<PAGE> 1
ANNUAL REPORT / DECEMBER 31 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 SUCCESSS. 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's performance figures are historical and reflect
reinvestment of all distributions and changes in net asset value.
o When sales charges are included in performance figures, Class A share
performance reflects the maximum 4.75% sales charge, and Class B and Class C
share performance reflects the applicable contingent deferred sales charge
(CDSC) for the period involved. The CDSC on Class B shares declines from 5%
beginning at the time of purchase to 0% at the beginning of the seventh
year. The CDSC on Class C shares is 1% for the first year after purchase.
The performance of the fund's Class B and Class C shares will differ from
that of 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 Lipper Balanced Fund Index is a net asset value weighted index of the
30 largest funds within the balanced fund investment objective tracked by
Lipper, Inc., an independent mutual fund performance monitor. It is
calculated daily with adjustments for distributions as of the ex-dividend
dates.
o The unmanaged Standard & Poor's Composite of 500 Stocks (S&P 500) is
generally considered representative of the stock market.
o An investment cannot be made in any index listed. Unless otherwise
indicated, index results include reinvested dividends and do not reflect
sales charges.
AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OF A BANK AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY. THERE IS A RISK THAT YOU COULD LOSE SOME OR ALL OF YOUR MONEY.
This report may be distributed only to current shareholders or to persons
who have received a current prospectus of the fund.
AIM BALANCED FUND
<PAGE> 3
ANNUAL REPORT / CHAIRMAN'S LETTER
Dear Fellow Shareholder:
The fiscal year discussed in this report has reconfirmed our
[PHOTO of faith in two long-established principles of investing:
Charles T. portfolio diversification and long-term thinking. We could
Bauer, title this report "What a Difference a Year Makes."
Chairman of An investor surveying conditions when the fiscal year
the Board of opened on January 1, 1999, would have seen a market dominated
THE FUND by large-capitalization stocks and high-quality bonds,
APPEARS HERE] especially U.S. Treasuries. During 1998, two well-known
indexes of large-capitalization U.S. companies, the S&P 500
and the Dow Jones Industrial Average, were up 28.60% and
18.15%, respectively. By contrast, smaller-company stocks in
the Russell 2000 had lost 2.55%. Overseas, many markets were
languishing, especially in Asia, where so many financial
difficulties had originated in 1997.
In bond markets as well, name-brand quality was the
place to be. The Lehman Government/Corporate Bond Index,
which follows sovereign issues and investment-grade debt, was up 9.47%, while
the Lehman High Yield Index, which tracks riskier "junk bonds," had risen only
1.60%.
It would be easy for an investor to conclude that blue-chip issues, whether
equity or fixed-income, were the place to be, that it was time to divest himself
of everything else and put all his eggs in the blue-chip basket. The investor,
of course, would be wrong.
MARKETS TURN
While large-capitalization stocks continued to do very well, during 1999 markets
broadened dramatically with many investment sectors performing a complete
turnaround. For example, the small-cap stocks in the Russell 2000 were up 21.26%
for calendar year 1999, and many Asian markets, particularly Japan, had staged a
comeback.
The same holds true of bonds. The higher-quality Lehman index was down 2.15%
during 1999 while the Lehman High Yield index was up 2.39%.
The point, at the risk of sounding repetitive to those of you who have
invested with us for a long time, is that this is why diversification is a
fundamental investing principle. Market sectors and asset classes go in and out
of favor, but over the long run--and the long run is several years--the markets'
overall trend has been upward. Selecting an asset class or a market sector on
the basis of a short-term snapshot of conditions is usually unwise, as is
concentrating your portfolio in one asset class. Staying fully invested in a
diversified portfolio remains a compelling strategy and one of your best
prospects for long-term gain. We also continue to remind you that the past few
years have seen extraordinary gains in some markets, and there is no assurance
that this trend will continue.
LOOKING AHEAD
As we look about at the close of this fiscal year, we are encouraged by multiple
signs of economic health in Europe and Asia, not to mention the prolonged U.S.
economic expansion. However, we are aware of how easily an investor could have
been misled by conditions just 12 months ago. For our shareholders, we therefore
reiterate our commitment to investing through a financial advisor. In addition
to helping you select investments appropriate to your time horizon and risk
tolerance, a financial advisor can keep you informed about how changing market
conditions affect you and your portfolio--and help ensure that when you do alter
your investments, there's a logical reason for doing so. AIM believes every
investor should be guided by a financial professional.
FUND MANAGERS COMMENT
In the pages that follow, your fund's portfolio managers discuss how they
managed your fund during the year ended December 31, how the markets behaved and
what they foresee for the near future. We trust you will find their discussion
informative. If you have any questions or comments, we invite you to contact us,
either at our Web site, aimfunds.com, or through our Client Services department
at 800-959-4246. Information about your account is also available through our
automated AIM Investor Line, 800-246-5463.
Thank you for your continued participation in The AIM Family of Funds --
Registered Trademark --.
Sincerely,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman, A I M Advisors, Inc.
------------------------------------
STAYING FULLY
INVESTED IN A DIVERSIFIED
PORTFOLIO REMAINS
A COMPELLING STRATEGY
AND ONE OF YOUR
BEST PROSPECTS FOR
LONG-TERM GAIN.
------------------------------------
AIM BALANCED FUND
<PAGE> 4
ANNUAL REPORT / MANAGERS' OVERVIEW
FUND BENEFITS FROM ONGOING
TECHNOLOGY DOMINANCE
HOW DID AIM BALANCED FUND PERFORM DURING THE FISCAL YEAR?
Boosted by strong technology holdings, AIM Balanced Fund posted a robust 19.04%
return for Class A shares, 18.08% for Class B shares, and 18.09% for Class C
shares. These returns are computed at net asset value, that is, without the
effect of sales charges. The fund handily outpaced the average balanced mutual
fund, as measured by the Lipper Balanced Fund Index, which returned 8.98%
during the same period.
Fund flows remained strong during the fiscal year, with net assets under
management growing to $3.18 billion on December 31.
WHAT WERE THE MAJOR TRENDS IN FINANCIAL MARKETS DURING 1999?
Although there were several prominent shifts in market sentiment during the
fiscal year, the overriding theme for financial markets in 1999 was the
dominance of the technology sector. During the first half of 1999, investors
favored large-cap and cyclical stocks. Then the markets began to broaden into
small- and mid-cap issues during the third quarter, while technology stocks
continued to soar through year-end.
Global equity markets ended 1999 at record levels. Every major index in the
United States, as well as markets across Europe, Asia and Latin America, hit new
highs at year-end. But in the midst of this prosperity we continued to struggle
with a stealth bear market. At the end of 1999, a third of the New York Stock
Exchange and over-the-counter stocks were off 20% or more from their previous
12-month highs.
This past year has been a challenging period for bond investors. Throughout
1999, downward pressure on bond prices came from the U.S. economy's continued
strong growth, improving global economies, rising long-term interest rates and
inflation fears. These factors contributed to a market environment in which
investors favored stocks over bonds. The ensuing bond sell-off produced the
worst calendar-year performance for bonds since 1994.
WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE?
The fund continued to maintain its target 60/40 allocation of stocks and bonds
during the fiscal year. Although our fixed-income component detracted from fund
performance, losses in this area were more than offset by the excellent gains on
the equity side.
We had significant exposure to the technology and communication services
sectors, which remained very strong during the year, driven largely by the
explosion in Internet and data communications traffic. At the end of 1999, these
sectors, which accounted for more than 50% of total net assets, were the fund's
largest sector allocations.
Our international holdings, which composed 9% of the fund's total net assets
at year end, enhanced performance on the renewed strength of global economies. A
particularly strong performer was Nokia,
FUND VS. PEER GROUP
One-year cumulative returns, excluding sales charges
As of 12/31/99
BAR CHART
================================================================================
CLASS A SHARES 19.04%
CLASS B SHARES 18.08%
CLASS C SHARES 18.09%
LIPPER BALANCED FUND INDEX 8.98%
================================================================================
GROWTH OF NET ASSESTS
In billions
BAR CHART
================================================================================
12/31/98 $2.33
12/31/99 $3.18
================================================================================
See important fund and index disclosures inside front cover.
AIM BALANCED FUND
2
<PAGE> 5
ANNUAL REPORT / MANAGERS' OVERVIEW
the world's number one mobile phone maker. During the year, the company's stock
rose from the low $60s per share to more than $175 at year-end.
We also participated in several successful IPOs during the year. One notable
example is Sycamore Networks, which markets optical networking products that
enable telecommunications service providers to upgrade their existing
fiber-optic networks. The company's stock opened around $180 per share in
mid-October. By the end of the fiscal year, the stock had soared to
approximately $330 per share.
DID YOU MAKE ANY CHANGES TO THE FUND'S PORTFOLIO DURING 1999?
Due to the rising interest rate environment in 1999, we elected to reduce the
fund's holdings in financial stocks to approximately 10% of total net assets.
When investors' inflation fears were at their peak, financial stocks bore the
brunt of the market decline. The financial component of the S&P 500 finished
with a return of only 3.97% for the year.
Several ongoing concerns have created pressure on the profit margins of
pharmaceutical companies and led us to decrease holdings in that area as well.
Many market watchers predict that global pharmaceutical sales will slow from
1999's sales growth of nearly 10%. One reason for this slide is that there may
be fewer new drugs with blockbuster potential in the 2000 lineup. At the same
time, government debate over various plans to add prescription-drug benefits to
Medicare will keep a spotlight on drug prices and make it more difficult for
pharmaceutical companies to increase prices.
We have used the proceeds from these reductions to increase our holdings in
the technology sector, particularly in the wireless communications arena. A new
addition to the fund's portfolio is Western Wireless, which provides cellular
service under the Cellular One brand to more than 774,000 subscribers in rural
areas in western U.S. states. During 1999, the company's stock more than doubled
to finish the year above $65 a share.
WHAT IS YOUR OUTLOOK FOR 2000?
Given the market volatility that we've seen in 1999 and the uncertainty
regarding interest rates in 2000, it's apparent that changes in market and
economic conditions cannot be predicted and should always be expected. The best
way to address these market risks, we believe, is through diversification. We
encourage investors to stay the course in terms of balancing their portfolios
with a variety of investment vehicles. AIM Balanced Fund has a distinct
advantage in this arena. Unlike the majority of its peers, which invest only in
large-cap stocks, the fund is well diversified across all market caps, so
investors can benefit from the strong growth potential of stocks of all sizes.
On the fixed-income side, further interest-rate increases may hamper bond
performance in the near future. However, the fund's balanced allocation of
stocks and bonds should continue to produce favorable relative returns by
mitigating risk in any market environment.
PORTFOLIO COMPOSITION
As of 12/31/99, based on total net assets
<TABLE>
<CAPTION>
TOP 10 FIXED-INCOME HOLDINGS
====================================================================================================================
TOP 10 EQUITY HOLDINGS ISSUER COUPON % OF NET ASSETS
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Nokia Oyj-ADR (Finland) 1.31% 1. U.S. Treasury Notes 5.63%-7.25% 6.43%
2. InfoSpace.com, Inc. 1.24 2. FNMA Notes 6.50%-7.00% 1.16
3. Lucent Technologies, Inc. 1.21 3. VERITAS Software Corp. 1.86% 0.85
4. Cisco Systems, Inc. 1.14 4. Comverse Technology Corp. 4.50% 0.83
5. EMC Corp. 1.06 5. U.S. Treasury Bond 9.38% 0.71
6. America Online, Inc. 1.05 6. GNMA 6.50% 0.56
7. FreeMarkets, Inc. 1.02 7. AT&T Corp. 8.63% 0.41
8. Univision Communications, Inc. 0.98 8. FHLMC 6.50% 0.42
9. Sun Microsystems, Inc. 0.97 9. Niagara Mohawk Power Co. 7.75% 0.37
10. Qwest Communications International, Inc. 0.90 10. Dow Capital B.V. (Netherlands) 9.20% 0.35
The fund's portfolio is subject to change, and there is no assurance that the
fund will continue to hold any particular security.
====================================================================================================================
<CAPTION>
TOP 10 FIXED-INCOME HOLDINGS
=====================================================
TOP 10 INDUSTRIES
- -----------------------------------------------------
<C> <C>
1. Computers (Software & Services) 7.04%
2. Telephone 5.67
3. Communications Equipment 5.50
4. Broadcasting (Television, Radio & Cable) 4.78
5. Telecommunications (Long Distance) 4.25
6. Electric Companies 2.96
7. Financial (Diversified) 2.95
8. Investment (Banking & Brokerage) 2.15
9. Natural Gas 2.14
10. Telecommunications (Cellular/ Wireless) 2.12
The fund's portfolio is subject to change, and there
is no assurance that the fund will continue to hold
any particular security.
=====================================================
</TABLE>
See important fund and index disclosures inside front cover.
AIM BALANCED FUND
3
<PAGE> 6
ANNUAL REPORT / PERFORMANCE HISTORY
YOUR FUND'S LONG-TERM PERFORMANCE
RESULTS OF A $10,000 INVESTMENT
AIM BALANCED FUND VS. BENCHMARK INDEXES
12/31/89-12/31/99
in thousands
MOUNTAIN CHART
===============================================================================
AIM Balanced Fund Lipper Balanced
Class A Shares Fund Index S&P 500 Index
- -------------------------------------------------------------------------------
12/89 $ 9,525 $ 10,000 $ 10,000
12/90 9,144 10,065.5 9,689.13
12/91 13,071 12,665.1 12,634.6
12/92 14,331 13,609.9 13,595.9
12/93 16,558 15,236.6 14,963.2
12/94 15,656 14,924.8 15,159.8
12/95 21,132 18,639.2 20,849.8
12/96 25,199 21,072 25,633.8
12/97 31,351 25,349.1 34,182.9
12/98 35,257 29,173.4 43,958.8
12/99 $41,971 $ 31,792 $ 53,205
Past performance cannot guarantee comparable future results.
===============================================================================
Source: Lipper, Inc.
MARKET VOLATILITY CAN SIGNIFICANTLY IMPACT SHORT-TERM PERFORMANCE. RESULTS
OF AN INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL
PERFORMANCE SHOWN.
AVERAGE ANNUAL TOTAL RETURNS
As of 12/31/99, including sales charges
===============================================================================
CLASS A SHARES
10 years 15.42%
5 years 20.62
1 year 13.38*
*19.04% excluding sales charges
CLASS B SHARES
Inception (10/18/93) 14.66%
5 years 20.63
1 year 13.08**
**18.08% excluding CDSC
CLASS C SHARES
Inception (8/4/97) 14.29%
1 year 17.09***
***18.09% excluding CDSC
Source: Lipper, Inc.
===============================================================================
Your fund's total return includes sales charges, expenses and management fees.
The performance of the fund's Class B and Class C shares will differ from that
of Class A shares due to differing fees and expenses. For fund performance
calculations and descriptions of the indexes cited on this page, please see the
inside front cover.
ABOUT THIS CHART
The chart compares your fund's Class A shares to benchmark indexes. It is
intended to give you a general idea of how your fund performed compared to these
benchmarks over the period 12/31/89 to 12/31/99. It is important to understand
the differences between your fund and these indexes. An index measures the
performance of a hypothetical portfolio. A market index such as the S&P 500 is
not managed, incurring no sales charges, expenses or fees. If you could buy all
the securities that make up a market index, you would incur expenses that would
affect your investments' return. In addition, it is worth noting that the S&P
500 represents stocks only; approximately 40% of AIM Balanced Fund's portfolio
is invested in fixed-income securities. An index of funds such as the Lipper
Balanced Fund Index includes a number of mutual funds grouped by investment
objective. Each of those funds interprets that objective differently, and each
employs a different management style and investment strategy.
AIM BALANCED FUND
4
<PAGE> 7
[PHOTO]
CHOOSE YOUR INVESTMENT PALETTE
No two pieces of art are exactly alike. Just as an artist may use different
paints to create a piece, so does an investor use different kinds of investments
to create a portfolio. And as with art, tastes can change over time--most
investors have different goals at different stages in their lives, as well as
varying tolerance for risk. The biggest advantage mutual funds offer is the
potential for diversification. Providing funds with assorted objectives and
goals allows investors to shape their portfolios to their specific needs and
spread their risk over several different funds, rather than painting their
portfolios all one color.
GROWTH VS. INCOME
If you look at the list of AIM's retail mutual funds on the back of your fund
report, you'll notice that they are divided into different types. Two that
frequently appear are growth and income. Common stock is normally the growth
component of a mutual fund with growth as a primary or secondary objective.
Bonds are typically the income components of a mutual fund with income as a
primary or secondary objective.
Let's take a closer look at the categories into which AIM's retail mutual
funds are divided. Keep in mind that funds listed under the same category don't
necessarily have the same kind of investment strategy or portfolio, even if they
have the same objective.
DOMESTIC MUTUAL FUNDS
GROWTH FUNDS
Growth funds typically invest in common stocks of companies whose businesses are
growing. Growth companies tend to reinvest their profits toward expansion of
their potential to produce greater returns instead of paying dividends. So
growth mutual funds focus on generating capital gains--increasing the value of
the stocks they hold--rather than current income, which means they generally
don't pay regular income dividends. Growth funds usually do, however, make one
capital-gains distribution per year, when there are gains.
An increase over time in the value of a growth fund's portfolio means the
fund's value, or share price, increases over time also. Shareholders in a growth
fund, then, make money by selling their shares for more than they paid for them.
Of course, the opposite is also true--shareholders can lose money by selling
their shares for less than they paid for them. Growth funds usually range from
moderate to very aggressive, depending on the size and types of companies in
which they invest.
GROWTH AND INCOME FUNDS
A growth and income fund generally invests in common and preferred stocks and
bonds of older, more established companies that have a longer track record of
growth and paying dividends.
A typical growth and income mutual fund will pay quarterly or annual income
dividends to its shareholders. (Monthly dividends are not common.) In this way,
growth and income funds can potentially provide long-term growth of investments
and also current income. These funds tend to be more conservative than growth
funds.
INCOME FUNDS
Income funds are generally designed to provide high current income rather than
long-term growth. To that end, income funds usually invest chiefly in
interest-paying corporate and government bonds. They may also own stocks of
companies that pay regular dividends. Some income funds are more aggressive than
others. The aggressiveness of a particular fund depends not only on the kinds of
securities in which it invests, but also on the fund's sector allocation and
maturity structure.
[PHOTO]
AIM BALANCED FUND
5
<PAGE> 8
For example, Treasury securities are considered a relatively safe investment
because they are guaranteed by the U.S. government. However, lower risk also
means lower return potential. On the other hand, lower-rated corporate bonds,
often called junk bonds, involve more risk because they are not guaranteed--they
are only as good as the companies that issue them. But the added risk also means
higher return potential.
Income funds are considered more conservative and are suited for investors
seeking income rather than growth.
TAX-FREE INCOME OR MUNICIPAL FUNDS
These funds provide shareholders with current income that is tax-exempt at some
level, depending on the securities in which they invest. So municipal mutual
funds appeal to investors who are looking to reduce income that would otherwise
be subject to tax. Municipal bonds or notes, which are issued by state or local
governments, are generally exempt from federal taxes. Federal securities, like
Treasury bonds, are usually exempt from state taxes. And then there are some
securities that are exempt from both federal and state taxes.(1)
MONEY MARKET FUNDS
A money market fund is one of the safest types of mutual funds available because
its main goal is preserving your investment while paying current income in the
form of interest. As a result, these funds tend to appeal to investors looking
for safety, liquidity and some income from their investment. Money market funds
invest in high-quality, short-term securities such as commercial paper and U.S.
government agency securities. Although money market funds are not guaranteed or
insured by the U.S. government, the securities they hold are less risky than
other types of fixed-income securities. The trade-off for safety of principal
investment is a lower rate of return.(2)
INTERNATIONAL AND GLOBAL MUTUAL FUNDS
INTERNATIONAL GROWTH FUNDS
An international growth fund has the same objective as a domestic growth fund,
except it invests in stocks of companies located outside the United States. Like
their domestic counterparts, international growth funds tend to pay
distributions in the form of capital gains rather than dividends. An
international growth mutual fund might invest in a particular country, region or
continent depending on the investment strategy shown in its prospectus.
International funds carry different risks than domestic funds because most
foreign markets are not as established as the markets in the United States.
Other risks include changes in the value of the U.S. dollar compared to foreign
currencies, accounting differences, political risks and foreign regulatory
differences.
GLOBAL GROWTH, GLOBAL GROWTH AND INCOME, AND GLOBAL INCOME FUNDS
These funds are similar to their domestic equivalents in terms of their goals
and the income distributions they pay. Global funds are comparable to
international funds in that they can invest in stocks of companies outside the
United States. But global funds can also invest substantially in U.S. stocks;
international funds generally do not. The amount of a global fund's portfolio
that can be invested in the United States varies greatly from fund to fund,
according to a fund's prospectus. Global funds carry the same risks as
international funds.
SPECIALIZED FUNDS
THEME FUNDS
Theme or sector funds invest primarily in a particular industry or sector of the
economy, either domestically or globally. Theme funds are required by prospectus
to invest a certain percentage of their assets in their industry or sector of
choice under normal market conditions. As a result, theme funds present greater
risk and potential reward than more diversified funds. The types of securities
held by a theme fund determine its goal of growth and/or income.
TYPES OF FUND DISTRIBUTIONS
INCOME DIVIDENDS are paid from dividends and/or interest from securities in a
fund's portfolio. For example, if a company in which a mutual fund owns stock
distributes some of its earnings to its shareholders as a dividend, the fund
passes on those earnings to its own shareholders. Income dividends are usually
taxed as ordinary income.
CAPITAL GAINS represent the net profit realized from the growth in value of the
holdings in a fund's portfolio. These distributions are usually made once per
year. There are two types of capital gains:
o Short-term capital gains are paid from net profits gained when a mutual fund
sells stocks or bonds it has held for less than a year. Short-term capital
gains are taxed as ordinary income.
o Long-term capital gains are paid from net profits gained when a mutual fund
sells stocks or bonds it has held for more than a year. Long-term capital
gains are usually taxed at the capital-gains rate, which is typically lower
than ordinary income-tax rates.
(1) Investors in tax-free income funds still have a risk of incurring taxes on
capital-gains distributions, for example, so it's wise to see your tax advisor
before investing in such funds.
(2) There is no guarantee that a money market fund will be able to maintain a
stable net asset value of $1.00 per share.
See the back cover for a complete list of AIM's retail mutual funds. For more
information about your fund's objective, read your fund prospectus. For more
complete information about any AIM fund(s), including sales charges and
expenses, ask your financial advisor or securities dealer for a free
prospectus(es). Please read the prospectus(es) carefully before you invest or
send money.
AIM BALANCED FUND
6
<PAGE> 9
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
U.S. DOLLAR DENOMINATED BONDS &
NOTES-25.23%
AIRLINES-1.37%
Airplanes Pass Through
Trust-Series D, Gtd. Sub.
Bonds, 10.88%, 03/15/19 $ 500,000 $ 440,000
- ---------------------------------------------------------------
America West Airlines,
Inc.,-Series C, Pass Through
Ctfs., 6.86%, 07/02/04 4,581,363 4,481,352
- ---------------------------------------------------------------
American Airlines, Inc.-Series
87-A, Equipment Trust Ctfs.,
9.90%, 01/15/11 2,955,000 3,271,510
- ---------------------------------------------------------------
AMR Corp., Deb., 10.00%,
04/15/21 4,300,000 4,878,049
- ---------------------------------------------------------------
Delta Air Lines, Inc.,
Deb., 9.00%, 05/15/16 5,000,000 5,172,100
- ---------------------------------------------------------------
Deb., 10.38%, 12/15/22 2,300,000 2,702,845
- ---------------------------------------------------------------
Notes, 7.90%, 12/15/09
(Acquired 12/07/99; Cost
$5,958,360)(a) 6,000,000 5,884,080
- ---------------------------------------------------------------
Series B, Medium Term Notes,
8.52%, 01/30/04 2,000,000 2,054,980
- ---------------------------------------------------------------
Series C, Medium Term Notes,
6.65%, 03/15/04 2,900,000 2,781,912
- ---------------------------------------------------------------
Northwest Airlines Inc.-Series
971B, Pass Through Ctfs.,
7.25%, 07/02/14 4,471,394 4,044,041
- ---------------------------------------------------------------
United Air Lines, Inc.,
Deb., 9.75%, 08/15/21 3,600,000 3,943,224
- ---------------------------------------------------------------
Series 95A2, Pass Through
Ctfs., 9.56%, 10/19/18 3,750,000 4,006,237
- ---------------------------------------------------------------
43,660,330
- ---------------------------------------------------------------
AUTOMOBILES-0.33%
DaimlerChrysler N.A. Holdings,
Gtd. Notes, 7.20%, 09/01/09 5,950,000 5,853,372
- ---------------------------------------------------------------
General Motors Corp., Putable
Deb., 8.80%, 03/01/21 400,000 440,096
- ---------------------------------------------------------------
Rocs Series CHR-1998-1,
Collateral Trust, 6.50%,
08/01/18 4,814,270 4,283,040
- ---------------------------------------------------------------
10,576,508
- ---------------------------------------------------------------
BANKS (MAJOR REGIONAL)-0.20%
Bank One Corp.-Series A, Medium
Term Sub. Notes, 6.00%,
02/17/09 4,750,000 4,218,047
- ---------------------------------------------------------------
Midland Bank PLC (United
Kingdom), Yankee Sub. Notes,
7.65%, 05/01/25 2,105,000 2,099,990
- ---------------------------------------------------------------
6,318,037
- ---------------------------------------------------------------
BANKS (MONEY CENTER)-0.68%
First Union Corp., Putable Sub.
Deb., 7.50%, 04/15/35 5,700,000 5,690,025
- ---------------------------------------------------------------
Republic New York Corp.,
Sub. Deb., 9.50%, 04/15/14 5,400,000 5,951,232
- ---------------------------------------------------------------
Sub. Notes, 9.70%, 02/01/09 5,000,000 5,517,800
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
BANKS (MONEY CENTER)-(CONTINUED)
Santander Financial Issuances
Ltd. (Cayman Islands), Unsec.
Gtd. Yankee Sub. Notes, 7.25%,
11/01/15 $ 5,000,000 $ 4,626,300
- ---------------------------------------------------------------
21,785,357
- ---------------------------------------------------------------
BANKS (REGIONAL)-0.91%
Marshall & Ilsley Corp.-Series
D, Medium Term Notes, 6.43%,
10/15/02 4,000,000 3,937,840
- ---------------------------------------------------------------
Mercantile Bancorp., Inc.,
Unsec. Sub. Notes, 7.30%,
06/15/07 8,300,000 8,126,945
- ---------------------------------------------------------------
Riggs Capital Trust II-Series C,
Gtd. Bonds, 8.88%, 03/15/27 9,550,000 8,711,348
- ---------------------------------------------------------------
US Bancorp, Sub. Deb., 7.50%,
06/01/26 8,400,000 8,314,068
- ---------------------------------------------------------------
29,090,201
- ---------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO
& CABLE)-1.98%
British Sky Broadcasting Group
PLC (United Kingdom), Sr.
Unsec. Gtd. Yankee Notes,
8.20%, 07/15/09 11,520,000 11,094,071
- ---------------------------------------------------------------
Clear Channel Communications,
Inc., Conv. Unsec. Notes,
1.50%, 12/01/02 10,500,000 10,788,750
- ---------------------------------------------------------------
Comcast Cable Communications,
Unsec. Notes, 8.50%, 05/01/27 3,400,000 3,609,848
- ---------------------------------------------------------------
Continental Cablevision, Inc.,
Sr. Notes, 8.30%, 05/15/06 8,350,000 8,662,540
- ---------------------------------------------------------------
Cox Communications, Inc., Unsec.
Notes, 7.75%, 08/15/06 6,300,000 6,347,187
- ---------------------------------------------------------------
CSC Holdings Inc.,
Sr. Unsec. Deb., 7.63%,
07/15/18 7,100,000 6,626,430
- ---------------------------------------------------------------
Sr. Unsec. Deb., 7.88%,
02/15/18 1,420,000 1,358,883
- ---------------------------------------------------------------
Sr. Unsec. Notes, 7.88%,
12/15/07 5,545,000 5,470,420
- ---------------------------------------------------------------
Lenfest Communications, Inc.,
Sr. Unsec. Sub. Notes, 8.25%,
02/15/08 2,300,000 2,311,500
- ---------------------------------------------------------------
TCI Communications, Inc., Sr.
Notes, 8.00%, 08/01/05 6,500,000 6,697,925
- ---------------------------------------------------------------
62,967,554
- ---------------------------------------------------------------
CHEMICALS-0.40%
Airgas, Inc., Medium Term Notes,
7.14%, 03/08/04 6,700,000 6,317,028
- ---------------------------------------------------------------
Union Carbide Corp., Deb.,
6.79%, 06/01/25 6,750,000 6,476,760
- ---------------------------------------------------------------
12,793,788
- ---------------------------------------------------------------
CHEMICALS (DIVERSIFIED)-0.18%
Equistar Chemical, L.P., Sr.
Unsec. Notes, 8.50%, 02/15/04 5,750,000 5,721,946
- ---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-0.83%
Comverse Technology, Inc., Conv.
Unsec. Sub. Deb., 4.50%,
07/01/05 7,700,000 26,266,625
- ---------------------------------------------------------------
</TABLE>
7
<PAGE> 10
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
COMPUTERS (HARDWARE)-0.31%
Candescent Technology Corp., Sr.
Conv. Sub. Deb., 7.00%,
05/01/03 (Acquired
04/17/98-07/12/99; Cost
$11,901,350)(a) $ 12,670,000 $ 9,882,600
- ---------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES)-0.85%
VERITAS Software Corp., Conv.
Unsec. Disc. Notes, 1.86%,
08/13/06(b) 10,000,000 26,962,500
- ---------------------------------------------------------------
CONSUMER FINANCE-1.36%
Capital One Financial Corp.,
Unsec. Notes, 7.25%, 05/01/06 3,890,000 3,674,533
- ---------------------------------------------------------------
CitiFinancial Credit Co.,
Putable Notes,
6.63%, 06/01/15 2,000,000 1,979,820
- ---------------------------------------------------------------
7.88%, 02/01/25 4,000,000 3,892,800
- ---------------------------------------------------------------
Countrywide Capital III-Series
B, Gtd. Bonds, 8.05%, 06/15/27 4,300,000 3,960,171
- ---------------------------------------------------------------
General Motors Acceptance Corp.,
Notes, 9.00%, 10/15/02 4,175,000 4,367,509
- ---------------------------------------------------------------
Household Finance Corp., Notes,
7.13%, 09/01/05 4,700,000 4,604,449
- ---------------------------------------------------------------
Sr. Unsec. Unsub. Notes,
6.40%, 06/17/08 10,900,000 10,060,918
- ---------------------------------------------------------------
MBNA Capital I-Series A, Gtd.
Bonds, 8.28%, 12/01/26 12,415,000 10,893,418
- ---------------------------------------------------------------
43,433,618
- ---------------------------------------------------------------
ELECTRIC COMPANIES-2.53%
Arizona Public Service Co.,
Unsec. Notes, 6.25%, 01/15/05 5,000,000 4,717,850
- ---------------------------------------------------------------
CMS Energy Corp., Sr. Unsec.
Notes, 8.13%, 05/15/02 4,950,000 4,932,823
- ---------------------------------------------------------------
Commonwealth Edison Co.-Series
94, First Mortgage Notes,
7.50%, 07/01/13 9,300,000 9,086,100
- ---------------------------------------------------------------
El Paso Electric Co.-Series E,
Sec. First Mortgage Bonds,
9.40%, 05/01/11 4,000,000 4,237,720
- ---------------------------------------------------------------
Empire District Electric Co.
(The), Sr. Notes, 7.70%,
11/15/04 8,550,000 8,383,189
- ---------------------------------------------------------------
Indiana Michigan Power
Co.-Series F, Sec. Lease
Obligation Bonds, 9.82%,
12/07/22 1,357,218 1,501,735
- ---------------------------------------------------------------
Niagara Mohawk Power Co.,
First Mortgage Notes, 6.63%,
07/01/05 7,200,000 6,881,184
- ---------------------------------------------------------------
Series G, Sr. Unsec. Notes,
7.75%, 10/01/08 11,700,000 11,716,497
- ---------------------------------------------------------------
Series H, Sr. Unsec. Disc.
Notes, 8.50%, 07/01/10(c) 12,000,000 8,989,440
- ---------------------------------------------------------------
Southern Energy, Inc., Sr.
Notes, 7.90%, 07/15/09
(Acquired 07/21/99-12/03/99;
Cost $7,165,447)(a) 7,225,000 6,966,056
- ---------------------------------------------------------------
Texas-New Mexico Power Co., Sr.
Sec. Notes, 6.25%, 01/15/09 2,750,000 2,365,302
- ---------------------------------------------------------------
UtiliCorp United, Inc., Sr.
Unsec. Putable Notes, 6.70%,
10/15/06 3,000,000 2,963,820
- ---------------------------------------------------------------
Western Resources, Inc., Sr.
Unsec. Notes,
6.25%, 08/15/03 2,425,000 2,292,837
- ---------------------------------------------------------------
7.13%, 08/01/09 6,000,000 5,428,920
- ---------------------------------------------------------------
80,463,473
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
ENTERTAINMENT-0.62%
Time Warner Inc., Deb.,
9.13%, 01/15/13 $ 10,000,000 $ 10,984,700
- ---------------------------------------------------------------
9.15%, 02/01/23 7,850,000 8,764,996
- ---------------------------------------------------------------
19,749,696
- ---------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-1.01%
BellSouth Capital Funding,
Putable Deb., 6.04%, 11/15/26 4,000,000 3,943,240
- ---------------------------------------------------------------
Chrysler Financial Corp., Deb.,
8.50%, 02/01/18 150,000 150,219
- ---------------------------------------------------------------
Dow Capital B.V. (Netherlands),
Gtd. Yankee Deb., 9.20%,
06/01/10 10,250,000 11,282,175
- ---------------------------------------------------------------
Heller Financial, Inc., Notes,
7.38%, 11/01/09 (Acquired
11/23/99; Cost $9,469,885)(a) 9,500,000 9,265,635
- ---------------------------------------------------------------
Source One Mortgage Services
Corp., Deb., 9.00%, 06/01/12 5,700,000 6,208,662
- ---------------------------------------------------------------
Sun Canada Financial Co., Gtd.
Sub. Notes, 6.63%, 12/15/07
(Acquired 10/14/99; Cost
$1,402,095)(a) 1,500,000 1,404,550
- ---------------------------------------------------------------
32,254,481
- ---------------------------------------------------------------
FOODS-0.58%
ConAgra, Inc.,
Sr. Putable Notes, 6.70%,
08/01/27 7,500,000 6,981,075
- ---------------------------------------------------------------
Sr. Unsec. Putable Notes,
7.13%, 10/01/26 7,700,000 7,461,377
- ---------------------------------------------------------------
Grand Metropolitan Investment
Corp., Gtd. Bonds, 7.45%,
04/15/35 4,000,000 3,967,600
- ---------------------------------------------------------------
18,410,052
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC &
OTHER)-0.20%
Alpharma, Inc., Conv. Sr. Unsec.
Sub. Notes, 3.00%, 06/01/06
(Acquired 05/27/99; Cost
$6,000,000)(a) 6,000,000 6,465,000
- ---------------------------------------------------------------
HOUSEHOLD PRODUCTS
(NON-DURABLES)-0.19%
Procter & Gamble Co. (The),
Putable Deb., 8.00%, 09/01/24 5,650,000 5,998,718
- ---------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-0.66%
Conseco, Inc., Unsec. Notes,
6.80%, 06/15/05 6,700,000 6,259,207
- ---------------------------------------------------------------
9.00%, 10/15/06 2,560,000 2,634,829
- ---------------------------------------------------------------
Torchmark Corp., Notes,
7.38%, 08/01/13 3,000,000 2,728,560
- ---------------------------------------------------------------
7.88%, 05/15/23 10,500,000 9,385,215
- ---------------------------------------------------------------
21,007,811
- ---------------------------------------------------------------
INSURANCE
(PROPERTY-CASUALTY)-0.36%
Florida Windstorm, Underwriting
Association, Sr. Sec. Notes,
7.13%, 02/25/19 (Acquired
03/26/99; Cost $2,834,354)(a) 2,850,000 2,625,449
- ---------------------------------------------------------------
</TABLE>
8
<PAGE> 11
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
INSURANCE (PROPERTY-CASUALTY)-(CONTINUED)
Terra Nova Insurance PLC (United
Kingdom),
Sr. Unsec. Gtd. Notes, 7.00%,
05/15/08 $ 2,350,000 $ 2,161,483
- ---------------------------------------------------------------
Sr. Unsec. Gtd. Yankee Notes,
7.20%, 08/15/07 7,000,000 6,553,330
- ---------------------------------------------------------------
11,340,262
- ---------------------------------------------------------------
INVESTMENT
BANKING/BROKERAGE-0.52%
HSBC America Capital Trust II,
Gtd. Bonds, 8.38%, 05/15/27
(Acquired 08/12/99; Cost
$1,907,256)(a) 1,990,000 1,842,700
- ---------------------------------------------------------------
Lehman Brothers Holdings Inc.,
Notes, 8.50%, 08/01/15 5,350,000 5,481,664
- ---------------------------------------------------------------
Sr. Notes, 8.80%, 03/01/15 4,855,000 5,075,903
- ---------------------------------------------------------------
Sr. Sub. Notes, 7.38%,
01/15/07 4,400,000 4,272,400
- ---------------------------------------------------------------
16,672,667
- ---------------------------------------------------------------
NATURAL GAS-1.38%
CMS Panhandle Holding Co., Sr.
Notes, 6.13%, 03/15/04 6,600,000 6,250,688
- ---------------------------------------------------------------
Enron Corp., Sr. Sub. Deb.,
6.75%, 07/01/05 4,550,000 4,367,727
- ---------------------------------------------------------------
8.25%, 09/15/12 4,300,000 4,367,768
- ---------------------------------------------------------------
Ferrellgas Partners L.P.-Series
B, Sr. Sec. Gtd. Notes, 9.38%,
06/15/06 4,950,000 4,875,750
- ---------------------------------------------------------------
Kinder Morgan, Inc., Unsec.
Deb., 7.35%, 08/01/26 7,800,000 7,591,116
- ---------------------------------------------------------------
National Fuel Gas Co.-Series D,
Medium Term Notes, 6.30%,
05/27/08 8,600,000 7,830,386
- ---------------------------------------------------------------
Nova Gas Transmission Ltd.
(Canada), Yankee Deb., 8.50%,
12/15/12 5,015,000 5,217,054
- ---------------------------------------------------------------
PanEnergy Corp., Notes, 7.88%,
08/15/04 1,500,000 1,505,505
- ---------------------------------------------------------------
Sonat Inc., Unsec. Notes, 7.63%,
07/15/11 2,000,000 1,967,120
- ---------------------------------------------------------------
43,973,114
- ---------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT)-0.15%
NRG Energy, Inc., Sr. Unsec.
Notes, 7.50%, 06/01/09 5,000,000 4,603,500
- ---------------------------------------------------------------
OIL & GAS (EXPLORATION &
PRODUCTION)-0.14%
ONEOK, Inc., Unsec. Notes,
7.75%, 08/15/06 3,100,000 3,068,969
- ---------------------------------------------------------------
Talisman Energy Inc. (Canada),
Yankee Deb., 7.13%, 06/01/07 1,500,000 1,441,425
- ---------------------------------------------------------------
4,510,394
- ---------------------------------------------------------------
OIL & GAS (REFINING &
MARKETING)-0.22%
Quaker State Corp., Notes,
6.63%, 10/15/05 2,840,000 2,660,938
- ---------------------------------------------------------------
Tosco Corp., Unsec. Deb., 7.80%,
01/01/27 4,450,000 4,194,837
- ---------------------------------------------------------------
6,855,775
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
POWER PRODUCERS
(INDEPENDENT)-0.70%
AES Corp.,
Sr. Notes, 8.00%, 12/31/08 $ 1,000,000 $ 917,500
- ---------------------------------------------------------------
Sr. Unsec. Sub. Notes, 8.38%,
08/15/07 3,000,000 2,797,500
- ---------------------------------------------------------------
Sr. Unsec. Sub. Notes, 10.25%,
07/15/06 1,800,000 1,836,000
- ---------------------------------------------------------------
CE Generation LLC, Sr. Sec.
Notes, 7.42%, 12/15/18
(Acquired 02/24/99-08/19/99;
Cost $7,913,190)(a) 7,800,000 7,187,926
- ---------------------------------------------------------------
Hydro-Quebec,
Series B (Canada), Gtd. Medium
Term Notes, 8.62%, 12/15/11 4,750,000 5,127,245
- ---------------------------------------------------------------
Series IO (Canada), Gtd.
Yankee Bond, 8.05%, 07/07/24 1,300,000 1,364,246
- ---------------------------------------------------------------
Kincaid Generation LLC, Sec.
Bonds, 7.33%, 06/15/20
(Acquired 04/30/98; Cost
$3,508,645)(a) 3,500,000 3,095,355
- ---------------------------------------------------------------
22,325,772
- ---------------------------------------------------------------
PUBLISHING (NEWSPAPERS)-0.62%
News America Holdings, Inc.,
Putable Notes, 8.45%, 08/01/34 3,125,000 3,173,688
- ---------------------------------------------------------------
Sr. Gtd. Deb., 9.25%, 02/01/13 10,150,000 11,062,485
- ---------------------------------------------------------------
Sr. Unsec. Gtd. Putable Bonds,
7.43%, 10/01/26 5,450,000 5,353,045
- ---------------------------------------------------------------
19,589,218
- ---------------------------------------------------------------
RAILROADS-0.50%
CSX Corp.,
Deb., 9.00%, 08/15/06 6,750,000 7,146,225
- ---------------------------------------------------------------
Sr. Unsec. Putable Deb.,
6.95%, 05/01/27 3,530,000 3,507,020
- ---------------------------------------------------------------
Norfolk Southern Corp., Notes,
7.05%, 05/01/37 5,500,000 5,391,265
- ---------------------------------------------------------------
16,044,510
- ---------------------------------------------------------------
REAL ESTATE INVESTMENT
TRUSTS-0.27%
Health Care REIT, Inc., Sr.
Unsec. Notes, 7.63%, 03/15/08 1,150,000 952,189
- ---------------------------------------------------------------
Spieker Properties, Inc., Unsec.
Deb., 7.35%, 12/01/17 8,800,000 7,767,848
- ---------------------------------------------------------------
8,720,037
- ---------------------------------------------------------------
RETAIL (FOOD CHAINS)-0.16%
Great Atlantic & Pacific Tea
Co., Inc. (Canada), Yankee
Gtd. Notes, 7.78%, 11/01/00(c) 5,000,000 5,048,200
- ---------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-0.25%
AnnTaylor Stores Corp., Conv.
Unsec. Gtd. Sub. Bonds, 0.55%,
06/18/19 (Acquired
11/04/99-11/17/99; Cost
$9,000,250)(a) 14,600,000 7,829,250
- ---------------------------------------------------------------
SAVINGS & LOAN COMPANIES-0.69%
Dime Capital Trust I-Series A,
Gtd. Bonds, 9.33%, 05/06/27 5,400,000 5,091,768
- ---------------------------------------------------------------
Sovereign Bancorp, Inc., Medium
Term Sub. Notes, 8.00%,
03/15/03 5,330,000 5,090,203
- ---------------------------------------------------------------
</TABLE>
9
<PAGE> 12
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
SAVINGS & LOAN COMPANIES-(CONTINUED)
St. Paul Bancorp, Inc., Sr.
Unsec. Notes, 7.13%, 02/15/04 $ 5,500,000 $ 5,361,070
- ---------------------------------------------------------------
Washington Mutual, Inc.,
Gtd. Bonds, 8.38%, 06/01/27 4,285,000 4,094,403
- ---------------------------------------------------------------
Notes, 7.50%, 08/15/06 2,215,000 2,204,523
- ---------------------------------------------------------------
21,841,967
- ---------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING)-0.24%
Lamar Advertising Co., Conv.
Unsec. Notes, 5.25%, 09/15/06 5,300,000 7,751,250
- ---------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-0.47%
Laidlaw Inc. (Canada),
Putable Yankee Deb., 6.72%,
10/01/27 3,000,000 2,552,100
- ---------------------------------------------------------------
Unsec. Yankee Deb., 6.70%,
05/01/08 8,100,000 6,894,477
- ---------------------------------------------------------------
Unsec. Yankee Notes, 7.65%,
05/15/06 5,965,000 5,541,783
- ---------------------------------------------------------------
14,988,360
- ---------------------------------------------------------------
SHIPPING-0.08%
Hutchison Delta Finance
Ltd.-Series REGS (Cayman
Islands), Conv. Unsec. Notes,
7.00%, 11/25/01 2,250,000 2,610,000
- ---------------------------------------------------------------
SOVEREIGN DEBT-0.76%
Province of Manitoba (Canada),
Yankee Unsec. Deb., 5.50%,
10/01/08 2,000,000 1,794,160
- ---------------------------------------------------------------
Series AZ, Putable Yankee
Deb., 7.75%, 07/17/16 5,850,000 5,990,108
- ---------------------------------------------------------------
Province of Newfoundland
(Canada), Unsec. Yankee Deb.,
9.00%, 06/01/19 2,500,000 2,804,975
- ---------------------------------------------------------------
Province of Quebec-Series A
(Canada), Medium Term Putable
Yankee Notes,
5.74%, 03/02/26 4,430,000 4,392,877
- ---------------------------------------------------------------
6.29%, 03/06/26 9,300,000 9,144,132
- ---------------------------------------------------------------
24,126,252
- ---------------------------------------------------------------
TELECOMMUNICATIONS (LONG
DISTANCE)-1.02%
AT&T Corp., Deb., 8.63%,
12/01/31 12,700,000 13,017,373
- ---------------------------------------------------------------
MCI Communications Corp.,
Sr. Unsec. Notes, 6.50%,
04/15/10 7,900,000 7,373,544
- ---------------------------------------------------------------
Sr. Unsec. Putable Deb.,
7.13%, 06/15/27 10,150,000 10,198,720
- ---------------------------------------------------------------
Sprint Corp., Putable Deb.,
9.00%, 10/15/19 1,800,000 1,994,346
- ---------------------------------------------------------------
32,583,983
- ---------------------------------------------------------------
TELEPHONE-1.17%
AT&T Corp.-Liberty Media Group,
Bonds, 7.88%, 07/15/09
(Acquired 06/30/99; Cost
$2,833,014)(a) 2,850,000 2,841,778
- ---------------------------------------------------------------
Cable & Wireless Communications
PLC (United Kingdom), Yankee
Notes, 6.75%, 12/01/08 3,400,000 3,349,578
- ---------------------------------------------------------------
Electric Lightwave, Inc. Notes,
6.05%, 05/15/04 (Acquired
04/21/99; Cost $9,792,846)(a) 9,800,000 9,247,378
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
TELEPHONE-(CONTINUED)
GTE Corp., Unsec. Deb., 6.84%,
04/15/18 $ 5,500,000 $ 5,040,860
- ---------------------------------------------------------------
NTL Inc., Conv. Sub. Notes,
5.75%, 12/15/09 (Acquired
12/17/99; Cost $9,000,000)(a) 9,000,000 9,720,000
- ---------------------------------------------------------------
SBC Communications, Inc., Deb.,
7.38%, 07/15/43 7,930,000 7,133,352
- ---------------------------------------------------------------
37,332,946
- ---------------------------------------------------------------
WASTE MANAGEMENT-0.34%
Browning-Ferris Industries,
Inc., Deb., 7.40%, 09/15/35 4,170,000 3,023,250
- ---------------------------------------------------------------
Waste Management, Inc.,
Sr. Unsec. Notes, 7.13%,
12/15/17 1,020,000 799,292
- ---------------------------------------------------------------
Unsec. Putable Notes, 7.10%,
08/01/26 7,500,000 6,955,650
- ---------------------------------------------------------------
10,778,192
- ---------------------------------------------------------------
Total U.S. Dollar
Denominated Bonds & Notes
(Cost $804,332,607) 803,333,944
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
COMMON STOCKS & OTHER EQUITY
INTERESTS-45.04%
AUTOMOBILES-0.31%
Ford Motor Co. 185,000 9,885,937
- ---------------------------------------------------------------
BANKS (MONEY CENTER)-0.49%
Chase Manhattan Corp. (The) 200,000 15,537,500
- ---------------------------------------------------------------
BIOTECHNOLOGY-0.66%
Biogen, Inc.(d) 155,000 13,097,500
- ---------------------------------------------------------------
Genzyme Corp.(d) 175,000 7,875,000
- ---------------------------------------------------------------
20,972,500
- ---------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO
& CABLE)-2.80%
CBS Corp.(d) 361,400 23,107,012
- ---------------------------------------------------------------
Hispanic Broadcasting Corp.(d) 193,000 17,798,219
- ---------------------------------------------------------------
Infinity Broadcasting
Corp.-Class A(d) 474,250 17,161,922
- ---------------------------------------------------------------
Univision Communications,
Inc.-Class A(d) 305,000 31,167,187
- ---------------------------------------------------------------
89,234,340
- ---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-3.36%
ANTEC Corp.(d) 260,600 9,511,900
- ---------------------------------------------------------------
JDS Uniphase Corp.(d) 58,000 9,356,125
- ---------------------------------------------------------------
Lucent Technologies Inc. 517,000 38,678,062
- ---------------------------------------------------------------
Motorola, Inc. 100,000 14,725,000
- ---------------------------------------------------------------
Sycamore Networks, Inc.(d) 47,000 14,476,000
- ---------------------------------------------------------------
Tellabs, Inc.(d) 190,000 12,195,625
- ---------------------------------------------------------------
Williams Communications Group,
Inc.(d) 275,700 7,978,069
- ---------------------------------------------------------------
106,920,781
- ---------------------------------------------------------------
COMPUTERS (HARDWARE)-1.64%
Dell Computer Corp.(d) 135,000 6,885,000
- ---------------------------------------------------------------
International Business Machines
Corp.(e) 133,000 14,364,000
- ---------------------------------------------------------------
</TABLE>
10
<PAGE> 13
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (HARDWARE)-(CONTINUED)
Sun Microsystems, Inc.(d) 398,000 $ 30,820,125
- ---------------------------------------------------------------
52,069,125
- ---------------------------------------------------------------
COMPUTERS (NETWORKING)-1.46%
Cisco Systems, Inc.(d) 340,000 36,422,500
- ---------------------------------------------------------------
Foundry Networks, Inc.(d) 33,000 9,955,687
- ---------------------------------------------------------------
46,378,187
- ---------------------------------------------------------------
COMPUTERS (PERIPHERALS)-1.16%
EMC Corp.(d) 309,000 33,758,250
- ---------------------------------------------------------------
Immersion Corp.(d) 85,400 3,277,225
- ---------------------------------------------------------------
37,035,475
- ---------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES)-5.63%
America Online, Inc.(d)(e) 442,000 33,343,375
- ---------------------------------------------------------------
Concord Communications, Inc.(d) 81,100 3,598,812
- ---------------------------------------------------------------
eSPEED, Inc.-Class A(d) 128,700 4,576,894
- ---------------------------------------------------------------
FreeMarkets, Inc.(d) 94,700 32,322,293
- ---------------------------------------------------------------
InfoSpace.com, Inc.(d) 184,800 39,547,200
- ---------------------------------------------------------------
ISS Group, Inc.(d) 220,000 15,647,500
- ---------------------------------------------------------------
Microsoft Corp.(d) 200,000 23,350,000
- ---------------------------------------------------------------
Telemate.Net Software, Inc.(d) 282,700 4,593,875
- ---------------------------------------------------------------
USWeb Corp.(d) 500,000 22,218,750
- ---------------------------------------------------------------
179,198,699
- ---------------------------------------------------------------
CONSUMER FINANCE-0.21%
SLM Holding Corp. 155,000 6,548,750
- ---------------------------------------------------------------
ELECTRIC COMPANIES-0.09%
Plug Power, Inc.(d) 100,000 2,825,000
- ---------------------------------------------------------------
ELECTRICAL EQUIPMENT-0.67%
Conexant Systems, Inc.(d) 30,300 2,011,162
- ---------------------------------------------------------------
General Electric Co. 125,000 19,343,750
- ---------------------------------------------------------------
21,354,912
- ---------------------------------------------------------------
ELECTRONICS (COMPONENT
DISTRIBUTORS)-0.00%
Sensormatic Electronics Corp.
(Acquired 06/30/98; Cost
$59,993)(a) 4,392 76,585
- ---------------------------------------------------------------
ELECTRONICS (DEFENSE)-0.29%
General Motors Corp.-Class
H(d)(e) 95,000 9,120,000
- ---------------------------------------------------------------
ELECTRONICS
(SEMICONDUCTORS)-2.05%
Analog Devices, Inc.(d) 196,000 18,228,000
- ---------------------------------------------------------------
Intel Corp. 233,500 19,219,969
- ---------------------------------------------------------------
Microchip Technology, Inc.(d) 136,000 9,307,500
- ---------------------------------------------------------------
SDL, Inc.(d) 85,200 18,573,600
- ---------------------------------------------------------------
65,329,069
- ---------------------------------------------------------------
ENTERTAINMENT-0.33%
Time Warner Inc. 144,200 10,445,488
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
EQUIPMENT (SEMICONDUCTOR)-0.50%
Applied Materials, Inc.(d) 125,000 $ 15,835,938
- ---------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-1.82%
American Express Co. 75,000 12,468,750
- ---------------------------------------------------------------
Citigroup Inc. 242,998 13,501,576
- ---------------------------------------------------------------
Fannie Mae 175,000 10,926,563
- ---------------------------------------------------------------
Freddie Mac 238,000 11,200,875
- ---------------------------------------------------------------
MGIC Investment Corp. 163,000 9,810,563
- ---------------------------------------------------------------
57,908,327
- ---------------------------------------------------------------
FOODS-0.21%
Keebler Foods Co.(d) 234,000 6,581,250
- ---------------------------------------------------------------
HEALTH CARE (DIVERSIFIED)-1.27%
American Home Products Corp. 196,000 7,729,750
- ---------------------------------------------------------------
Bristol-Myers Squibb Co. 135,000 8,665,313
- ---------------------------------------------------------------
Johnson & Johnson 100,000 9,312,500
- ---------------------------------------------------------------
Warner-Lambert Co. 178,000 14,584,875
- ---------------------------------------------------------------
40,292,438
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC &
OTHER)-0.30%
Forest Laboratories, Inc.(d) 156,000 9,584,250
- ---------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR
PHARMACEUTICALS)-1.09%
Lilly (Eli) & Co. 141,000 9,376,500
- ---------------------------------------------------------------
Merck & Co., Inc. 122,000 8,181,625
- ---------------------------------------------------------------
Pfizer Inc. 331,000 10,736,813
- ---------------------------------------------------------------
Schering-Plough Corp. 152,000 6,412,500
- ---------------------------------------------------------------
34,707,438
- ---------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-1.76%
Baxter International, Inc. 150,400 9,447,000
- ---------------------------------------------------------------
Guidant Corp.(d) 280,000 13,160,000
- ---------------------------------------------------------------
Medtronic, Inc. 490,000 17,854,375
- ---------------------------------------------------------------
VISX, Inc.(d) 300,000 15,525,000
- ---------------------------------------------------------------
55,986,375
- ---------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES)-0.21%
MAXIMUS, Inc.(d) 200,000 6,787,500
- ---------------------------------------------------------------
HOUSEHOLD FURNISHING & APPLIANCES-0.27%
Ethan Allen Interiors, Inc. 270,000 8,656,875
- ---------------------------------------------------------------
HOUSEHOLD PRODUCTS (NON-DURABLES)-0.38%
Procter & Gamble, Co. (The) 110,000 12,051,875
- ---------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-0.46%
AXA Financial, Inc. 314,000 10,636,750
- ---------------------------------------------------------------
Nationwide Financial Services,
Inc.-Class A 140,000 3,911,250
- ---------------------------------------------------------------
14,548,000
- ---------------------------------------------------------------
INSURANCE (MULTI-LINE)-0.87%
American International Group,
Inc. 175,000 18,921,875
- ---------------------------------------------------------------
</TABLE>
11
<PAGE> 14
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
INSURANCE (MULTI-LINE)-(CONTINUED)
CIGNA Corp. 110,000 $ 8,861,875
- ---------------------------------------------------------------
27,783,750
- ---------------------------------------------------------------
INSURANCE
(PROPERTY-CASUALTY)-0.21%
Travelers Property Casualty
Corp.-Class A 195,000 6,678,750
- ---------------------------------------------------------------
INVESTMENT
BANKING/BROKERAGE-1.29%
Goldman Sachs Group, Inc. (The) 52,300 4,926,006
- ---------------------------------------------------------------
Merrill Lynch & Co., Inc. 176,000 14,696,000
- ---------------------------------------------------------------
Morgan Stanley Dean Witter & Co. 150,000 21,412,500
- ---------------------------------------------------------------
41,034,506
- ---------------------------------------------------------------
INVESTMENT MANAGEMENT-0.13%
Federated Investors, Inc.-Class B 206,400 4,140,900
- ---------------------------------------------------------------
LODGING-HOTELS-0.76%
Carnival Corp. 230,000 10,996,875
- ---------------------------------------------------------------
Royal Caribbean Cruises Ltd. 270,400 13,334,100
- ---------------------------------------------------------------
24,330,975
- ---------------------------------------------------------------
MANUFACTURING
(DIVERSIFIED)-0.35%
Tyco International Ltd. 284,000 11,040,500
- ---------------------------------------------------------------
NATURAL GAS-0.65%
Enron Corp. 295,000 13,090,625
- ---------------------------------------------------------------
Williams Companies, Inc. (The) 251,000 7,671,188
- ---------------------------------------------------------------
20,761,813
- ---------------------------------------------------------------
OIL & GAS (EXPLORATION &
PRODUCTION)-0.23%
Apache Corp. 200,000 7,387,500
- ---------------------------------------------------------------
OIL (DOMESTIC INTEGRATED)-0.23%
Conoco Inc.-Class B 300,000 7,462,500
- ---------------------------------------------------------------
OIL (INTERNATIONAL
INTEGRATED)-0.25%
Exxon Mobil Corp. 100,644 8,108,132
- ---------------------------------------------------------------
PERSONAL CARE-0.14%
Steiner Leisure Ltd.(d) 275,000 4,589,063
- ---------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT)-0.50%
AES Corp.(d) 215,000 16,071,250
- ---------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-0.56%
Home Depot, Inc. (The) 262,500 17,997,656
- ---------------------------------------------------------------
RETAIL (FOOD CHAINS)-0.25%
Safeway Inc.(d) 228,000 8,108,250
- ---------------------------------------------------------------
RETAIL (GENERAL
MERCHANDISE)-0.50%
Dayton Hudson Corp. 215,100 15,796,406
- ---------------------------------------------------------------
RETAIL (SPECIALTY)-0.83%
Amazon.com, Inc.(d) 95,000 7,231,875
- ---------------------------------------------------------------
Bed Bath & Beyond, Inc.(d) 290,000 10,077,500
- ---------------------------------------------------------------
Linens 'n Things, Inc.(d) 305,200 9,041,550
- ---------------------------------------------------------------
26,350,925
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SERVICES (ADVERTISING/MARKETING)-0.94%
Omnicom Group, Inc. 130,000 $ 13,000,000
- ---------------------------------------------------------------
Young & Rubicam Inc. 241,000 17,050,750
- ---------------------------------------------------------------
30,050,750
- ---------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER)-0.93%
National Information Consortium,
Inc.(d) 278,000 8,896,000
- ---------------------------------------------------------------
Official Payments Corp.(d) 186,300 9,687,600
- ---------------------------------------------------------------
Quanta Services, Inc.(d) 392,000 11,074,000
- ---------------------------------------------------------------
29,657,600
- ---------------------------------------------------------------
SERVICES (DATA PROCESSING)-0.25%
DST Systems, Inc.(d) 106,000 8,089,125
- ---------------------------------------------------------------
TELECOMMUNICATIONS-0.49%
Broadwing Inc.(d) 419,520 15,469,800
- ---------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/
WIRELESS)-0.72%
Infonet Services Corp.-Class
B(d) 370,000 9,712,500
- ---------------------------------------------------------------
Western Wireless Corp.-Class
A(d) 196,300 13,103,025
- ---------------------------------------------------------------
22,815,525
- ---------------------------------------------------------------
TELECOMMUNICATIONS (LONG
DISTANCE)-1.56%
AT&T Corp. 216,450 10,984,838
- ---------------------------------------------------------------
Global TeleSystems Group,
Inc.(d) 475,450 16,462,456
- ---------------------------------------------------------------
MCI WorldCom, Inc.(d) 420,000 22,286,250
- ---------------------------------------------------------------
49,733,544
- ---------------------------------------------------------------
TELEPHONE-2.98%
Bell Atlantic Corp. 158,000 9,726,875
- ---------------------------------------------------------------
McLeodUSA, Inc.-Class A(d) 290,000 17,073,750
- ---------------------------------------------------------------
NEXTLINK Communications,
Inc.-Class A(d) 224,800 18,672,450
- ---------------------------------------------------------------
Qwest Communications
International, Inc.(d) 665,000 28,595,000
- ---------------------------------------------------------------
SBC Communications, Inc. 204,000 9,945,000
- ---------------------------------------------------------------
Time Warner Telecom, Inc.(d) 218,500 10,911,344
- ---------------------------------------------------------------
94,924,419
- ---------------------------------------------------------------
Total Common Stocks & Other
Equity Interests (Cost
$765,923,442) 1,434,256,253
- ---------------------------------------------------------------
DOMESTIC PREFERRED STOCKS-2.43%
COMPUTERS (SOFTWARE & SERVICES)-0.45%
PSINet, Inc.-Series C, $3.375
Conv. Pfd. 100,000 5,837,500
- ---------------------------------------------------------------
Verio Inc.-$3.375 Conv. Pfd.
(Acquired 07/15/99-10/01/99;
Cost $7,092,498)(a) 150,000 8,475,000
- ---------------------------------------------------------------
14,312,500
- ---------------------------------------------------------------
ELECTRIC COMPANIES-0.28%
Calpine Capital Trust-$2.875
Conv. Pfd. 139,000 8,982,875
- ---------------------------------------------------------------
OIL & GAS (EXPLORATION &
PRODUCTION)-0.22%
Kerr-McGee Corp.-5.50% Pfd. DECS 209,800 6,818,500
- ---------------------------------------------------------------
</TABLE>
12
<PAGE> 15
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
PERSONAL CARE-0.16%
Estee Lauder Cos. Inc.-$3.805
Conv. Pfd. 60,000 $ 5,193,750
- ---------------------------------------------------------------
TELECOMMUNICATIONS-0.13%
Broadwing Inc.-Series B, $3.375
Conv. Pfd. 70,000 4,147,500
- ---------------------------------------------------------------
TELECOMMUNICATIONS (LONG
DISTANCE)-0.71%
WinStar Communications,
Inc.-Series F, $72.50 Conv.
Pfd. 16,950 22,585,875
- ---------------------------------------------------------------
TELEPHONE-0.27%
NEXTLINK Communications,
Inc.-$3.25 Conv. Pfd. 24,200 4,643,375
- ---------------------------------------------------------------
NEXTLINK Communications,
Inc.-$3.25 Conv. Pfd.
(Acquired 03/26/98-06/02/98;
Cost $975,188)(a) 20,800 3,991,000
- ---------------------------------------------------------------
8,634,375
- ---------------------------------------------------------------
WATER UTILITIES-0.21%
AES Trust III-$3.375 Conv. Pfd. 108,600 6,692,475
- ---------------------------------------------------------------
Total Domestic Preferred
Stocks (Cost $63,730,828) 77,367,850
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT(f)
<S> <C> <C>
NON-U.S. DOLLAR DENOMINATED
NON-CONVERTIBLE BONDS &
NOTES-3.50%
AUSTRALIA-0.22%
New South Wales Treasury
Corp.-Series 4 (Sovereign
Debt), Gtd. Notes, 7.00%,
04/01/04 AUD 4,300,000 2,838,785
- ---------------------------------------------------------------
State Bank New South
Wales-Series E (Banks-Major
Regional), Sr. Unsec. Gtd.
Medium Term Notes, 8.63%,
08/20/01 AUD 6,125,000 4,155,283
- ---------------------------------------------------------------
6,994,068
- ---------------------------------------------------------------
CANADA-0.71%
AT&T Canada Inc. (Telephone),
Sr. Unsec. Notes, 7.15%,
09/23/04 CAD 1,700,000 1,163,734
- ---------------------------------------------------------------
Bell Mobility Cellular, Inc.
(Telecommunications-Cellular/Wireless),
Deb., 6.55%, 06/02/08 CAD 2,500,000 1,659,721
- ---------------------------------------------------------------
Canadian Oil Debco Inc. (Oil &
Gas- Exploration &
Production), Deb., 11.00%,
10/31/00 CAD 2,500,000 1,790,601
- ---------------------------------------------------------------
Clearnet Communications Inc.
(Telecommunications-Cellular/Wireless),
Sr. Unsec. Disc. Notes,
10.75%, 02/15/09(c) CAD 5,000,000 2,026,606
- ---------------------------------------------------------------
Export Development Corp.
(Sovereign Debt), Sr. Unsub.
Notes, 6.50%, 12/21/04 NZD 6,000,000 2,970,914
- ---------------------------------------------------------------
Poco Petroleums Ltd. (Oil & Gas-
Exploration & Production),
Unsec. Deb., 6.60%,
09/11/07 CAD 5,400,000 3,540,923
- ---------------------------------------------------------------
Province of British Columbia
(Sovereign Debt), Notes,
7.50%, 12/31/03 GBP 950,000 1,553,548
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(f) VALUE
<S> <C> <C>
CANADA-(CONTINUED)
Province of Ontario (Sovereign
Debt),
Notes, 6.38%, 06/10/04 GBP 950,000 $ 1,498,329
- ---------------------------------------------------------------
Unsec. Unsub. Notes, 6.25%,
12/03/08 NZD 3,750,000 1,711,057
- ---------------------------------------------------------------
Province of Quebec (Sovereign
Debt), Unsec. Notes, 5.13%,
01/04/09 DEM 1,600,000 770,578
- ---------------------------------------------------------------
Teleglobe Canada Inc.
(Telephone), Unsec. Deb.,
8.35%, 06/20/03 CAD 1,000,000 709,423
- ---------------------------------------------------------------
TransCanada Pipelines-Series Q
(Natural Gas), Deb., 10.63%,
10/20/09 CAD 1,500,000 1,282,478
- ---------------------------------------------------------------
Westcoast Energy Inc.-Series V
(Natural Gas), Unsec. Deb.,
6.45%, 12/18/06 CAD 3,000,000 2,037,497
- ---------------------------------------------------------------
22,715,409
- ---------------------------------------------------------------
DENMARK-0.21%
Kingdom of Denmark (Sovereign
Debt), Bonds, 5.00%,
08/15/05 DKK 51,000,000 6,806,533
- ---------------------------------------------------------------
GERMANY-0.25%
Bundesrepublik Deutschland
(Sovereign Debt), Series 92
Bonds, 7.25%, 10/21/02 EUR 2,790,000 3,004,448
- ---------------------------------------------------------------
Landesbank Baden-Wuerttemberg
(Banks- Major Regional), Sr.
Unsec. Unsub. Medium Term
Notes, 6.25%, 12/15/04 AUD 5,700,000 3,572,998
- ---------------------------------------------------------------
Treuhandanstalt (Sovereign
Debt), Gtd. Notes, 6.00%,
11/12/03 EUR 1,140,000 1,195,434
- ---------------------------------------------------------------
7,772,880
- ---------------------------------------------------------------
GREECE-0.24%
Hellenic Republic (Sovereign
Debt), Bonds, 6.60%,
01/15/04 GRD 2,500,000,000 7,669,388
- ---------------------------------------------------------------
NETHERLANDS-0.48%
Dresdner Finance B.V.-Series 11
(Banks- Major Regional),
Floating Rate Gtd. Notes,
3.53%, 07/30/03 EUR 7,250,000 7,281,476
- ---------------------------------------------------------------
Hypovereins Finance N.V.-Series
E (Banks- Major Regional),
Gtd. Medium Term Notes, 6.00%,
03/12/07 DEM 2,900,000 1,496,248
- ---------------------------------------------------------------
Mannesmann Finance B.V.
(Machinery- Diversified), Gtd.
Unsec. Unsub. Notes, 4.75%,
05/27/09 EUR 1,300,000 1,153,665
- ---------------------------------------------------------------
SPT Telecom A.S.
(Telecommunications- Long
Distance), Gtd. Unsec. Unsub.
Notes, 5.13%, 05/07/03 DEM 4,600,000 2,346,111
- ---------------------------------------------------------------
Tecnost International Finance
N.V.-Series E (Telephone),
Medium Term Gtd. Notes, 6.13%,
07/30/09 EUR 3,210,000 3,111,084
- ---------------------------------------------------------------
15,388,584
- ---------------------------------------------------------------
NEW ZEALAND-0.22%
International Bank for
Reconstruction & Development
(Banks-Money Center), Unsec.
Notes, 5.50%, 04/15/04 NZD 8,500,000 4,113,246
- ---------------------------------------------------------------
</TABLE>
13
<PAGE> 16
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(f) VALUE
<S> <C> <C>
NEW ZEALAND-(CONTINUED)
New Zealand Government
(Sovereign Debt)
Series 302 Bonds, 10.00%,
03/15/02 NZD 2,650,000 $ 1,478,054
- ---------------------------------------------------------------
Series 404 Bonds, 8.00%,
04/15/04 NZD 2,650,000 1,430,651
- ---------------------------------------------------------------
7,021,951
- ---------------------------------------------------------------
SWEDEN-0.26%
Stadshypotek A.B.-Series 1562
(Banks- Regional), Bonds,
3.50%, 09/15/04 SEK 43,000,000 4,544,805
- ---------------------------------------------------------------
Swedish Government-Series 1035
(Sovereign Debt), Bonds,
6.00%, 02/09/05 SEK 30,000,000 3,609,571
- ---------------------------------------------------------------
8,154,376
- ---------------------------------------------------------------
UNITED KINGDOM-0.79%
Lloyds Bank PLC-Series E
(Banks-Major Regional), Medium
Term Sub. Notes, 5.25%,
07/14/08 DEM 6,800,000 3,325,110
- ---------------------------------------------------------------
Merrill Lynch & Co., Inc.-Series
E (Investment
Banking/Brokerage), Sr. Unsec.
Unsub. Medium Term Notes,
7.38%, 12/17/07 GBP 6,650,000 10,887,514
- ---------------------------------------------------------------
National Power PLC (Electric
Companies), Sr. Unsec. Unsub.
Bonds, 8.00%, 02/21/07 AUD 3,100,000 2,012,382
- ---------------------------------------------------------------
National Westminster Bank
PLC-Series E (Banks-Money
Center), Unsec. Unsub. Medium
Term Bonds, 5.13%, 06/30/11EUR 2,500,000 2,255,470
- ---------------------------------------------------------------
Sutton Bridge Financial
Ltd.-Series REGS (Power
Producers-Independent), Gtd.
Eurobonds, 8.63%, 06/30/22
(Acquired 05/29/97; Cost
$4,890,565)(a) GBP 3,000,000 5,090,868
- ---------------------------------------------------------------
Union Bank Switzerland London,
(Banks- Major Regional),
Unsec. Sub. Notes, 7.38%,
11/26/04 GBP 1,000,000 1,637,219
- ---------------------------------------------------------------
25,208,563
- ---------------------------------------------------------------
UNITED STATES OF AMERICA-0.12%
General Electric Capital
Corp.-Series E
(Financial-Diversified), Sr.
Unsec. Unsub. Medium Term
Notes, 6.00%, 07/27/01 GBP 2,400,000 3,814,070
- ---------------------------------------------------------------
Total Non-U.S. Dollar
Denominated
Non-Convertible Bonds &
Notes (Cost $117,303,454) 111,545,822
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
FOREIGN STOCKS-5.46%
BERMUDA-0.88%
Global Crossing Ltd.
(Telecommunications- Long
Distance)(d) 559,252 27,962,600
- ---------------------------------------------------------------
CANADA-0.37%
AT&T Canada, Inc. (Telephone)(d) 291,000 11,712,750
- ---------------------------------------------------------------
FINLAND-2.03%
Nokia Oyj-ADR (Communications
Equipment) 220,000 41,800,000
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FINLAND-(CONTINUED)
Sonera Oyj
(Telecommunications-Cellular/
Wireless) 333,900 $ 22,868,451
- ---------------------------------------------------------------
64,668,451
- ---------------------------------------------------------------
FRANCE-0.41%
AXA (Insurance-Multi-Line) 36,800 5,125,971
- ---------------------------------------------------------------
AXA-ADR (Insurance-Multi-Line) 110,000 7,810,000
- ---------------------------------------------------------------
12,935,971
- ---------------------------------------------------------------
GERMANY-0.36%
Mannesmann A.G.
(Machinery-Diversified) 47,823 11,527,482
- ---------------------------------------------------------------
ISRAEL-0.19%
Partner Communications Co.
Ltd.-ADR
(Telecommunications-Cellular/
Wireless)(d) 228,300 5,907,263
- ---------------------------------------------------------------
NETHERLANDS-0.38%
Libertel N.V.
(Telecommunications-Cellular/
Wireless)(d) 467,200 12,225,549
- ---------------------------------------------------------------
SOUTH KOREA-0.34%
Korea Telecom Corp.-ADR
(Telephone) 143,596 10,733,801
- ---------------------------------------------------------------
SPAIN-0.50%
Telefonica S.A. (Telephone)(d) 495,000 12,355,180
- ---------------------------------------------------------------
Terra Networks, S.A.
(Computers-Software &
Services)(d) 68,100 3,718,254
- ---------------------------------------------------------------
16,073,434
- ---------------------------------------------------------------
Total Foreign Stocks (Cost
$72,168,443) 173,747,301
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
U.S. TREASURY SECURITIES-7.14%
U.S. TREASURY BONDS-0.71%
9.375%, 02/15/06 $ 20,000,000 22,820,200
- ---------------------------------------------------------------
U.S. TREASURY NOTES-6.43%
7.25%, 08/15/04 35,000,000 36,099,000
- ---------------------------------------------------------------
5.875%, 11/15/04 2,000,000 1,960,620
- ---------------------------------------------------------------
6.50%, 08/15/05 to 10/15/06 121,000,000(g) 120,776,810
- ---------------------------------------------------------------
6.875%, 05/15/06 34,500,000(g) 35,088,225
- ---------------------------------------------------------------
6.625%, 05/15/07 7,000,000(g) 7,027,230
- ---------------------------------------------------------------
5.63%, 05/15/08 4,000,000 3,763,160
- ---------------------------------------------------------------
204,715,045
- ---------------------------------------------------------------
Total U.S. Treasury
Securities (Cost
$231,414,173) 227,535,245
- ---------------------------------------------------------------
U.S. GOVERNMENT AGENCY
SECURITIES-2.14%
FEDERAL HOME LOAN MORTGAGE CORP.
("FHLMC")-0.42%
Pass through ctfs.
6.50%, 12/01/28 13,995,426 13,199,366
- ---------------------------------------------------------------
</TABLE>
14
<PAGE> 17
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
FEDERAL NATIONAL MORTGAGE
ASSOCIATION ("FNMA")-1.16%
Pass through ctfs.
7.00%, 05/01/28 $ 20,690,733 $ 19,998,836
- ---------------------------------------------------------------
6.50%, 11/01/28 to 12/01/28 18,009,410 16,968,105
- ---------------------------------------------------------------
36,966,941
- ---------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION ("GNMA")-0.56%
Pass through ctfs.
6.50%, 09/15/28 to 03/15/29 19,065,864 17,898,080
- ---------------------------------------------------------------
Total U.S. Government Agency
Securities (Cost
$72,041,945) 68,064,387
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER
OF EXERCISE EXPIRATION
CONTRACTS PRICE DATE
<S> <C> <C> <C> <C>
OPTIONS
PURCHASED-0.01%
ELECTRONICS
(DEFENSE)-0.01%
General Motors
Corp.-Class H (Cost
$465,975) 95,000 $ 90 Jan-00 195,938
- --------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MONEY MARKET FUNDS-7.50%
STIC Liquid Assets Portfolio(h) $119,363,406 $ 119,363,406
- ---------------------------------------------------------------
STIC Prime Portfolio(h) 119,363,406 119,363,406
- ---------------------------------------------------------------
Total Money Market Funds
(Cost $238,726,812) 238,726,812
- ---------------------------------------------------------------
TOTAL INVESTMENTS-98.45% (Cost
$2,366,107,679) 3,134,773,552
- ---------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-1.55% 49,376,620
- ---------------------------------------------------------------
NET ASSETS-100.00% $3,184,150,172
===============================================================
</TABLE>
Investment Abbreviations:
ADR - American Depositary Receipt
AUD - Australian Dollar
CAD - Canadian Dollars
Conv. - Convertible
Ctfs. - Certificates
Deb. - Debentures
DECS - Dividend Enhanced Convertible Stock
DEM - German Deutsche Mark
DKK - Danish Krone
Disc. - Discounted
EUR - Euro
GBP - British Pound Sterling
GRD - Greek Drachma
Gtd. - Guaranteed
NZD - New Zealand Dollar
Pfd. - Preferred
REIT - Real Estate Investment Trust
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 market
value at 12/31/99 represented 3.20% of the Fund's net assets.
(b) Discounted bond at purchase. Interest rate shown represents the coupon rate
at which the bond will accrue at a specified future date.
(c) Represents a security sold under Rule 144A, which is exempt from
registration and may be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended.
(d) Non-income producing security.
(e) A portion of this security is subject to call options written. See Note 7.
(f) Foreign denominated security. Par value and coupon are denominated in
currency indicated.
(g) A portion of this principal was pledged as collateral to cover margin
requirements for open future contracts. See Note 8.
(h) The money market fund has the same investment advisor as the Fund.
See Notes to Financial Statements.
15
<PAGE> 18
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$2,366,107,679) $3,134,773,552
- ---------------------------------------------------------
Receivables for:
Investments sold 18,914,453
- ---------------------------------------------------------
Foreign currency contracts closed 24,825
- ---------------------------------------------------------
Fund shares sold 25,083,485
- ---------------------------------------------------------
Interest and dividends 22,904,366
- ---------------------------------------------------------
Variation margin 276,250
- ---------------------------------------------------------
Foreign currency contracts 655,642
- ---------------------------------------------------------
Investment for deferred compensation plan 42,523
- ---------------------------------------------------------
Other assets 40,344
- ---------------------------------------------------------
Total assets 3,202,715,440
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 4,357,824
- ---------------------------------------------------------
Fund shares reacquired 8,656,785
- ---------------------------------------------------------
Options written (premiums $1,494,360) 1,167,812
- ---------------------------------------------------------
Deferred compensation plan 42,523
- ---------------------------------------------------------
Accrued advisory fees 1,343,610
- ---------------------------------------------------------
Accrued distribution fees 2,543,619
- ---------------------------------------------------------
Accrued transfer agent fees 249,013
- ---------------------------------------------------------
Accrued operating expenses 204,082
- ---------------------------------------------------------
Total liabilities 18,565,268
- ---------------------------------------------------------
Net assets applicable to shares
outstanding $3,184,150,172
=========================================================
NET ASSETS:
Class A $1,800,349,970
=========================================================
Class B $1,183,215,180
=========================================================
Class C $ 200,585,022
=========================================================
SHARES OUTSTANDING, $0.01 PAR VALUE PER
SHARE:
Class A 55,074,835
=========================================================
Class B 36,282,468
=========================================================
Class C 6,144,390
=========================================================
Class A:
Net asset value and redemption price
per share $ 32.69
- ---------------------------------------------------------
Offering price per share:
(Net asset value of $32.69 / 95.25%) $ 34.32
=========================================================
Class B:
Net asset value and offering price per
share $ 32.61
=========================================================
Class C:
Net asset value and offering price per
share $ 32.65
=========================================================
</TABLE>
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 85,768,860
- ---------------------------------------------------------
Dividends (net of $91,426 foreign
withholding tax) 13,436,438
- ---------------------------------------------------------
Total investment income 99,205,298
- ---------------------------------------------------------
EXPENSES:
Advisory fees 13,624,208
- ---------------------------------------------------------
Administrative services fees 158,046
- ---------------------------------------------------------
Custodian fees 240,252
- ---------------------------------------------------------
Distribution fees-Class A 3,755,133
- ---------------------------------------------------------
Distribution fees-Class B 10,013,693
- ---------------------------------------------------------
Distribution fees-Class C 1,464,190
- ---------------------------------------------------------
Trustees' fees 22,015
- ---------------------------------------------------------
Transfer agent fees-Class A 2,032,670
- ---------------------------------------------------------
Transfer agent fees-Class B 2,032,007
- ---------------------------------------------------------
Transfer agent fees-Class C 297,956
- ---------------------------------------------------------
Other 550,475
- ---------------------------------------------------------
Total expenses 34,190,645
- ---------------------------------------------------------
Less: Expenses paid indirectly (75,967)
- ---------------------------------------------------------
Net expenses 34,114,678
- ---------------------------------------------------------
Net investment income 65,090,620
- ---------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES, FOREIGN
CURRENCIES, FOREIGN CURRENCY CONTRACTS,
FUTURES AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities 436,666
- ---------------------------------------------------------
Foreign currencies (154,053)
- ---------------------------------------------------------
Foreign currency contracts 534,910
- ---------------------------------------------------------
Futures contracts 45,119,738
- ---------------------------------------------------------
Option contracts written 908,045
- ---------------------------------------------------------
46,845,306
- ---------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of:
Investment securities 384,287,115
- ---------------------------------------------------------
Foreign currencies 5,416
- ---------------------------------------------------------
Foreign currency contracts 396,014
- ---------------------------------------------------------
Futures contracts (10,141,023)
- ---------------------------------------------------------
Option contracts written 391,074
- ---------------------------------------------------------
374,938,596
- ---------------------------------------------------------
Net gain from investment securities,
foreign currencies, foreign currency
contracts, futures and option contracts 421,783,902
- ---------------------------------------------------------
Net increase in net assets resulting from
operations $486,874,522
=========================================================
</TABLE>
16
<PAGE> 19
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 65,090,620 $ 42,651,746
- ---------------------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies, foreign currency contracts, futures
and option contracts 46,845,306 (34,961,701)
- ---------------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities, foreign currencies, foreign currency
contracts, futures and option contracts 374,938,596 202,514,022
- ---------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 486,874,522 210,204,067
- ---------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (42,749,278) (25,009,619)
- ---------------------------------------------------------------------------------------------
Class B (20,909,084) (12,164,517)
- ---------------------------------------------------------------------------------------------
Class C (3,188,689) (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 243,729,476 537,064,636
- ---------------------------------------------------------------------------------------------
Class B 132,034,584 344,386,485
- ---------------------------------------------------------------------------------------------
Class C 61,800,642 99,082,872
- ---------------------------------------------------------------------------------------------
Net increase in net assets 857,592,173 1,147,025,763
- ---------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 2,326,557,999 1,179,532,236
- ---------------------------------------------------------------------------------------------
End of period $3,184,150,172 $2,326,557,999
=============================================================================================
NET ASSETS CONSIST OF:
Shares of beneficial interest $2,395,161,389 $1,957,596,687
- ---------------------------------------------------------------------------------------------
Undistributed net investment income 404,927 5,095,292
- ---------------------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities, foreign currencies, foreign currency
contracts, futures and option contracts 14,952,655 (34,826,585)
- ---------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities, foreign
currencies, foreign currency contracts, futures and
option contracts 773,631,201 398,692,605
- ---------------------------------------------------------------------------------------------
$3,184,150,172 $2,326,557,999
=============================================================================================
</TABLE>
See Notes to Financial Statements.
17
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
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 portfolios, each
having an unlimited number of shares of beneficial interest. The Fund currently
offers three different classes of shares: Class A shares, Class B shares and
Class C shares. Class A shares are sold with a front-end sales charge. Class B
shares and Class C shares are sold with a contingent deferred sales charge.
Matters affecting each portfolio or class will be voted on exclusively by the
shareholders of such portfolio or class. The assets, liabilities and operations
of each portfolio are accounted for separately. Information presented in these
financial statements pertains only to the Fund. The Fund's investment objective
is to achieve as high a total return 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 the significant accounting policies
followed by the Fund in the preparation of its financial statements.
A. Security Valuations -- A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular day,
the security is valued at the closing bid price on that day. Each security
reported on the NASDAQ National Market System is valued at the last sales
price on the valuation date or absent a last sales price, at the closing bid
price. Debt obligations (including convertible bonds) are valued on the basis
of prices provided by an independent pricing service. Prices provided by the
pricing service may be determined without exclusive reliance on quoted
prices, and may reflect appropriate factors such as yield, type of issue,
coupon rate and maturity date. Securities for which market prices are not
provided by any of the above methods are valued based upon quotes furnished
by independent sources and are valued at the last bid price in the case of
equity securities and in the case of debt obligations, the mean between the
last bid and asked prices. Securities for which market quotations are not
readily available or are questionable are valued at fair value as determined
in good faith by or under the supervision of the Trust's officers in a manner
specifically authorized by the Board of Trustees. Short-term obligations
having 60 days or less to maturity are valued at amortized cost which
approximates market value. For purposes of determining net asset value per
share, futures and option contracts generally will be valued 15 minutes after
the close of trading of the New York Stock Exchange ("NYSE").
Generally, trading in foreign securities is substantially completed each
day at various times prior to the close of the NYSE. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the NYSE
which would not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such securities occur
during such period, then these securities will be valued at their fair value
as determined in good faith by or under the supervision of the Board of
Trustees.
B. Securities Transactions and Investment Income -- Securities transactions are
accounted for on a trade date basis. Realized gains or losses on sales are
computed on the basis of specific identification of the securities sold.
Interest income is recorded as earned from settlement date and is recorded on
the accrual basis. Dividend income is recorded on the ex-dividend date. On
December 31, 1999, undistributed net investment income was decreased by
$2,933,934 and undistributed net realized gains increased by $2,933,934 as a
result of differing book/tax treatment of foreign currency transactions and
other reclassifications. Net assets of the Fund were unaffected by the
reclassifications.
C. Distributions -- Distributions from income are recorded on ex-dividend date,
and are declared and paid quarterly. Distributions from net realized capital
gains, if any, are generally paid annually and recorded on ex-dividend date.
The Fund may elect to use a portion of the proceeds of fund share redemptions
as distributions for federal income tax purposes.
D. Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income taxes
is recorded in the financial statements.
E. Foreign Currency Translations -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S. dollar
amounts at date of valuation. Purchases and sales of portfolio securities and
income items denominated in foreign currencies are translated into U.S.
dollar amounts on the respective dates of such transactions. The Fund does
not separately account for that portion of the results of operations
resulting from changes in foreign exchange rates on investments and the
fluctuations arising from changes in market prices of securities held. Such
fluctuations
18
<PAGE> 21
are included with the net realized and unrealized gain or loss from
investments.
F. Foreign Currency Contracts -- A foreign currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a foreign currency contract to attempt to
minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency contract
for the purchase or sale of a security denominated in a foreign currency in
order to "lock in" the U.S. dollar price of that security. The Fund could be
exposed to risk if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably.
Outstanding foreign currency contracts at December 31, 1999 were as follows:
<TABLE>
<CAPTION>
CONTRACT TO
------------------------- UNREALIZED
SETTLEMENT DATE DELIVER RECEIVE VALUE APPRECIATION
--------------------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
01/24/00 SEK 68,000,000 $ 8,381,403 $ 8,004,163 $377,240
-----------------------------------------------------------------------------
02/28/00 EUR 10,000,000 10,385,000 10,110,458 274,542
-----------------------------------------------------------------------------
02/28/00 GBP 500,000 811,250 807,390 3,860
-----------------------------------------------------------------------------
78,500,000 $19,577,653 $18,922,011 $655,642
=============================================================================
</TABLE>
G. Futures Contracts -- The Fund may purchase or sell futures contracts as a
hedge against changes in market conditions. Initial margin deposits required
upon entering into futures contracts are satisfied by the segregation of
specific securities as collateral for the account of the broker (the Fund's
agent in acquiring the futures position). During the period the futures
contracts are open, changes in the value of the contracts are recognized as
unrealized gains or losses by "marking to market" on a daily basis to reflect
the market value of the contracts at the end of each day's trading. Variation
margin payments are made or received depending upon whether unrealized gains
or losses are incurred. When the contracts are closed, the Fund recognizes a
realized gain or loss equal to the difference between the proceeds from, or
cost of, the closing transaction and the Fund's basis in the contract. Risks
include the possibility of an illiquid market and that a change in value of
the contracts may not correlate with changes in the value of the securities
being hedged.
H. Covered Call Options -- The Fund may write call options, 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.
I. Put Options -- The Fund may purchase put options. By purchasing a put
option, the Fund obtains the right (but not the obligation) to sell the
option's underlying instrument at a fixed strike price. In return for this
right, the Fund pays an option premium. The option's underlying instrument
may be a security or a futures contract. Put options may be used by the Fund
to hedge securities it owns by locking in a minimum price at which the Fund
can sell. If security prices fall, the put option could be exercised to
offset all or a portion of the Fund's resulting losses. At the same time,
because the maximum the Fund has at risk is the cost of the option,
purchasing put options does not eliminate the potential for the Fund to
profit from an increase in the value of the securities hedged.
J. Bond Premiums -- It is the policy of the Fund not to amortize market premiums
on bonds for financial reporting purposes.
K. Expenses -- Distribution expenses and transfer agency expenses directly
attributable to a class of shares are charged to that class' operations. All
other expenses which are attributable to more than one class are allocated
among the classes.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the 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
19
<PAGE> 22
the Fund. For the year ended December 31, 1999, AIM was paid $158,046 for such
services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. For the year ended December 31, 1999, AFS was
paid $1,916,453 for such services.
The Trust has entered into master distribution agreements with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Class A, Class B and Class C shares of the Fund. The Trust has adopted plans
pursuant to Rule 12b-1 under the 1940 Act with respect to the Fund's Class A
shares, Class B shares and Class C shares (collectively, the "Plans"). The Fund,
pursuant to the Plans, pays AIM Distributors compensation at the annual rate of
0.25% of the Fund's average daily net assets of Class A shares and 1.00% of the
average daily net assets of Class B and C shares. Of these amounts, the Fund may
pay a service fee of 0.25% of the average daily net assets of the Class A, Class
B or Class C shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
the appropriate class of shares of the Fund. Any amounts not paid as a service
fee under the Plans would constitute an asset-based sales charge. The Plans also
impose a cap on the total sales charges, including asset-based sales charges
that may be paid by the respective classes. For the year ended December 31,
1999, the Class A, Class B and Class C shares paid AIM Distributors $3,755,133,
$10,013,693 and $1,464,190, respectively, as compensation under the Plans.
AIM Distributors received commissions of $823,856 from sales of the Class A
shares of the Fund during the year ended December 31, 1999. Such commissions are
not an expense of the Fund. They are deducted from, and are not included in, the
proceeds from sales of Class A shares. During the year ended December 31, 1999,
AIM Distributors received $150,341 in contingent deferred sales charges imposed
on redemptions of Fund shares.
Certain officers and trustees of the Trust are officers and directors of AIM,
AFS and AIM Distributors.
During the year ended December 31, 1999, the Fund paid legal fees of $7,985
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Board of Trustees. A member of that firm is a trustee of the Trust.
NOTE 3-INDIRECT EXPENSES
During the year ended December 31, 1999, the Fund received reductions in
transfer agency fees from AFS (an affiliate of AIM) and reductions in custodian
fees of $29,183 and $46,784, respectively, under expense offset arrangements.
The effect of the above arrangements resulted in a reduction of the Fund's total
expenses of $75,967 during the year ended December 31, 1999.
NOTE 4-TRUSTEES' FEES
Trustees' fees represent remuneration paid to trustees who are not an
"interested person" of AIM. The Trust invests trustees' fees, if so elected by a
trustee, in mutual fund shares in accordance with a deferred compensation plan.
NOTE 5-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. During the year
ended December 31, 1999, the Fund did not borrow under the line of credit
agreement. The funds which are party to the line of credit are charged a
commitment fee of 0.09% on the unused balance of the committed line. Prior to
May 28, 1999, the commitment fee rate was 0.05%. The commitment fee is allocated
among the funds based on their respective average net assets for the period.
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the year ended December 31, 1999 was
$2,017,133,351 and $1,619,226,894, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of December 31, 1999 was as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $826,568,954
- ---------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (58,369,796)
- ---------------------------------------------------------
Net unrealized appreciation of investment
securities $768,199,158
=========================================================
Cost of investments for tax purposes is
$2,366,574,394.
</TABLE>
20
<PAGE> 23
NOTE 7-CALL OPTION CONTRACTS
Transactions in call options written during the year ended December 31, 1999 are
summarized as follows:
<TABLE>
<CAPTION>
CALL OPTION CONTRACTS
----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- ----------
<S> <C> <C>
Beginning of year 500 $ 797,973
- ------------------------------------------------------------------------------------
Written 6,745 4,420,253
- ------------------------------------------------------------------------------------
Closed (3,755) (3,723,866)
- ------------------------------------------------------------------------------------
End of year 3,490 $1,494,360
====================================================================================
</TABLE>
Open call option contracts written at December 31, 1999 were as follows:
<TABLE>
<CAPTION>
UNREALIZED
CONTRACT STRIKE NUMBER OF PREMIUMS MARKET APPRECIATION
ISSUE MONTH PRICE CONTRACTS RECEIVED VALUE (DEPRECIATION)
- ------------------------------------------------------ -------- ------- --------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
America Online Inc. Jan-00 $ 88 2,210 $ 851,927 $ 414,374 $ 437,553
- ---------------------------------------------------------------------------------------------------------------------------------
General Motors Corp. - Class H Jan-00 100 950 412,761 279,063 133,698
- ---------------------------------------------------------------------------------------------------------------------------------
International Business Machines Corp. Jan-00 95 330 229,672 474,375 (244,703)
- ---------------------------------------------------------------------------------------------------------------------------------
3,490 $1,494,360 $1,167,812 $ 326,548
=================================================================================================================================
</TABLE>
NOTE 8-FUTURES CONTRACTS
On December 31, 1999, $7,619,000 principal amount of U.S. Treasury obligations
was pledged as collateral to cover margin requirements for open futures
contracts. Open futures contracts were as follows:
<TABLE>
<CAPTION>
VALUE OF
NO. OF MONTH/ OPEN FUTURES UNREALIZED
CONTRACT CONTRACTS COMMITMENT CONTRACTS APPRECIATION
- ------------------------------------------------------------ --------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
S&P 500 Index 325 Mar-00/Buy $120,591,250 $3,977,452
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 9-SHARE INFORMATION
Changes in shares outstanding during the years ended December 31, 1999 and 1998
were as follows:
<TABLE>
<CAPTION>
1999 1998
--------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Sold:
Class A 24,207,279 $ 705,353,097 29,663,763 $ 789,886,049
- -----------------------------------------------------------------------------------------------------------------------
Class B 9,923,280 287,877,047 15,995,669 427,423,474
- -----------------------------------------------------------------------------------------------------------------------
Class C 3,295,250 96,614,771 4,375,455 117,461,185
- -----------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 1,334,538 39,562,999 872,547 23,134,563
- -----------------------------------------------------------------------------------------------------------------------
Class B 652,505 19,306,388 492,389 13,073,889
- -----------------------------------------------------------------------------------------------------------------------
Class C 92,159 2,744,998 54,578 1,446,813
- -----------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (17,165,067) (501,186,620) (10,355,432) (275,955,976)
- -----------------------------------------------------------------------------------------------------------------------
Class B (6,020,681) (175,148,851) (3,657,104) (96,110,878)
- -----------------------------------------------------------------------------------------------------------------------
Class C (1,289,864) (37,559,127) (747,879) (19,825,126)
- -----------------------------------------------------------------------------------------------------------------------
15,029,399 $ 437,564,702 36,693,986 $ 980,533,993
=======================================================================================================================
</TABLE>
21
<PAGE> 24
NOTE 10-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A and a share of
Class B outstanding during each of the years in the five-year period ended
December 31, 1999, and for a share of Class C outstanding during each of the
years in the two-year period ended December 31, 1999 and the period August 4,
1997 (date sales commenced) through December 31, 1997.
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------------
1999(a) 1998(a) 1997 1996 1995
---------- ---------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 28.23 $ 25.78 $ 21.84 $ 19.22 $ 14.62
- ------------------------------------------------------------ ---------- ---------- -------- -------- -------
Income from investment operations:
Net investment income 0.82 0.71 0.60 0.66 0.49
- ------------------------------------------------------------ ---------- ---------- -------- -------- -------
Net gains on securities (both realized and unrealized) 4.46 2.45 4.66 2.99 4.57
- ------------------------------------------------------------ ---------- ---------- -------- -------- -------
Total from investment operations 5.28 3.16 5.26 3.65 5.06
- ------------------------------------------------------------ ---------- ---------- -------- -------- -------
Less distributions:
Dividends from net investment income (0.82) (0.65) (0.55) (0.55) (0.46)
- ------------------------------------------------------------ ---------- ---------- -------- -------- -------
Distributions from net realized gains -- (0.06) (0.77) (0.48) --
- ------------------------------------------------------------ ---------- ---------- -------- -------- -------
Total distributions (0.82) (0.71) (1.32) (1.03) (0.46)
- ------------------------------------------------------------ ---------- ---------- -------- -------- -------
Net asset value, end of period $ 32.69 $ 28.23 $ 25.78 $ 21.84 $ 19.22
============================================================ ========== ========== ======== ======== =======
Total return(b) 19.04% 12.46% 24.41% 19.25% 34.97%
============================================================ ========== ========== ======== ======== =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,800,350 $1,318,230 $683,633 $334,189 $92,241
============================================================ ========== ========== ======== ======== =======
Ratio of expenses to average net assets 0.94%(c) 0.95% 0.98% 1.15% 1.43%(d)
============================================================ ========== ========== ======== ======== =======
Ratio of net investment income to average net assets 2.81%(c) 2.81% 2.48% 2.97% 2.81%(e)
============================================================ ========== ========== ======== ======== =======
Portfolio turnover rate 65% 43% 66% 72% 77%
============================================================ ========== ========== ======== ======== =======
</TABLE>
<TABLE>
<S> <C>
(a) Calculated using average shares outstanding.
(b) Does not deduct sales charges.
(c) Ratios are based on average net assets of $1,502,053,346.
(d) After fee waivers and/or expense reimbursements. The ratio
of expenses to average net assets prior to fee waivers
and/or expense reimbursements was 1.46% for 1995.
(e) After fee waivers and/or expense reimbursements. The ratio
of net investment income to average net assets prior to fee
waivers and/or expense reimbursements was 2.78% for 1995.
</TABLE>
<TABLE>
<CAPTION>
CLASS B CLASS C
------------------------------------------------------ ------------------------------
1999(a) 1998(a) 1997 1996 1995 1999(a) 1998(a) 1997
---------- -------- -------- -------- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 28.18 $ 25.75 $ 21.83 $ 19.22 $ 14.62 $ 28.21 $ 25.76 $ 25.55
- ---------------------------------------- ---------- -------- -------- -------- ------- -------- -------- -------
Income from investment operations:
Net investment income 0.58 0.42 0.38 0.48 0.31 0.58 0.42 0.16
- ---------------------------------------- ---------- -------- -------- -------- ------- -------- -------- -------
Net gains on securities (both realized
and unrealized) 4.45 2.51 4.68 2.99 4.61 4.46 2.53 1.01
- ---------------------------------------- ---------- -------- -------- -------- ------- -------- -------- -------
Total from investment operations 5.03 2.93 5.06 3.47 4.92 5.04 2.95 1.17
- ---------------------------------------- ---------- -------- -------- -------- ------- -------- -------- -------
Less distributions:
Dividends from net investment income (0.60) (0.44) (0.37) (0.38) (0.32) (0.60) (0.44) (0.19)
- ---------------------------------------- ---------- -------- -------- -------- ------- -------- -------- -------
Distributions from net realized gains -- (0.06) (0.77) (0.48) -- -- (0.06) (0.77)
- ---------------------------------------- ---------- -------- -------- -------- ------- -------- -------- -------
Total distributions (0.60) (0.50) (1.14) (0.86) (0.32) (0.60) (0.50) (0.96)
- ---------------------------------------- ---------- -------- -------- -------- ------- -------- -------- -------
Net asset value, end of period $ 32.61 $ 28.18 $ 25.75 $ 21.83 $ 19.22 $ 32.65 $ 28.21 $ 25.76
======================================== ========== ======== ======== ======== ======= ======== ======== =======
Total return(b) 18.08% 11.53% 23.42% 18.28% 33.93% 18.09% 11.60% 4.67%
======================================== ========== ======== ======== ======== ======= ======== ======== =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,183,215 $894,165 $486,506 $237,082 $72,634 $200,585 $114,163 $ 9,394
======================================== ========== ======== ======== ======== ======= ======== ======== =======
Ratio of expenses to average net assets 1.75%(c) 1.76% 1.79% 1.97% 2.21%(d) 1.75%(c) 1.73% 1.78%(f)
======================================== ========== ======== ======== ======== ======= ======== ======== =======
Ratio of net investment income to
average net assets 2.00%(c) 2.00% 1.67% 2.15% 2.03%(e) 2.00%(c) 2.03% 1.68%(f)
======================================== ========== ======== ======== ======== ======= ======== ======== =======
Portfolio turnover rate 65% 43% 66% 72% 77% 65% 43% 66%
======================================== ========== ======== ======== ======== ======= ======== ======== =======
</TABLE>
<TABLE>
<S> <C>
(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 based on average net assets of $1,001,369,340 and
$146,419,005 for Class B and Class C, respectively.
(d) After fee waivers and/or expense reimbursements. The ratio
of expenses to average net assets prior to fee waivers
and/or expense reimbursements was 2.23% for 1995.
(e) After fee waivers and/or expense reimbursements. The ratio
of net investment income to average net assets prior to fee
waivers and/or expense reimbursements was 2.01% for 1995.
(f) Annualized.
</TABLE>
22
<PAGE> 25
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of
AIM Balanced Fund:
We have audited the accompanying statement of assets and
liabilities of AIM Balanced Fund (a portfolio of AIM
Funds Group), including the schedule of investments, as
of December 31, 1999, and the related statement of
operations for the year then ended, the statement of
changes in net assets for each of the years in the
two-year period then ended, and the financial highlights
for each of the years in the five-year period then ended.
These financial statements and financial highlights are
the responsibility of the Fund's management. Our
responsibility is to express an opinion on these
financial statements and financial highlights based on
our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and
financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of
securities owned as of December 31, 1999, by
correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all
material respects, the financial position of AIM Balanced
Fund as of December 31, 1999, the results of its
operations for the year then ended, the changes in its
net assets for each of the years in the two-year period
then ended, and the financial highlights for each of the
years in the five-year period then ended, in conformity
with generally accepted accounting principles.
KPMG LLP
February 4, 2000
Houston, Texas
23
<PAGE> 26
<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, President CUSTODIAN
and Chief Operating Officer, Stuart W. Coco
Mercantile-Safe Deposit & Trust Co.; and Vice President State Street Bank and Trust Company
President, Mercantile Bankshares 225 Franklin Street
Melville B. Cox Boston, MA 02110
Jack Fields Vice President
Chief Executive Officer COUNSEL TO THE FUND
Texana Global, Inc.; Karen Dunn Kelley
Formerly Member Vice President Ballard Spahr
of the U.S. House of Representatives Andrews & Ingersoll, LLP
Edgar M. Larsen 1735 Market Street
Carl Frischling Vice President Philadelphia, PA 19103
Partner
Kramer, Levin, Naftalis & Frankel LLP Mary J. Benson COUNSEL TO THE TRUSTEES
Assistant Vice President and
Robert H. Graham Assistant Treasurer Kramer, Levin, Naftalis & Frankel LLP
President and Chief Executive Officer 919 Third Avenue
A I M Management Group Inc. Sheri Morris New York, NY 10022
Assistant Vice President and
Prema Mathai-Davis Assistant Treasurer DISTRIBUTOR
Chief Executive Officer, YWCA of the U.S.A .
Renee A. Friedli A I M Distributors, Inc.
Lewis F. Pennock Assistant Secretary 11 Greenway Plaza
Attorney Suite 100
P. Michelle Grace Houston, TX 77046
Louis S. Sklar Assistant Secretary
Executive Vice President AUDITORS
Hines Interests Nancy L. Martin
Limited Partnership Assistant Secretary KPMG LLP
700 Louisiana
Ofelia M. Mayo Houston, TX 77002
Assistant Secretary
Lisa A. Moss
Assistant Secretary
Kathleen J. Pflueger
Assistant Secretary
Samuel D. Sirko
Assistant Secretary
Stephen I. Winer
Assistant Secretary
</TABLE>
(UNAUDITED)
REQUIRED FEDERAL INCOME TAX INFORMATION
AIM Balanced Fund Class A, Class B, and Class C shares paid ordinary dividends
in the amount of $0.82, $0.598, and $0.598 per share, respectively, to
shareholders during its tax year ended December 31, 1999. Of these amounts
17.57% is eligible for the dividends received deduction for corporations.
REQUIRED STATE INCOME TAX INFORMATION
Of the total ordinary dividends paid, 20.12% was derived from U.S. Treasury
obligations.
24
<PAGE> 27
AIM FUNDS(SM) MAKES INVESTING EASY
------------------------------------
Our automated
AIM Investor Line,
800-246-5463,
provides current account
information and the price,
yield and total return
on all AIM funds
24 hours a day.
------------------------------------
o AIM BANK CONNECTION(SM). You can make investments in your AIM account in
amounts from $50 to $100,000 without writing a check. Once you set up this
convenient feature, AIM will draw the funds from your pre-authorized
checking account at your request.
o AIM INTERNET CONNECT(SM). With this service, you can purchase, redeem or
exchange shares of AIM funds in your current AIM account simply by accessing
our Web site at www.aimfunds.com. For a retirement account, such as an IRA
or 403(b), only exchanges are allowed over the Internet because of the
tax-reporting and record-keeping requirements these accounts involve.
o AUTOMATIC REINVESTMENT OF DIVIDENDS AND/OR CAPITAL GAINS. You can receive
distributions in cash, or you can reinvest them in your account without
paying a sales charge. Over time, the power of compounding can significantly
increase the value of your account.
o AUTOMATIC INVESTMENT PLAN. You can add to your account by authorizing your
AIM fund to withdraw a specified amount, minimum $50, from your bank account
on a regular schedule.
o EASY ACCESS TO YOUR MONEY. You can redeem shares of your AIM fund any day
the New York Stock Exchange is open. The value of the shares may be more or
less than their original cost depending on market conditions.
o EXCHANGE PRIVILEGE. As your investment goals change, you may exchange part
or all of your shares of one fund for shares of a different AIM fund within
the same share class. You may make up to 10 such exchanges per calendar
year.
o TAX-ADVANTAGED RETIREMENT PLANS. You can enjoy the tax advantages offered by
a variety of investment plans, including Traditional IRAs, Roth IRAs and
education IRAs, among others.
o E-MAIL ACCESS. You can contact us at [email protected] for general
information. For account information, contact us at
[email protected].
o www.aimfunds.com. Our award-winning Web site provides account information,
shareholder education and fund performance information.
<PAGE> 28
THE AIM FAMILY OF FUNDS -- REGISTERED TRADEMARK --
<TABLE>
<S> <C> <C>
GROWTH FUNDS MONEY MARKET FUNDS A I M Management Group Inc. has
AIM Aggressive Growth Fund AIM Money Market Fund provided leadership in the mutual
AIM Blue Chip Fund AIM Tax-Exempt Cash Fund fund industry since 1976 and managed
AIM Capital Development Fund approximately $160 billion in assets
AIM Constellation Fund(1) INTERNATIONAL GROWTH FUNDS for more than 6.6 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 AIM Developing Markets Fund financial institutions, as of
AIM Mid Cap Growth Fund AIM Euroland Growth Fund(4) December 31, 1999.
AIM Mid Cap Opportunities Fund AIM European Development Fund The AIM Family of Funds --
AIM Select Growth Fund AIM International Equity Fund Registered Trademark -- is
AIM Small Cap Growth Fund(2) AIM Japan Growth Fund distributed nationwide, and AIM
AIM Small Cap Opportunities Fund(3) AIM Latin American Growth Fund today is the eighth-largest mutual
AIM Value Fund AIM New Pacific Growth Fund fund complex in the United States in
AIM Weingarten Fund assets under management, according
GLOBAL GROWTH FUNDS to Strategic Insight, an independent
GROWTH & INCOME FUNDS AIM Global Aggressive Growth Fund mutual fund monitor.
AIM Advisor Flex Fund AIM Global Growth Fund
AIM Advisor Large Cap Value Fund
AIM Advisor Real Estate Fund GLOBAL GROWTH & INCOME FUNDS
AIM Balanced Fund AIM Global Growth & Income Fund
AIM Basic Value Fund AIM Global Utilities Fund
AIM Charter Fund
GLOBAL INCOME FUNDS
INCOME FUNDS AIM Emerging Markets Debt Fund
AIM Floating Rate Fund AIM Global Government Income Fund
AIM High Yield Fund AIM Global Income Fund
AIM High Yield Fund II AIM Strategic Income Fund
AIM Income Fund
AIM Intermediate Government Fund THEME FUNDS
AIM Limited Maturity Treasury Fund AIM Global Consumer Products and Services Fund
AIM Global Financial Services Fund
TAX-FREE INCOME FUNDS AIM Global Health Care Fund
AIM High Income Municipal Fund AIM Global Infrastructure Fund
AIM Municipal Bond Fund AIM Global Resources Fund
AIM Tax-Exempt Bond Fund of Connecticut AIM Global Telecommunications and Technology Fund(5)
AIM Tax-Free Intermediate Fund AIM Global Trends Fund(6)
</TABLE>
(1) Effective December 1, 1999, AIM Constellation Fund's investment strategy
broadened to allow investments across all market capitalizations. (2) AIM Small
Cap Growth Fund closed to new investors on November 8, 1999. (3) AIM Small Cap
Opportunities Fund closed to new investors on November 4, 1999. (4) On September
1, 1999, AIM Europe Growth Fund was renamed AIM Euroland Growth Fund. Previously
the fund invested in all size companies in most areas of Europe. The fund now
seeks to invest at least 65% of its assets in large-cap companies within
countries using the euro as their currency (EMU-member countries). (5) On June
1, 1999, AIM Global Telecommunications Fund was renamed AIM Global
Telecommunications and Technology Fund. (6) Effective August 27, 1999, AIM
Global Trends Fund was restructured to operate as a traditional mutual fund.
Before that date, the fund operated as a fund of funds. For more complete
information about any AIM fund(s), including sales charges and expenses, ask
your financial advisor or securities dealer for a free prospectus(es). Please
read the prospectus(es) carefully before you invest or send money. If used as
sales material after April 20, 2000, this report must be accompanied by a
current Quarterly Review of Performance for AIM Funds.
[AIM LOGO APPEARS HERE]
INVEST WITH DISCIPLINE
-- Registered Trademark --
A I M Distributors, Inc. BAL-AR-1
