44 Conv. Pfd.
TAPS 158,000 1,668,875
- ---------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-0.14%
McKesson Corp.-$2.50 Conv.
Pfd.(a)(Acquired 02/13/97; Cost
$1,105,000) 22,100 2,499,510
- ---------------------------------------------------------------
HOMEBUILDING-0.26%
Fleetwood Capital Trust, $3.00
Conv. Pfd.
(Acquired 02/04/98; Cost
$4,500,000) 90,000 4,829,040
- ---------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-0.22%
Conseco Inc.-$4.278 Conv. PRIDES 14,000 2,250,500
- ---------------------------------------------------------------
Penncorp Financial Group,
Inc.-$3.50 Conv. Pfd.(a)
(Acquired 08/02/96-11/15/96;
Cost $2,072,500) 40,000 1,743,400
- ---------------------------------------------------------------
3,993,900
- ---------------------------------------------------------------
INVESTMENT
BANKING/BROKERAGE-0.04%
Salomon Smith Barney
Holdings-$3.48 Conv. Pfd. DECS 14,600 816,688
- ---------------------------------------------------------------
LODGING-HOTELS-0.32%
Lodgian Capital Trust I, $3.50
Conv. Pfd.(a)(Acquired
06/09/98; Cost $3,500,000) 70,000 3,272,500
- ---------------------------------------------------------------
Royal Caribbean Cruises
Ltd.-$3.63 Conv. Pfd. 20,750 2,614,500
- ---------------------------------------------------------------
5,887,000
- ---------------------------------------------------------------
NATURAL GAS-0.25%
El Paso Energy Cap Trust,
Inc.-$2.375 Conv. Pfd. 65,000 3,445,000
- ---------------------------------------------------------------
MCN Corp.-$2.013 Conv. PRIDES 46,000 1,089,625
- ---------------------------------------------------------------
4,534,625
- ---------------------------------------------------------------
POWER PRODUCERS
(INDEPENDENT)-0.31%
AES Trust II-$2.75 Conv. Pfd. 97,000 5,657,040
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
REAL ESTATE INVESTMENT
TRUSTS-0.44%
Reckson Associates Realty-$1.91
Conv. Pfd. 180,000 $ 4,275,000
- ---------------------------------------------------------------
Sensormatic Electronics-$1.625
Conv. Pfd.(a)(Acquired
04/06/98; Cost $4,000,000) 160,000 3,770,000
- ---------------------------------------------------------------
8,045,000
- ---------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-0.95%
Budget Group Capital Trust,
$3.125 Conv. Pfd.(a)(Acquired
06/16/98; Cost $3,500,000) 70,000 4,067,490
- ---------------------------------------------------------------
Cendant Corp.-$3.75 Conv. PRIDES 150,000 5,615,625
- ---------------------------------------------------------------
L&H Capital Trust I, $2.375 Conv.
Pfd.(a)(Acquired 05/20/98; Cost
$6,250,000) 125,000 7,562,500
- ---------------------------------------------------------------
17,245,615
- ---------------------------------------------------------------
SERVICES (COMPUTER SYSTEMS)-0.27%
Ciber, Inc. $4.26 Conv.
Pfd.-STRYPES 70,000 4,900,000
- ---------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-0.36%
IXC Communications, Inc.-$3.375
Conv. Pfd.(a)(Acquired
03/25/98; Cost $3,500,000) 70,000 3,360,000
- ---------------------------------------------------------------
WinStar Communications-$3.50
Conv. Pfd.(a)(Acquired
03/12/98; Cost $2,955,000) 59,100 3,235,725
- ---------------------------------------------------------------
6,595,725
- ---------------------------------------------------------------
Total Domestic Convertible
Preferred Stocks (Cost
$84,716,352) 88,822,299
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
U.S. DOLLAR DENOMINATED FOREIGN BONDS & NOTES-4.38%
CANADA-2.59%
Bell Canada
(Telecommunications-Long
Distance), Deb., 9.50%,
10/15/10 $ 1,750,000 2,216,200
- ---------------------------------------------------------------
Great Atlantic & Pacific Tea Co.,
Inc., (Retail-Food Chains)
Yankee Gtd. Notes, 7.78%,
11/01/00(a)(Acquired 10/18/95-
04/27/98; Cost $5,131,490) 5,000,000 5,132,700
- ---------------------------------------------------------------
Gulf Canada Resources,
Ltd.(Oil-International
Integrated), Sr. Yankee Unsec.
Notes, 8.35%, 08/01/06 4,500,000 4,958,325
- ---------------------------------------------------------------
Husky Oil Ltd.,
(Oil-International Integrated)
Sr. Yankee Notes, 7.125%,
11/15/06 6,300,000 6,507,900
- ---------------------------------------------------------------
Laidlaw Inc. (Services-Commercial
& Consumer),
Deb., 6.65%, 10/01/04 4,000,000 4,071,000
- ---------------------------------------------------------------
Deb., 6.72%, 10/1/27 3,000,000 3,117,930
- ---------------------------------------------------------------
Nova Chemicals Ltd. (Chemicals),
Yankee Deb., 7.00%, 08/15/26 4,000,000 4,166,960
- ---------------------------------------------------------------
Nova Gas Transmission Ltd.
(Chemicals), Yankee Deb.,
8.50%, 12/15/12 5,015,000 5,988,361
- ---------------------------------------------------------------
Province of Manitoba (Sovereign
Debt), Yankee Bonds, 7.75%,
07/17/16 1,500,000 1,762,755
- ---------------------------------------------------------------
</TABLE>
13
<PAGE> 16
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
CANADA-(CONTINUED)
Province of Quebec (Sovereign
Debt), Yankee Notes, 5.735%,
03/02/26 $ 2,300,000 $ 2,516,430
- ---------------------------------------------------------------
Notes, 6.29%, 03/06/26 2,050,000 2,210,146
- ---------------------------------------------------------------
Royal Bank of Canada (Banks-Major
Regional), Yankee Sub. Notes,
6.75%, 10/24/11 3,000,000 3,005,970
- ---------------------------------------------------------------
Talisman Energy, Inc. (Oil &
Gas-Exploration & Production),
Yankee Deb., 7.125%, 06/01/07 1,500,000 1,566,075
- ---------------------------------------------------------------
47,220,752
- ---------------------------------------------------------------
CAYMAN ISLANDS-0.41%
Hutchison Delta Finance
(Shipping), Conv. Unsec. Notes,
7.00%, 11/08/02 2,250,000 2,340,000
- ---------------------------------------------------------------
Hutchison Whampoa Ltd.
(Shipping), Series D Sr. Gtd.
Unsec. Unsub. Deb., 6.988%,
08/01/37(a)(Acquired 10/02/97;
Cost $6,027,460) 6,000,000 5,088,900
- ---------------------------------------------------------------
7,428,900
- ---------------------------------------------------------------
GERMANY-0.30%
Dresdner Bank A.G. (Banks-Major
Regional), Sub. Bonds, 6.00%,
11/03/08 4,000,000 3,944,304
- ---------------------------------------------------------------
Tarkett International (Household
Furniture & Appliances), Yankee
Sr. Sub. Notes, 9.00%, 03/01/02 1,500,000 1,477,500
- ---------------------------------------------------------------
5,421,804
- ---------------------------------------------------------------
NORWAY-0.32%
Petroleum Geo-Services A.S.A.
(Oil & Gas-Drilling &
Equipment), Yankee Notes,
7.50%, 03/31/07 5,500,000 5,916,240
- ---------------------------------------------------------------
UNITED KINGDOM-0.76%
Royal Bank of Scotland PLC
(Banks-Major Regional), Yankee
Sub. Notes, 6.375%, 02/01/11 1,500,000 1,486,170
- ---------------------------------------------------------------
Terra Nova Ins Holdings
(Insurance-Property &
Casualty), Gtd. Notes, 7.00%,
05/15/08(a)(Acquired 05/12/98;
Cost $2,097,879) 2,100,000 2,151,198
- ---------------------------------------------------------------
Gtd. Sr. Sec. Notes, 7.20%,
08/15/07 5,000,000 5,270,050
- ---------------------------------------------------------------
Videotron Holdings PLC
(Broadcasting-Television,
Radio, & Cable), Sr. Discount
Notes, 11.125%, 07/01/04(e) 5,000,000 4,893,750
- ---------------------------------------------------------------
13,801,168
- ---------------------------------------------------------------
Total U.S. Dollar Denominated
Foreign Bonds & Notes (Cost
$78,922,245) 79,788,864
- ---------------------------------------------------------------
</TABLE>
NON-U.S. DOLLAR DENOMINATED BONDS &
NOTES(f)-2.40%
AUSTRALIAN DOLLARS-0.39%
Australian Government (Sovereign
Debt), Bonds, 8.75%, 08/15/08 AUD 5,400,000 4,163,890
- ---------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
AUSTRALIAN DOLLARS-(CONTINUED)
New South Wales Treasury Corp.
(Sovereign Debt), Gtd.
Notes, 8.00%, 03/01/08 AUD 1,500,000 $ 1,076,929
- ---------------------------------------------------------------
Citibank Ltd. (Banks-Money
Center), Unsec. Notes,
7.00%, 03/15/02 3,000,000 1,930,130
- ---------------------------------------------------------------
7,170,949
- ---------------------------------------------------------------
BRITISH POUND STERLING-0.73%
Fannie Mae
(Financial-Diversified), Sr.
Unsec. Notes, 6.875%,
06/07/02 GBP 2,800,000 4,709,330
- ---------------------------------------------------------------
Province of Ontario (Sovereign
Debt), Deb., 11.125%,
02/14/01 1,600,000 2,889,589
- ---------------------------------------------------------------
Sutton Bridge Financial Ltd.
(Financial-Diversified),
Gtd. Bonds, 8.625%,
06/03/22(a)(Acquired
05/29/97; Cost $4,890,565) 3,000,000 5,657,408
- ---------------------------------------------------------------
13,256,327
- ---------------------------------------------------------------
CANADIAN DOLLARS-0.93%
Bank of Montreal (Banks-Money
Center), Sub. Deb., 7.92%,
07/31/12 CAD 1,850,000 1,439,543
- ---------------------------------------------------------------
Bell Mobility Cellular Inc.,
(Telecommunications-Cellular/
Wireless), Deb., 6.55%,
06/02/08 2,500,000 1,730,397
- ---------------------------------------------------------------
Canadian Oil Debco Inc. (Oil &
Gas-Exploration &
Production), Deb., 11.00%,
10/31/00 1,500,000 1,143,571
- ---------------------------------------------------------------
NAV Canada
(Services-Commercial &
Consumer), Bonds, 7.40%,
06/01/27 3,500,000 2,880,062
- ---------------------------------------------------------------
Poco Petroleums Ltd. (Oil &
Gas-Exploration &
Production), Unsec. Deb.,
6.60%, 09/11/07 5,400,000 3,712,934
- ---------------------------------------------------------------
Province of Ontario (Sovereign
Debt), Sr. Unsub. Notes,
8.00%, 03/11/03 2,300,000 1,725,196
- ---------------------------------------------------------------
Telegobe Canada, Inc.
(Telephone), Unsec. Deb.,
8.35%, 06/20/03 1,000,000 755,542
- ---------------------------------------------------------------
Trans-Canada Pipelines
(Natural Gas), Series Q
Deb., 10.625%, 10/20/09 1,500,000 1,412,919
- ---------------------------------------------------------------
Westcoast Energy, Inc. (Oil &
Gas-Exploration &
Production), Deb., 6.45%,
12/18/06 3,000,000 2,131,457
- ---------------------------------------------------------------
16,931,621
- ---------------------------------------------------------------
NEW ZEALAND DOLLARS-0.28%
Fannie Mae
(Financial-Diversified),
Notes, 7.25%, 06/20/02 NZD 9,850,000 5,081,881
- ---------------------------------------------------------------
SWISS FRANCS-0.07%
Swiss Re (Insurance Brokers),
2.25%, 04/17/08 CHF 2,000,000 1,231,076
- ---------------------------------------------------------------
Total Non-U.S. Dollar
Denominated Bonds &
Notes (Cost $44,010,253) 43,671,854
- ---------------------------------------------------------------
</TABLE>
14
<PAGE> 17
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FOREIGN STOCKS & OTHER EQUITY INTERESTS-3.31%
AUSTRALIA-0.27%
St. George Bank Ltd.
(Banks-Regional), $4.50 Conv.
Pfd.(a)(Acquired
05/21/98-05/22/98; Cost
$5,007,500) 100,000 $ 4,800,000
- --------------------------------------------------------------
BERMUDA-0.14%
Annuity and Life Re, Ltd.
(Insurance-Life-Health)(c) 107,000 2,367,375
- --------------------------------------------------------------
CANADA-0.64%
Cadillac Fairview Corp. (Land
Development)(c) 180,000 4,140,000
- --------------------------------------------------------------
Laidlaw One, Inc.
(Services-Commercial &
Consumer)-$1.22 Conv. Pfd. 102,000 3,723,000
- --------------------------------------------------------------
MetroNet Communications
Corp.-Class B (Communications
Equipment)(c) 99,800 2,819,350
- --------------------------------------------------------------
Newcourt Credit Group, Inc.,
(Financial-Diversified) 21,700 1,067,369
- --------------------------------------------------------------
11,749,719
- --------------------------------------------------------------
FINLAND-0.19%
Nokia Oyj A.B.-Class A-ADR
(Communications Equipment) 47,000 3,410,438
- --------------------------------------------------------------
FRANCE-0.31%
Alstom (Engineering &
Construction)(c) 105,000 3,456,862
- --------------------------------------------------------------
AXA-ADR (Insurance-Multi-Line) 40,000 2,272,500
- --------------------------------------------------------------
5,729,362
- --------------------------------------------------------------
IRELAND-0.08%
Warner Chilcott Laboratories-SP
ADR (Health Care-Drugs-Generic &
Other)(c) 150,600 1,487,175
- --------------------------------------------------------------
ISRAEL-0.18%
Gilat Communications Ltd.
(Telecommunications-
Cellular/Wireless)(c) 200,000 1,725,000
- --------------------------------------------------------------
Teva Pharmaceutical Industries
Ltd.-ADR (Health
Care-Drugs-Generic & Other) 45,000 1,583,438
- --------------------------------------------------------------
3,308,438
- --------------------------------------------------------------
NEW ZEALAND-0.06%
Sky Network Television Ltd.
(Broadcasting-Television, Radio
& Cable)(c) 93,700 1,124,400
- --------------------------------------------------------------
NORWAY-0.10%
Petroleum Geo-Services ASA-ADR
(Oil & Gas-Drilling &
Equipment)(c) 60,000 1,830,000
- --------------------------------------------------------------
PORTUGAL-0.10%
Telecel-Comunicacaoes Pessoais,
S.A.
(Telecommunications-
Cellular/Wireless) 10,300 1,828,250
- --------------------------------------------------------------
SPAIN-0.14%
Corporacion Bancaria de Espana
S.A. (Banks-Regional) 56,952 2,569,959
- --------------------------------------------------------------
SWEDEN-0.31%
Telefonaktiebolaget LM
Ericsson-ADR (Communications
Equipment) 200,000 5,725,000
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
UNITED KINGDOM-0.79%
Avis Europe PLC
(Services-Commercial & Consumer) 765,450 $ 3,469,903
- --------------------------------------------------------------
Bass PLC (Beverages-Alcoholic) 57,455 1,077,968
- --------------------------------------------------------------
ESG Re Limited
(Insurance-Life/Health) 70,300 1,520,237
- --------------------------------------------------------------
SmithKline Beecham PLC-ADR (Health
Care-Drugs-Major
Pharmaceuticals) 46,000 2,783,000
- --------------------------------------------------------------
Stirling Cooke Brown Holdings Ltd.
(Insurance-Life/Health) 39,400 1,108,125
- --------------------------------------------------------------
Stolt Comex Seaway, S.A.-ADR (Oil
& Gas-
Exploration & Production)(c) 160,000 3,100,000
- --------------------------------------------------------------
Stolt Comex Seaway, S.A. (Oil &
Gas-Exploration & Production)(c) 80,000 1,400,000
- --------------------------------------------------------------
14,459,233
- --------------------------------------------------------------
Total Foreign Stocks & Other
Equity Interests (Cost
$45,431,722) 60,389,349
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
U.S. TREASURY SECURITIES-7.24%
U.S. TREASURY NOTES & BONDS-7.24%
Notes, 6.50%, 05/31/01 $17,000,000 17,429,250
- ---------------------------------------------------------------
Notes, 6.25%, 08/31/02 17,750,000 18,204,933
- ---------------------------------------------------------------
Notes, 5.625%, 12/31/02 10,000,000 10,044,800
- ---------------------------------------------------------------
Notes, 5.75%, 04/30/03 2,900,000 2,928,681
- ---------------------------------------------------------------
Notes, 7.25%, 08/15/04 7,500,000 8,165,400
- ---------------------------------------------------------------
Notes, 7.875%, 11/15/04 15,000,000 16,851,900
- ---------------------------------------------------------------
Notes, 7.50%, 02/15/05 3,000,000 3,322,320
- ---------------------------------------------------------------
Notes, 6.50%, 08/15/05 5,000,000 5,278,950
- ---------------------------------------------------------------
Notes, 6.50%, 10/15/06 12,000,000 12,747,480
- ---------------------------------------------------------------
Notes, 6.25%, 02/15/07 5,000,000 5,239,050
- ---------------------------------------------------------------
Notes, 6.625%, 05/15/07 7,000,000 7,523,250
- ---------------------------------------------------------------
Bonds, 6.75%, 08/15/26 3,000,000 3,434,970
- ---------------------------------------------------------------
Bonds, 6.625%, 02/15/27 11,700,000 13,226,616
- ---------------------------------------------------------------
Bonds, 6.125%, 11/15/27 7,000,000 7,505,330
- ---------------------------------------------------------------
Total U.S. Treasury
Securities (Cost
$127,304,829) 131,902,930
- ---------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES-1.63%
Fannie Mae, 7.00%, 05/01/28 24,669,496 25,016,349
- ---------------------------------------------------------------
Tennessee Valley Authority,
Bonds, 5.98%, 04/01/36 4,600,000 4,717,162
- ---------------------------------------------------------------
Total U.S. Government Agency
Securities (Cost
$29,603,646) 29,733,511
- ---------------------------------------------------------------
REPURCHASE AGREEMENT-2.16%(g)
Dean Witter Reynolds, Inc.,
6.10%, 07/01/98(h) (Cost
$39,321,206) 39,321,206 39,321,206
- ---------------------------------------------------------------
TOTAL INVESTMENTS-99.37% 1,810,842,918
- ---------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-0.63% 11,419,631
- ---------------------------------------------------------------
NET ASSETS-100.00% $1,822,262,549
===============================================================
</TABLE>
15
<PAGE> 18
(a) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined in
accordance with procedures established by the Board of Trustees. The
aggregate market value of these securities at 06/30/98 was $133,178,720
which represented 7.31% of the Fund's net assets.
(b) Zero coupon bond issued at a discount. The interest rate shown represents
the rate of original discount.
(c) Non-income producing security.
(d) A portion of this security is subject to call options written. See Note 7.
(e) Discounted bond at purchase. The interest rate represents the coupon rate at
which the bond will accrue at a specified future date.
(f) Foreign denominated security. Par value and coupon are denominated in
currency of country indicated.
(g) 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.
(h) Joint repurchase agreement entered into 06/30/98 with a maturing value
$200,033,889. Collateralized by $203,366,000 U.S. Government obligations, 0%
to 9.375% due 07/01/98 to 09/21/04 with an aggregate market value at
06/30/98 of $209,153,696.
Investment abbreviations:
ADR - American Depositary Receipts
AUD - Australian Dollar
CAD - Canadian Dollar
CHF - Swiss Francs
Conv. - Convertible
Ctfs. - Certificates
Deb. - Debentures
DECS - Dividend Enhanced Convertible Stock
Disc. - Discount
GBP - British Pound Sterling
Gtd. - Guaranteed
NZD - New Zealand Dollar
Pfd. - Preferred
PIK - Payment in Kind
PRIDES - Preferred Redeemable Increased Dividend Equity Security
Sec. - Secured
Sr. - Senior
STRYPES - Structured Yield Product Exchangeable for Stock
Sub. - Subordinated
TAPS - Threshold Appreciation Priced Securities
Unsec. - Unsecured
Unsub. - Unsubordinated
See Notes to Financial Statements.
16
<PAGE> 19
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$1,529,347,667) $1,810,842,918
- ---------------------------------------------------------
Foreign currencies, at value (cost
$4,242,915) 4,268,787
- ---------------------------------------------------------
Receivables for:
Investments sold 3,261,608
- ---------------------------------------------------------
Forward currency contracts 382,166
- ---------------------------------------------------------
Fund shares sold 16,554,961
- ---------------------------------------------------------
Interest and dividends 13,141,519
- ---------------------------------------------------------
Investment for deferred compensation plan 21,650
- ---------------------------------------------------------
Other assets 93,230
- ---------------------------------------------------------
Total assets 1,848,566,839
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 17,419,208
- ---------------------------------------------------------
Fund shares reacquired 5,344,954
- ---------------------------------------------------------
Options written 197,500
- ---------------------------------------------------------
Deferred compensation plan 21,650
- ---------------------------------------------------------
Accrued advisory fees 748,473
- ---------------------------------------------------------
Accrued administrative services fees 7,632
- ---------------------------------------------------------
Accrued distribution fees 1,397,292
- ---------------------------------------------------------
Accrued transfer agent fees 226,978
- ---------------------------------------------------------
Accrued trustees' fees 3,311
- ---------------------------------------------------------
Accrued operating expenses 937,292
- ---------------------------------------------------------
Total liabilities 26,304,290
- ---------------------------------------------------------
Net assets applicable to shares
outstanding $1,822,262,549
=========================================================
NET ASSETS:
Class A $1,009,393,384
=========================================================
Class B $ 741,876,231
=========================================================
Class C $ 70,992,934
=========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 36,341,905
=========================================================
Class B 26,748,347
=========================================================
Class C 2,558,210
=========================================================
Class A:
Net asset value and redemption price
per share $ 27.77
=========================================================
Offering price per share:
(Net asset value of $27.77 divided
by 95.25%) $ 29.15
=========================================================
Class B:
Net asset value and offering price per
share $ 27.74
=========================================================
Class C:
Net asset value and offering price per
share $ 27.75
=========================================================
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 22,081,398
- ---------------------------------------------------------
Dividends (net of $24,736 foreign
withholding tax) 4,764,070
- ---------------------------------------------------------
Total investment income 26,845,468
- ---------------------------------------------------------
EXPENSES:
Advisory fees 3,944,924
- ---------------------------------------------------------
Administrative services fees 45,792
- ---------------------------------------------------------
Custodian fees 87,617
- ---------------------------------------------------------
Distribution fees-Class A 1,073,499
- ---------------------------------------------------------
Distribution fees-Class B 3,060,387
- ---------------------------------------------------------
Distribution fees-Class C 163,548
- ---------------------------------------------------------
Trustees' fees 6,731
- ---------------------------------------------------------
Transfer agent fees-Class A 650,846
- ---------------------------------------------------------
Transfer agent fees-Class B 485,424
- ---------------------------------------------------------
Transfer agent fees-Class C 25,392
- ---------------------------------------------------------
Other 299,838
- ---------------------------------------------------------
Total expenses 9,843,998
- ---------------------------------------------------------
Less: Expenses paid indirectly (17,819)
- ---------------------------------------------------------
Net expenses 9,826,179
- ---------------------------------------------------------
Net investment income 17,019,289
- ---------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN
CURRENCIES, FUTURES AND OPTION CONTRACTS:
Net realized gain from:
Investment securities 10,670,067
- ---------------------------------------------------------
Foreign currencies (114,023)
- ---------------------------------------------------------
Forward currency contracts 721,330
- ---------------------------------------------------------
Futures contracts 3,688,253
- ---------------------------------------------------------
Option contracts 188,653
- ---------------------------------------------------------
15,154,280
- ---------------------------------------------------------
Net unrealized appreciation (depreciation)
of:
Investment securities 85,314,636
- ---------------------------------------------------------
Foreign currencies 34,586
- ---------------------------------------------------------
Forward currency contracts 382,148
- ---------------------------------------------------------
Option contracts (17,690)
- ---------------------------------------------------------
85,713,680
- ---------------------------------------------------------
Net gain from investment securities,
foreign currencies, futures and
option contracts 100,867,960
- ---------------------------------------------------------
Net increase in net assets resulting from
operations $117,887,249
=========================================================
</TABLE>
17
See Notes to Financial Statements.
<PAGE> 20
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 17,019,289 $ 19,016,014
- ---------------------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies, futures and option contracts 15,154,280 34,831,453
- ---------------------------------------------------------------------------------------------
Net unrealized appreciation of investment securities,
foreign currencies, futures and option contracts 85,713,680 134,939,011
- ---------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 117,887,249 188,786,478
- ---------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (9,271,583) (12,472,168)
- ---------------------------------------------------------------------------------------------
Class B (4,305,044) (5,631,570)
- ---------------------------------------------------------------------------------------------
Class C (284,016) (29,666)
- ---------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on
investment securities:
Class A -- (19,245,568)
- ---------------------------------------------------------------------------------------------
Class B -- (13,549,718)
- ---------------------------------------------------------------------------------------------
Class C -- (198,011)
- ---------------------------------------------------------------------------------------------
Net equalization credits -- 8,681,162
- ---------------------------------------------------------------------------------------------
Share transactions-net:
Class A 265,938,260 260,376,777
- ---------------------------------------------------------------------------------------------
Class B 212,929,158 192,163,146
- ---------------------------------------------------------------------------------------------
Class C 59,836,289 9,380,380
- ---------------------------------------------------------------------------------------------
Net increase in net assets 642,730,313 608,261,242
- ---------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 1,179,532,236 571,270,994
- ---------------------------------------------------------------------------------------------
End of period $1,822,262,549 $1,179,532,236
=============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $1,515,417,683 $ 958,373,243
- ---------------------------------------------------------------------------------------------
Undistributed net investment income 4,841,266 20,023,353
- ---------------------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies, futures and option
contracts 20,111,337 4,957,057
- ---------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies, futures and option contracts 281,892,263 196,178,583
- ---------------------------------------------------------------------------------------------
$1,822,262,549 $1,179,532,236
=============================================================================================
</TABLE>
See Notes to Financial Statements.
18
<PAGE> 21
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
(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 three different classes of shares: Class A shares, Class B
shares and Class C shares. Class A shares are sold with a front-end sales
charge. Class B shares and Class C shares are sold with a contingent deferred
sales charge. Matters affecting each portfolio or class will be voted on
exclusively by the shareholders of such portfolio or class. The assets,
liabilities and operations of each portfolio are accounted for separately.
Information presented in these financial statements pertains only to the Fund.
The Fund's 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 preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies followed by the Fund
in the preparation of its financial statements.
A. Security Valuations -- 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 previously followed the accounting practice known as
equalization by which a portion of the proceeds from sales and 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
net income when the transaction is recorded so that the undistributed net
investment income per share is unaffected by sales or redemptions of Fund
shares. Effective January 1, 1998, the Fund discontinued equalization
accounting and reclassified the cumulative equalization credits of
$18,340,733 from undistributed net investment income to paid-in capital. This
change had no effect on the net assets, the results of operations or the net
asset value per share of the Fund.
F. Expenses -- Distribution and transfer agency expenses directly attributable
to a class of shares are charged to that class' operations. All other
expenses which are attributable to more than one class are allocated among
the classes.
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
19
<PAGE> 22
denominated in foreign currencies are translated into U.S. dollar amounts on
the respective dates of such transactions.
H. Foreign Currency Contracts -- A foreign currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a foreign currency contract to attempt to
minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency contract
for the purchase or sale of a security denominated in a foreign currency in
order to "lock in" the U.S. dollar price of that security. The Fund could be
exposed to risk if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably. Outstanding forward currency contracts at June 30, 1998 were as
follows:
CONTRACT TO UNREALIZED
SETTLEMENT --------------------------- APPRECIATION
DATE DELIVER RECEIVE VALUE (DEPRECIATION)
---------- ------------- ----------- ----------- --------------
08/04/98 AUD 6,170,000 $ 4,023,457 $ 3,833,853 $189,604
09/22/98 AUD 5,030,000 3,052,204 3,127,151 (74,947)
07/27/98 GBP 1,800,000 2,983,320 3,002,724 (19,404)
08/04/98 NZD 9,000,000 4,959,000 4,672,087 286,913
----------- ----------- --------
$15,017,981 $14,635,815 $382,166
=========== =========== ========
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.
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, 1998, AIM
was reimbursed $45,792 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, 1998, AFS
was paid $611,917 for such services.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B and Class C shares of the Fund. The Trust has adopted
distribution plans pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Class A shares and Class C shares (the "Class A and C Plan"), and the
Fund's Class B shares (the "Class B Plan") (collectively, the "Plans"). The
Fund, pursuant to the Class A and C Plan, pays AIM Distributors compensation at
an annual rate of 0.25% of the average daily net assets of the Class A shares
and 1.00% of the average daily net assets of the Class C shares. The Fund
pursuant to the Class B Plan, pays AIM Distributors compensation at an annual
rate of 1.00% of the average daily net assets of the Class B shares. Of these
amounts, the Fund may pay a service fee of 0.25% of the average daily net assets
of the Class A, Class B or Class C shares to selected dealers and financial
institutions who furnish continuing personal shareholder services to their
customers who purchase and own the appropriate class of shares of the Fund. Any
amounts not paid as a service fee under the Plans would constitute an
asset-based sales charge. The Plans also impose a cap on the total sales
charges, including asset-based sales charges that may be paid by the
20
<PAGE> 23
respective classes. During the six months ended June 30, 1998, the Class A,
Class B and Class C shares paid AIM Distributors $1,073,499, $3,060,387 and
$163,548, respectively, as compensation under the Plans.
AIM Distributors received commissions of $658,398 from sales of the Class A
shares of the Fund during the six months ended June 30, 1998. 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,
1998, AIM Distributors received $51,963 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, 1998, the Fund paid legal fees of $10,889
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
During the six months ended June 30, 1998, the Fund received reductions in
transfer agency fees from AFS (an affiliate of AIM) and reductions in custodian
fees of $9,051 and $8,768, respectively under expense offset arrangements. The
effect of the above arrangements resulted in a reduction of the Fund's total
expenses of $17,819 during the six months ended June 30, 1998.
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) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. 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 May 1, 1998, the Fund was limited
to borrowing up to the lesser of (i) $500,000,000 or (ii) the limits set by its
prospectus for borrowings. During the six months ended June 30, 1998, 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, 1998 was
$791,711,530 and $263,205,220, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of June 30, 1998 is as follows:
Aggregate unrealized appreciation of
investment securities $314,621,354
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (33,139,696)
- ---------------------------------------------------------
Net unrealized appreciation of investment
securities $281,481,658
=========================================================
Cost of investments for tax purposes is $1,529,361,260.
NOTE 7-CALL OPTION CONTRACTS WRITTEN
Transactions in call options written during the six months ended June 30, 1998
are summarized as follows:
CALL OPTION CONTRACTS
------------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- --------
Beginning of period 500 $ 101,622
- ---------------------------------------------------------
Written 7,074 1,673,292
- ---------------------------------------------------------
Closed (3,582) (987,685)
- ---------------------------------------------------------
Exercised (2,442) (487,114)
- ---------------------------------------------------------
Expired (950) (109,621)
- ---------------------------------------------------------
End of period 600 $ 190,494
=========================================================
Open call option contracts written at June 30, 1998 were as follows:
<TABLE>
<CAPTION>
JUNE 30,
NUMBER 1998 UNREALIZED
CONTRACT STRIKE OF PREMIUM MARKET APPRECIATION
ISSUE MONTH PRICE CONTRACTS RECEIVED VALUE (DEPRECIATION)
----- -------- ------ --------- -------- -------- --------------
<S> <C> <C> <C> <C> <C> <C>
Walt Disney Co. (The) July 115 400 $96,297 $ 32,500 $ 63,797
Warner-Lambert Co. Oct. 65 200 94,197 165,000 (70,803)
--- -------- -------- --------
600 $190,494 $197,500 $ (7,006)
=== ======== ======== ========
</TABLE>
NOTE 8-SHARE INFORMATION
Changes in shares outstanding during the six months ended June 30, 1998 and the
year ended December 31, 1997 were as follows:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Sold:
Class A 13,758,982 $ 373,083,320 16,304,170 $ 379,544,296
- ------------------------------------------------------------------------------
Class B 8,923,473 241,980,639 8,995,999 214,419,729
- ------------------------------------------------------------------------------
Class C* 2,276,226 62,096,440 363,376 9,356,324
- ------------------------------------------------------------------------------
Issued as reinvestment
of dividends:
Class A 317,114 8,578,939 1,215,553 29,691,206
- ------------------------------------------------------------------------------
Class B 145,050 3,918,256 710,951 17,509,949
- ------------------------------------------------------------------------------
Class C* 10,014 269,718 8,636 215,490
- ------------------------------------------------------------------------------
Reacquired:
Class A (4,251,398) (115,723,999) (6,305,229) (148,858,725)
- ------------------------------------------------------------------------------
Class B (1,216,586) (32,969,737) (1,668,675) (39,766,532)
- ------------------------------------------------------------------------------
Class C* (92,721) (2,529,869) (7,321) (191,434)
- ------------------------------------------------------------------------------
19,870,154 $ 538,703,707 19,617,460 $ 461,920,303
==============================================================================
* Class C shares commenced sales on August 4, 1997.
</TABLE>
21
<PAGE> 24
NOTE 9-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A outstanding
during the six months ended June 30, 1998, each of the years in the four-year
period ended December 31, 1997; the four months ended December 31, 1993 and the
year ended August 31, 1993; for a share of Class B outstanding during the six
months ended June 30, 1998, each of the years in the four-year period ended
December 31, 1997 and the period October 18, 1993 (date sales commenced) through
December 31, 1993 and for a share of Class C outstanding during the six months
ended June 30, 1998 and the period August 4, 1997 (date sales commenced) through
December 31, 1997. Prior to October 15, 1993, the Fund was known as AIM
Convertible Securities, Inc. and had a different investment objective.
<TABLE>
<CAPTION>
CLASS A
----------------------------------------------------------------------------------
DECEMBER 31,
JUNE 30, ----------------------------------------------------- AUGUST 31,
1998 1997 1996 1995 1994 1993 1993
---------- -------- -------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 25.78 $ 21.84 $ 19.22 $ 14.62 $ 16.10 $ 15.97 $ 12.77
- --------------------------------------------- ---------- -------- -------- ------- ------- ------- -------
Income from investment operations:
Net investment income 0.32 0.60 0.66 0.49 0.44 0.10 0.32
- --------------------------------------------- ---------- -------- -------- ------- ------- ------- -------
Net gains (losses) on securities (both
realized and unrealized) 1.95 4.66 2.99 4.57 (1.31) 0.18 3.18
- --------------------------------------------- ---------- -------- -------- ------- ------- ------- -------
Total from investment operations 2.27 5.26 3.65 5.06 (0.87) 0.28 3.50
- --------------------------------------------- ---------- -------- -------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income (0.28) (0.55) (0.55) (0.46) (0.39) (0.15) (0.30)
- --------------------------------------------- ---------- -------- -------- ------- ------- ------- -------
Distributions from net realized gains -- (0.77) (0.48) -- (0.22) -- --
- --------------------------------------------- ---------- -------- -------- ------- ------- ------- -------
Total distributions (0.28) (1.32) (1.03) (0.46) (0.61) (0.15) (0.30)
- --------------------------------------------- ---------- -------- -------- ------- ------- ------- -------
Net asset value, end of period $ 27.77 $ 25.78 $ 21.84 $ 19.22 $ 14.62 $ 16.10 $ 15.97
============================================= ========== ======== ======== ======= ======= ======= =======
Total return(b) 8.84% 24.41% 19.25% 34.97% (5.44)% 1.76% 27.75%
============================================= ========== ======== ======== ======= ======= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,009,393 $683,633 $334,189 $92,241 $37,572 $23,520 $19,497
============================================= ========== ======== ======== ======= ======= ======= =======
Ratio of expenses to average net assets 0.99%(b) 0.98% 1.15% 1.43%(c) 1.25%(c) 2.17%(e) 2.07%
============================================= ========== ======== ======== ======= ======= ======= =======
Ratio of net investment income to average net
assets 2.59%(b) 2.48% 2.97% 2.81%(d) 3.07%(d) 1.81%(e) 2.23%
============================================= ========== ======== ======== ======= ======= ======= =======
Portfolio turnover rate 18% 66% 72% 77% 76% 233% 154%
============================================= ========== ======== ======== ======= ======= ======= =======
Average brokerage commission rate paid(f) $ 0.0526 $ 0.0570 $ 0.0558 N/A N/A N/A N/A
============================================= ========== ======== ======== ======= ======= ======= =======
</TABLE>
(a) Does not deduct sales charges and is not annualized for
periods less than one year.
(b) Ratios are annualized and based on average net assets of
$865,916,206.
(c) 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.
(d) 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.
(e) Annualized.
(f) The average commission rate paid is the total brokerage
commissions paid on applicable purchases and sales of
securities for the period divided by the total number of
related shares purchased and sold, which is required to be
disclosed for fiscal years beginning September 1, 1995 and
thereafter.
22
<PAGE> 25
NOTE 9-FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
CLASS B
--------------------------------------------------------------------------
DECEMBER 31,
JUNE 30, -------------------------------------------------------------
1998 1997 1996 1995 1994 1993
-------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 25.75 $ 21.83 $ 19.22 $ 14.62 $ 16.11 $ 16.69
- ------------------------------------------- -------- -------- -------- ------- ------- -------
Income from investment operations:
Net investment income 0.22 0.38 0.48 0.31 0.31 0.04
- ------------------------------------------- -------- -------- -------- ------- ------- -------
Net gains (losses) on securities (both
realized and unrealized) 1.95 4.68 2.99 4.61 (1.31) (0.58)
- ------------------------------------------- -------- -------- -------- ------- ------- -------
Total from investment operations 2.17 5.06 3.47 4.92 (1.00) (0.54)
- ------------------------------------------- -------- -------- -------- ------- ------- -------
Less distributions:
Dividends from net investment income (0.18) (0.37) (0.38) (0.32) (0.27) (0.04)
- ------------------------------------------- -------- -------- -------- ------- ------- -------
Distributions from net realized gains -- (0.77) (0.48) -- (0.22) --
- ------------------------------------------- -------- -------- -------- ------- ------- -------
Total distributions (0.18) (1.14) (0.86) (0.32) (0.49) (0.04)
- ------------------------------------------- -------- -------- -------- ------- ------- -------
Net asset value, end of period $ 27.74 $ 25.75 $ 21.83 $ 19.22 $ 14.62 $ 16.11
=========================================== ======== ======== ======== ======= ======= =======
Total return(b) 8.45% 23.42% 18.28% 33.93% (6.23)% (3.23)%
=========================================== ======== ======== ======== ======= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $741,876 $486,506 $237,082 $72,634 $20,245 $ 2,754
=========================================== ======== ======== ======== ======= ======= =======
Ratio of expenses to average net assets 1.74%(c) 1.79% 1.97% 2.21%(d) 1.98%(d) 2.83%(f)
=========================================== ======== ======== ======== ======= ======= =======
Ratio of net investment income to average
net assets 1.83%(c) 1.67% 2.15% 2.03%(e) 2.34%(e) 1.15%(f)
=========================================== ======== ======== ======== ======= ======= =======
Portfolio turnover rate 18% 66% 72% 77% 76% 233%
=========================================== ======== ======== ======== ======= ======= =======
Average brokerage commission rate paid(g) $ 0.0526 $ 0.0570 $ 0.0558 N/A N/A N/A
=========================================== ======== ======== ======== ======= ======= =======
<CAPTION>
CLASS C
--------------------------
JUNE 30, DECEMBER 31,
1998 1997
-------- ------------
<S> <C> <C>
Net asset value, beginning of period $ 25.76 $ 25.55
- ------------------------------------------- ------- -------
Income from investment operations:
Net investment income 0.19(a) 0.16
- ------------------------------------------- ------- -------
Net gains (losses) on securities (both
realized and unrealized) 1.98 1.01
- ------------------------------------------- ------- -------
Total from investment operations 2.17 1.17
- ------------------------------------------- ------- -------
Less distributions:
Dividends from net investment income (0.18) (0.19)
- ------------------------------------------- ------- -------
Distributions from net realized gains -- (0.77)
- ------------------------------------------- ------- -------
Total distributions (0.18) (0.96)
- ------------------------------------------- ------- -------
Net asset value, end of period $ 27.75 $ 25.76
=========================================== ======= =======
Total return(b) 8.44% 4.67%
=========================================== ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $70,993 $ 9,394
=========================================== ======= =======
Ratio of expenses to average net assets 1.74%(c) 1.78%(f)
=========================================== ======= =======
Ratio of net investment income to average
net assets 1.85%(c) 1.68%(f)
=========================================== ======= =======
Portfolio turnover rate 18% 66%
=========================================== ======= =======
Average brokerage commission rate paid(g) $0.0526 $0.0570
=========================================== ======= =======
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct contingent deferred sales charges and is not
annualized for periods less than one year.
(c) Ratios are annualized and based on average net assets of
$617,149,824 and $32,980,761 for Class B and Class C,
respectively.
(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) The average commission rate paid is the total brokerage
commissions paid on applicable purchases and sales of
securities for the period divided by the total number of
related shares purchased and sold, which is required to be
disclosed for fiscal years beginning September 1, 1995 and
thereafter.
23
<PAGE> 26
Trustees & Officers
<TABLE>
<CAPTION>
BOARD OF TRUSTEES OFFICERS OFFICE OF THE FUND
<S> <C> <C>
Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
Chairman Chairman Suite 100
A I M Management Group Inc. Houston, TX 77046
Robert H. Graham
Bruce L. Crockett President INVESTMENT ADVISOR
Director
ACE Limited; John J. Arthur A I M Advisors, Inc.
Formerly Director, President, and Senior Vice President and Treasurer 11 Greenway Plaza
Chief Executive Officer Suite 100
COMSAT Corporation Carol F. Relihan Houston, TX 77046
Senior Vice President and Secretary
Owen Daly II TRANSFER AGENT
Director Gary T. Crum
Cortland Trust Inc. Senior Vice President A I M Fund Services, Inc.
P.O. Box 4739
Edward K. Dunn Jr. Dana R. Sutton Houston, TX 77210-4739
Chairman, Mercantile Mortgage Corp.; Vice President and Assistant Treasurer
Formerly Vice Chairman and President, CUSTODIAN
Mercantile-Safe Deposit & Trust Co.; and Robert G. Alley
President, Mercantile Bankshares Vice President State Street Bank and Trust Company
225 Franklin Street
Jack Fields Stuart W. Coco Boston, MA 02110
Chief Executive Officer Vice President
Texana Global, Inc.; COUNSEL TO THE FUND
Formerly Member Melville B. Cox
of the U.S. House of Representatives Vice President Ballard Spahr
Andrews & Ingersoll, LLP
Carl Frischling Karen Dunn Kelley 1735 Market Street
Partner Vice President Philadelphia, PA 19103
Kramer, Levin, Naftalis & Frankel
Jonathan C. Schoolar COUNSEL TO THE TRUSTEES
Robert H. Graham Vice President
President and Chief Executive Officer Kramer, Levin, Naftalis & Frankel
A I M Management Group Inc. Renee A. Friedli 919 Third Avenue
Assistant Secretary New York, NY 10022
Lewis F. Pennock
Attorney P. Michelle Grace DISTRIBUTOR
Assistant Secretary
Ian W. Robinson A I M Distributors, Inc.
Consultant; Formerly Executive Jeffrey H. Kupor 11 Greenway Plaza
Vice President and Assistant Secretary Suite 100
Chief Financial Officer Houston, TX 77046
Bell Atlantic Management Nancy L. Martin
Services, Inc. Assistant Secretary
Louis S. Sklar Ofelia M. Mayo
Executive Vice President Assistant Secretary
Hines Interests
Limited Partnership Lisa A. Moss
Assistant Secretary
Kathleen J. Pflueger
Assistant Secretary
Samuel D. Sirko
Assistant Secretary
Stephen I. Winer
Assistant Secretary
Mary J. Benson
Assistant Treasurer
</TABLE>
24
<PAGE> 27
HOW AIM MAKES INVESTING
EASY FOR YOU
o LOW INITIAL INVESTMENT. You can get your investment program started for as
little as $500. Subsequent investments can be made for only $50.
o AUTOMATIC REINVESTMENT OF DIVIDENDS AND/OR CAPITAL GAINS. Distributions may
be received in cash or reinvested in the Fund free of charge. Over time, the
power of compounding can significantly increase the value of your assets.
o AUTOMATIC INVESTMENT PLAN. You may build your investment by regularly
purchasing additional shares. Pre-authorized checks for $50 or more can be
drafted monthly from your personal checking account.
o EASY ACCESS TO YOUR MONEY. Your shares may be redeemed at net asset value
any day the New York Stock Exchange is open. The price of shares sold may be
more or less than their original cost, depending on market conditions.
o SYSTEMATIC WITHDRAWAL PLAN. You may elect to receive checks of at least $50
monthly or quarterly through a systematic withdrawal plan.
o EXCHANGE PRIVILEGE. As your goals change, you may exchange all or part of
your assets for those of other funds within the same share class of The AIM
Family of Funds(R). The exchange privilege may be modified or discontinued
for any of the AIM funds. Certain restrictions apply.
o RETIREMENT PLANS. You may purchase shares of the fund for your Individual
Retirement Account (IRA) or any other type of retirement plan, and earn
tax-deferred dollars for your retirement.
o TOLL-FREE ACCESS. Current shareholders can call our AIM Investor Line at
800-246-5463 for 24-hour-a-day account information. Or, of course, you may
contact your financial consultant for assistance.
o WWW.AIMFUNDS.COM. As a current shareholder, you can check account balances
24 hours a day over the Internet. State-of-the-art encryption lets you send
us questions that include confidential information without the fear of
eavesdropping, tampering, or forgery.
----------------
Current shareholders
can call our
AIM Investor Line at
800-246-5463
for 24-hour-a-day
account information.
----------------
<PAGE> 28
THE AIM FAMILY OF FUNDS--Registered Trademark--
<TABLE>
<S> <C> <C>
GROWTH FUNDS INTERNATIONAL GROWTH FUNDS
AIM Aggressive Growth Fund(1) AIM Advisor International Value Fund
AIM Blue Chip Fund AIM Asian Growth Fund
AIM Capital Development Fund AIM Developing Markets Fund(2)
AIM Constellation Fund AIM Emerging Markets Fund(2)
AIM Mid Cap Growth Fund(2) AIM Europe Growth Fund(2)
[PHOTO OF AIM Select Growth Fund(3) AIM European Development Fund
11 GREENWAY PLAZA AIM Small Cap Equity Fund(2) AIM International Equity Fund
APPEARS HERE] AIM Small Cap Opportunities Fund AIM International Growth Fund(2)
AIM Value Fund AIM Japan Growth Fund(2)
AIM Weingarten Fund AIM Latin American Growth Fund(2)
AIM New Pacific Growth Fund(2)
GROWTH & INCOME FUNDS
GLOBAL GROWTH FUNDS
AIM Advisor Flex Fund
AIM Advisor Large Cap Value Fund AIM Global Aggressive Growth Fund
AIM Advisor MultiFlex Fund AIM Global Growth Fund
AIM Advisor Real Estate Fund AIM Worldwide Growth Fund(2)
AIM America Value Fund(2)
AIM Balanced Fund GLOBAL GROWTH & INCOME FUNDS
AIM Charter Fund
AIM Global Growth & Income Fund(2)
INCOME FUNDS AIM Global Utilities Fund
AIM Floating Rate Fund(2) GLOBAL INCOME FUNDS
AIM High Yield Fund
AIM Income Fund AIM Global Government Income Fund(2)
AIM Intermediate Government Fund AIM Global High Income Fund(2)
AIM Limited Maturity Treasury Fund AIM Global Income Fund
AIM Strategic Income Fund(2)
TAX-FREE INCOME FUNDS
THEME FUNDS
AIM High Income Municipal Fund
AIM Municipal Bond Fund AIM Global Consumer Products and Services Fund(2)
AIM Tax-Exempt Bond Fund of Connecticut AIM Global Financial Services Fund(2)
AIM Tax-Free Intermediate Fund AIM Global Health Care Fund(2)
AIM Global Infrastructure Fund(2)
MONEY MARKET FUNDS AIM Global Resources Fund(2)
AIM Global Telecommunications Fund(2)
AIM Dollar Fund(2) AIM New Dimension Fund(2)
AIM Money Market Fund
AIM Tax-Exempt Cash Fund
</TABLE>
(1)AIM Aggressive Growth Fund was closed to new investors on June 5, 1997.
(2)Effective May 29, 1998, A I M Advisors, Inc. became advisor to the former GT
Global Funds. (3)On May 1, 1998, AIM Growth Fund was renamed AIM Select Growth
Fund. For more complete information about any AIM Fund(s), including sales
charges and expenses, ask your financial consultant or securities dealer for a
free prospectus(es). Please read the prospectus(es) carefully before you invest
or send money.
A I M Management Group Inc. has provided leadership in the mutual fund industry
since 1976 and managed approximately $101 billion in assets for more than 5.2
million shareholders, including individual investors, corporate clients, and
financial institutions, as of June 30, 1998. The AIM Family of Funds(R) is
distributed nationwide, and AIM today is the ninth-largest mutual fund complex
in the U.S. in assets under management, according to Strategic Insight, an
independent mutual fund monitor.
INVEST WITH DISCIPLINE-SM-
