<PAGE> 1
SEMIANNUAL REPORT / JUNE 30 1999
AIM BALANCED FUND
[COVER IMAGE]
[AIM LOGO APPEARS HERE]
<PAGE> 2
[COVER IMAGE]
-------------------------------------
TWO BLUE DANCERS
BY EDGAR DEGAS (1834-1917, FRENCH)
IN EVERY ART FORM, WHETHER DANCE OR INVESTING, DISCIPLINE
AND DEDICATION ARE PARAMOUNT FOR SUCCESS. AT AIM WE
CONTINUALLY STRIVE FOR EXCELLENCE BY ADHERING TO A UNIQUELY
DISCIPLINED INVESTMENT STYLE.
-------------------------------------
AIM Balanced Fund is 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 performance figures are historical and reflect
reinvestment of all distributions and changes in net asset value.
o When sales charges are included in performance figures, Class A share
performance reflects the maximum 4.75% sales charge, and Class B and Class C
share performance reflects the applicable contingent deferred sales charge
(CDSC) for the period involved. The CDSC on Class B shares declines from 5%
beginning at the time of purchase to 0% at the beginning of the seventh
year. The CDSC on Class C shares is 1% for the first year after purchase.
The performance of the fund's Class B and Class C shares will differ from
that of Class A shares due to differences in sales charge structure and
expenses.
o Had fees and expenses not been waived in the past, returns for Class A
shares would have been lower.
o The fund's investment return and principal value will fluctuate, so an
investor's shares, when redeemed, may be worth more or less than their
original cost.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o The Dow Jones Industrial Average (the Dow) is a price-weighted average of 30
actively traded primarily industrial stocks.
o The Nasdaq (National Association of Securities Dealers Automated Quotation
system) Composite Index is a market-value-weighted index comprising all
Nasdaq domestic and non-U.S. based common stocks listed on the Nasdaq Stock
Market. It includes more than 5,000 companies and is often considered
representative of the small and medium-size company stock universe. While
it includes many small and mid-sized company stocks, large-capitalization
technology companies tend to dominate the Nasdaq Index.
o The Standard & Poor's Composite of 500 Stocks (S&P 500) is a group of
unmanaged securities widely regarded by investors to be representative of
the stock market in general.
o The Lipper Balanced Funds Index is a net-asset-value-weighted index of the
30 largest funds within the balanced fund investment objective. It is
calculated daily with adjustments for distributions as of the ex-dividend
dates. It is compiled by Lipper, Inc., an independent mutual-fund
performance monitor.
o An investment cannot be made in any index listed. Unless otherwise
indicated, index results include reinvested dividends and do not reflect
sales charges.
MARKET VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFOR-
MANCE. RESULTS OF AN INVESTMENT MADE TODAY MAY DIFFER
SUBSTANTIALLY FROM THE HISTORICAL PERFORMANCE SHOWN.
AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OF A BANK AND IS
NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENT AGENCY. THERE IS A RISK
THAT YOU COULD LOSE SOME OR ALL OF YOUR MONEY.
This report may be distributed only to current shareholders or to persons
who have received a current prospectus of the fund.
AIM BALANCED FUND
<PAGE> 3
SEMIANNUAL REPORT / CHAIRMAN'S LETTER
Dear Fellow Shareholder:
With only several months remaining in 1999, the question on
[PHOTO OF many of your minds may be, "How will the year 2000 computer
Charles T. issue affect AIM and my investments?" We would like you to
Bauer, feel comfortable. We are pleased to be able to report to you
Chairman of that as of June 1999 we achieved a major milestone toward
the Board of year 2000 compliance status: we have successfully completed
THE FUND the testing of all of our mission-critical systems.
APPEARS HERE] Earlier this year, AIM participated in an industrywide
test that gave us a chance to see how our technology systems
might be affected by the changeover to the year 2000 (Y2K).
Everything went as well as we had hoped; in general, the
industry sailed through the testing process with flying
colors. The financial industry has been seen as a leader in
planning for year 2000 concerns. Thus, it was no surprise to
most participants that the test was an overwhelming success.
The general purpose of the process was to test
electronic interfaces among financial industry members in the United States and
to follow transactions through a typical trading cycle--from order entry to the
settlement process. Investment banks, broker-dealers, custodian banks and mutual
fund companies all worked together to make this possible. Approximately 400
firms were involved in the testing; AIM was one of 70 asset managers.
During the testing process, thousands of transactions were submitted and
approximately 260,000 steps were tested. Of those, only a handful experienced
minor glitches--just 0.02% of the total number of transactions. All problems
were worked through quickly before the hypothetical trades were settled. Of
course, AIM will keep testing and planning throughout 1999 as a precaution.
AIM'S INTERNAL EFFORTS CONTINUE
As you know from our previous communications to you, AIM has been addressing the
year 2000 issue for several years. Now that we have finished adjusting our
applications and systems, our focus for the rest of 1999 is to continue
monitoring the year 2000 readiness status of outside sources we're linked to
electronically. On the investment side, our portfolio management staff is
continually evaluating the Y2K preparedness of the domestic and foreign
companies in which we invest.
We feel that our preparations for 2000 are very comprehensive, and the
industrywide testing showed that our colleagues in the financial industry are
also working hard to be ready for the new year. We do not think shareholders
need to take any extraordinary measures with their investments to prepare for
2000. However, if you have any lingering concerns, it may reassure you to know
that AIM is finalizing contingency plans that will be ready if necessary. Our
plans will give AIM employees guidelines to follow for a wide variety of
situations.
For a more comprehensive discussion of our Y2K efforts and for periodic
updates, please visit our Web site, www.aimfunds.com.
We are pleased to send you this report covering your fund's performance over
the last six months. If you have any questions or comments, please contact our
Client Services department at 800-959-4246, or e-mail your inquiry to us at
[email protected]. You can access information about your account through our
automated AIM Investor Line at 800-246-5463 or at our Web site.
Thank you for your continued participation in The AIM Family of
Funds--Registered Trademark--. We appreciate your business.
Sincerely,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
AIM Advisors, Inc.
PLEASE NOTE THAT THE INFORMATION ABOUT THE YEAR 2000 IN THIS LETTER IS DEEMED
AIM'S YEAR 2000 READINESS DISCLOSURE.
-------------------------------------
THE FINANCIAL INDUSTRY
HAS BEEN SEEN AS A
LEADER IN PLANNING FOR
YEAR 2000 CONCERNS.
-------------------------------------
AIM BALANCED FUND
<PAGE> 4
SEMIANNUAL REPORT / MANAGERS' OVERVIEW
AIM BALANCED FUND BENEFITS
FROM BROADER MARKET
HOW DID AIM BALANCED FUND PERFORM DURING THE REPORTING PERIOD?
For the six-month reporting period ended June 30, 1999, cumulative total return
was a solid 5.02% for Class A shares, 4.61% for Class B shares and 4.60% for
Class C shares. These returns are computed at net asset value, that is, without
the effect of sales charges.
The fund's long-term performance continued to compare favorably to its
peers. For the 10-year period ended June 30, 1999, AIM Balanced Fund's class A
shares were the top-performing share class in the balanced fund category
monitored by Lipper, Inc. In addition, the fund's Class A shares' 5-year and
3-year returns were in the top 11% and 33% of the Lipper balanced fund universe,
respectively.
Fund flows remained strong during the reporting period, with net assets
under management growing from $2.33 billion on December 31, 1998 to $2.67
billion on June 30.
WHAT WERE THE MAJOR TRENDS IN THE FINANCIAL MARKETS?
U.S. equity markets regained their momentum in the first half of 1999 as major
market indexes--the Dow, S&P 500 and Nasdaq--reached record highs. During the
first quarter of 1999, the broadening of strong earnings across all market-cap
sectors sparked investor interest in mid- and small-sized companies. The
recovery also extended to a wide range of industries that had suffered during
the market narrowness of the last few years. As a result of this dramatic shift
in market sentiment, traditional large-cap growth stocks were no longer the
dominant market drivers at the reporting period's end.
Bond performance during the reporting period was generally disappointing,
stemming from heightened concerns regarding the Federal Reserve Board's (the
Fed) move to raise interest rates. This uncertainty eroded bond prices in May
and June, sending their yields higher.
On June 30, the Fed raised the federal funds rate from 4.75% to 5%, but
returned to a neutral rate policy. The latter decision, signaling that rate
increases were unlikely in the near future, sparked a "relief rally" in both the
stock and bond markets.
WHAT FACTORS CONTRIBUTED TO THE FUND'S STRONG GAINS?
Unlike most of its peers, which invest solely in large-cap companies, AIM
Balanced Fund has a flexible structure and invests across all market-cap
sectors. This flexibility proved especially beneficial during the reporting
period, as market performance broadened to include smaller companies. As of June
30, the fund had approximately two-thirds of its equity holdings in large-cap
companies. The balance was invested in mid- and small-cap firms.
The fund's stock portion surged ahead in early 1999, led by favorable
holdings in technology companies and telephone and telecommunications firms. On
the
LIPPER RANKINGS
As of 6/30/99
================================================================================
AIM BALANCED FUND
CLASS A SHARES
RANK VS. PERCENTILE
PERIOD FUND CATEGORY RANK
10 Years 1 of 58 2%
5 Years 20 of 182 11%
3 Years 98 of 304 33%
Fund percentage rankings are vs. all funds in its category tracked by Lipper,
Inc., excluding sales charges and including fees and expenses.
================================================================================
================================================================================
RESULTS OF A $10,000 INVESTMENT
6/30/89-6/30/99
- --------------------------------------------------------------------------------
[BAR CHART]
FUND CLASS A SHARES $39,872
LIPPER BALANCED FUNDS INDEX $33,287
Past performance is no guarantee of comparable future results. Fund performance
includes sales charges, expenses and management fees.
================================================================================
================================================================================
AVERAGE ANNUAL TOTAL RETURNS
As of 6/30/99, including sales charges
CLASS A SHARES
10 Years 14.83%
5 Years 17.74
1 Year 3.38
CLASS B SHARES
Since Inception (10/18/93) 13.52%
5 Years 17.72
1 Year 2.58
CLASS C SHARES
Since Inception (8/4/97) 11.10%
1 Year 6.65
================================================================================
See important fund and index disclosures inside front cover.
AIM BALANCED FUND
2
<PAGE> 5
SEMIANNUAL REPORT / MANAGERS' OVERVIEW
PORTFOLIO COMPOSITION
As of 6/30/99, based on total net assets
================================================================================
TOP 10 EQUITY HOLDINGS TOP 10 FIXED-INCOME HOLDINGS
- --------------------------------------------------------------------------------
1. America Online, Inc. 1.41% 1. U.S. Treasury Securities 8.87%
2. Lucent Technologies, Inc. 1.30 2. U.S. Government Agency 2.73
Securities
3. VISX Inc. 0.89 3. Comverse Technology, Inc. 0.49
4. Cisco Systems, Inc. 0.82 4. Merrill Lynch & Co. 0.45
5. Nokia Oyj A.B.-Class A-ADR 0.75 5. International Bank for 0.43
Reconstruction and
Development (The)
6. Univision Communications, Inc. 0.75 6. Time Warner, Inc. 0.43
7. Qwest Communications 0.74 7. Treuhandanstalt 0.42
International, Inc.
8. Microsoft Corp. 0.67 8. Florida Windstorm 0.41
9. Hispanic Broadcasting Corp. 0.65 9. Exodus Communications, Inc. 0.40
10. Chase Manhattan Corp. (The) 0.65 10. Global Telesystems Group 0.39
The fund's portfolio is subject to change, and there is no assurance that the
fund will continue to hold any particular security.
===============================================================================
equity side, the fund's top sector holdings were technology, health care,
and financials.
THE TECHNOLOGY SECTOR EXPERIENCED SOME VOLATILITY IN EARLY 1999. WHAT TYPES OF
TECHNOLOGY COMPANIES DOES THE FUND OWN?
The majority of the fund's technology holdings are high-quality, dominant
brand-name firms. Companies such as America Online, Lucent Technologies and
Cisco Systems continued to weather the sector's volatility due to their large
size, which has become a strategic weapon in this sector. Larger technology
companies have more money to spend on research and development, which in turn
drives further technological advancement. In this sector, being small- or
mid-cap may not necessarily be an advantage. Having money to spend on research
and development and the ability to provide global reach to customers have become
the main thrusts behind a technology business' success.
WHAT TYPES OF FIXED-INCOME HOLDINGS ARE IN THE FUND'S PORTFOLIO?
On the fixed-income side, we continued to keep to an intermediate maturity
structure that is less sensitive to interest-rate changes. The average quality
rating of bonds in the fund's portfolio remained A. We invest mainly in
higher-quality, shorter-maturity bonds, such as U.S. government issues and
investment-grade corporate bonds.
During the reporting period, we increased our holdings of corporate bonds in
an attempt to capture more yield as the yield spread between U.S. Treasuries and
corporate bonds widened at the end of 1998. As of June 30, corporate bonds
represented 33.11% of total net assets, while Treasuries accounted for 8.87%.
The average maturity of the fund's bond portion was approximately 12 years: this
is slightly longer than in the past because we were trying to obtain higher
returns on these bonds by moving up the maturity curve. However, as interest
rates started to increase toward the end of the reporting period, we began to
shorten the maturity on the fund's fixed-income holdings. We also held
approximately 3.62% of total net assets in convertible bonds on June 30.
WHAT ARE CONVERTIBLE BONDS? HOW DO THEY FIT INTO THE FUND'S INVESTMENT STRATEGY?
Convertible bonds are corporate bonds that may be exchanged for a fixed number
of shares of the issuing company's common stock. Convertibles fit the theme for
AIM Balanced Fund since they contain both an equity and a fixed-income
component. They offer the relative safety of the fixed-income market and the
potential appreciation of the equity market. As with all holdings, we follow
AIM's earnings-momentum model in making decisions regarding convertible bonds.
When earnings for the issuing company increase, we generally convert the bonds
to capture all the returns of the underlying stocks. We use convertibles as a
way to reduce volatility with investments in the small- and mid-cap sectors.
WHAT IS YOUR OUTLOOK FOR THE REMAINDER OF 1999?
Equity performance remains strong as corporations across all
market-capitalization sectors continue to post solid earning reports. At the
same time, several current economic forces are favorable for bond performance:
modest inflationary pressures, full employment, income growth and capital
formation. To the extent that these factors remain in place through 1999, AIM
Balanced Fund should continue to meet its goals of competitive returns and
reduced volatility.
See important fund and index disclosures inside front cover.
AIM BALANCED FUND
3
<PAGE> 6
SCHEDULE OF INVESTMENTS
June 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
U.S. DOLLAR DENOMINATED
NON-CONVERTIBLE BONDS &
NOTES-24.76%
AGRICULTURAL PRODUCTS-0.06%
Cargill, Inc., Notes, 6.875%,
05/01/28 (Acquired 03/12/99;
Cost $1,846,337)(a) $ 1,850,000 $ 1,721,129
- ---------------------------------------------------------------
AIRLINES-1.14%
Airplanes Pass Through Trust,
Series D Gtd. Sub. Bonds,
10.875%, 03/15/19 500,000 481,822
- ---------------------------------------------------------------
America West Airlines, Inc., Pass
Through Ctfs., 6.86%, 07/02/04 4,799,996 4,751,948
- ---------------------------------------------------------------
American Airlines, Equipment
Trust Ctfs., 9.90%, 01/15/11 2,955,000 3,441,688
- ---------------------------------------------------------------
Delta Air Lines, Inc.,
Deb., 9.00%, 05/15/16 5,000,000 5,457,800
- ---------------------------------------------------------------
Deb., 10.375%, 12/15/22 2,300,000 2,857,382
- ---------------------------------------------------------------
Medium Term Notes, 8.52%,
01/30/04 2,000,000 2,109,240
- ---------------------------------------------------------------
Notes, 6.65%, 03/15/04 2,900,000 2,849,598
- ---------------------------------------------------------------
Northwest Airlines Corp., Pass
Through Ctfs., 7.248%, 07/02/14 4,594,232 4,353,701
- ---------------------------------------------------------------
United Air Lines, Inc., Pass
Through Ctfs., 9.56%, 10/19/18 3,750,000 4,204,125
- ---------------------------------------------------------------
30,507,304
- ---------------------------------------------------------------
AUTOMOBILES-0.52%
General Motors Acceptance Corp.,
Bonds, 6.15%, 04/05/07 9,400,000 9,008,537
- ---------------------------------------------------------------
General Motors Corp., Deb.,
8.80%, 03/01/21 400,000 455,816
- ---------------------------------------------------------------
Rocs Series CHR-1998-1,
Collateral Trust, 6.50%,
08/01/18 (Acquired 05/19/98;
Cost $4,829,145)(a) 4,878,171 4,542,260
- ---------------------------------------------------------------
14,006,613
- ---------------------------------------------------------------
BANKS (MAJOR REGIONAL)-0.37%
Dresdner Bank A.G. (Germany),
Sub. Bonds, 6.00%, 11/03/08 4,000,000 3,647,824
- ---------------------------------------------------------------
HSBC Holdings PLC (United
Kingdom), Sub. Notes, 7.50%,
07/15/09 1,050,000 1,061,739
- ---------------------------------------------------------------
Royal Bank of Canada (Canada),
Unsec. Yankee Sub. Notes,
6.75%, 10/24/11 3,000,000 3,004,230
- ---------------------------------------------------------------
Royal Bank of Scotland PLC
(Scotland), Yankee Sub. Notes,
6.375%, 02/01/11 1,500,000 1,417,425
- ---------------------------------------------------------------
Wachovia Corp., Sub. Notes,
6.375%, 02/01/09 800,000 767,952
- ---------------------------------------------------------------
9,899,170
- ---------------------------------------------------------------
BANKS (MONEY CENTER)-1.20%
Bank of America Corp., Unsec.
Sub. Notes, 7.125%, 03/01/09 4,250,000 4,267,297
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
BANKS (MONEY CENTER)-(CONTINUED)
Bankers Trust Corp., Unsec. Sub.
Notes, 7.50%, 11/15/15 $ 3,000,000 $ 2,941,470
- ---------------------------------------------------------------
Chase Manhattan Corp., Unsec.
Sub. Notes, 6.375%, 04/01/08 4,400,000 4,207,456
- ---------------------------------------------------------------
Deutsche Bank Financial, Unsec.
Gtd. Sub. Deb., 6.70%, 12/13/06 3,500,000 3,431,785
- ---------------------------------------------------------------
First Union Bancorp, Sub. Deb.,
7.50%, 04/15/35 4,600,000 4,732,986
- ---------------------------------------------------------------
First Union Corp., Sub. Notes,
6.375%, 01/15/09 800,000 762,232
- ---------------------------------------------------------------
International Bank for
Reconstruction and Development
(The), Deb., 8.25%, 09/01/16 9,800,000 11,604,866
- ---------------------------------------------------------------
31,948,092
- ---------------------------------------------------------------
BANKS (REGIONAL)-1.46%
HSBC USA, Inc., Unsec. Sub.
Notes, 7.00%, 11/01/06 7,400,000 7,320,080
- ---------------------------------------------------------------
Marshall & Ilsley Corp.-Series D,
Medium Term Notes, 6.43%,
10/15/02 4,000,000 4,003,800
- ---------------------------------------------------------------
Mercantile Bancorp, Inc.,
Sub. Notes, 6.375%, 01/15/04 700,000 688,471
- ---------------------------------------------------------------
Unsec. Sub. Notes, 7.30%,
06/15/07 9,140,000 9,253,610
- ---------------------------------------------------------------
Signet Banking Corp., Sub. Notes,
7.80%, 09/15/06 5,000,000 5,239,350
- ---------------------------------------------------------------
Swiss Bank Corp.-NY, Sub. Deb.,
7.375%, 07/15/15 5,000,000 4,911,450
- ---------------------------------------------------------------
US Bancorp, Sub. Deb., 7.50%,
06/01/26 7,500,000 7,664,775
- ---------------------------------------------------------------
39,081,536
- ---------------------------------------------------------------
BEVERAGES (NON-ALCOHOLIC)-0.06%
Coca-Cola Enterprises, Inc.,
Putable Notes, 8.35%,
06/20/20(b) 7,500,000 1,658,625
- ---------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO &
CABLE)-1.02%
Comcast Cable Communications,
Notes, 8.50%, 05/01/27 3,400,000 3,790,694
- ---------------------------------------------------------------
Unsec. Unsub. Notes, 6.20%,
11/15/08 2,750,000 2,565,942
- ---------------------------------------------------------------
CSC Holdings, Inc.,
Sr. Unsec. Deb., 7.875%,
02/15/18 1,420,000 1,378,280
- ---------------------------------------------------------------
Sr. Unsec. Deb., 7.625%,
07/15/18 3,100,000 2,934,398
- ---------------------------------------------------------------
Sr. Unsec. Notes, 7.875%,
12/15/07 4,400,000 4,433,088
- ---------------------------------------------------------------
TCI Communications, Inc., Sr.
Notes, 8.00%, 08/01/05 6,500,000 6,879,730
- ---------------------------------------------------------------
USA Networks, Inc., Sr. Unsec.
Gtd. Notes, 6.75%, 11/15/05 5,600,000 5,380,721
- ---------------------------------------------------------------
27,362,853
- ---------------------------------------------------------------
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
CHEMICALS-0.69%
Airgas, Inc., Medium Term Notes,
7.14%, 03/08/04 $ 6,700,000 $ 6,439,504
- ---------------------------------------------------------------
Nova Gas Transmission Ltd.
(Canada), Yankee Deb., 8.50%,
12/15/12 5,015,000 5,577,081
- ---------------------------------------------------------------
Union Carbide Corp., Deb., 6.79%,
06/01/25 6,500,000 6,381,635
- ---------------------------------------------------------------
18,398,220
- ---------------------------------------------------------------
CHEMICALS (DIVERSIFIED)-0.19%
Monsanto Co., Deb., 6.50%,
12/01/18 (Acquired 12/04/98;
Cost $5,477,010)(a) 5,500,000 4,972,220
- ---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-0.13%
Lucent Technologies, Unsec. Deb.,
6.45%, 03/15/29 3,900,000 3,589,131
- ---------------------------------------------------------------
CONSUMER (JEWELRY, NOVELTIES &
GIFTS)-0.21%
American Greetings Corp., Unsec.
Notes, 6.10%, 08/01/28 5,800,000 5,530,474
- ---------------------------------------------------------------
CONSUMER FINANCE-0.81%
Beneficial Corp.-Series H Medium
Term Notes, 6.94%, 12/15/06 4,750,000 4,736,035
- ---------------------------------------------------------------
Commercial Credit Co.,
Putable Notes, 6.625%, 06/01/15 2,000,000 2,008,400
- ---------------------------------------------------------------
Putable Notes, 7.875%, 02/01/25 4,000,000 4,229,600
- ---------------------------------------------------------------
Countrywide Funding Corp., Sub.
Notes, 8.25%, 07/15/02 500,000 522,105
- ---------------------------------------------------------------
Ford Motor Credit, Notes, 6.75%,
08/15/08 800,000 784,848
- ---------------------------------------------------------------
GMAC, Notes, 9.00%, 10/15/02 4,175,000 4,491,047
- ---------------------------------------------------------------
Household Finance Corp., Notes,
7.125%, 09/01/05 4,700,000 4,736,378
- ---------------------------------------------------------------
21,508,413
- ---------------------------------------------------------------
ELECTRIC COMPANIES-2.29%
Arizona Public Service Co.,
Notes, 6.25%, 01/15/05 5,000,000 4,828,850
- ---------------------------------------------------------------
Cleveland Electric Illuminating
Co. (The), Sec. Sr. Series D
Notes, 7.43%, 11/01/09 3,300,000 3,324,849
- ---------------------------------------------------------------
CMS Energy Corp., Sr. Unsec.
Notes, 7.375%, 11/15/00 4,000,000 4,057,960
- ---------------------------------------------------------------
Commonwealth Edison Co., First
Mortgage Notes, 7.50%, 07/01/13 7,000,000 7,359,170
- ---------------------------------------------------------------
El Paso Electric Co.,
Series D Sec. First Mortgage
Bonds, 8.90%, 02/01/06 4,750,000 5,122,875
- ---------------------------------------------------------------
Series E Sec. First Mortgage
Bonds, 9.40%, 05/01/11 4,000,000 4,497,240
- ---------------------------------------------------------------
Niagara Mohawk Power Corp.,
First Mortgage Notes, 6.625%,
07/01/05 7,200,000 7,173,504
- ---------------------------------------------------------------
First Mortgage Notes, 9.25%,
10/01/01 5,380,000 5,704,737
- ---------------------------------------------------------------
Series G Sr. Unsec. Notes,
7.75%, 10/01/08 7,600,000 7,828,000
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
ELECTRIC COMPANIES-(CONTINUED)
UtiliCorp United, Inc., Sr.
Unsec. Putable Notes, 6.70%,
10/15/06 $ 3,000,000 $ 3,026,280
- ---------------------------------------------------------------
Western Resources, Inc., Sr.
Unsec. Notes,
6.25%, 8/15/03 2,425,000 2,381,908
- ---------------------------------------------------------------
7.125%, 08/01/09 6,000,000 5,969,040
- ---------------------------------------------------------------
61,274,413
- ---------------------------------------------------------------
ENTERTAINMENT-0.89%
News America Holdings, Inc., Sr.
Notes, 8.45%, 08/01/34 3,125,000 3,305,594
- ---------------------------------------------------------------
Time Warner, Inc., Deb.,
9.125%, 01/15/13 10,000,000 11,438,100
- ---------------------------------------------------------------
9.15%, 02/01/23 7,850,000 9,119,266
- ---------------------------------------------------------------
23,862,960
- ---------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-1.12%
Associates Corp. of North
America,
Series B Sr. Deb., 7.95%,
02/15/10 5,900,000 6,247,982
- ---------------------------------------------------------------
Sr. Deb., 6.95%, 11/01/18 4,400,000 4,189,372
- ---------------------------------------------------------------
BellSouth Capital Funding, Deb.,
6.04%, 11/15/26 4,000,000 3,990,960
- ---------------------------------------------------------------
Chrysler Financial Corp., Deb.,
8.50%, 02/01/18 150,000 152,242
- ---------------------------------------------------------------
Citigroup, Inc., Deb., 6.625%,
01/15/28 5,000,000 4,520,000
- ---------------------------------------------------------------
Finova Capital Corp., Unsec.
Notes, 7.40%, 05/06/06 3,750,000 3,791,625
- ---------------------------------------------------------------
General Electric Capital Corp.,
Deb., 8.30%, 09/20/09 500,000 554,465
- ---------------------------------------------------------------
Sprint Capital Corp., Sr. Unsec.
Gtd. Notes, 6.125%, 11/15/08 6,930,000 6,489,252
- ---------------------------------------------------------------
29,935,898
- ---------------------------------------------------------------
FOODS-0.69%
ConAgra Inc. Sr. Notes,
7.125%, 10/01/26 7,000,000 7,041,860
- ---------------------------------------------------------------
6.70%, 08/01/27 7,500,000 7,281,825
- ---------------------------------------------------------------
Grand Metro Investment, Gtd.
Bonds, 7.45%, 04/15/35 4,000,000 4,183,360
- ---------------------------------------------------------------
18,507,045
- ---------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-0.20%
Beckman Coulter Inc., Sr. Unsec.
Gtd. Notes, 7.45%, 03/04/08 5,700,000 5,428,281
- ---------------------------------------------------------------
HOUSEHOLD PRODUCTS
(NON-DURABLES)-0.24%
Procter & Gamble Co. (The),
Putable Deb., 8.00%, 09/01/24 5,650,000 6,310,937
- ---------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-0.48%
Sun Life Canada Capital Trust,
Gtd. Notes, 8.526%, 05/29/49
(Acquired 11/05/98-03/29/99;
Cost $2,912,902)(a) 2,775,000 2,805,719
- ---------------------------------------------------------------
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
INSURANCE (LIFE/HEALTH)-(CONTINUED)
Torchmark Corp., Notes, 7.875%,
05/15/23 $10,000,000 $ 10,009,700
- ---------------------------------------------------------------
12,815,419
- ---------------------------------------------------------------
INSURANCE (PROPERTY-CASUALTY)-1.04%
Florida Windstorm,
Sr. Notes, 6.85%, 08/25/07
(Acquired 09/05/97-01/07/99;
Cost $11,118,379)(a) 10,900,000 10,826,741
- ---------------------------------------------------------------
Sr. Sec. Notes, 7.125%,
02/25/19 (Acquired 03/26/99;
Cost $2,834,354)(a) 2,850,000 2,819,932
- ---------------------------------------------------------------
Terra Nova Holdings Co. (United
Kingdom),
Sr. Yankee Unsec. Gtd. Notes,
7.20%, 08/15/07 7,000,000 6,803,440
- ---------------------------------------------------------------
Sr. Unsec. Gtd. Notes, 7.00%,
05/15/08 (Acquired
05/12/98-02/25/99; Cost
$2,341,770)(a) 2,350,000 2,249,538
- ---------------------------------------------------------------
USF&G Corp., Gtd. Series B Bonds,
8.47%, 01/10/27 5,000,000 5,056,250
- ---------------------------------------------------------------
27,755,901
- ---------------------------------------------------------------
INVESTMENT
BANKING/BROKERAGE-0.35%
Merrill Lynch & Co., Unsec.
Notes, 6.875%, 11/15/18 9,950,000 9,310,812
- ---------------------------------------------------------------
NATURAL GAS-1.80%
CMS Panhandle Holding Company,
Sr. Notes, 6.125%, 03/15/04
(Acquired 06/08/99; Cost
$6,422,198)(a) 6,600,000 6,427,476
- ---------------------------------------------------------------
Enron Corp.,
Notes, 6.75%, 08/01/09 9,080,000 8,721,522
- ---------------------------------------------------------------
Sr. Sub. Deb., 6.75%, 07/01/05 4,550,000 4,495,173
- ---------------------------------------------------------------
Sr. Sub. Deb., 8.25%, 09/15/12 4,300,000 4,559,505
- ---------------------------------------------------------------
Ferrellgas Partners, Series B Sr.
Sec. Gtd. Notes, 9.375%,
06/15/06 4,950,000 4,875,750
- ---------------------------------------------------------------
K N Energy, Inc., Unsec. Deb.,
7.35%, 08/01/26 6,350,000 6,273,356
- ---------------------------------------------------------------
National Fuel Gas Co., Series D
Medium Term Notes, 6.303%,
05/27/08 8,600,000 8,249,722
- ---------------------------------------------------------------
PanEnergy Corp., Notes, 7.875%,
08/15/04 750,000 785,048
- ---------------------------------------------------------------
Trans-Canada Pipelines (Canada),
Yankee Bonds, 6.49%, 01/21/09 3,800,000 3,650,227
- ---------------------------------------------------------------
48,037,779
- ---------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT)-0.18%
NRG Energy, Inc., Sr. Unsec.
Notes, 7.50%, 06/01/09 5,000,000 4,932,400
- ---------------------------------------------------------------
OIL & GAS (EXPLORATION &
PRODUCTION)-0.53%
Louis Dreyfus National Gas,
Notes, 6.875%, 12/01/07 5,000,000 4,712,550
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
OIL & GAS (EXPLORATION &
PRODUCTION)-(CONTINUED)
Talisman Energy, Inc. (Canada),
Yankee Deb.,
7.125%, 06/01/07 $ 1,500,000 $ 1,464,240
- ---------------------------------------------------------------
7.25%, 10/15/27 4,150,000 3,866,887
- ---------------------------------------------------------------
Tennessee Gas Pipeline Co.,
Unsec. Bonds, 7.00%, 03/15/27 4,000,000 3,999,840
- ---------------------------------------------------------------
14,043,517
- ---------------------------------------------------------------
OIL & GAS (REFINING & MARKETING)-0.27%
Quaker State Corp., Notes,
6.625%, 10/15/05 2,840,000 2,756,958
- ---------------------------------------------------------------
Tosco Corp., Unsec. Deb., 7.80%,
01/01/27 4,450,000 4,487,736
- ---------------------------------------------------------------
7,244,694
- ---------------------------------------------------------------
OIL (INTERNATIONAL INTEGRATED)-0.23%
Husky Oil Ltd., (Canada), Sr.
Unsec. Yankee Notes, 7.125%,
11//15/06 6,300,000 6,038,802
- ---------------------------------------------------------------
PERSONAL CARE-0.14%
Alberto-Culver Corp., Unsec.
Deb., 6.375%, 06/15/28 4,000,000 3,855,200
- ---------------------------------------------------------------
POWER PRODUCERS
(INDEPENDENT)-0.93%
AES Corp., Sr. Sub. Notes,
10.25%, 07/15/06 1,000,000 1,030,000
- ---------------------------------------------------------------
8.375%, 08/15/07 3,000,000 2,827,500
- ---------------------------------------------------------------
CE Generation LLC, Notes, 7.416%,
12/15/18 (Acquired
02/24/99-04/13/99; Cost
$7,348,506)(a) 7,200,000 6,997,406
- ---------------------------------------------------------------
Indiana Michigan Power, Sec.
Lease Obligation Bonds, 9.82%,
12/07/22 1,357,348 1,672,850
- ---------------------------------------------------------------
Kincaid Generation LLC, Sec.
Bonds, 7.33%, 06/15/20
(Acquired 04/30/98; Cost
$3,508,645)(a) 3,500,000 3,336,904
- ---------------------------------------------------------------
MidAmerican Energy Holdings Co.,
Sr. Unsec. Bonds, 8.48%,
09/15/28 8,400,000 8,994,468
- ---------------------------------------------------------------
24,859,128
- ---------------------------------------------------------------
PUBLISHING (NEWSPAPERS)-0.53%
News America Holdings, Inc.,
Sr. Gtd. Deb., 9.25%, 02/01/13 4,900,000 5,522,839
- ---------------------------------------------------------------
Sr. Gtd. Putable Bonds, 7.43%,
10/01/26 5,450,000 5,520,305
- ---------------------------------------------------------------
United News & Media PLC (United
Kingdom), Yankee Notes, 7.75%,
07/01/09 3,000,000 2,994,480
- ---------------------------------------------------------------
14,037,624
- ---------------------------------------------------------------
RAILROADS-0.41%
CSX Corp.,
Sr. Unsec. Putable Deb., 6.95%,
05/01/27 3,380,000 3,392,709
- ---------------------------------------------------------------
Series C Medium Term Notes,
6.80%, 12/01/28 4,950,000 4,464,450
- ---------------------------------------------------------------
Norfolk Southern Corp., Putable
Bonds, 7.05%, 05/01/37 3,000,000 3,054,360
- ---------------------------------------------------------------
10,911,519
- ---------------------------------------------------------------
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
REAL ESTATE INVESTMENT TRUSTS-0.26%
Health Care REIT, Inc., Sr.
Unsec. Notes, 7.625%, 03/15/08 $ 2,300,000 $ 2,115,816
- ---------------------------------------------------------------
Spieker Properties LP, Unsec.
Deb., 7.35%, 12/01/17 5,250,000 4,877,880
- ---------------------------------------------------------------
6,993,696
- ---------------------------------------------------------------
RETAIL (DEPARTMENT STORES)-0.08%
J.C. Penney Co., Inc., Series A
Medium Term Notes, 6.50%,
06/15/02 2,015,000 1,994,427
- ---------------------------------------------------------------
RETAIL (FOOD CHAINS)-0.19%
Great Atlantic & Pacific Tea Co.,
Inc. (Canada), Yankee Gtd.
Notes, 7.78%, 11/01/00
(Acquired 10/18/95-04/27/98;
Cost $5,131,490)(a) 5,000,000 5,101,150
- ---------------------------------------------------------------
SAVINGS & LOAN COMPANIES-0.20%
Sovereign Bancorp, Inc., Sub.
Notes, 8.00%, 03/15/03 5,330,000 5,395,506
- ---------------------------------------------------------------
SERVICES (COMMERCIAL &
CONSUMER)-0.54%
Laidlaw, Inc. (Canada),
Yankee Deb., 6.72%, 10/01/27 3,000,000 2,754,660
- ---------------------------------------------------------------
Unsec. Deb., 6.70%, 05/01/08 6,900,000 6,266,373
- ---------------------------------------------------------------
Protection One, Inc., Sr. Unsec.
Gtd. Notes, 7.375%, 08/15/05 5,800,000 5,364,884
- ---------------------------------------------------------------
14,385,917
- ---------------------------------------------------------------
SOVEREIGN DEBT-0.60%
Province of Manitoba (Canada),
Yankee Deb., 7.75%, 07/17/16 2,800,000 3,021,536
- ---------------------------------------------------------------
Yankee Unsec. Deb., 5.50%,
10/01/08 2,000,000 1,833,960
- ---------------------------------------------------------------
Province of Quebec (Canada),
Series A Yankee Notes,
6.29%, 03/06/26 6,700,000 6,687,203
- ---------------------------------------------------------------
5.735%, 03/02/26 4,430,000 4,413,963
- ---------------------------------------------------------------
15,956,662
- ---------------------------------------------------------------
TELECOMMUNICATIONS (LONG
DISTANCE)-0.97%
Bell Canada (Canada), Yankee
Deb., 9.50%, 10/15/10 1,750,000 2,072,805
- ---------------------------------------------------------------
Centel Capital, Deb., 9.00%,
10/15/19 1,800,000 2,119,518
- ---------------------------------------------------------------
MCI Communications Corp.,
Putable Sr. Unsec. Deb.,
7.125%,
06/15/27 10,150,000 10,257,286
- ---------------------------------------------------------------
Sr. Unsec. Notes, 6.50%,
04/15/10 7,900,000 7,593,954
- ---------------------------------------------------------------
Sprint Capital Corp., Sr. Unsec.
Gtd. Notes, 6.875%, 11/15/28 4,150,000 3,800,902
- ---------------------------------------------------------------
25,844,465
- ---------------------------------------------------------------
TELEPHONE-1.46%
Alltel Corp., Unsec. Deb., 7.00%,
03/15/16 1,500,000 1,480,665
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
TELEPHONE-(CONTINUED)
Cable & Wireless Communications
PLC (United Kingdom), Yankee
Notes, 6.75%, 12/01/08 $ 6,800,000 $ 6,524,260
- ---------------------------------------------------------------
Electric Lightwave, Inc., Notes,
6.05%, 05/15/04 (Acquired
04/21/99; Cost $9,792,846)(a) 9,800,000 9,499,630
- ---------------------------------------------------------------
GTE California, Inc., Unsec.
Deb., 6.75%, 05/15/27 6,930,000 6,516,466
- ---------------------------------------------------------------
GTE Florida, Inc., Unsec. Deb.,
6.86%, 02/01/28 4,750,000 4,529,600
- ---------------------------------------------------------------
GTE North Inc., Series G Unsec.
Deb. 6.73%, 02/15/28 3,000,000 2,808,690
- ---------------------------------------------------------------
SBC Communications, Inc., Deb.,
7.375%, 07/15/43 7,930,000 7,779,805
- ---------------------------------------------------------------
39,139,116
- ---------------------------------------------------------------
WASTE MANAGEMENT-0.28%
WMX Technologies, Inc., Unsec.
Putable Notes, 7.10%, 08/01/26 7,500,000 7,598,250
- ---------------------------------------------------------------
Total U.S. Dollar Denominated
Non-Convertible Bonds &
Notes (Cost $685,814,521) 661,755,299
- ---------------------------------------------------------------
U.S. DOLLAR DENOMINATED
CONVERTIBLE BONDS & NOTES-2.87%
COMMUNICATIONS EQUIPMENT-0.49%
Comverse Technology, Inc., Conv.
Unsec. Sub. Deb., 4.50%,
07/01/05 7,000,000 13,081,250
- ---------------------------------------------------------------
COMPUTERS (HARDWARE)-0.35%
Candescent Technology Corp.,
Conv. Sr. Sub. Deb., 7.00%,
05/01/03 (Acquired
04/17/98-02/10/99; Cost
$11,395,182)(a) 11,950,000 9,321,000
- ---------------------------------------------------------------
COMPUTERS (SOFTWARE &
SERVICES)-0.75%
Exodus Communications, Inc.,
Conv. Sub. Notes, 5.00%,
03/15/06 (Acquired 02/25/99;
Cost $4,000,000)(a) 4,000,000 10,775,000
- ---------------------------------------------------------------
Veritas Software Corp., Conv.
Unsec. Notes, 5.25%, 11/01/04 4,000,000 9,377,500
- ---------------------------------------------------------------
20,152,500
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC &
OTHER)-0.27%
Alpharma, Inc., Conv. Sr. Unsec.
Sub. Notes, 3.00%, 06/01/06
(Acquired 05/27/99; Cost
$6,000,000)(a) 6,000,000 7,380,000
- ---------------------------------------------------------------
RETAIL (SPECIALTY)-0.33%
Amazon.com, Inc., Conv. Deb.,
4.75%, 02/01/09 (Acquired
01/29/99-02/18/99; Cost
$8,594,859)(a) 9,000,000 8,735,625
- ---------------------------------------------------------------
</TABLE>
7
<PAGE> 10
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
RETAIL (SPECIALTY-APPAREL)-0.11%
AnnTaylor Stores Corp., Conv.
Gtd. Bond, 0.55%, 06/18/19
(Acquired 06/14/99; Cost
$2,627,010)(a) $ 4,750,000 $ 3,004,375
- ---------------------------------------------------------------
TELECOMMUNICATIONS (LONG
DISTANCE)-0.39%
Global Telesystems Group, Conv.
Notes, 8.75%, 06/30/00 2,550,000 10,378,500
- ---------------------------------------------------------------
TELEPHONE-0.18%
Telefonos de Mexico S.A., Conv.
Yankee Notes, 4.25%, 06/15/04 4,703,000 4,802,939
- ---------------------------------------------------------------
Total U.S. Dollar Denominated
Convertible Bonds & Notes
(Cost $55,908,351) 76,856,189
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
DOMESTIC COMMON STOCKS-45.07%
AUTOMOBILES-0.32%
Ford Motor Co. 150,000 $ 8,465,625
- ---------------------------------------------------------------
BANKS (MONEY CENTER)-0.89%
Bank of America Corp. 88,948 6,521,000
- ---------------------------------------------------------------
Chase Manhattan Corp. (The) 200,000 17,325,000
- ---------------------------------------------------------------
23,846,000
- ---------------------------------------------------------------
BANKS (REGIONAL)-0.39%
Bank United Corp.-Class A 170,000 6,831,875
- ---------------------------------------------------------------
TCF Financial Corp. 130,000 3,623,750
- ---------------------------------------------------------------
10,455,625
- ---------------------------------------------------------------
BEVERAGES (NON-ALCOHOLIC)-0.12%
PepsiCo, Inc. 80,000 3,095,000
- ---------------------------------------------------------------
BIOTECHNOLOGY-0.66%
Biogen, Inc.(c) 140,000 9,003,750
- ---------------------------------------------------------------
Genzyme Corp.(c) 175,000 8,487,500
- ---------------------------------------------------------------
Genzyme Surgical Products(c) 31,327 138,033
- ---------------------------------------------------------------
17,629,283
- ---------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO &
CABLE)-1.99%
CBS Corp.(c) 361,400 15,698,312
- ---------------------------------------------------------------
Hispanic Broadcasting Corp.(c) 228,500 17,337,437
- ---------------------------------------------------------------
Univision Communications, Inc.(c) 305,000 20,130,000
- ---------------------------------------------------------------
53,165,749
- ---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-2.73%
ADC Telecommunications, Inc. 152,000 6,925,500
- ---------------------------------------------------------------
ANTEC Corp.(c) 275,000 8,817,187
- ---------------------------------------------------------------
Lucent Technologies, Inc. 517,000 34,865,187
- ---------------------------------------------------------------
Motorola, Inc. 100,000 9,475,000
- ---------------------------------------------------------------
Tellabs, Inc.(c) 190,000 12,836,875
- ---------------------------------------------------------------
72,919,749
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (HARDWARE)-1.44%
Dell Computer Corp.(c) 265,000 $ 9,805,000
- ---------------------------------------------------------------
International Business Machines
Corp. 116,000 14,993,000
- ---------------------------------------------------------------
Sun Microsystems, Inc.(c) 199,000 13,706,125
- ---------------------------------------------------------------
38,504,125
- ---------------------------------------------------------------
COMPUTERS (NETWORKING)-1.00%
3Com Corp.(c) 180,000 4,803,750
- ---------------------------------------------------------------
Cisco Systems, Inc.(c) 340,000 21,930,000
- ---------------------------------------------------------------
26,733,750
- ---------------------------------------------------------------
COMPUTERS (PERIPHERALS)-0.59%
EMC Corp.(c) 288,000 15,840,000
- ---------------------------------------------------------------
COMPUTERS (SOFTWARE &
SERVICES)-3.52%
America Online, Inc. 340,000 37,570,000
- ---------------------------------------------------------------
Computer Associates
International, Inc. 100,000 5,500,000
- ---------------------------------------------------------------
Concord Communications, Inc.(c) 150,000 6,750,000
- ---------------------------------------------------------------
InfoSpace.com, Inc.(c) 184,800 8,685,600
- ---------------------------------------------------------------
ISS Group, Inc.(c) 220,000 8,305,000
- ---------------------------------------------------------------
Microsoft Corp.(c) 200,000 18,037,500
- ---------------------------------------------------------------
USWeb Corp.(c) 420,000 9,318,750
- ---------------------------------------------------------------
94,166,850
- ---------------------------------------------------------------
CONSUMER FINANCE-0.27%
SLM Holding Corp. 155,000 7,100,937
- ---------------------------------------------------------------
DISTRIBUTORS (FOOD &
HEALTH)-0.35%
Cardinal Health, Inc. 144,500 9,266,062
- ---------------------------------------------------------------
ELECTRICAL EQUIPMENT-0.53%
General Electric Co. 125,000 14,125,000
- ---------------------------------------------------------------
Sensormatic Electronics Corp.
(Acquired 06/30/98; Cost
$59,993)(a) 4,392 61,213
- ---------------------------------------------------------------
14,186,213
- ---------------------------------------------------------------
ELECTRONICS
(INSTRUMENTATION)-0.55%
Quanta Services, Inc.(c) 332,500 14,630,000
- ---------------------------------------------------------------
ELECTRONICS
(SEMICONDUCTORS)-0.78%
Intel Corp. 255,000 15,172,500
- ---------------------------------------------------------------
Microchip Technology, Inc.(c) 120,000 5,685,000
- ---------------------------------------------------------------
20,857,500
- ---------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR)-0.34%
Applied Materials, Inc.(c) 125,000 9,234,375
- ---------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-2.23%
American Express Co. 75,000 9,759,375
- ---------------------------------------------------------------
Citigroup, Inc. 242,998 11,542,405
- ---------------------------------------------------------------
Fannie Mae 175,000 11,965,625
- ---------------------------------------------------------------
FINOVA Group, Inc. 137,000 7,209,625
- ---------------------------------------------------------------
Freddie Mac 238,000 13,804,000
- ---------------------------------------------------------------
</TABLE>
8
<PAGE> 11
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FINANCIAL (DIVERSIFIED)-(CONTINUED)
MGIC Investment Corp. 110,000 $ 5,348,750
- ---------------------------------------------------------------
59,629,780
- ---------------------------------------------------------------
FOODS-0.55%
Keebler Foods Co.(c) 207,000 6,287,625
- ---------------------------------------------------------------
Ralston-Ralston Purina Group 273,000 8,309,438
- ---------------------------------------------------------------
14,597,063
- ---------------------------------------------------------------
HEALTH CARE (DIVERSIFIED)-2.00%
Abbott Laboratories 100,000 4,550,000
- ---------------------------------------------------------------
American Home Products Corp. 224,000 12,880,000
- ---------------------------------------------------------------
Bristol-Myers Squibb Co. 135,000 9,509,063
- ---------------------------------------------------------------
Johnson & Johnson 100,000 9,800,000
- ---------------------------------------------------------------
Warner-Lambert Co. 240,000 16,650,000
- ---------------------------------------------------------------
53,389,063
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC &
OTHER)-0.38%
Barr Laboratories, Inc.(c) 81,100 3,233,863
- ---------------------------------------------------------------
Forest Laboratories, Inc.(c) 150,000 6,937,500
- ---------------------------------------------------------------
10,171,363
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR
PHARMACEUTICALS)-1.79%
Lilly (Eli) & Co. 141,000 10,099,125
- ---------------------------------------------------------------
Merck & Co., Inc. 140,000 10,360,000
- ---------------------------------------------------------------
Pfizer, Inc. 125,000 13,718,750
- ---------------------------------------------------------------
Pharmacia & Upjohn, Inc. 100,000 5,681,250
- ---------------------------------------------------------------
Schering-Plough Corp. 152,000 8,056,000
- ---------------------------------------------------------------
47,915,125
- ---------------------------------------------------------------
HEALTH CARE (LONG TERM
CARE)-0.29%
Sunrise Assisted Living, Inc.(c) 222,000 7,742,250
- ---------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-2.54%
Baxter International, Inc. 149,000 9,033,125
- ---------------------------------------------------------------
Becton, Dickinson & Co. 210,000 6,300,000
- ---------------------------------------------------------------
Guidant Corp. 250,000 12,859,375
- ---------------------------------------------------------------
Medtronic, Inc. 204,000 15,886,500
- ---------------------------------------------------------------
VISX, Inc.(c) 300,000 23,756,250
- ---------------------------------------------------------------
67,835,250
- ---------------------------------------------------------------
HEALTH CARE (SPECIALIZED
SERVICES)-0.48%
MAXIMUS, Inc.(c) 200,000 5,750,000
- ---------------------------------------------------------------
Omnicare, Inc. 220,000 2,777,500
- ---------------------------------------------------------------
Quintiles Transnational Corp.(c) 100,000 4,200,000
- ---------------------------------------------------------------
12,727,500
- ---------------------------------------------------------------
HOUSEHOLD FURN. &
APPLIANCES-0.56%
Ethan Allen Interiors, Inc. 270,000 10,192,500
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HOUSEHOLD FURN. & APPLIANCES-(CONTINUED)
Maytag Corp. 70,000 $ 4,878,125
- ---------------------------------------------------------------
15,070,625
- ---------------------------------------------------------------
HOUSEHOLD PRODUCTS
(NON-DURABLES)-0.23%
Procter & Gamble Co. (The) 70,000 6,247,500
- ---------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-0.58%
Equitable Companies, Inc. 136,000 9,112,000
- ---------------------------------------------------------------
Nationwide Financial Services,
Inc.-Class A 140,000 6,335,000
- ---------------------------------------------------------------
15,447,000
- ---------------------------------------------------------------
INSURANCE (MULTI-LINE)-0.90%
American International Group,
Inc. 140,000 16,388,750
- ---------------------------------------------------------------
CIGNA Corp. 86,000 7,654,000
- ---------------------------------------------------------------
24,042,750
- ---------------------------------------------------------------
INSURANCE
(PROPERTY-CASUALTY)-0.45%
Everest Reinsurance Holdings,
Inc. 135,000 4,404,375
- ---------------------------------------------------------------
Travelers Property Casualty
Corp.-Class A 195,000 7,629,375
- ---------------------------------------------------------------
12,033,750
- ---------------------------------------------------------------
INVESTMENT
BANKING/BROKERAGE-1.33%
Goldman Sachs Group, Inc. (The) 52,300 3,778,675
- ---------------------------------------------------------------
Hambrecht & Quist Group(c) 150,000 5,568,750
- ---------------------------------------------------------------
Merrill Lynch & Co., Inc. 156,000 12,470,250
- ---------------------------------------------------------------
Morgan Stanley, Dean Witter,
Discover & Co. 135,000 13,837,500
- ---------------------------------------------------------------
35,655,175
- ---------------------------------------------------------------
INVESTMENT MANAGEMENT-0.14%
Federated Investors, Inc.-Class B 206,400 3,702,300
- ---------------------------------------------------------------
LODGING-HOTELS-0.24%
Carnival Corp. 130,000 6,305,000
- ---------------------------------------------------------------
MANUFACTURING (DIVERSIFIED)-0.50%
Tyco International Ltd. 142,000 13,454,500
- ---------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-0.28%
Superior TeleCom, Inc. 302,700 7,567,500
- ---------------------------------------------------------------
NATURAL GAS-0.74%
Enron Corp. 110,000 8,992,500
- ---------------------------------------------------------------
Williams Companies, Inc. (The) 251,000 10,683,188
- ---------------------------------------------------------------
19,675,688
- ---------------------------------------------------------------
OIL & GAS (EXPLORATION &
PRODUCTION)-0.31%
Conoco, Inc.-Class A 300,000 8,362,500
- ---------------------------------------------------------------
OIL (INTERNATIONAL
INTEGRATED)-0.29%
Exxon Corp. 65,000 5,013,125
- ---------------------------------------------------------------
Mobil Corp. 27,000 2,673,000
- ---------------------------------------------------------------
7,686,125
- ---------------------------------------------------------------
</TABLE>
9
<PAGE> 12
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
PERSONAL CARE-0.46%
Avon Products, Inc. 108,000 $ 5,994,000
- ---------------------------------------------------------------
Gillette Co. 154,000 6,314,000
- ---------------------------------------------------------------
12,308,000
- ---------------------------------------------------------------
POWER PRODUCERS
(INDEPENDENT)-0.60%
AES Corp.(c) 200,000 11,625,000
- ---------------------------------------------------------------
MidAmerican Energy Holdings
Co.(c) 130,000 4,501,250
- ---------------------------------------------------------------
16,126,250
- ---------------------------------------------------------------
REAL ESTATE INVESTMENT
TRUSTS-0.35%
Boston Properties, Inc. 145,000 5,201,875
- ---------------------------------------------------------------
Starwood Hotels & Resorts
Worldwide, Inc. 140,000 4,278,750
- ---------------------------------------------------------------
9,480,625
- ---------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-0.42%
Home Depot, Inc. (The) 175,000 11,276,563
- ---------------------------------------------------------------
RETAIL (FOOD CHAINS)-0.56%
Albertson's, Inc. 100,170 5,165,016
- ---------------------------------------------------------------
Safeway, Inc.(c) 200,000 9,900,000
- ---------------------------------------------------------------
15,065,016
- ---------------------------------------------------------------
RETAIL (GENERAL
MERCHANDISE)-0.47%
Dayton Hudson Corp. 195,000 12,675,000
- ---------------------------------------------------------------
RETAIL (SPECIALTY)-0.41%
Linens 'N Things, Inc.(c) 249,200 10,902,500
- ---------------------------------------------------------------
SERVICES
(ADVERTISING/MARKETING)-1.05%
Omnicom Group, Inc. 79,000 6,320,000
- ---------------------------------------------------------------
Outdoor Systems, Inc.(c) 345,000 12,592,500
- ---------------------------------------------------------------
Young & Rubicam, Inc. 200,000 9,087,500
- ---------------------------------------------------------------
28,000,000
- ---------------------------------------------------------------
SERVICES (COMMERCIAL &
CONSUMER)-1.54%
Apollo Group, Inc.-Class A(c) 310,000 8,234,375
- ---------------------------------------------------------------
Avis Rent A Car, Inc.(c) 324,000 9,436,500
- ---------------------------------------------------------------
Hertz Corp.-Class A 235,000 14,570,000
- ---------------------------------------------------------------
Metzler Group, Inc.(c) 280,000 7,735,000
- ---------------------------------------------------------------
Trammell Crow Co.(c) 70,400 1,157,200
- ---------------------------------------------------------------
41,133,075
- ---------------------------------------------------------------
SERVICES (DATA PROCESSING)-0.74%
Ceridian Corp.(c) 164,200 5,367,288
- ---------------------------------------------------------------
DST Systems, Inc.(c) 106,000 6,664,750
- ---------------------------------------------------------------
Paychex, Inc. 240,000 7,650,000
- ---------------------------------------------------------------
19,682,038
- ---------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-1.80%
AT&T Corp. 216,450 12,080,616
- ---------------------------------------------------------------
IXC Communications, Inc.(c) 200,000 7,862,500
- ---------------------------------------------------------------
MCI WorldCom, Inc.(c) 187,723 16,191,109
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TELECOMMUNICATIONS (LONG DISTANCE)-(CONTINUED)
WinStar Communications, Inc.(c) 243,587 $ 11,874,866
- ---------------------------------------------------------------
48,009,091
- ---------------------------------------------------------------
TELEPHONE-2.20%
Bell Atlantic Corp. 158,000 10,329,250
- ---------------------------------------------------------------
McLeodUSA, Inc.-Class A(c) 145,000 7,975,000
- ---------------------------------------------------------------
NEXTLINK Communications,
Inc.-Class A(c) 112,400 8,359,750
- ---------------------------------------------------------------
Qwest Communications
International, Inc.(c) 600,000 19,837,500
- ---------------------------------------------------------------
SBC Communications, Inc. 164,000 9,512,000
- ---------------------------------------------------------------
Time Warner Telecom, Inc.(c) 95,500 2,769,500
- ---------------------------------------------------------------
58,783,000
- ---------------------------------------------------------------
TOBACCO-0.23%
Philip Morris Companies, Inc. 150,000 6,028,125
- ---------------------------------------------------------------
TRUCKERS-0.21%
C.H. Robinson Worldwide, Inc. 150,000 5,512,500
- ---------------------------------------------------------------
WASTE MANAGEMENT-0.50%
Allied Waste Industries, Inc.(c) 370,000 7,307,500
- ---------------------------------------------------------------
Republic Services, Inc.(c) 250,000 6,187,500
- ---------------------------------------------------------------
13,495,000
- ---------------------------------------------------------------
WATER UTILITIES-0.25%
Azurix Corp.(c) 330,000 6,600,000
- ---------------------------------------------------------------
Total Domestic Common Stocks
(Cost $766,458,568) 1,204,431,433
- ---------------------------------------------------------------
DOMESTIC PREFERRED STOCKS-1.53%
CHEMICALS (DIVERSIFIED)-0.20%
Monsanto Co., $2.60 Conv. Pfd. 135,000 5,416,875
- ---------------------------------------------------------------
COMPUTERS (SOFTWARE &
SERVICES)-0.18%
PSINet, Inc.-$3.375 Conv. Pfd. 100,000 4,825,000
- ---------------------------------------------------------------
PERSONAL CARE-0.20%
Estee Lauder Co., $3.805 Conv.
Pfd. 60,000 5,175,000
- ---------------------------------------------------------------
SERVICES (COMMERCIAL &
CONSUMER)-0.33%
L&H Capital Trust I, $2.375 Conv.
Pfd. (Acquired 05/20/98; Cost
$5,000,000)(a) 100,000 3,337,500
- ---------------------------------------------------------------
United Rentals Trust I, $3.25
Conv. Pfd. (Acquired 07/30/98;
Cost $6,000,000)(a) 120,000 5,550,000
- ---------------------------------------------------------------
8,887,500
- ---------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/
WIRELESS)-0.06%
Amodocs Automatic Common Exchange
Security Trust, $1.515 Conv.
Pfd. 74,900 1,666,525
- ---------------------------------------------------------------
TELECOMMUNICATIONS (LONG
DISTANCE)-0.40%
Global Telesystems Group,
Inc.-$3.625 Conv. Pfd.
(Acquired 05/05/99; Cost
$5,413,600)(a) 100,000 6,600,000
- ---------------------------------------------------------------
</TABLE>
10
<PAGE> 13
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TELECOMMUNICATIONS (LONG DISTANCE)-(CONTINUED)
IXC Communications, Inc.-$3.375
Conv. Pfd. (Acquired 03/25/98;
Cost $3,500,000)(a) 70,000 $ 2,673,125
- ---------------------------------------------------------------
WinStar Communications,
Inc.-$3.50 Series D Conv. Pfd. 26,100 1,461,600
- ---------------------------------------------------------------
10,734,725
- ---------------------------------------------------------------
TELEPHONE-0.16%
NEXTLINK Communications, Inc.
$3.25 Conv. Pfd. (Acquired
03/26/98-06/02/98; Cost
$975,188)(a) 20,800 1,895,400
- ---------------------------------------------------------------
$3.25 Conv. Pfd. 24,200 2,205,225
- ---------------------------------------------------------------
4,100,625
- ---------------------------------------------------------------
Total Domestic Preferred
Stocks (Cost $39,734,001) 40,806,250
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
NON-U.S. DOLLAR DENOMINATED
NON-CONVERTIBLE BONDS &
NOTES(D)-4.73%
AUSTRALIA-0.29%
New South Wales Treasury Corp.
(Sovereign Debt), Gtd. Notes,
7.00%, 04/01/04 AUD 11,300,000 $ 7,731,930
- ---------------------------------------------------------------
CANADA-0.97%
Bank of Montreal (Banks-Money
Center), Sub. Deb., 7.92%,
07/31/12 CAD 1,850,000 1,392,491
- ---------------------------------------------------------------
Bell Mobility Cellular, Inc.
(Telecommunications-Cellular/Wireless),
Deb., 6.55%, 06/02/08 CAD 2,500,000 1,678,656
- ---------------------------------------------------------------
Canadian Oil Debco Inc. (Oil &
Gas- Exploration & Production),
Deb., 11.00%, 10/31/00 CAD 2,500,000 1,817,950
- ---------------------------------------------------------------
Clearnet Communications, Inc.
(Telephone), Unsec. Sr. Disc.
Notes, 10.75%, 02/15/09(e) CAD 5,000,000 1,866,305
- ---------------------------------------------------------------
GMAC Canada Ltd. (Financial
Diversified), Sr. Unsec. Gtd.
Unsub. Notes, 6.50%,
03/23/04 GBP 1,240,000 1,958,422
- ---------------------------------------------------------------
NAV Canada (Services-Commercial &
Consumer), Bonds, 7.40%,
06/01/27 CAD 3,500,000 2,745,938
- ---------------------------------------------------------------
Province of Ontario (Sovereign
Debt), Sr. Unsec. Unsub. Notes,
8.00%, 03/11/03 CAD 2,300,000 1,672,574
- ---------------------------------------------------------------
Unsec. Unsub. Notes, 6.25%,
12/03/08 CAD 3,750,000 1,803,938
- ---------------------------------------------------------------
Poco Petroleums Ltd. (Oil & Gas-
Exploration & Production),
Unsec. Deb., 6.60%, 09/11/07CAD 5,400,000 3,501,076
- ---------------------------------------------------------------
Province of British Columbia
(Sovereign Debt), Unsec. Unsub.
Deb., 5.25%, 12/01/06 CAD 5,000,000 3,260,774
- ---------------------------------------------------------------
Teleglobe Canada, Inc.
(Telephone), Unsec. Deb.,
8.35%, 06/20/03 CAD 1,000,000 736,132
- ---------------------------------------------------------------
TransCanada Pipelines (Natural
Gas), Series Q Deb., 10.625%,
10/20/09 CAD 1,500,000 1,328,083
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
CANADA-(CONTINUED)
Westcoast Energy, Inc. (Natural
Gas), Unsec. Series V Deb.,
6.45%, 12/18/06 CAD 3,000,000 $ 2,074,754
- ---------------------------------------------------------------
25,837,093
- ---------------------------------------------------------------
DENMARK-0.29%
Kingdom of Denmark (Sovereign
Debt), Bonds, 7.00%,
12/15/04 DKK 50,000,000 7,797,464
- ---------------------------------------------------------------
GERMANY-0.67%
Bundesrepublik Deutschland
(Sovereign Debt), Series 92
Bonds, 7.25%, 10/21/02 EUR 6,000,000 6,866,177
- ---------------------------------------------------------------
Treuhandanstalt (Sovereign Debt),
Gtd. Notes, 6.00%, 11/12/03 EUR 10,000,000 11,147,196
- ---------------------------------------------------------------
18,013,373
- ---------------------------------------------------------------
NETHERLANDS-0.49%
Dresdner Finance B.V.
(Banks-Major Regional), Series
11 Gtd. Notes, 2.619%,
07/30/03 EUR 7,250,000 7,454,844
- ---------------------------------------------------------------
Hypovereins Finance N.V.
(Banks-Major Regional), Gtd.
Series E Medium Term Notes,
6.00%, 03/12/07 DEM 2,900,000 1,607,699
- ---------------------------------------------------------------
Mannesmann Finance B.V.
(Machinery- Diversified), Gtd.
Unsec. Unsub. Notes, 4.75%,
05/27/09 EUR 1,300,000 1,280,551
- ---------------------------------------------------------------
Prudential Financial B.V.
(Investment Banking/Brokerage),
Sr. Unsec. Gtd. Bonds, 9.375%,
06/04/07 GBP 1,400,000 2,608,959
- ---------------------------------------------------------------
12,952,053
- ---------------------------------------------------------------
NEW ZEALAND-0.27%
International Bank of
Reconstruction & Development
(Banks-Money Center), Unsec.
Notes, 5.50%, 04/15/04 NZD 8,500,000 4,260,539
- ---------------------------------------------------------------
New Zealand Government (Sovereign
Debt), Bonds, 10.00%,
03/15/02 NZD 2,650,000 1,552,388
- ---------------------------------------------------------------
New Zealand Government (Sovereign
Debt), Bonds, 8.00%,
04/15/04 NZD 2,650,000 1,504,269
- ---------------------------------------------------------------
7,317,196
- ---------------------------------------------------------------
SWEDEN-0.32%
AB Spintab (Banks-Regional),
Series 161, Unsec. Deb., 7.50%,
06/15/04 SEK 29,200,000 3,773,989
- ---------------------------------------------------------------
Stadshypotek A.B.
(Banks-Regional), Series 1562,
Notes, 3.50%, 09/15/04 SEK 43,000,000 4,653,215
- ---------------------------------------------------------------
8,427,204
- ---------------------------------------------------------------
UNITED STATES-0.04%
General Electric Capital Corp.
(Financial- Diversified), Sr.
Unsec. Unsub., 6.00%,
02/05/03 GBP 580,000 914,184
- ---------------------------------------------------------------
UNITED KINGDOM-1.39%
United Kingdom European
Investment
Bank (Banks-Money Center),
Unsec. Unsub. Notes, 7.625%,
12/07/07 GBP 4,050,000 7,089,160
- ---------------------------------------------------------------
</TABLE>
11
<PAGE> 14
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
UNITED KINGDOM-(CONTINUED)
Fannie Mae
(Financial-Diversified), Sr.
Unsec. Unsub. Notes, 6.875%,
06/07/02 GBP 3,300,000 $ 5,331,957
- ---------------------------------------------------------------
Lloyds Bank PLC (Banks-Major
Regional), Sub. Notes, 5.25%,
07/14/08 DEM 6,800,000 3,579,131
- ---------------------------------------------------------------
Merrill Lynch & Co. (Investment
Banking/ Brokerage), Sr. Unsec.
Unsub. Notes, 7.375%,
12/17/07 GBP 7,300,000 12,052,983
- ---------------------------------------------------------------
National Power PLC (Electric
Companies), Sr. Unsec. Unsub.
Notes, 8.00%, 02/21/07 AUD 3,100,000 2,100,378
- ---------------------------------------------------------------
Sutton Bridge Financial Ltd.
(Financial- Diversified), Gtd.
Eurobonds, 8.625%, 06/30/22
(Acquired 05/29/97; Cost
$4,891,169)(a) GBP 3,000,000 5,416,329
- ---------------------------------------------------------------
Union Bank Switzerland London,
(Banks- Major Regional), Unsec.
Sub. Notes, 7.375%, 11/26/04GBP 1,000,000 1,645,573
- ---------------------------------------------------------------
37,215,511
- ---------------------------------------------------------------
Total Non-U.S. Dollar
Denominated Non-Convertible
Bonds & Notes (Cost
$131,990,867) 126,206,008
- ---------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED
CONVERTIBLE BONDS &
NOTES(D)-0.75%
CAYMAN ISLANDS-0.10%
Hutchison Delta Finance
(Shipping), Conv. Unsec. Gtd.
Notes, 7.00%, 11/08/02 EUR 2,250,000 2,610,000
- ---------------------------------------------------------------
FRANCE-0.29%
France Telecom (Telephone), Conv.
Bonds, 2.00%, 01/01/04 FRF 45,132,800 7,852,787
- ---------------------------------------------------------------
NETHERLANDS-0.32%
Koninklijke Ahold N.V.
(Retail-Food Chains), Sub.
Notes, 3.00%, 09/30/03 NLG 15,000,000 8,680,962
- ---------------------------------------------------------------
SWITZERLAND-0.04%
Wuerttembergische A.G.
Versicherungs-
Beteiligungsgesellschaft
(Insurance Brokers), Conv. Sr.
Unsec. Bonds, 2.25%,
04/17/08 DEM 2,000,000 1,003,820
- ---------------------------------------------------------------
Total Non-U.S. Dollar
Denominated Convertible
Bonds & Notes (Cost
$19,307,676) 20,147,569
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
FOREIGN STOCKS & OTHER EQUITY
INTERESTS-4.09%
BERMUDA-0.46%
Global Crossing Ltd.
(Telecommunications- Long
Distance)(c) 286,552 $ 12,214,279
- ---------------------------------------------------------------
CANADA-0.41%
AT&T Canada, Inc. (Telephone)(c) 120,000 7,687,500
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
CANADA-(CONTINUED)
Cadillac Fairview Corp. (Land
Development)(c) 180,000 $ 3,397,500
- ---------------------------------------------------------------
11,085,000
- ---------------------------------------------------------------
CAYMAN ISLANDS-0.04%
Scottish Annuity & Life Holdings,
Ltd. (Insurance-Life/Health) 97,400 1,047,050
- ---------------------------------------------------------------
FINLAND-0.99%
Fortum Corp. (Electric Companies) 517,300 2,500,377
- ---------------------------------------------------------------
Nokia Oyj A.B.-Class A-ADR
(Communications Equipment) 220,000 20,143,750
- ---------------------------------------------------------------
Sonera Group Oyj
(Telecommunications-
Cellular/Wireless) 169,900 3,712,098
- ---------------------------------------------------------------
26,356,225
- ---------------------------------------------------------------
FRANCE-0.72%
Alstom (Engineering &
Construction)(c) 105,000 3,300,496
- ---------------------------------------------------------------
AXA S.A. (Insurance-Multi-Line) 36,800 4,486,655
- ---------------------------------------------------------------
AXA-ADR (Insurance-Multi-Line) 110,000 6,854,375
- ---------------------------------------------------------------
France Telecom S.A.-ADR
(Communications Equipment) 60,000 4,620,000
- ---------------------------------------------------------------
19,261,526
- ---------------------------------------------------------------
GERMANY-0.25%
DaimlerChrysler A.G.
(Automobiles) 74,820 6,649,627
- ---------------------------------------------------------------
NETHERLANDS-0.69%
Equant N.V.
(Computers-Networking)(c) 45,000 4,146,104
- ---------------------------------------------------------------
Equant N.V.-ADR
(Computers-Networking)(c) 61,200 5,760,450
- ---------------------------------------------------------------
Libertel
N.V.(Telecommunications-Cellular/
Wireless) 429,650 8,413,149
- ---------------------------------------------------------------
18,319,703
- ---------------------------------------------------------------
SOUTH KOREA-0.21%
Korea Telecom Corp.-ADR
(Telephone)(c) 143,596 5,743,840
- ---------------------------------------------------------------
UNITED KINGDOM-0.32%
Avis Europe PLC
(Services-Commercial &
Consumer) (Acquired 03/26/97;
Cost $1,535,109)(a) 765,450 3,221,463
- ---------------------------------------------------------------
SmithKline Beecham PLC-ADR
(Health Care- Drugs-Major
Pharmaceuticals) 81,000 5,351,063
- ---------------------------------------------------------------
8,572,526
- ---------------------------------------------------------------
Total Foreign Stocks & Other
Equity Interests (Cost
$67,308,111) 109,249,776
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
U.S. GOVERNMENT AGENCY SECURITIES-2.73%
FEDERAL HOME LOAN MORTGAGE CORP.
("FHLMC")-0.53%
Pass through certificates
6.50%, 12/01/28 $14,544,020 $ 14,057,668
- ---------------------------------------------------------------
</TABLE>
12
<PAGE> 15
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
FEDERAL NATIONAL MORTGAGE
ASSOCIATION ("FNMA")-1.49%
Pass through certificates
6.50%, 11/01/28 to 12/01/28 $18,880,475 $ 18,225,511
- ---------------------------------------------------------------
7.00%, 05/01/28 21,984,291 21,736,967
- ---------------------------------------------------------------
39,962,478
- ---------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION ("GNMA")-0.71%
Pass through certificates
6.50%, 09/15/28 to 03/15/29 19,699,001 18,960,289
- ---------------------------------------------------------------
Total U.S. Government Agency
Securities (Cost
$75,406,416) 72,980,435
- ---------------------------------------------------------------
U.S. TREASURY SECURITIES-8.87%
U.S. TREASURY BONDS-1.08%
6.75%, 08/15/26 3,000,000 3,207,060
- ---------------------------------------------------------------
6.625%, 02/15/27 11,700,000 12,338,820
- ---------------------------------------------------------------
6.125%, 11/15/27 13,500,000 13,393,080
- ---------------------------------------------------------------
28,938,960
- ---------------------------------------------------------------
U.S. TREASURY NOTES-7.79%
11.75%, 02/15/01 23,000,000 25,213,980
- ---------------------------------------------------------------
6.50%, 05/31/01 17,000,000 17,298,180
- ---------------------------------------------------------------
13.375%, 08/15/01 25,000,000 28,856,000
- ---------------------------------------------------------------
15.75%, 11/15/01 28,975,000 35,425,414
- ---------------------------------------------------------------
6.25%, 08/31/02 17,750,000 18,045,183
- ---------------------------------------------------------------
5.625%, 12/31/02 10,000,000 9,983,500
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
U.S. TREASURY NOTES-(CONTINUED)
5.75%, 04/30/03 $ 2,900,000 $ 2,903,857
- ---------------------------------------------------------------
7.25%, 08/15/04 7,500,000 7,976,625
- ---------------------------------------------------------------
7.875%, 11/15/04 15,000,000 16,404,000
- ---------------------------------------------------------------
7.50%, 02/15/05 3,000,000 3,237,120
- ---------------------------------------------------------------
6.50%, 08/15/05 5,000,000 5,165,900
- ---------------------------------------------------------------
5.875%, 11/15/05 9,000,000 9,008,820
- ---------------------------------------------------------------
6.50%, 10/15/06 12,000,000 12,398,280
- ---------------------------------------------------------------
6.25%, 02/15/07 5,000,000 5,099,300
- ---------------------------------------------------------------
6.625%, 05/15/07 7,000,000 7,298,410
- ---------------------------------------------------------------
5.625%, 05/15/08 4,000,000 3,921,000
- ---------------------------------------------------------------
208,235,569
- ---------------------------------------------------------------
Total U.S. Treasury
Securities (Cost
$240,750,126) 237,174,529
- ---------------------------------------------------------------
TIME DEPOSIT-3.51%
Dresdner Kleinwort Benson North
America, LLC, 5.75%, 07/01/99
(Cost $93,779,222) 93,779,222 93,779,222
- ---------------------------------------------------------------
REPURCHASE AGREEMENT(F)-0.07%
Dean Witter Reynolds, Inc.,
4.85%, 07/01/99 (Cost
$1,979,580)(g) 1,978,580 1,978,580
- ---------------------------------------------------------------
TOTAL INVESTMENTS-98.98% 2,645,365,289
- ---------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-1.02% 27,245,832
- ---------------------------------------------------------------
NET ASSETS-100.00% $2,672,611,121
===============================================================
</TABLE>
Investment Abbreviations:
ADR - American Depositary Receipt
AUD - Australian Dollar
CAD - Canadian Dollars
Conv. - Convertible
Ctfs. - Certificates
Deb. - Debentures
Dep. - Depositary
DEM - German Deutsche Mark
Disc. - Discounted
DKK - Danish Krone
EUR - Euro
FRF - French Franc
GBP - British Pound Sterling
Gtd. - Guaranteed
NLG - Netherlands
NZD - New Zealand Dollar
Pfd. - Preferred
Rts. - Rights
Sec. - Secured
SEK - Swedish Krona
Sr. - Senior
Sub. - Subordinated
Unsec.- Unsecured
Unsub.- Unsubordinated
Notes to Schedule of Investments:
(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 06/30/99 was $118,047,593
which represented 4.40% 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) Foreign denominated security. Par value and coupon are denominated in
currency of country indicated.
(e) Discounted bond at purchase. Interest rate shown represents the coupon rate
at which the bond will accrue at a specified future date.
(f) 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 is at least 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.
(g) Joint repurchase agreement entered into 06/30/99 with a maturing value of
$100,013,472. Collateralized by U.S. Government obligations.
See Notes to Financial Statements.
13
<PAGE> 16
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1999
(Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$2,178,437,439) $2,645,365,289
- ---------------------------------------------------------
Receivables for:
Investments sold 11,547,202
- ---------------------------------------------------------
Foreign currency contracts closed 924,440
- ---------------------------------------------------------
Fund shares sold 8,278,807
- ---------------------------------------------------------
Interest and dividends 22,522,042
- ---------------------------------------------------------
Variation margin 2,656,250
- ---------------------------------------------------------
Forward currency contracts 498,180
- ---------------------------------------------------------
Investment for deferred compensation plan 30,232
- ---------------------------------------------------------
Other assets 77,814
- ---------------------------------------------------------
Total assets 2,691,900,256
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 9,300,338
- ---------------------------------------------------------
Fund shares reacquired 6,055,373
- ---------------------------------------------------------
Distributions to shareholders 61,312
- ---------------------------------------------------------
Deferred compensation plan 30,232
- ---------------------------------------------------------
Accrued advisory fees 1,092,190
- ---------------------------------------------------------
Accrued distribution fees 2,175,311
- ---------------------------------------------------------
Accrued transfer agent fees 281,096
- ---------------------------------------------------------
Accrued operating expenses 293,283
- ---------------------------------------------------------
Total liabilities 19,289,135
- ---------------------------------------------------------
Net assets applicable to shares
outstanding $2,672,611,121
=========================================================
NET ASSETS:
Class A $1,504,925,657
=========================================================
Class B $1,018,952,439
=========================================================
Class C $ 148,733,025
=========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 51,329,389
=========================================================
Class B 34,826,913
=========================================================
Class C 5,078,350
=========================================================
Class A:
Net asset value and redemption price
per share $ 29.32
- ---------------------------------------------------------
Offering price per share:
(Net asset value of $29.32
divided by 95.25%) $ 30.78
=========================================================
Class B:
Net asset value and offering price per
share $ 29.26
=========================================================
Class C:
Net asset value and offering price per
share $ 29.29
=========================================================
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30, 1999
(Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 40,502,621
- ---------------------------------------------------------
Dividends (net of $89,528 foreign
withholding tax) 6,260,679
- ---------------------------------------------------------
Total investment income 46,763,300
- ---------------------------------------------------------
EXPENSES:
Advisory fees 6,396,718
- ---------------------------------------------------------
Administrative services fees 64,003
- ---------------------------------------------------------
Custodian fees 123,478
- ---------------------------------------------------------
Distribution fees-Class A 1,765,499
- ---------------------------------------------------------
Distribution fees-Class B 4,713,165
- ---------------------------------------------------------
Distribution fees-Class C 646,358
- ---------------------------------------------------------
Trustees' fees 12,777
- ---------------------------------------------------------
Transfer agent fees-Class A 967,484
- ---------------------------------------------------------
Transfer agent fees-Class B 1,016,692
- ---------------------------------------------------------
Transfer agent fees-Class C 154,837
- ---------------------------------------------------------
Other 372,541
- ---------------------------------------------------------
Total expenses 16,233,552
- ---------------------------------------------------------
Less: Expenses paid indirectly (20,915)
- ---------------------------------------------------------
Net expenses 16,212,637
- ---------------------------------------------------------
Net investment income 30,550,663
- ---------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN
CURRENCIES, FORWARD CURRENCY CONTRACTS,
FUTURES AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities (16,493,534)
- ---------------------------------------------------------
Foreign currencies 614,241
- ---------------------------------------------------------
Forward currency contracts 328,196
- ---------------------------------------------------------
Futures contracts 31,010,615
- ---------------------------------------------------------
Option contracts written (487,018)
- ---------------------------------------------------------
14,972,500
- ---------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of:
Investment securities 82,590,842
- ---------------------------------------------------------
Foreign currencies (70,927)
- ---------------------------------------------------------
Forward currency contracts 236,706
- ---------------------------------------------------------
Future contracts (8,215,663)
- ---------------------------------------------------------
Option contracts written 22,777
- ---------------------------------------------------------
74,563,735
- ---------------------------------------------------------
Net gain from investment securities,
foreign currencies, forward currency
contracts, futures and option
contracts 89,536,235
- ---------------------------------------------------------
Net increase in net assets resulting from
operations $120,086,898
=========================================================
</TABLE>
See Notes to Financial Statements.
14
<PAGE> 17
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1999 and the year ended December 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 30,550,663 $ 42,651,746
- ---------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies, forward currency contracts, futures
and option contracts 14,972,500 (34,961,701)
- ---------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities, foreign currencies, forward currency
contracts, futures and option contracts 74,563,735 202,514,022
- ---------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 120,086,898 210,204,067
- ---------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (16,048,648) (25,009,619)
- ---------------------------------------------------------------------------------------------
Class B (7,236,278) (12,164,517)
- ---------------------------------------------------------------------------------------------
Class C (1,014,815) (1,261,081)
- ---------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on
investment securities:
Class A -- (2,990,460)
- ---------------------------------------------------------------------------------------------
Class B -- (2,026,544)
- ---------------------------------------------------------------------------------------------
Class C -- (260,076)
- ---------------------------------------------------------------------------------------------
Share transactions-net:
Class A 132,263,372 537,064,636
- ---------------------------------------------------------------------------------------------
Class B 88,482,030 344,386,485
- ---------------------------------------------------------------------------------------------
Class C 29,520,563 99,082,872
- ---------------------------------------------------------------------------------------------
Net increase in net assets 346,053,122 1,147,025,763
- ---------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 2,326,557,999 1,179,532,236
- ---------------------------------------------------------------------------------------------
End of period $2,672,611,121 $2,326,557,999
=============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $2,207,862,652 $1,957,596,687
- ---------------------------------------------------------------------------------------------
Undistributed net investment income 11,346,214 5,095,292
- ---------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities, foreign currencies, forward currency
contracts, futures and option contracts (19,854,085) (34,826,585)
- ---------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies, forward currency contracts, futures and
option contracts 473,256,340 398,692,605
- ---------------------------------------------------------------------------------------------
$2,672,611,121 $2,326,557,999
=============================================================================================
</TABLE>
See Notes to Financial Statements.
15
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS
June 30, 1999
(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 closing bid price on that day. Each
security reported on the NASDAQ National Market System is valued at the last
sales price on the valuation date or absent a last sales price, at the
closing bid price. Debt obligations (including convertible bonds) are valued
on the basis of prices provided by an independent pricing service. Prices
provided by the pricing service may be determined without exclusive reliance
on quoted prices and may reflect appropriate factors such as yield, type of
issue, coupon rate and maturity date. Securities for which market prices are
not provided by any of the above methods are valued based upon quotes
furnished by independent sources and are valued at the last bid price in the
case of equity securities and in the case of debt obligations, the mean
between the last bid and asked prices. Securities for which market
quotations 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. Such distributions are
declared and paid quarterly. Distributions from net realized capital gains,
if any, are recorded on a dividend date and paid annually.
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. The Fund has a capital loss
carryforward of $20,440,896 as of December 31, 1998 (which may be carried
forward to offset future taxable capital gains, if any) which expires, if
not previously utilized, through the year 2006. The Fund cannot distribute
capital gains to shareholders until the tax loss carryforwards have been
utilized.
E. 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.
F. Foreign Currency Translations -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are translated
into U.S. dollar amounts on the respective dates of such transactions. The
Fund does not separately account for that portion of the results of
operations resulting from changes in foreign exchange rates on investments
and the fluctuations arising from changes in market prices of securities
held. Such fluctuations are included with the net realized and unrealized
gain or loss from investments.
G. 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
16
<PAGE> 19
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, 1999 were as follows:
<TABLE>
<CAPTION>
CONTRACT TO
SETTLEMENT ------------------------ UNREALIZED
DATE DELIVER RECEIVE VALUE APPRECIATION
---------- ---------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
08/04/99 CAD 13,000,000 $ 8,909,785 $ 8,826,999 $ 82,786
10/08/99 EUR 9,000,000 9,411,120 9,347,650 63,470
08/31/99 GBP 600,000 958,200 946,172 12,028
10/06/99 GBP 22,700,000 35,974,052 35,813,379 160,673
07/22/99 SEK 72,000,000 8,673,131 8,493,908 179,223
----------- ----------- --------
$63,926,288 $63,428,108 $498,180
=========== =========== ========
</TABLE>
H. 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.
I. 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 pay AIM for certain administrative costs incurred in providing
accounting services to the fund. During the six months ended June 30, 1999 AIM
was paid $64,003 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, 1999, AFS
was paid $943,086 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 respective
classes. During the six months ended June 30, 1999, the Class A, Class B and
Class C shares paid AIM Distributors $1,765,499, $4,713,165 and $646,358,
respectively, as compensation under the Plans.
17
<PAGE> 20
AIM Distributors received commissions of $457,923 from sales of the Class A
shares of the Fund during the six months ended June 30, 1999. Such commissions
are not an expense of the Fund. They are deducted from, and are not included in,
the proceeds from sales of Class A shares. During the six months ended June 30,
1999, AIM Distributors received $87,792 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, 1999, the Fund paid legal fees of
$4,227 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, 1999, the Fund received reductions in
transfer agency fees from AFS (an affiliate of AIM) and reductions in custodian
fees of $15,737 and $5,178, respectively under expense offset arrangements. The
effect of the above arrangements resulted in a reduction of the Fund's total
expenses of $20,915 during the six months ended June 30, 1999.
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) $975,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. During the six
months ended June 30, 1999, 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 0.09% 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. Prior to May 28, 1999, the commitment fee rate was
0.05%.
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, 1999 was
$918,510,667 and $543,876,413, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, on a tax basis, as of June 30, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $525,452,192
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (58,531,929)
- ---------------------------------------------------------
Net unrealized appreciation of investment
securities $466,920,263
=========================================================
</TABLE>
Cost of investments for tax purposes is $2,178,445,026.
NOTE 7-FUTURES CONTRACTS
On June 30, 1999, $12,307,000 principal amount of U.S. Treasury obligations were
pledged as collateral to cover margin requirements for open futures contracts.
Open futures contracts at June 30, 1999 were as follows:
<TABLE>
<CAPTION>
NO. OF UNREALIZED
CONTRACT CONTRACTS MONTH COMMITMENT APPRECIATION
- -------- --------- ----- ---------- ------------
<S> <C> <C> <C> <C>
S&P 500 425 Sept. Buy $5,902,813
======= ========= ===== ========== ============
</TABLE>
NOTE 8-CALL OPTION CONTRACTS WRITTEN
Transactions in call options written during the six months ended June 30, 1999
are summarized as follows:
<TABLE>
<CAPTION>
CALL OPTION CONTRACTS
-------------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- -----------
<S> <C> <C>
Beginning of period 500 $ 797,973
- ------------------- --------- -----------
Written 1,600 475,184
- ------------------- --------- -----------
Closed (2,100) (1,273,157)
- ------------------- --------- -----------
End of period -- $ --
=================== ========= ===========
</TABLE>
18
<PAGE> 21
NOTE 9-SHARE INFORMATION
Changes in shares outstanding during the six months ended June 30, 1999 and the
year ended December 31, 1998 were as follows:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
-------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Sold:
Class A 12,898,183 $ 368,970,954 29,663,763 $ 789,886,049
- ----------------------------------------------------------------------------------------------------------------------
Class B 5,793,585 165,386,698 15,995,669 427,423,474
- ----------------------------------------------------------------------------------------------------------------------
Class C 1,622,088 46,345,466 4,375,455 117,461,185
- ----------------------------------------------------------------------------------------------------------------------
Issued as reinvestment
of dividends:
Class A 533,355 15,307,454 872,547 23,134,563
- ----------------------------------------------------------------------------------------------------------------------
Class B 233,755 6,698,800 492,389 13,073,889
- ----------------------------------------------------------------------------------------------------------------------
Class C 33,612 964,240 54,578 1,446,813
- ----------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (8,800,234) (252,015,036) (10,355,432) (275,955,976)
- ----------------------------------------------------------------------------------------------------------------------
Class B (2,927,791) (83,603,468) (3,657,104) (96,110,878)
- ----------------------------------------------------------------------------------------------------------------------
Class C (624,195) (17,789,143) (747,879) (19,825,126)
- ----------------------------------------------------------------------------------------------------------------------
8,762,358 $ 250,265,965 36,693,986 $ 980,533,993
======================================================================================================================
</TABLE>
NOTE 10-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A and a share of
Class B outstanding during the six months ended June 30, 1999 and each of the
years in the five-year period ended December 31, 1998, and for a share of Class
C outstanding during the six months ended June 30, 1999, the year ended December
31, 1998 and the period August 4, 1997 (date sales commenced) through December
31, 1997.
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------------
DECEMBER 31,
JUNE 30, -----------------------------------------------------
1999(a) 1998 1997 1996 1995 1994
---------- ---------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 28.23 $ 25.78 $ 21.84 $ 19.22 $ 14.62 $ 16.10
- -------------------------------------------------------- ---------- ---------- -------- -------- ------- -------
Income from investment operations:
Net investment income 0.40 0.71(a) 0.60 0.66 0.49 0.44
- -------------------------------------------------------- ---------- ---------- -------- -------- ------- -------
Net gains (losses) on securities (both realized and
unrealized) 1.01 2.45 4.66 2.99 4.57 (1.31)
- -------------------------------------------------------- ---------- ---------- -------- -------- ------- -------
Total from investment operations 1.41 3.16 5.26 3.65 5.06 (0.87)
- -------------------------------------------------------- ---------- ---------- -------- -------- ------- -------
Less distributions:
Dividends from net investment income (0.32) (0.65) (0.55) (0.55) (0.46) (0.39)
- -------------------------------------------------------- ---------- ---------- -------- -------- ------- -------
Distributions from net realized gains -- (0.06) (0.77) (0.48) -- (0.22)
- -------------------------------------------------------- ---------- ---------- -------- -------- ------- -------
Total distributions (0.32) (0.71) (1.32) (1.03) (0.46) (0.61)
- -------------------------------------------------------- ---------- ---------- -------- -------- ------- -------
Net asset value, end of period $ 29.32 $ 28.23 $ 25.78 $ 21.84 $ 19.22 $ 14.62
======================================================== ========== ========== ======== ======== ======= =======
Total return(b) 5.02% 12.46% 24.41% 19.25% 34.97% (5.44)%
======================================================== ========== ========== ======== ======== ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,504,926 $1,318,230 $683,633 $334,189 $92,241 $37,572
======================================================== ========== ========== ======== ======== ======= =======
Ratio of expenses to average net assets 0.95%(c) 0.95% 0.98% 1.15% 1.43%(d) 1.25%(d)
======================================================== ========== ========== ======== ======== ======= =======
Ratio of net investment income to average net assets 2.81%(c) 2.81% 2.48% 2.97% 2.81%(e) 3.07%(e)
======================================================== ========== ========== ======== ======== ======= =======
Portfolio turnover rate 23% 43% 66% 72% 77% 76%
======================================================== ========== ========== ======== ======== ======= =======
</TABLE>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges and is not annualized for periods less than
one year.
(c) Ratios are annualized and based on average net assets of $1,424,103,796.
(d) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements
were 1.46% and 1.68% for 1995 and 1994, respectively.
(e) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 2.78% and 2.64% for 1995 and 1994, respectively.
19
<PAGE> 22
NOTE 10-FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
CLASS B CLASS C
--------------------------------------------------------------- ------------------------------
DECEMBER 31, DECEMBER 31,
JUNE 30, ------------------------------------------------- JUNE 30, ------------------
1999(a) 1998 1997 1996 1995 1994 1999(a) 1998 1997
---------- -------- -------- -------- ------- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 28.18 $ 25.75 $ 21.83 $ 19.22 $ 14.62 $ 16.11 $ 28.21 $ 25.76 $ 25.55
- ------------------------------ ---------- -------- -------- -------- ------- ------- -------- -------- -------
Income from investment
operations:
Net investment income 0.28 0.42(a) 0.38 0.48 0.31 0.31 0.27 0.42(a) 0.16
- ------------------------------ ---------- -------- -------- -------- ------- ------- -------- -------- -------
Net gains (losses) on
securities (both realized
and unrealized) 1.01 2.51 4.68 2.99 4.61 (1.31) 1.02 2.53 1.01
- ------------------------------ ---------- -------- -------- -------- ------- ------- -------- -------- -------
Total from investment
operations 1.29 2.93 5.06 3.47 4.92 (1.00) 1.29 2.95 1.17
- ------------------------------ ---------- -------- -------- -------- ------- ------- -------- -------- -------
Less distributions:
Dividends from net investment
income (0.21) (0.44) (0.37) (0.38) (0.32) (0.27) (0.21) (0.44) (0.19)
- ------------------------------ ---------- -------- -------- -------- ------- ------- -------- -------- -------
Distributions from net
realized gains -- (0.06) (0.77) (0.48) -- (0.22) -- (0.06) (0.77)
- ------------------------------ ---------- -------- -------- -------- ------- ------- -------- -------- -------
Total distributions (0.21) (0.50) (1.14) (0.86) (0.32) (0.49) (0.21) (0.50) (0.96)
- ------------------------------ ---------- -------- -------- -------- ------- ------- -------- -------- -------
Net asset value, end of period $ 29.26 $ 28.18 $ 25.75 $ 21.83 $ 19.22 $ 14.62 $ 29.29 $ 28.21 $ 25.76
============================== ========== ======== ======== ======== ======= ======= ======== ======== =======
Total return(b) 4.61% 11.53% 23.42% 18.28% 33.93% (6.23)% 4.60% 11.60% 4.67%
============================== ========== ======== ======== ======== ======= ======= ======== ======== =======
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $1,018,952 $894,165 $486,506 $237,082 $72,634 $20,245 $148,733 $114,163 $ 9,394
============================== ========== ======== ======== ======== ======= ======= ======== ======== =======
Ratio of expenses to average
net assets 1.78%(c) 1.76% 1.79% 1.97% 2.21%(d) 1.98%(d) 1.78%(c) 1.73% 1.78%(f)
============================== ========== ======== ======== ======== ======= ======= ======== ======== =======
Ratio of net investment income
to average net assets 1.98%(c) 2.00% 1.67% 2.15% 2.03%(e) 2.34%(e) 1.98%(c) 2.03% 1.68%(f)
============================== ========== ======== ======== ======== ======= ======= ======== ======== =======
Portfolio turnover rate 23% 43% 66% 72% 77% 76% 23% 43% 66%
============================== ========== ======== ======== ======== ======= ======= ======== ======== =======
</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
$950,444,870 and $130,343,014 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.
20
<PAGE> 23
<TABLE>
<CAPTION>
BOARD OF TRUSTEES OFFICERS OFFICE OF THE FUND
<S> <C> <C>
Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
Chairman Chairman Suite 100
A I M Management Group Inc. Houston, TX 77046
Robert H. Graham
Bruce L. Crockett President INVESTMENT ADVISOR
Director
ACE Limited; Carol F. Relihan A I M Advisors, Inc.
Formerly Director, President, and Senior Vice President and Secretary 11 Greenway Plaza
Chief Executive Officer Suite 100
COMSAT Corporation Gary T. Crum Houston, TX 77046
Senior Vice President
Owen Daly II TRANSFER AGENT
Director Dana R. Sutton
Cortland Trust Inc. Vice President and Treasurer A I M Fund Services, Inc.
P.O. Box 4739
Edward K. Dunn Jr. Robert G. Alley Houston, TX 77210-4739
Chairman, Mercantile Mortgage Corp.; Vice President
Formerly Vice Chairman and President, CUSTODIAN
Mercantile-Safe Deposit & Trust Co.; and Stuart W. Coco
President, Mercantile Bankshares Vice President State Street Bank and Trust Company
225 Franklin Street
Jack Fields Melville B. Cox Boston, MA 02110
Chief Executive Officer Vice President
Texana Global, Inc.; COUNSEL TO THE FUND
Formerly Member Karen Dunn Kelley
of the U.S. House of Representatives Vice President Ballard Spahr
Andrews & Ingersoll, LLP
Carl Frischling Edgar M. Larsen 1735 Market Street
Partner Vice President Philadelphia, PA 19103
Kramer, Levin, Naftalis & Frankel LLP
Mary J. Benson COUNSEL TO THE TRUSTEES
Robert H. Graham Assistant Vice President and
President and Chief Executive Officer Assistant Treasurer Kramer, Levin, Naftalis & Frankel LLP
A I M Management Group Inc. 919 Third Avenue
Sheri Morris New York, NY 10022
Prema Mathai-Davis Assistant Vice President and
Chief Executive Officer, YWCA of the U.S.A., Assistant Treasurer DISTRIBUTOR
Commissioner, New York City Dept. for
the Aging; and member of the Board of Directors, Renee A. Friedli A I M Distributors, Inc.
Metropolitan Transportation Authority of Assistant Secretary 11 Greenway Plaza
New York State Suite 100
P. Michelle Grace Houston, TX 77046
Lewis F. Pennock Assistant Secretary
Attorney
Jeffrey H. Kupor
Louis S. Sklar Assistant Secretary
Executive Vice President
Hines Interests Nancy L. Martin
Limited Partnership Assistant Secretary
Ofelia M. Mayo
Assistant Secretary
Lisa A. Moss
Assistant Secretary
Kathleen J. Pflueger
Assistant Secretary
Samuel D. Sirko
Assistant Secretary
Stephen I. Winer
Assistant Secretary
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<PAGE> 24
THE AIM FAMILY OF FUNDS--Registered Trademark--
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<S> <C> <C>
GROWTH FUNDS MONEY MARKET FUNDS A I M Management Group Inc. has
AIM Aggressive Growth Fund(1) AIM Money Market Fund provided leadership in the mutual-
AIM Blue Chip Fund AIM Tax-Exempt Cash Fund fund industry since 1976 and
AIM Capital Development Fund managed approximately $121 billion
AIM Constellation Fund INTERNATIONAL GROWTH FUNDS in assets for more than 6.3 million
AIM Dent Demographic Trends Fund AIM Advisor International Value Fund shareholders, including individual
AIM Large Cap Growth Fund AIM Asian Growth Fund investors, corporate clients and
AIM Mid Cap Equity Fund(A) AIM Developing Markets Fund financial institutions, as of June
AIM Select Growth Fund AIM Europe Growth Fund 30, 1999.
AIM Small Cap Growth Fund(B) AIM European Development Fund The AIM Family of
AIM Small Cap Opportunities Fund AIM International Equity Fund Funds--Registered Trademark-- is
AIM Value Fund AIM Japan Growth Fund distributed nationwide, and AIM
AIM Weingarten Fund AIM Latin American Growth Fund today is the 10th-largest mutual-
AIM New Pacific Growth Fund fund complex in the United States
GROWTH & INCOME FUNDS in assets under management,
AIM Advisor Flex Fund GLOBAL GROWTH FUNDS according to Strategic Insight, an
AIM Advisor Large Cap Value Fund AIM Global Aggressive Growth Fund independent mutual-fund monitor.
AIM Advisor Real Estate Fund AIM Global Growth Fund
AIM Balanced Fund
AIM Basic Value Fund(C) GLOBAL GROWTH & INCOME FUNDS
AIM Charter Fund AIM Global Growth & Income Fund
AIM Global Utilities Fund
INCOME FUNDS
AIM Floating Rate Fund GLOBAL INCOME FUNDS
AIM High Yield Fund AIM Emerging Markets Debt Fund(D)
AIM High Yield Fund II AIM Global Government Income Fund
AIM Income Fund AIM Global Income Fund
AIM Intermediate Government Fund AIM Strategic Income Fund
AIM Limited Maturity Treasury Fund
THEME FUNDS
TAX-FREE INCOME FUNDS AIM Global Consumer Products and Services Fund
AIM High Income Municipal Fund AIM Global Financial Services Fund
AIM Municipal Bond Fund AIM Global Health Care Fund
AIM Tax-Exempt Bond Fund of Connecticut AIM Global Infrastructure Fund
AIM Tax-Free Intermediate Fund AIM Global Resources Fund
AIM Global Telecommunications and Technology Fund(E)
AIM Global Trends Fund(F)
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(1) AIM Aggressive Growth Fund reopened to new investors November 16, 1998. (A)
On September 8, 1998, AIM Mid Cap Growth Fund was renamed AIM Mid Cap Equity
Fund. (B) On September 8, 1998, AIM Small Cap Equity Fund was renamed AIM Small
Cap Growth Fund. (C) On September 8, 1998, AIM America Value Fund was renamed
AIM Basic Value Fund. (D) On September 8, 1998, AIM Global High Income Fund was
renamed AIM Emerging Markets Debt Fund. (E) On June 1, 1999, AIM Global
Telecommunications Fund was renamed AIM Global Telecommunications and Technology
Fund. (F) On September 8, 1998, AIM New Dimension Fund was renamed AIM Global
Trends 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.
[AIM LOGO APPEARS HERE]
INVEST WITH DISCIPLINE--Registered Trademark--
