<PAGE> 1
[COVER IMAGE]
AIM
ADVISOR MULTIFLEX FUND
[AIM LOGO APPEARS HERE] ANNUAL REPORT DECEMBER 31 1998
INVEST WITH DISCIPLINE--Registered Trademark--
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[ COVER IMAGE ]
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FRUIT DISPLAYED ON A STAND
BY GUSTAVE CAILLEBOTTE (1848-1894, FRENCH)
GUSTAVE CAILLEBOTTE WAS NOT ONLY A GIFTED PAINTER, BUT
ALSO A GREAT COLLECTOR AND PATRON OF IMPRESSIONIST ART.
HIS QUIET PAINTING OF A SIMPLE, YET ELEGANT DISPLAY OF FRUIT
EXEMPLIFIES THE ORDER AND DIVERSITY OF INVESTING.
------------------------------------
AIM Advisor MultiFlex Fund is for shareholders who seek to achieve a high total
return on investment from five different types of investments--large-cap stocks,
small-cap stocks, international stocks, real estate securities, and fixed-income
securities.
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o AIM Advisor MultiFlex Fund's performance figures are historical and reflect
reinvestment of all distributions and changes in net asset value. Unless
otherwise indicated, the Fund's performance is computed at net asset value
without a sales charge.
o During the fiscal year ended 12/31/98 the Fund paid the following
distributions: Class A shares, $0.80 per share; Class B and Class C shares,
$0.70 per share.
o When sales charges are included in performance figures, Class A share
performance reflects the maximum 5.50% 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 Fund
expenses.
o The Fund's investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o The Dow Jones Industrial Average (the Dow) is a price-weighted average of 30
actively traded primarily industrial stocks.
o The five asset-class benchmark indexes to which Fund performance is compared
are the S&P 500, the Lehman Aggregate Bond Index, the Russell 2000, the
EAFE, and the NAREIT Equity Index. In calculating total return, a 20%
weighting was used for each index.
o The Standard & Poor's Composite Index of 500 Stocks (S&P 500) is a group of
unmanaged securities widely regarded by investors to be representative of
the stock market in general.
o The EAFE--Registered Trademark-- (Europe, Australasia, and the Far East)
Index is a group of unmanaged foreign securities. The index is compiled by
Morgan Stanley Capital International.
o The Lehman Aggregate Bond Index is an unmanaged index generally considered
to be representative of the overall performance of the U.S. bond market. It
is compiled by Lehman Brothers.
o The Russell 2000 Stock Index is an unmanaged index generally considered to
be representative of small-capitalization stocks.
o The NAREIT (National Association of Real Estate Investment Trusts) Equity
Index tracks the performance of all tax-qualified REITs listed on the New
York Stock Exchange, American Stock Exchange, and the NASDAQ National Market
System. Equity REITS are defined as REITS with 75% or more of their gross
invested book assets invested directly or indirectly in the equity ownership
of real estate.
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 A PORTION 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 ADVISOR MULTIFLEX FUND
<PAGE> 3
ANNUAL REPORT / CHAIRMAN'S LETTER
Dear Fellow Shareholder:
As the fiscal year opened, markets were recovering from the
[PHOTO OF concerns produced by financial crises in Asia during 1997,
Charles T. and this optimism early in 1998 led several market indexes
Bauer, to all-time highs in spring and early summer. However, the
Chairman of year Chairman was to bring two particularly serious
the Board of financial shocks, first the debt default by Russia, and
THE FUND later the gathering crisis in Brazil, which devalued its
[APPEARS HERE] currency shortly after the fiscal year closed. The result
was another year of significant market volatility here and
abroad.
Optimism yielded to pessimism over the summer amid
global financial crises and a widespread decline in U.S.
corporate earnings growth. Particularly from July through
October, a major market correction for equities, including
previously high-flying blue chips, bolstered U.S. Treasury
issues, whose safety attracts investors in doubtful times.
Beginning in late September, the U.S. Federal Reserve Board intervened to pump
liquidity and confidence into markets. Investors responded favorably, and the
year closed on a positive note with domestic equities rallying and bonds
displaying much less momentum.
Some stock indexes produced excellent total return for the year, with the
S&P 500 index of large-company stocks up a dramatic 28.60%. But focusing on one
market benchmark may give you an incomplete view. There was wide divergence
among market segments this fiscal year. For example, the Russell 2000 index of
small-company stocks declined 2.55%. Even within the S&P 500, the bigger the
company, the better the performance.
HOW SHOULD INVESTORS RESPOND?
We understood how unnerving 1998's level of volatility could have been. Of
course, our repeated message to you is to keep a long-term outlook on
investments rather than responding to short-term fluctuations. And we are
pleased to note that most mutual fund shareholders remained cool headed and did
not pull out of the markets during 1998. In the end, most were rewarded for
their long-term perspective.
In view of recent volatility and the divergent performance of market
sectors, this may be a very good time to meet with your financial consultant to
review your current asset allocation and the diversification of your portfolio.
Broad portfolio diversification remains one of the most fundamental principles
of investing, along with long-term thinking and realistic expectations.
YOUR FUND MANAGERS' COMMENTS
On the pages that follow, your Fund's managers, experienced professionals who
have weathered previous periods of market turbulence, offer more detailed
discussion of how markets behaved, how they managed the portfolio in light of
recent volatility, and what they foresee for markets and your Fund. We hope you
find their discussion informative.
YEAR 2000 CONCERN
Many of our shareholders have asked us about AIM's year 2000 readiness status.
We appreciate these concerns, and we take the year 2000 issue seriously. AIM has
devoted considerable effort to creating a comprehensive plan for assessing,
correcting and testing our in-house systems. We will also participate in an
industrywide testing effort scheduled to begin in March. But no matter how well
we prepare and test, no one can know for sure what the year 2000 will bring. Our
industry's systems are connected in complex ways to many third parties, and
there may be unforeseen problems when the year 2000 actually arrives. Though we
cannot predict what all those problems might be, we are working with our
business recovery team to develop contingency plans appropriate for a variety of
year 2000 scenarios.
We are pleased to send you this report on your Fund's fiscal year. If you
have any questions or comments, please contact our Client Services department at
800-959-4246, or e-mail your inquiry to us at [email protected]. You can
access information about your account through our AIM Investor Line at
800-246-5463 or at our Web site, www.aimfunds.com. We often post market updates
on our Web site.
We 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.
------------------------------------
. . . WE ARE PLEASED
TO NOTE THAT MOST
MUTUAL FUND
SHAREHOLDERS REMAINED
COOL HEADED AND DID NOT
PULL OUT OF THE
MARKETS DURING 1998.
------------------------------------
AIM ADVISOR MULTIFLEX FUND
<PAGE> 4
ANNUAL REPORT / MANAGERS' OVERVIEW
ASSET ALLOCATION STRATEGY TEMPERS
MARKET VOLATILITY
THIS YEAR WAS PARTICULARLY TURBULENT FOR FINANCIAL MARKETS. HOW DID THE FUND
PERFORM?
The market experienced a difficult year, including a major correction in world
equity markets during August. The Fund's Class C shares produced a total annual
return of -0.26%, while Class A shares had a total annual return of 0.51%. Class
B shares were introduced on March 3, 1998, and reported a cumulative total
return of -3.96% since inception. Please keep in mind that your Fund is managed
for long-term results. As shown in the chart on page four, the Fund's Class C
shares produced a return of 10.57% from its inception on November 17, 1993, to
the end of the reporting period.
HOW WOULD YOU CHARACTERIZE MARKET CONDITIONS OVER THE FISCAL YEAR?
We would describe 1998 as a market with three definite phases: bull, decline,
bull. During the first stage, from January to mid-July, the bull market climbed,
spurred by strong economies in the United States and Europe. But by summer these
good sentiments began to disintegrate. In July the market entered its second
phase, abruptly declining.
By August, market indexes such as the Dow plunged. A number of international
problems triggered the downturn: Currency devaluation occurred in Thailand,
Malaysia, Indonesia and Korea. A lingering recession gripped Japan. Crippled by
overwhelming debt, Russia suspended repayment of much of its foreign debt and
suffered deep currency devaluation. Fears of a global credit crunch then spread
to Latin America. Markets there plunged as investors worried that Brazil could
not sustain its exchange rate in light of the country's increasing debt. The
down market spurred a "flight to quality," as investors turned away from riskier
securities such as small-cap stocks and high-yield bonds. Seeking a safe haven,
they turned to the liquidity of domestic large-cap stocks and U.S. Treasuries.
Small-cap stocks plunged significantly, represented by the 36.49% drop in the
Russell 2000 Index from a high on April 21 to October 8, its low in 1998.
The third phase came in October as markets stabilized during a series of
interest rate cuts. Over the course of seven weeks, the U.S. Federal Reserve
Board lowered the key federal funds rate from 5.50% to 4.75%. Stock markets
rallied in response; in fact, most of the equity returns for 1998 came in the
fourth quarter.
HOW DID YOU MANAGE THE FUND IN THIS ENVIRONMENT?
We adhered to our diversified investment strategy, which focuses on five major
asset classes. At the end of the fiscal year, the Fund's total net assets were
allocated as follows: small-cap stocks, 25.49%; real estate, 25.22%;
international stocks, 24.68%; large-cap stocks, 20.24%; and fixed-income
securities, 4.79%. Through-out the year, we increased our equity holdings from
80.2% at the beginning of 1998 to 95.63% as of December 31. Equity investments
include large-cap, small-cap and international stocks and REITs (real estate
investment trusts).
This was a year when holdings in small-cap stocks and REITs hurt Fund
performance relative to the broader market. Relative valuations and
fundamentals, including earnings growth, were good for these two asset classes,
but they did not deliver the returns we expected.
WHY DID REITS UNDERPERFORM?
A rare convergence of events led to the decline in REIT stock prices in 1998.
Early in the year, investors feared that the strong domestic economy would spark
a glut of new construction. While this concern may have had some merit in
selected metropolitan areas, the capital crunch of the late summer and early
fall, following the global currency crisis, limited the capital available to
developers. Perfor-mance also suffered from a perception that REITs were
overpaying for properties.
We maintained a high weighting in REITs because their negative returns in
1998 had little to do with actual earnings or other fundamentals of the real
estate market. In fact, full occupancy helps REITs that own apartment and office
properties. After falling 17.5% in 1998, REIT stock prices appear relatively
attractive compared with most other investments.
Our top REIT holdings included Carr America Realty Corp., which owns 300
office properties nationwide; Prentiss Properties Trust, owner of 250 office and
industrial properties in U.S. suburbs; and Equity Residential Properties Trust,
the largest owner of U.S. apartment complexes, with 525 multifamily properties
throughout the country.
HOW DID SMALL CAPS PERFORM? WHY DID THE FUND FAVOR THIS SECTOR?
Small caps lagged behind large caps in performance throughout the year. The
------------------------------------
WE ARE OPTIMISTIC ABOUT A POSSIBLE
REBOUND FOR THE REIT MARKET AND
BELIEVE THAT THE FUND'S STRONG FOCUS
IN THIS AREA POSITIONS IT WELL FOR 1999.
------------------------------------
See important Fund and index disclosures inside front cover.
AIM ADVISOR MULTIFLEX FUND
2
<PAGE> 5
ANNUAL REPORT / MANAGERS' OVERVIEW
PORTFOLIO COMPOSITION
As of 12/31/98, based on total net assets
<TABLE>
<CAPTION>
====================================================================================================================================
SMALL-CAP STOCKS FIXED-INCOME SECURITIES Real Estate Securities
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1. DeVry, Inc. 0.39% 1. U.S. Treasury Notes & Bonds 1.99% 1. CarrAmerica Realty Corp. 0.99%
2. Bindley Western Industries, Inc. 0.36 2. Federal National Mortgage 0.73 2. Prentiss Properties Trust 0.98
3. Alpharma, Inc. - Class A 0.32 Association 3. Equity Residential 0.96
4. Express Scripts, Inc. - Class A 0.31 3. Federal Home Loan 0.36 Properties Trust
5. Orion Capital Corp. 0.31 Mortgage Corp. 4. Equity Office Properties Trust 0.89
4. Bellsouth Telecommunications, 0.30 5. Highwoods Properties, Inc. 0.87
Deb., 5.85%, 11/15/45
5. GTE Corp., Deb., 0.26
10.25%, 11/01/20
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
International Stocks Large-Cap Stocks
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Unilever N.V. (Netherlands) 0.79% 1. Bristol-Myers Squibb Co. 0.63%
2. Repsol S.A. - ADR (Spain) 0.78 2. Schering-Plough Corp. 0.54
3. Novartis A.G. - ADR 0.78 3. Fannie Mae 0.54
(Switzerland) 4. American General Corp. 0.46
4. Telecom Italia S.p.A. - 0.78 5. Merck & Co., Inc. 0.46
ADR (Italy)
5. Istituto Bancario San 0.75
Paolo di Torino - ADR (Italy)
Please keep in mind the Fund's portfolio composition is subject to change, and there is no assurance the Fund
will continue to hold any particular security.
====================================================================================================================================
</TABLE>
[PIE CHART]
FIXED-INCOME SECURITIES AND CASH 4.37%
SMALL-CAP STOCKS 25.49%
LARGE-CAP STOCKS 20.24%
INTERNATIONAL STOCKS 24.68%
REAL ESTATE 25.22%
intense volatility of the market made the riskier stocks of smaller companies
fall out of favor with many investors. The Fund continued to add to this sector
because we found better value in this asset class.
HOW WOULD YOU DESCRIBE INTERNATIONAL MARKETS IN 1998?
Latin American and Asian markets took a pounding over the fiscal year, but
European stocks soared, especially in the fourth quarter when countries
preparing to enter the European Economic and Monetary Union participated in a
coordinated interest-rate cut. Our top European stocks included Unilever of the
Netherlands, a consumer goods company whose famous brands include Lipton,
Vaseline and Q-tips; Repsol, Spain's largest oil and gas producer; and Novartis,
a Swiss pharmaceutical company.
WHAT WERE THE MAJOR TRENDS FOR FIXED-INCOME MARKETS?
The fixed-income portion of the portfolio favored government bonds, with a 1.99%
position in this category. Corporate securities made up 1.54% of the portfolio.
U.S. Treasuries were the undisputed fixed-income leaders in 1998. The investor
flight to quality during market upheavals drove up demand for Treasuries,
particularly among foreign investors.
WHAT IS YOUR OUTLOOK FOR THE FUND AND THE MARKETS IN GENERAL?
We expect continued volatility in the stock markets, perhaps as much as we
experienced in 1998. At the same time, we predict that the United States will
avoid a recession in 1999. The economy is likely to experience annual gross
domestic product growth in the 1.5% to 2% range, so low inflation and low
interest rates should continue. With global markets experiencing weakness and
the U.S. economy expanding more slowly, many companies will find it difficult to
produce earnings growth.
For fixed-income markets, a slowdown in the U.S. economy could benefit
government bonds, because it could lead to more interest rate cuts. At the same
time, corporate bonds could suffer if the economy slows and earnings falter. As
with stock markets, we expect another year of intense volatility.
We are optimistic about a possible rebound for the REIT market and believe
that the Fund's strong focus in this area positions it well for 1999. In
addition, we expect improvement in the small-cap market.
See important Fund and index disclosures inside front cover.
AIM ADVISOR MULTIFLEX FUND
3
<PAGE> 6
ANNUAL REPORT / PERFORMANCE HISTORY
YOUR FUND'S LONG-TERM PERFORMANCE
AIM ADVISOR MULTIFLEX FUND VS. BENCHMARK INDEXES
RESULTS OF A $10,000 INVESTMENT
11/17/93-12/31/98
In thousands
- --------------------------------------------------------------------------------
AIM ADVISOR
MULTIFLEX S&P
CLASS C SHARES 500 INDEX INDEX BLEND
- --------------------------------------------------------------------------------
11/15/93 $10,000.00 $10,000.00 $10,000.00
12/93 10,046.00 10,015.00 10,639.00
3/94 9,796.00 9,636.00 10,339.00
6/94 9,785.00 9,676.00 10,395.00
9/94 9,972.00 10,149.00 10,491.00
12/94 9,944.00 10,147.00 10,355.00
3/95 10,279.00 11,134.00 11,076.00
6/95 10,998.00 12,196.00 11,927.00
9/95 11,642.00 13,164.00 12,001.00
12/95 12,089.00 13,956.00 12,865.00
3/96 12,420.00 14,705.00 13,317.00
6/96 12,744.00 15,365.00 13,085.00
9/96 13,106.00 15,840.00 13,965.00
12/96 14,148.00 17,159.00 15,017.00
3/97 14,103.00 17,620.00 14,888.00
6/97 15,694.00 20,694.00 17,002.00
9/97 16,908.00 22,244.00 16,962.00
12/97 16,773.00 22,883.00 17,585.00
3/98 18,029.00 26,073.00 18,775.00
6/98 17,670.00 26,933.00 18,152.00
9/98 15,105.00 24,258.00 17,490.00
12/98 16,730.00 29,881.00 18,632.00
================================================================================
Past performance is no guarantee of comparable future results.
================================================================================
AVERAGE ANNUAL TOTAL RETURNS
As of 12/31/98, including sales charges
CLASS C SHARES
Inception (11/17/93) 10.57%
5 years 10.74
1 year (1.21)*
CLASS B SHARES
Inception (3/3/98) (8.52)%**
CLASS A SHARES
Inception (12/31/96) 6.51%
1 year (5.04)***
*(0.26)% excluding sales charges
**(3.96) excluding sales charges
***cumulative total return since inception, 0.51% excluding sales charges
================================================================================
SOURCE: TOWERS DATA SYSTEMS HYPO--Registered Trademark--
Your Fund's total return includes sales charges, expenses, and management
fees. For Fund data performance calculations and descriptions of indexes cited
on this page, please refer to the inside front cover. The performance of the
Fund's Class C shares will differ from Class A and Class B shares due to
differences in sales charge structure and Fund expenses.
MARKET VOLATILITY CAN SIGNIFICANTLY IMPACT SHORT-TERM PERFORMANCE. RESULTS
OF AN INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL
PERFORMANCE SHOWN.
ABOUT THIS CHART
The chart compares your Fund's Class C shares to benchmark indexes. It is
intended to give you a general idea of how your Fund performed compared to the
financial market over the period 11/17/93-12/31/98. (Please note that the Index
Blend is for the period 11/30/93- 12/31/98.) It is important to understand
differences between your Fund and these indexes. An index measures 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 the return on your investment. It is important to note that the S&P 500
is representative of the large-cap stocks only; approximately 80% of AIM Advisor
MultiFlex Fund's portfolio is invested in small-cap stocks, international
stocks, real estate securities, and fixed-income securities.
AIM ADVISOR MULTIFLEX FUND
4
<PAGE> 7
ANNUAL REPORT / FOR CONSIDERATION
OF FINANCE AND THE FED
A few words from Federal Reserve Board Chairman Alan Greenspan can send the
markets into a frenzy or calm them down.
Why? In 1998, a year of record volatility in stock and bond markets, when
investors and analysts alike seemed genuinely puzzled as to what to do next, the
Federal Reserve Board became a constant in the midst of the unsettling
environment.
WHAT IS THE FED?
The Federal Reserve Board, or "The Fed," consists of seven presidential
appointees including Chairman Greenspan. In addition to overseeing the country's
Federal Reserve System--the central bank of the United States--members of the
Fed serve on the Federal Open Market Committee (FOMC), which decides monetary
policy. Other FOMC members include the chairman of the New York Federal Reserve
Bank and four other FOMC seats that are rotated among the remaining 11 Federal
Reserve Banks.
The FOMC meets eight times a year. These meetings are preceded by the
release of the so-called "Beige Book" (see sidebar) and are always followed with
a great deal of interest because it is here that decisions on monetary policy
are made. The meetings traditionally feature reports on international and
domestic economic developments, conditions in financial markets, and forecasts
for the future. Policy options are then laid out and discussed, and a vote is
taken on whether the Fed will act, often by adjusting interest rates.
WHY ARE ADJUSTMENTS TO INTEREST RATES SO CLOSELY FOLLOWED?
Interest rate changes by the Fed are important for several reasons: (1) they
frequently reflect economic trends; (2) they immediately affect bond markets;
(3) they usually affect the stock market because when rates are high, people
tend to be less apt to take on the greater risks of stocks; and (4) they often
have a trickle-down effect.
For example, an interest rate hike was considered during the first half of
1998 when the U.S. economy seemed in danger of overheating and sparking
inflation. A rate hike would have helped slow things down by making borrowing
more expensive. Instead, myriad financial difficulties abroad affected markets
and slowed the U.S. economy enough to persuade the Fed to lower the federal
funds rate--the interest rate banks charge each other for overnight credit--in
September. When that rate cut did little to calm markets and loosen credit in
the U.S., the Fed cut both the federal funds rate and the discount rate--the
interest rate at which banks borrow emergency funds from the Federal Reserve--in
October and set off rallies in stock and bond markets. The Fed cut both interest
rates again in November 1998, citing continued strains in financial markets and
spurring another jump in the stock market as a whole.
Consumers feel the effect of interest rate adjustments as they trickle down
through the banking system. Rate cuts by the Fed often prompt rate reductions on
home mortgages, car loans, and variable-rate credit cards. Conversely, rate
hikes
------------------------------------
[THE BEIGE BOOK]
WHAT IS THE BEIGE BOOK?
The Beige Book report is published
about two weeks before each FOMC
meeting. The report contains anecdotal
data on current economic conditions in
each Federal Reserve Bank district,
summarizing the information by district and
sector. Interviews with key business people,
economists, market experts and other
sources supply the details for the report.
You can find out more about the Fed's Beige
Book and other interesting topics by visiting
the Fed's Web site at www.bog.frb.fed.us.
------------------------------------
AIM ADVISOR MULTIFLEX FUND
5
<PAGE> 8
ANNUAL REPORT / FOR CONSIDERATION
make all forms of loans more expensive.
Although the Fed does not directly control the financial markets, its
influence over short-term interest rates makes it a potent force.
WHAT ELSE DOES THE FED DO?
The Fed is an integral part of the Federal Reserve System (FRS), created by
Congress in 1913. The FRS includes 12 regional Federal Reserve Banks in New
York, Atlanta, Boston, Chicago, Cleveland, Dallas, Kansas City, Minneapolis,
Philadelphia, Richmond, St. Louis, and San Francisco. A Federal Reserve Bank
o clears checks,
o lends money to banks needing emergency reserves,
o issues currency, and
o holds reserve deposits of member banks.
A bank must hold a percentage of its loans as liquid reserves, meaning readily
available. The Fed decides what this percentage will be and can lower it to
inject more money into the economy or raise it to tighten credit.
The Fed also determines the margin requirements for securities investors and
traders and which securities may be purchased on margin. (Margin is the minimum
amount of cash that a customer is required to deposit on the purchase of
securities.) Known as Regulation T, this rule prevents the overextension of
credit in securities transactions.
While these other functions of the Federal Reserve System do not generate as
many headlines as its interest rate moves, they are crucial to the Fed's purpose
of keeping the nation's banking system safe, flexible and stable.
FED RATE CUTS AND THE DOW
WEEKLY CLOSES, DOW JONES INDUSTRIAL AVERAGE*
7/3/98-12/31/98
- --------------------------------------------------------------------------------
1998DJIA DOW CLOSE
- --------------------------------------------------------------------------------
7/10/98 $9105.74
7/17/98 7/17/98 9337.97
Dow reaches new high 7/24/98 8937.36
9,337.97 7/31/98 8883.29
8/7/98 8598.02
8/28/98 8/14/98 8425.00
Dow's worst weekly decline 8/21/98 8533.66
(-481.97) 8/28/98 8051.68
9/4/98 7640.25
9/11/98 7795.50
9/29/98 9/18/98 7895.66
1st rate cut 9/25/98 8028.77
10/2/98 7784.69
10/9/98 7899.52
10/15/98 10/16/98 8416.76
2nd rate cut 10/23/98 8452.29
10/30/98 8592.10
11/17/98 11/6/98 8975.46
3rd rate cut 11/13/98 8919.59
11/20/98 9159.55
11/27/98 9333.08
12/4/98 9016.14
12/31/98 12/11/98 8821.76
Dow closes at 9,191.43 12/18/98 8903.63
12/24/98 9217.99
12/31/98 9181.43
This graph shows the weekly closing levels for the Dow from July 3 through
December 31, 1998. While the Fed does not control the Dow, which is affected by
innumerable factors, its influence is clearly reflected in the index's behavior.
* The Dow Jones Industrial Average (the Dow) is a price-weighted average of 30
actively traded primarily industrial stocks.
- --------------------------------------------------------------------------------
AIM ADVISOR MULTIFLEX FUND
6
<PAGE> 9
SCHEDULE OF INVESTMENTS
December 31, 1998
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS & OTHER EQUITY
INTERESTS-95.63%
AEROSPACE/DEFENSE-0.45%
BE Aerospace, Inc.(a) 15,900 $ 333,900
- --------------------------------------------------------------
Precision Castparts Corp. 19,500 862,875
- --------------------------------------------------------------
Sequa Corp.(a) 5,500 329,312
- --------------------------------------------------------------
1,526,087
- --------------------------------------------------------------
AGRICULTURAL PRODUCTS-0.12%
Universal Corp. 11,600 407,450
- --------------------------------------------------------------
AIR FREIGHT-0.13%
Airborne Freight Corp. 11,900 429,143
- --------------------------------------------------------------
AIRLINES-0.98%
Alaska Air Group, Inc.(a) 12,600 557,550
- --------------------------------------------------------------
British Airways PLC-ADR (United
Kingdom) 19,000 1,288,437
- --------------------------------------------------------------
SkyWest, Inc. 8,300 271,306
- --------------------------------------------------------------
Southwest Airlines Co. 52,350 1,174,603
- --------------------------------------------------------------
3,291,896
- --------------------------------------------------------------
AUTO PARTS & EQUIPMENT-0.53%
Arvin Industries, Inc. 17,500 729,531
- --------------------------------------------------------------
Borg-Warner Automotive, Inc. 14,600 814,863
- --------------------------------------------------------------
Standard Products Co. (The) 11,400 232,275
- --------------------------------------------------------------
1,776,669
- --------------------------------------------------------------
AUTOMOBILES-0.57%
Ford Motor Co. 16,600 974,213
- --------------------------------------------------------------
Volvo A.B.-ADR (Sweden) 40,000 932,500
- --------------------------------------------------------------
1,906,713
- --------------------------------------------------------------
BANKS (MAJOR REGIONAL)-2.66%
ABN Amro Holding NV-ADR
(Netherlands) 100,000 2,175,000
- --------------------------------------------------------------
Bank One Corp. 27,540 1,406,261
- --------------------------------------------------------------
Istituto Bancario San Paolo di
Torino-ADR (Italy)(a) 70,537 2,521,698
- --------------------------------------------------------------
Societe Generale (France) 69,000 2,235,766
- --------------------------------------------------------------
Wachovia Corp. 7,000 612,063
- --------------------------------------------------------------
8,950,788
- --------------------------------------------------------------
BANKS (MONEY CENTER)-2.83%
BankAmerica Corp. 21,662 1,302,428
- --------------------------------------------------------------
Chase Manhattan Corp. (The) 13,800 939,263
- --------------------------------------------------------------
Den Danske Bank-ADR (Denmark) 17,000 2,283,816
- --------------------------------------------------------------
Deutsche Bank A.G.-ADR (Germany) 33,000 1,942,726
- --------------------------------------------------------------
First Union Corp. 13,000 790,563
- --------------------------------------------------------------
HSBC Holdings PLC-ADR (United
Kingdom) 9,000 2,242,153
- --------------------------------------------------------------
9,500,949
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
BANKS (REGIONAL)-2.11%
Commerce Bancorp, Inc. 15,625 $ 820,313
- --------------------------------------------------------------
Commerce Bancshares, Inc. 16,380 696,150
- --------------------------------------------------------------
Cullen/Frost Bankers, Inc. 11,600 636,550
- --------------------------------------------------------------
Firstbank Corp. 18,000 543,375
- --------------------------------------------------------------
GBC Bancorp 11,900 306,425
- --------------------------------------------------------------
HUBCO, Inc. 14,832 446,814
- --------------------------------------------------------------
Imperial Bancorp(a) 39,100 650,038
- --------------------------------------------------------------
Independent Bank Corp. 16,600 288,425
- --------------------------------------------------------------
National Australia Bank Ltd.-ADR
(Australia) 30,000 2,233,125
- --------------------------------------------------------------
Republic Bancorp, Inc. 6,700 91,287
- --------------------------------------------------------------
Silicon Valley Bancshares(a) 9,200 156,687
- --------------------------------------------------------------
Trustmark Corp. 9,900 223,987
- --------------------------------------------------------------
7,093,176
- --------------------------------------------------------------
BEVERAGES (ALCOHOLIC)-0.91%
Canandaigua Wine Co., Inc.-Class
A(a) 12,000 693,750
- --------------------------------------------------------------
Compania Cervecerias Unidas
S.A.-ADR (Chile) 45,000 866,250
- --------------------------------------------------------------
Kirin Brewery Co., Ltd.-ADR (Japan) 12,000 1,485,000
- --------------------------------------------------------------
3,045,000
- --------------------------------------------------------------
BEVERAGES (NON-ALCOHOLIC)-0.30%
PepsiCo, Inc. 24,750 1,013,203
- --------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO &
CABLE)-0.12%
Adelphia Communications Corp.(a) 9,100 416,325
- --------------------------------------------------------------
BUILDING MATERIALS-0.42%
Cameron Ashley Building Products(a) 12,700 165,894
- --------------------------------------------------------------
Cemex S.A. de C.V.-ADR (Mexico) 110,000 543,895
- --------------------------------------------------------------
Nortek, Inc.(a) 7,000 193,375
- --------------------------------------------------------------
TJ International, Inc. 20,400 524,025
- --------------------------------------------------------------
1,427,189
- --------------------------------------------------------------
CHEMICALS-0.59%
Akzo Nobel N.V.-ADR (Netherlands) 40,000 1,785,000
- --------------------------------------------------------------
NL Industries, Inc. 14,500 205,719
- --------------------------------------------------------------
1,990,719
- --------------------------------------------------------------
CHEMICALS (DIVERSIFIED)-1.07%
BASF A.G.-ADR (Germany) 50,000 1,909,315
- --------------------------------------------------------------
Bayer A.G.-ADR (Germany) 40,000 1,670,348
- --------------------------------------------------------------
3,579,663
- --------------------------------------------------------------
CHEMICALS (SPECIALTY)-0.27%
Dexter Corp. 28,800 905,400
- --------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-0.11%
Polycom, Inc.(a) 17,100 380,475
- --------------------------------------------------------------
</TABLE>
7
<PAGE> 10
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (HARDWARE)-1.15%
Compaq Computer Corp. 22,000 $ 922,625
- --------------------------------------------------------------
International Business Machines
Corp. 6,500 1,200,875
- --------------------------------------------------------------
Micron Electronics, Inc.(a) 11,800 204,287
- --------------------------------------------------------------
Sun Microsystems, Inc.(a) 17,800 1,524,125
- --------------------------------------------------------------
3,851,912
- --------------------------------------------------------------
COMPUTERS (NETWORKING)-0.14%
META Group, Inc.(a) 16,100 478,975
- --------------------------------------------------------------
COMPUTERS (PERIPHERALS)-0.49%
Jabil Circuit, Inc.(a) 3,600 268,650
- --------------------------------------------------------------
MICROS Systems, Inc.(a) 8,800 289,300
- --------------------------------------------------------------
Network Appliance, Inc.(a) 18,600 837,000
- --------------------------------------------------------------
Xircom, Inc.(a) 7,200 244,800
- --------------------------------------------------------------
1,639,750
- --------------------------------------------------------------
COMPUTERS (SOFTWARE &
SERVICES)-1.80%
Aspect Development, Inc.(a) 8,900 394,381
- --------------------------------------------------------------
BroadVision, Inc.(a) 11,300 361,600
- --------------------------------------------------------------
Computer Associates International,
Inc. 23,000 980,375
- --------------------------------------------------------------
Electronic Data Systems Corp. 20,000 1,005,000
- --------------------------------------------------------------
Hyperion Solutions Corp.(a) 8,930 160,740
- --------------------------------------------------------------
Legato Systems, Inc.(a) 7,800 514,312
- --------------------------------------------------------------
Lycos, Inc.(a) 9,800 544,513
- --------------------------------------------------------------
Mastech Corp.(a) 8,500 243,312
- --------------------------------------------------------------
Oracle Corp.(a) 30,000 1,293,750
- --------------------------------------------------------------
Progress Software Corp.(a) 8,400 283,500
- --------------------------------------------------------------
Rational Software Corp.(a) 10,500 278,250
- --------------------------------------------------------------
6,059,733
- --------------------------------------------------------------
CONSTRUCTION (CEMENT & AGGREGATES)-0.77%
Centex Construction Products, Inc. 20,600 836,875
- --------------------------------------------------------------
Lone Star Industries, Inc. 8,200 301,862
- --------------------------------------------------------------
Vulcan Materials Co. 11,000 1,447,188
- --------------------------------------------------------------
2,585,925
- --------------------------------------------------------------
CONSUMER (JEWELRY, NOVELTIES & GIFTS)-0.15%
American Greetings Corp.-Class A 12,400 509,175
- --------------------------------------------------------------
CONSUMER FINANCE-0.33%
Doral Financial Corp. 34,700 767,738
- --------------------------------------------------------------
Flagstar Bancorp, Inc. 12,500 326,563
- --------------------------------------------------------------
1,094,301
- --------------------------------------------------------------
DISTRIBUTORS (FOOD & HEALTH)-0.77%
AmeriSource Health Corp.-Class A(a) 12,600 819,000
- --------------------------------------------------------------
Bindley Western Industries, Inc. 24,666 1,214,801
- --------------------------------------------------------------
SUPERVALU, INC 20,000 560,000
- --------------------------------------------------------------
2,593,801
- --------------------------------------------------------------
ELECTRIC COMPANIES-3.43%
CILCORP, Inc. 5,500 336,531
- --------------------------------------------------------------
Cleco Corp. 13,500 463,219
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRIC COMPANIES-(CONTINUED)
CMP Group Inc. 16,000 $ 302,000
- --------------------------------------------------------------
Commonwealth Energy System 10,400 421,200
- --------------------------------------------------------------
DTE Energy Co. 26,700 1,144,763
- --------------------------------------------------------------
Endesa S.A.-ADR (Spain) 90,000 2,430,000
- --------------------------------------------------------------
Hawaiian Electric Industries, Inc. 15,200 611,800
- --------------------------------------------------------------
Interstate Energy Corp. 20,355 656,449
- --------------------------------------------------------------
Minnesota Power & Light Co. 8,300 365,200
- --------------------------------------------------------------
PowerGen PLC-ADR (United Kingdom) 35,000 1,872,500
- --------------------------------------------------------------
Scottish Power PLC-ADR (United
Kingdom) 40,000 1,652,500
- --------------------------------------------------------------
SIGCORP, Inc. 10,950 390,778
- --------------------------------------------------------------
Southern Co. 30,000 871,875
- --------------------------------------------------------------
11,518,815
- --------------------------------------------------------------
ELECTRICAL EQUIPMENT-2.31%
C & D Technologies, Inc. 11,600 319,000
- --------------------------------------------------------------
Carlton Communications PLC-ADR
(United Kingdom) 48,000 2,202,000
- --------------------------------------------------------------
Emerson Electric Co. 14,400 900,900
- --------------------------------------------------------------
Esterline Technologies Corp.(a) 16,300 354,525
- --------------------------------------------------------------
General Cable Corp. 29,100 596,550
- --------------------------------------------------------------
General Electric Co. 11,000 1,122,688
- --------------------------------------------------------------
Matsushita Electric Industrial Co.,
Ltd.-ADR (Japan) 8,000 1,396,000
- --------------------------------------------------------------
Pinnacle Systems, Inc.(a) 7,500 268,125
- --------------------------------------------------------------
Recoton Corp.(a) 21,500 385,656
- --------------------------------------------------------------
Technitrol, Inc. 7,100 226,312
- --------------------------------------------------------------
7,771,756
- --------------------------------------------------------------
ELECTRONICS (COMPONENT DISTRIBUTORS)-0.55%
Kyocera Corp.-ADR (Japan) 35,600 1,848,975
- --------------------------------------------------------------
ELECTRONICS (DEFENSE)-0.32%
Raytheon Co. 20,000 1,065,000
- --------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS)-0.54%
Applied Micro Circuits Corp.(a) 11,500 390,641
- --------------------------------------------------------------
Dallas Semiconductor Corp. 9,300 378,975
- --------------------------------------------------------------
PMC-Sierra, Inc.(a) 10,000 631,250
- --------------------------------------------------------------
TranSwitch Corp.(a) 10,300 401,056
- --------------------------------------------------------------
1,801,922
- --------------------------------------------------------------
ENGINEERING & CONSTRUCTION-0.15%
Granite Construction Inc. 2,100 70,481
- --------------------------------------------------------------
Stone & Webster, Inc. 12,700 422,275
- --------------------------------------------------------------
492,756
- --------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-1.84%
American General Corp. 19,900 1,552,200
- --------------------------------------------------------------
Associates First Capital
Corp.-Class A 16,000 678,000
- --------------------------------------------------------------
Citigroup Inc. 22,035 1,090,733
- --------------------------------------------------------------
Fannie Mae 24,300 1,798,200
- --------------------------------------------------------------
</TABLE>
8
<PAGE> 11
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FINANCIAL (DIVERSIFIED)-(CONTINUED)
Morgan Stanley, Dean Witter,
Discover & Co. 14,850 $ 1,054,350
- --------------------------------------------------------------
6,173,483
- --------------------------------------------------------------
FOODS-3.91%
Associated British Foods PLC-ADR
(United Kingdom) 200,000 1,866,800
- --------------------------------------------------------------
Earthgrains Co. (The) 20,000 618,750
- --------------------------------------------------------------
Groupe Danone-ADR (France) 40,000 2,250,000
- --------------------------------------------------------------
H.J. Heinz Co. 19,000 1,075,875
- --------------------------------------------------------------
Nestle S.A.-ADR (Switzerland) 22,000 2,394,647
- --------------------------------------------------------------
Pilgrim's Pride Corp.-Class B 13,500 269,156
- --------------------------------------------------------------
Smithfield Foods, Inc.(a) 17,000 575,875
- --------------------------------------------------------------
Unigate PLC (Spain) 200,000 1,437,540
- --------------------------------------------------------------
Unilever N.V. (Netherlands) 32,000 2,654,000
- --------------------------------------------------------------
13,142,643
- --------------------------------------------------------------
GAMING, LOTTERY & PARIMUTUEL
COMPANIES-0.10%
Grand Casinos, Inc.(a) 42,300 341,044
- --------------------------------------------------------------
GOLD & PRECIOUS METALS MINING-0.10%
Stillwater Mining Co.(a) 7,800 319,800
- --------------------------------------------------------------
HEALTH CARE (DIVERSIFIED)-1.70%
Abbott Laboratories 29,500 1,445,500
- --------------------------------------------------------------
American Home Products Corp. 22,000 1,238,875
- --------------------------------------------------------------
Bristol-Myers Squibb Co. 15,900 2,127,619
- --------------------------------------------------------------
Johnson & Johnson 10,800 905,850
- --------------------------------------------------------------
5,717,844
- --------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC &
OTHER)-0.66%
Agouron Pharmaceuticals, Inc.(a) 6,500 381,875
- --------------------------------------------------------------
Alpharma, Inc.-Class A 30,100 1,062,906
- --------------------------------------------------------------
MedImmune, Inc.(a) 3,700 367,919
- --------------------------------------------------------------
Parexel International Corp.(a) 7,100 177,500
- --------------------------------------------------------------
Roberts Pharmaceutical Corp.(a) 10,500 228,375
- --------------------------------------------------------------
2,218,575
- --------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR
PHARMACEUTICALS)-3.27%
Astra A.B.-ADR (Sweden) 110,000 2,275,625
- --------------------------------------------------------------
Glaxo Wellcome PLC (United Kingdom) 20,000 1,390,000
- --------------------------------------------------------------
Merck & Co., Inc. 10,400 1,535,950
- --------------------------------------------------------------
Novartis A.G.-ADR (Switzerland) 26,666 2,621,014
- --------------------------------------------------------------
Novo-Nordisk A.S.-ADR (Denmark) 20,000 1,330,000
- --------------------------------------------------------------
Schering-Plough Corp. 33,000 1,823,250
- --------------------------------------------------------------
10,975,839
- --------------------------------------------------------------
HEALTH CARE (MANAGED CARE)-0.31%
Express Scripts, Inc.-Class A(a) 15,600 1,047,150
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-1.01%
Biomatrix, Inc.(a) 5,800 $ 337,850
- --------------------------------------------------------------
Biomet, Inc. 19,500 784,875
- --------------------------------------------------------------
MiniMed, Inc.(a) 3,600 377,100
- --------------------------------------------------------------
ResMed, Inc.(a) 14,400 653,400
- --------------------------------------------------------------
Theragenics Corp.(a) 41,500 697,719
- --------------------------------------------------------------
VISX, Inc.(a) 3,400 297,287
- --------------------------------------------------------------
West Co, Inc. (The) 6,800 242,675
- --------------------------------------------------------------
3,390,906
- --------------------------------------------------------------
HEALTH CARE (SPECIALIZED
SERVICES)-0.35%
Covance, Inc.(a) 18,600 541,725
- --------------------------------------------------------------
Hanger Orthopedic Group, Inc.(a) 15,700 353,250
- --------------------------------------------------------------
Hooper Holmes, Inc. 9,600 278,400
- --------------------------------------------------------------
1,173,375
- --------------------------------------------------------------
HOMEBUILDING-0.52%
M.D.C. Holdings, Inc. 19,700 421,088
- --------------------------------------------------------------
NVR Inc.(a) 16,700 796,381
- --------------------------------------------------------------
Pulte Corp. 8,500 236,406
- --------------------------------------------------------------
U.S. Home Corp.(a) 9,000 299,250
- --------------------------------------------------------------
1,753,125
- --------------------------------------------------------------
HOUSEHOLD FURNITURE &
APPLIANCES-0.31%
Furniture Brands International,
Inc.(a) 14,300 389,675
- --------------------------------------------------------------
Whirlpool Corp. 11,500 636,812
- --------------------------------------------------------------
1,026,487
- --------------------------------------------------------------
HOUSEHOLD PRODUCTS
(NON-DURABLES)-0.29%
Kimberly-Clark Corp. 18,000 981,000
- --------------------------------------------------------------
INSURANCE (LIFE/HEALTH)-0.67%
Delphi Financial Group, Inc. 10,852 569,052
- --------------------------------------------------------------
ING Groep N.V.-ADR (Netherlands) 21,000 1,305,937
- --------------------------------------------------------------
Presidential Life Corp. 18,900 375,637
- --------------------------------------------------------------
2,250,626
- --------------------------------------------------------------
INSURANCE (MULTI-LINE)-0.40%
American International Group, Inc. 7,837 757,250
- --------------------------------------------------------------
Century Business Services, Inc.(a) 18,200 261,625
- --------------------------------------------------------------
FBL Financial Group, Inc. 13,400 324,950
- --------------------------------------------------------------
1,343,825
- --------------------------------------------------------------
INSURANCE (PROPERTY-CASUALTY)-0.98%
Fidelity National Financial, Inc. 11,220 342,210
- --------------------------------------------------------------
First American Financial Corp.
(The) 17,200 552,550
- --------------------------------------------------------------
LandAmerica Financial Group, Inc. 14,800 826,025
- --------------------------------------------------------------
Old Republic International Corp. 23,000 517,500
- --------------------------------------------------------------
Orion Capital Corp. 26,000 1,035,125
- --------------------------------------------------------------
3,273,410
- --------------------------------------------------------------
</TABLE>
9
<PAGE> 12
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
INSURANCE BROKERS-0.34%
Marsh & McLennan Co. 12,075 $ 705,633
- --------------------------------------------------------------
Poe & Brown, Inc. 12,300 429,731
- --------------------------------------------------------------
1,135,364
- --------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE-0.06%
Advest Group, Inc. 10,800 199,800
- --------------------------------------------------------------
IRON & STEEL-0.69%
AK Steel Holding Corp. 40,700 956,450
- --------------------------------------------------------------
Nucor Corp. 17,000 735,250
- --------------------------------------------------------------
Texas Industries, Inc. 23,000 619,562
- --------------------------------------------------------------
2,311,262
- --------------------------------------------------------------
LEISURE TIME (PRODUCTS)-1.07%
Bally Total Fitness Holding
Corp.(a) 11,600 288,550
- --------------------------------------------------------------
International Speedway Corp.-Class
A 13,100 530,550
- --------------------------------------------------------------
Mattel, Inc. 30,900 704,906
- --------------------------------------------------------------
Nintendo Co. Ltd.-ADR (Japan) 170,000 2,053,481
- --------------------------------------------------------------
3,577,487
- --------------------------------------------------------------
LODGING-HOTELS-0.73%
Crestline Capital Corp.(a) 16,110 235,609
- --------------------------------------------------------------
Host Marriott Corp. 161,100 2,225,194
- --------------------------------------------------------------
2,460,803
- --------------------------------------------------------------
MACHINERY (DIVERSIFIED)-0.76%
Applied Power, Inc.-Class A 15,400 581,350
- --------------------------------------------------------------
Dover Corp. 19,700 721,512
- --------------------------------------------------------------
Manitiwoc Co., Inc. (The) 14,850 658,969
- --------------------------------------------------------------
NACCO Industries, Inc.-Class A 3,000 276,000
- --------------------------------------------------------------
Terex Corp.(a) 11,100 317,044
- --------------------------------------------------------------
2,554,875
- --------------------------------------------------------------
MANUFACTURING (DIVERSIFIED)-2.07%
Carlisle Companies, Inc. 8,800 454,300
- --------------------------------------------------------------
GenCorp, Inc. 17,200 428,925
- --------------------------------------------------------------
Hitachi Ltd.-ADR (Japan) 18,000 1,087,875
- --------------------------------------------------------------
IDEX Corp. 13,300 325,850
- --------------------------------------------------------------
Illinois Tool Works Inc. 9,000 522,000
- --------------------------------------------------------------
Norsk Hydro A.S.A.-ADR (Norway) 30,000 1,025,625
- --------------------------------------------------------------
RWE A.G.-ADR (Germany) 32,000 1,753,206
- --------------------------------------------------------------
Textron, Inc. 10,700 812,531
- --------------------------------------------------------------
Tredegar Industries, Inc. 24,550 552,375
- --------------------------------------------------------------
6,962,687
- --------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-1.07%
AptarGroup, Inc. 29,200 819,425
- --------------------------------------------------------------
Federal Signal Corp. 32,300 884,213
- --------------------------------------------------------------
Insituform Technologies, Inc.-Class
A(a) 22,500 326,250
- --------------------------------------------------------------
Superior TeleCom Inc. 12,100 571,725
- --------------------------------------------------------------
York International Corp. 24,600 1,003,988
- --------------------------------------------------------------
3,605,601
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
METAL FABRICATORS-0.06%
Metals USA(a) 19,100 $ 186,225
- --------------------------------------------------------------
METALS MINING-0.44%
Rio Tinto Ltd.-ADR (Australia) 31,000 1,472,078
- --------------------------------------------------------------
NATURAL GAS-0.30%
Energen Corp. 33,000 643,500
- --------------------------------------------------------------
ONEOK, Inc. 10,200 368,475
- --------------------------------------------------------------
1,011,975
- --------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES-0.65%
Knoll, Inc.(a) 16,100 476,963
- --------------------------------------------------------------
Mail-Well, Inc.(a) 22,700 259,631
- --------------------------------------------------------------
Pitney Bowes, Inc. 14,000 924,875
- --------------------------------------------------------------
United Stationers, Inc.(a) 20,000 520,000
- --------------------------------------------------------------
2,181,469
- --------------------------------------------------------------
OIL & GAS (DRILLING &
EQUIPMENT)-0.28%
Marine Drilling Companies, Inc.(a) 21,400 164,512
- --------------------------------------------------------------
Pride International, Inc.(a) 36,300 256,369
- --------------------------------------------------------------
SEACOR Holdings Inc.(a) 5,600 276,850
- --------------------------------------------------------------
Veritas DGC, Inc.(a) 18,500 240,500
- --------------------------------------------------------------
938,231
- --------------------------------------------------------------
OIL & GAS (EXPLORATION &
PRODUCTION)-0.37%
Barrett Resources Corp.(a) 22,800 547,200
- --------------------------------------------------------------
Basin Exploration, Inc.(a) 15,300 192,206
- --------------------------------------------------------------
Evergreen Resources, Inc.(a) 11,500 204,125
- --------------------------------------------------------------
HS Resources, Inc.(a) 38,600 291,913
- --------------------------------------------------------------
1,235,444
- --------------------------------------------------------------
OIL (DOMESTIC INTEGRATED)-0.18%
Atlantic Richfield Co. 9,000 587,250
- --------------------------------------------------------------
OIL (INTERNATIONAL
INTEGRATED)-2.77%
Amoco Corp. 14,000 845,250
- --------------------------------------------------------------
Exxon Corp. 17,400 1,272,375
- --------------------------------------------------------------
Repsol S.A.-ADR (Spain) 48,000 2,622,000
- --------------------------------------------------------------
Royal Dutch Petroleum Co.-New York
Shares (Netherlands) 16,100 770,787
- --------------------------------------------------------------
Shell Transport & Trading Co.-ADR
(United Kingdom) 45,000 1,673,438
- --------------------------------------------------------------
Total S.A.-ADR (France) 20,000 995,000
- --------------------------------------------------------------
YPF Sociedad Anonima-ADR
(Argentina) 40,000 1,117,500
- --------------------------------------------------------------
9,296,350
- --------------------------------------------------------------
OIL & GAS (REFINING &
MARKETING)-0.13%
Tesoro Petroleum Corp.(a) 34,700 420,737
- --------------------------------------------------------------
PHOTOGRAPHY/IMAGING-1.02%
Fuji Photo Film-ADR (Japan) 60,000 2,197,500
- --------------------------------------------------------------
Xerox Corp. 10,500 1,239,000
- --------------------------------------------------------------
3,436,500
- --------------------------------------------------------------
</TABLE>
10
<PAGE> 13
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
PUBLISHING (NEWSPAPERS)-0.94%
Gannett Co., Inc. 11,600 $ 767,775
- --------------------------------------------------------------
Hollinger International, Inc. 31,800 443,213
- --------------------------------------------------------------
McClatchy Newspapers, Inc. 17,300 611,988
- --------------------------------------------------------------
News Corp. Ltd.-ADR (The)
(Australia) 50,000 1,321,875
- --------------------------------------------------------------
3,144,851
- --------------------------------------------------------------
RAILROADS-0.32%
GATX Corp. 19,000 719,625
- --------------------------------------------------------------
Johnstown America Industries,
Inc.(a) 26,400 346,500
- --------------------------------------------------------------
1,066,125
- --------------------------------------------------------------
REAL ESTATE INVESTMENT
TRUSTS-25.22%
Apartment Investment & Management
Co. 24,400 907,375
- --------------------------------------------------------------
Arden Realty Group, Inc. 114,000 2,643,375
- --------------------------------------------------------------
Avalonbay Communities, Inc. 51,300 1,757,025
- --------------------------------------------------------------
Beacon Capital(a) 60,000 952,500
- --------------------------------------------------------------
Bedford Property Investors, Inc. 97,500 1,645,313
- --------------------------------------------------------------
Camden Property Trust 54,589 1,419,314
- --------------------------------------------------------------
CarrAmerica Realty Corp. 138,000 3,312,000
- --------------------------------------------------------------
CBL & Associates Properties, Inc. 75,000 1,935,938
- --------------------------------------------------------------
Charles E. Smith Residential
Realty, Inc. 58,400 1,876,100
- --------------------------------------------------------------
Crescent Real Estate Equities, Co. 59,000 1,357,000
- --------------------------------------------------------------
CRIIMI MAE, Inc. 40,000 140,000
- --------------------------------------------------------------
Eastgroup Properties, Inc. 39,400 726,438
- --------------------------------------------------------------
Equity Office Properties Trust 124,879 2,997,096
- --------------------------------------------------------------
Equity Residential Properties Trust 79,900 3,230,956
- --------------------------------------------------------------
Essex Property Trust, Inc. 76,700 2,281,825
- --------------------------------------------------------------
First Industrial Realty Trust, Inc. 80,500 2,158,406
- --------------------------------------------------------------
Gables Residential Trust 60,100 1,393,569
- --------------------------------------------------------------
General Growth Properties 28,500 1,079,438
- --------------------------------------------------------------
Glenborough Realty Trust, Inc. 62,800 1,279,550
- --------------------------------------------------------------
Highwoods Properties, Inc. 113,800 2,930,350
- --------------------------------------------------------------
Hospitality Properties Trust 60,700 1,464,388
- --------------------------------------------------------------
JDN Realty Corp. 72,000 1,552,500
- --------------------------------------------------------------
Kilroy Realty Corp. 60,700 1,396,100
- --------------------------------------------------------------
Kimco Realty Corp. 40,600 1,611,313
- --------------------------------------------------------------
Koger Equity, Inc. 87,900 1,510,781
- --------------------------------------------------------------
Liberty Property Trust 117,700 2,898,363
- --------------------------------------------------------------
Mack-Cali Realty Corp. 64,200 1,982,175
- --------------------------------------------------------------
Meditrust Corp. 172,900 2,615,112
- --------------------------------------------------------------
MeriStar Hospitality Corp. 110,259 2,046,683
- --------------------------------------------------------------
MGI Properties, Inc. 46,000 1,285,125
- --------------------------------------------------------------
New Plan Excel Realty Trust 95,060 2,109,144
- --------------------------------------------------------------
Pan Pacific Retail Properties, Inc. 35,300 703,794
- --------------------------------------------------------------
Parkway Properties, Inc. 24,900 778,125
- --------------------------------------------------------------
Patriot American Hospitality, Inc. 407,128 2,442,768
- --------------------------------------------------------------
Philips International Realty Corp. 52,400 805,650
- --------------------------------------------------------------
Post Properties, Inc. 22,600 868,687
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
REAL ESTATE INVESTMENT TRUSTS-(CONTINUED)
Prentiss Properties Trust 147,700 $ 3,295,556
- --------------------------------------------------------------
Prime Group Realty Trust 65,500 990,687
- --------------------------------------------------------------
Public Storage, Inc. 97,600 2,641,300
- --------------------------------------------------------------
Realty Income Corp. 36,000 895,500
- --------------------------------------------------------------
Regency Realty Corp. 70,000 1,557,500
- --------------------------------------------------------------
Security Capital U.S. Realty
(Luxembourg)(a) 98,700 977,130
- --------------------------------------------------------------
Shurgard Storage Centers, Inc. 87,700 2,263,756
- --------------------------------------------------------------
Simon Property Group, Inc. 63,600 1,812,600
- --------------------------------------------------------------
SL Green Realty Corp. 65,600 1,418,600
- --------------------------------------------------------------
Starwood Hotels & Resorts 67,150 1,523,466
- --------------------------------------------------------------
Sunstone Hotel Investors, Inc. 135,900 1,282,556
- --------------------------------------------------------------
TriNet Corporate Realty Trust, Inc. 49,900 1,334,825
- --------------------------------------------------------------
Vornado Realty Trust 56,600 1,910,250
- --------------------------------------------------------------
Weeks Corp. 25,600 721,600
- --------------------------------------------------------------
84,719,602
- --------------------------------------------------------------
RESTAURANTS-0.84%
Brinker International, Inc.(a) 27,400 791,175
- --------------------------------------------------------------
Buffets, Inc.(a) 27,900 333,056
- --------------------------------------------------------------
Cheesecake Factory (The)(a) 14,400 427,050
- --------------------------------------------------------------
Consolidated Products, Inc.(a) 20,156 415,723
- --------------------------------------------------------------
McDonald's Corp. 11,300 865,862
- --------------------------------------------------------------
2,832,866
- --------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-0.57%
Lowe's Companies, Inc. 17,000 870,187
- --------------------------------------------------------------
Sherwin-Williams Co. 35,800 1,051,625
- --------------------------------------------------------------
1,921,812
- --------------------------------------------------------------
RETAIL (DEPARTMENT STORES)-0.20%
J.C. Penney Co., Inc. 14,375 673,828
- --------------------------------------------------------------
RETAIL (DISCOUNTERS)-0.15%
ShopKo Stores, Inc.(a) 15,400 512,050
- --------------------------------------------------------------
RETAIL (DRUG STORES)-0.41%
Rite Aid Corp. 27,900 1,382,794
- --------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE)-0.26%
Wal-Mart Stores, Inc. 10,500 855,094
- --------------------------------------------------------------
RETAIL (HOME SHOPPING)-0.10%
Lands' End, Inc.(a) 11,800 317,862
- --------------------------------------------------------------
RETAIL (SPECIALTY)-0.40%
Footstar, Inc.(a) 15,400 385,000
- --------------------------------------------------------------
Inacom Corp.(a) 21,500 319,813
- --------------------------------------------------------------
Zale Corp.(a) 20,300 654,675
- --------------------------------------------------------------
1,359,488
- --------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL)-0.44%
American Eagle Outfitters, Inc.(a) 5,400 359,775
- --------------------------------------------------------------
Cato Corp. (The)-Class A 25,700 252,984
- --------------------------------------------------------------
</TABLE>
11
<PAGE> 14
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (SPECIALTY-APPAREL)-(CONTINUED)
Limited, Inc. (The) 30,000 $ 873,750
- --------------------------------------------------------------
1,486,509
- --------------------------------------------------------------
SAVINGS & LOAN COMPANIES-0.87%
Anchor Bancorp Wisconsin, Inc. 10,100 242,400
- --------------------------------------------------------------
Astoria Financial Corp. 7,700 352,275
- --------------------------------------------------------------
Downey Financial Corp. 20,705 526,683
- --------------------------------------------------------------
FirstFed Financial Corp.(a) 33,400 597,025
- --------------------------------------------------------------
TR Financial Corp. 15,900 626,063
- --------------------------------------------------------------
Webster Financial Corp. 13,600 373,150
- --------------------------------------------------------------
WSFS Financial Corp. 12,700 214,312
- --------------------------------------------------------------
2,931,908
- --------------------------------------------------------------
SERVICES
(ADVERTISING/MARKETING)-0.49%
Acxiom Corp.(a) 25,400 787,400
- --------------------------------------------------------------
Metris Companies Inc. 8,643 434,851
- --------------------------------------------------------------
True North Communications, Inc. 16,100 432,687
- --------------------------------------------------------------
1,654,938
- --------------------------------------------------------------
SERVICES (COMMERCIAL &
CONSUMER)-0.75%
Comfort Systems USA, Inc.(a) 29,900 534,463
- --------------------------------------------------------------
Copart, Inc.(a) 9,800 317,275
- --------------------------------------------------------------
DeVry, Inc.(a) 43,000 1,316,875
- --------------------------------------------------------------
Sylvan Learning Systems, Inc.(a) 11,200 341,600
- --------------------------------------------------------------
2,510,213
- --------------------------------------------------------------
SERVICES (COMPUTER SYSTEMS)-0.24%
Banctec, Inc.(a) 21,800 273,863
- --------------------------------------------------------------
Gerber Scientific, Inc. 22,900 545,306
- --------------------------------------------------------------
819,169
- --------------------------------------------------------------
SERVICES (DATA PROCESSING)-0.52%
Computer Horizons Corp.(a) 7,900 210,338
- --------------------------------------------------------------
Lason Holdings, Inc.(a) 14,100 820,444
- --------------------------------------------------------------
MedQuist, Inc.(a) 18,200 718,900
- --------------------------------------------------------------
1,749,682
- --------------------------------------------------------------
SERVICES (EMPLOYMENT)-0.65%
AHL Services, Inc.(a) 8,700 271,875
- --------------------------------------------------------------
Labor Ready, Inc.(a) 18,000 354,375
- --------------------------------------------------------------
Norrell Corp. 20,800 306,800
- --------------------------------------------------------------
ProBusiness Services, Inc.(a) 2,300 104,650
- --------------------------------------------------------------
Romac International, Inc.(a) 27,000 600,750
- --------------------------------------------------------------
StaffMark, Inc.(a) 11,100 248,362
- --------------------------------------------------------------
Syntel, Inc.(a) 26,600 300,913
- --------------------------------------------------------------
2,187,725
- --------------------------------------------------------------
SPECIALTY PRINTING-0.81%
Consolidated Graphics, Inc.(a) 3,300 222,956
- --------------------------------------------------------------
Dai Nippon Printing Co., Ltd.-ADR
(Japan) 9,000 1,437,809
- --------------------------------------------------------------
Deluxe Corp. 28,900 1,056,656
- --------------------------------------------------------------
2,717,421
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TELECOMMUNICATIONS (CELLULAR/
WIRELESS)-0.36%
Centennial Cellular Corp.(a) 18,900 $ 774,900
- --------------------------------------------------------------
Metromedia Fiber Network, Inc.(a) 13,200 442,200
- --------------------------------------------------------------
1,217,100
- --------------------------------------------------------------
TELECOMMUNICATIONS (LONG
DISTANCE)-0.20%
ITC DeltaCom, Inc.(a) 22,500 343,125
- --------------------------------------------------------------
Pacific Gateway Exchange, Inc.(a) 6,700 322,019
- --------------------------------------------------------------
665,144
- --------------------------------------------------------------
TELEPHONE-3.10%
Bell Atlantic Corp. 10,000 568,125
- --------------------------------------------------------------
British Telecommunications PLC
(United Kingdom) 15,000 2,275,313
- --------------------------------------------------------------
Century Telephone Enterprises, Inc. 16,000 1,080,000
- --------------------------------------------------------------
GeoTel Communications Corp.(a) 10,400 387,400
- --------------------------------------------------------------
Portugal Telecom S.A.-ADR
(Portugal) 43,300 1,932,262
- --------------------------------------------------------------
Telecom Italia S.p.A.-ADR (Italy) 30,000 2,610,000
- --------------------------------------------------------------
Telefonica S.A.-ADR (Spain) 6,120 828,495
- --------------------------------------------------------------
Telefonos de Mexico S.A.-ADR
(Mexico) 15,000 730,312
- --------------------------------------------------------------
10,411,907
- --------------------------------------------------------------
TEXTILES (APPAREL)-0.18%
Kellwood Co. 23,800 595,000
- --------------------------------------------------------------
TEXTILES (HOME FURNISHINGS)-0.28%
Interface, Inc. 30,800 285,862
- --------------------------------------------------------------
Springs Industries, Inc.-Class A 15,600 646,425
- --------------------------------------------------------------
932,287
- --------------------------------------------------------------
TEXTILES (SPECIALTY)-0.22%
Burlington Industries, Inc.(a) 52,700 579,700
- --------------------------------------------------------------
Galey & Lord, Inc.(a) 19,200 165,600
- --------------------------------------------------------------
745,300
- --------------------------------------------------------------
TOBACCO-0.34%
Philip Morris Companies, Inc. 21,450 1,147,575
- --------------------------------------------------------------
TRUCKERS-0.22%
Roadway Express, Inc. 22,700 327,731
- --------------------------------------------------------------
Werner Enterprises, Inc. 22,875 404,602
- --------------------------------------------------------------
732,333
- --------------------------------------------------------------
WATER UTILITIES-0.07%
E'Town Corp. 5,100 241,613
- --------------------------------------------------------------
Total Common Stocks (Cost
$273,747,418) 321,189,107
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
CORPORATE BONDS & NOTES-1.54%
BROADCASTING (TELEVISION, RADIO &
CABLE)-0.15%
CSC Holdings, Inc., Sr. Notes,
7.25%, 07/15/08 $ 500,000 $ 515,900
- --------------------------------------------------------------
</TABLE>
12
<PAGE> 15
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
BUILDING MATERIALS-0.18%
USG Corp., Sr. Notes, 8.50%,
08/01/05 $ 550,000 $ 600,363
- --------------------------------------------------------------
CONTAINERS (METAL & GLASS)-0.15%
Owens-Illinois, Inc., Deb., 7.80%,
05/15/18 500,000 506,675
- --------------------------------------------------------------
MANUFACTURING (DIVERSIFIED)-0.17%
Tyco International Group S.A.,
Yankee Bonds, 7.00%, 06/15/28 550,000 554,119
- --------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS-0.18%
Highwoods Properties, Sr. Unsec.
Notes, 7.50%, 04/15/18 700,000 619,360
- --------------------------------------------------------------
RETAIL (DEPARTMENT STORES)-0.15%
Neiman Marcus Group, Inc., Sr.
Deb., 7.125%, 06/01/28 500,000 486,050
- --------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/
WIRELESS)-0.30%
Bellsouth Telecommunications, Deb.,
5.85%, 11/15/45 1,000,000 1,012,690
- --------------------------------------------------------------
TELEPHONE-0.26%
GTE Corp., Deb., 10.25%, 11/01/20 790,000 885,149
- --------------------------------------------------------------
Total Corporate Bonds & Notes
(Cost $5,180,748) 5,180,306
- --------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES-1.26%
FEDERAL HOME LOAN MORTGAGE CORP.
("FHLMC")-0.36%
Pass Through Certificates
6.50%, 08/01/03 218,613 226,741
- --------------------------------------------------------------
9.00%, 01/01/05 to 08/15/06 696,417 725,967
- --------------------------------------------------------------
8.00%, 08/01/17 244,872 258,722
- --------------------------------------------------------------
1,211,430
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
FEDERAL NATIONAL MORTGAGE
ASSOCIATION ("FNMA")-0.73%
Pass Through Certificates
9.00%, 12/01/06 $ 590,033 $ 619,346
- --------------------------------------------------------------
8.50%, 06/01/07 579,905 598,931
- --------------------------------------------------------------
5.50%, 02/01/14 410,000 395,266
- --------------------------------------------------------------
7.00%, 01/14/28 830,000 846,859
- --------------------------------------------------------------
2,460,402
- --------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION ("GNMA")-0.17%
Pass Through Certificates
7.00%, 01/16/07 570,096 573,251
- --------------------------------------------------------------
Total U.S. Government Agency
Securities (Cost $4,244,008) 4,245,083
- --------------------------------------------------------------
U.S. TREASURY SECURITIES-1.99%
U.S. TREASURY BOND-0.21%
7.50%, 11/15/16 580,000 720,650
- --------------------------------------------------------------
U.S. TREASURY NOTES-1.78%
7.50%, 11/15/01 3,000,000 3,224,490
- --------------------------------------------------------------
6.25%, 02/15/07 2,500,000 2,741,950
- --------------------------------------------------------------
5,966,440
- --------------------------------------------------------------
Total U.S. Treasury Securities
(Cost $6,646,242) 6,687,090
- --------------------------------------------------------------
REPURCHASE AGREEMENT(b)-0.87%
SBC Warburg Dillon Read, Inc.,
4.75%, 01/04/99(c) (Cost
$2,913,509) 2,913,509 2,913,509
- --------------------------------------------------------------
TOTAL INVESTMENTS-101.29% 340,215,095
- --------------------------------------------------------------
LIABILITIES LESS OTHER
ASSETS-(1.29%) (4,325,554)
- --------------------------------------------------------------
NET ASSETS-100.00% $335,889,541
==============================================================
</TABLE>
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value is at least 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(c) Joint repurchase agreement entered into 12/31/98 with a maturing value of
$1,000,527,778. Collateralized by $2,207,068,000 U.S. Government
obligations, 0% to 6.75% due 06/30/99 to 11/15/21 with an aggregate market
value at 12/31/98 of $1,020,001,079.
Abbreviations:
ADR - American Depositary Receipt
Deb. - Debentures
Gtd. - Guaranteed
Sr. - Senior
Sub. - Subordinated
Unsec. - Unsecured
See Notes to Financial Statements.
13
<PAGE> 16
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$292,731,925) $340,215,095
- ---------------------------------------------------------
Receivables for:
Capital stock sold 369,339
- ---------------------------------------------------------
Interest and dividends 1,589,287
- ---------------------------------------------------------
Paydowns 35,226
- ---------------------------------------------------------
Investment for deferred compensation plan 6,914
- ---------------------------------------------------------
Other assets 4,610
- ---------------------------------------------------------
Total assets 342,220,471
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 2,732,192
- ---------------------------------------------------------
Capital stock reacquired 2,506,522
- ---------------------------------------------------------
Deferred compensation plan 6,914
- ---------------------------------------------------------
Accrued advisory fees 283,254
- ---------------------------------------------------------
Accrued operating services fees 43,477
- ---------------------------------------------------------
Accrued distribution fees 734,061
- ---------------------------------------------------------
Accrued directors' fees and expenses 24,510
- ---------------------------------------------------------
Total liabilities 6,330,930
- ---------------------------------------------------------
Net assets applicable to shares outstanding $335,889,541
- ---------------------------------------------------------
NET ASSETS:
Class A $ 16,485,231
=========================================================
Class B $ 7,221,683
=========================================================
Class C $312,182,627
=========================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Class A:
Authorized 100,000,000
- ---------------------------------------------------------
Outstanding 1,225,276
=========================================================
Class B:
Authorized 100,000,000
- ---------------------------------------------------------
Outstanding 535,931
=========================================================
Class C:
Authorized 100,000,000
- ---------------------------------------------------------
Outstanding 23,188,570
=========================================================
Class A:
Net asset value and redemption price per
share $ 13.45
- ---------------------------------------------------------
Offering price per share:
(Net asset value of $13.45
divided by 94.50%) $ 14.23
=========================================================
Class B:
Net asset value and offering price per
share $ 13.48
=========================================================
Class C:
Net asset value and offering price per
share $ 13.46
=========================================================
</TABLE>
See Notes to Financial Statements.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 3,810,775
- --------------------------------------------------------
Dividends (net of $278,923 foreign
withholding tax) 9,401,993
- --------------------------------------------------------
Total investment income 13,212,768
- --------------------------------------------------------
EXPENSES:
Advisory fees 3,855,357
- --------------------------------------------------------
Operating services fees 1,670,511
- --------------------------------------------------------
Distribution fees-Class A 54,320
- --------------------------------------------------------
Distribution fees-Class B 38,874
- --------------------------------------------------------
Distribution fees-Class C 3,661,284
- --------------------------------------------------------
Directors' fees and expenses 11,183
- --------------------------------------------------------
Total expenses 9,291,529
- --------------------------------------------------------
Less: Fees waived (666,698)
- --------------------------------------------------------
Net expenses 8,624,831
- --------------------------------------------------------
Net investment income 4,587,937
- --------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENT SECURITIES:
Net realized gain on sales of investment
securities 12,874,380
- --------------------------------------------------------
Net unrealized appreciation (depreciation)
of investment securities (22,961,634)
- --------------------------------------------------------
Net gain (loss) from investment
securities (10,087,254)
- --------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations $(5,499,317)
=========================================================
</TABLE>
14
<PAGE> 17
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 4,587,937 $ 3,030,247
- ------------------------------------------------------------------------------------------
Net realized gain on sales of investment securities 12,874,380 28,345,151
- ------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities (22,961,634) 24,205,999
- ------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations (5,499,317) 55,581,397
- ------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (307,700) (54,439)
- ------------------------------------------------------------------------------------------
Class B (57,949) --
- ------------------------------------------------------------------------------------------
Class C (3,942,359) (2,620,318)
- ------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on
investment securities:
Class A (674,979) (574,586)
- ------------------------------------------------------------------------------------------
Class B (277,833) --
- ------------------------------------------------------------------------------------------
Class C (12,255,976) (29,179,585)
- ------------------------------------------------------------------------------------------
Share transactions-net:
Class A 8,660,733 9,196,237
- ------------------------------------------------------------------------------------------
Class B 7,834,101 --
- ------------------------------------------------------------------------------------------
Class C (43,459,114) 86,678,096
- ------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (49,980,393) 119,026,802
- ------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 385,869,934 266,843,132
- ------------------------------------------------------------------------------------------
End of period $335,889,541 $385,869,934
==========================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $287,690,477 $313,154,757
- ------------------------------------------------------------------------------------------
Undistributed net investment income 759,557 479,628
- ------------------------------------------------------------------------------------------
Undistributed net realized gain on sales of investment
securities (43,663) 1,790,745
- ------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 47,483,170 70,444,804
- ------------------------------------------------------------------------------------------
$335,889,541 $385,869,934
==========================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Advisor MultiFlex Fund (the "Fund") is a series portfolio of AIM Advisor
Funds, Inc. (the "Company"). The Company is a Maryland corporation registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end series management investment company consisting of five diversified
portfolios. 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 a high total return on
investment through capital appreciation and current income, without regard to
federal income tax considerations.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amount of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses during the
reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies followed by the Fund
in the preparation of its financial statements.
A. Security Valuations-A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the mean between the closing bid and asked
prices on that day. Each security traded in the over-the-counter market (but
not including securities reported on the NASDAQ National Market System) is
valued at the mean between the last bid and
15
<PAGE> 18
asked prices based upon quotes furnished by market makers for such
securities. Each security reported on the NASDAQ National Market System is
valued at the last sales price on the valuation date, or absent a last sales
price, at the mean of the closing bid and asked prices. Debt obligations
(including convertible bonds) are valued on the basis of prices provided by
an independent pricing service. Prices provided by the pricing service may
be determined without exclusive reliance on quoted prices, and may reflect
appropriate factors such as yield, type of issue, coupon rate and maturity
date. Securities for which market prices are not provided by any of the
above methods are valued at the mean between last bid and asked prices based
upon quotes furnished by independent sources. Securities for which market
quotations are not readily available or are questionable are valued at fair
value as determined in good faith by or under the supervision of the
Company's Board of Directors. Investments with maturities of 60 days or less
are valued on the basis of amortized cost which approximates market value.
B. Securities Transactions, Investment Income and Distributions-Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date. Such dividends are
declared and paid quarterly. On December 31, 1998 additional paid-in capital
was increased by $1,500,000 and undistributed net realized gains was
decreased by $1,500,000 as a result of equalization credits and in order to
comply with the requirements of the American Institute of Certified Public
Accountants Statement of Position 93-2. Net assets of the Fund were
unaffected by the reclassifications discussed above.
C. Bond Premiums-It is the policy of the Fund not to amortize market premiums
on bonds for financial reporting purposes.
D. Federal Income Taxes-The Fund intends to comply with the requirements of the
Internal Revenue Code necessary to qualify as a regulated investment company
and, as such, will not be subject to federal income taxes on otherwise
taxable income (including net realized capital gains) which is distributed
to shareholders. Therefore, no provision for federal income taxes is
recorded in the financial statements.
E. Expenses-Distribution expenses directly attributable to a class of shares
are charged to that class' operations. All other expenses which are
attributable to more than one class are allocated among the classes.
NOTE 2-ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company 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 1.00% of
the Fund's average daily net assets. AIM has entered into a sub-advisory
agreement with INVESCO Management and Research, Inc. ("IMR") whereby AIM pays
IMR an annual rate of 0.35% of the Fund's average daily net assets up to $500
million and 0.25% on the Fund's average daily net assets in excess of $500
million.
The Company, pursuant to an operating services agreement with AIM, has agreed
to pay AIM an annual rate of 0.45% of the Fund's average daily net assets for
providing or arranging to provide accounting, legal (except litigation),
dividend disbursing, transfer agency, registrar, custodial, shareholder
reporting, sub-accounting and recordkeeping services and functions. This
agreement provides that AIM pays all fees and expenses associated with these and
other functions, including, but not limited to, registration fees, shareholder
meeting fees, and proxy statement and shareholder report expenses. During the
year ended December 31, 1998, AIM was paid $1,019,333 for such services. As of
June 1, 1998, AIM has voluntarily agreed to limit the operating services fees to
an annual rate of 0.45% of the first $50 million of the Fund's average daily net
assets and 0.10% of the Fund's average daily net assets in excess of $50
million. During the period June 1, 1998 through December 31, 1998, AIM
voluntarily waived operating services fees in the amount of $651,178.
The Company 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 Company has adopted
distribution plans pursuant to Rule 12b-1 under the 1940 Act with respect to the
Fund's Class A shares and Class C shares (the "Class A and C Plan"), and the
Fund's Class B shares (the "Class B Plan") (collectively, the "Plans"). The
Fund, pursuant to the Class A and C Plan, pays AIM Distributors compensation at
an annual rate of 0.35% of the average daily net assets attributable to the
Class A shares and 1.00% of the average daily net assets attributable to the
Class C shares. AIM Distributors has voluntarily agreed to limit the Class A
shares plan payments to 0.25% for three years beginning August 4, 1997. The Fund
pursuant to the Class B Plan, pays AIM Distributors compensation at an annual
rate of 1.00% of the average daily net assets attributable to the Class B
shares. Of these amounts, the Fund may pay a service fee of 0.25% of the average
daily net assets of the Class A, Class B or Class C shares to selected dealers
and financial institutions who furnish continuing personal shareholder services
to their customers who purchase and own the appropriate class of shares of the
Fund. Any amounts not paid as a service fee under the Plans would constitute an
asset-based sales charge. The Plans also impose a cap on the total sales
charges, including asset-based sales charges that may be paid by the respective
classes. During the year ended December 31, 1998, for the Class A and Class C
shares and the period March 3, 1998 (date sales commenced) through December 31,
1998 for the Class B shares, the Class A, Class B and Class C shares paid AIM
Distributors $38,800, $38,874 and $3,661,284, respectively, as compensation
under the Plans. During the year ended December 31, 1998, AIM Distributors
waived fees of $15,520 for the Class A shares.
AIM Distributors received commissions of $66,763 from sales of Class A shares
of the Fund during the year ended December 31, 1998. Such commissions are not an
expense to 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, 1998,
AIM Distributors received commissions of $86,385 in contingent deferred sales
charges imposed on redemptions of Fund shares. Certain officers and directors of
the Company are officers and directors of AIM, A I M Fund Services, Inc. and AIM
Distributors.
16
<PAGE> 19
The combined effect of the advisory agreements, operating services agreement
and the distribution plan for the Fund is to place a cap or ceiling on the total
annual expenses of the Fund, other than brokerage commissions, interest, taxes,
litigation, directors' fees and expenses, and other extraordinary expenses. AIM
has voluntarily agreed to adhere to maximum expense ratios for the Fund. To the
extent that the Fund exceeds the amounts, AIM or its affiliates will waive its
fees to reimburse the Fund to assure that the Fund's expenses do not exceed the
designated maximum amounts except for those items specifically identified above.
If, in any calendar quarter, the average net assets of the Fund are less than
$100 million, the Fund's expenses shall not exceed 1.80% for Class A and 2.45%
for Class C; on the next $400 million of net assets, expenses shall not exceed
1.75% for Class A and 2.40% for Class C; on the next $500 million, expenses
shall not exceed 1.70% for Class A and 2.35% for Class C; on the next $1 billion
of net assets, expenses shall not exceed 1.65% for Class A and 2.30% for Class
C; and on all assets over $2 billion, expenses shall not exceed 1.60% for Class
A and 2.25% for Class C.
During the year ended December 31, 1998, the Fund paid legal fees of $4,230
for services rendered by Kramer, Levin, Naftalis & Frankel as counsel to the
Company's directors. A member of that firm is a director of the Company.
NOTE 3-DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if so
elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
Prior to an amendment of the line of credit on May 1, 1998, the Fund was limited
to borrowing up to the lesser of (i) $500,000,000 or (ii) the limits set by its
prospectus for borrowings. During the year ended December 31, 1998, 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 0.05% on the unused balance of
the committed line. The commitment fee is allocated among the funds based on
their respective average net assets for the period.
NOTE 5-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, 1998 was
$270,515,961 and $291,512,781, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of December 31, 1998 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of
investment securities $ 72,943,595
- ------------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (25,503,273)
- ------------------------------------------------------------
Net unrealized appreciation of investment
securities $ 47,440,322
============================================================
Cost of investments for tax purposes is
$292,774,773.
</TABLE>
NOTE 6-CAPITAL STOCK
Changes in the Fund's capital stock outstanding for the years ended December 31,
1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1998 1997*
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
Sold:
Class A 898,890 $ 12,964,303 619,395 $ 8,916,997
- ------------------------------------------------------------------------------
Class B** 560,937 8,180,606 -- --
- ------------------------------------------------------------------------------
Class C 3,605,748 52,233,849 6,751,442 95,937,310
- ------------------------------------------------------------------------------
Issued as
reinvestment of
dividends:
Class A 73,100 958,674 44,119 616,050
- ------------------------------------------------------------------------------
Class B** 24,700 321,494 -- --
- ------------------------------------------------------------------------------
Class C 1,187,114 15,552,589 2,197,213 30,337,244
- ------------------------------------------------------------------------------
Reacquired:
Class A (384,926) (5,262,244) (25,302) (336,810)
- ------------------------------------------------------------------------------
Class B** (49,706) (667,999) -- --
- ------------------------------------------------------------------------------
Class C (8,111,162) (111,245,552) (2,756,585) (39,596,458)
- ------------------------------------------------------------------------------
(2,195,305) $ (26,964,280) 6,830,282 $ 95,874,333
==============================================================================
</TABLE>
* Shares have been restated to reflect a 4 for 1 stock split, effected in the
form of a 300% stock dividend, on November 7, 1997.
** Class B shares commenced sales on March 3, 1998.
17
<PAGE> 20
NOTE 7-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A capital stock
outstanding during each of the years in the two-year period ended December 31,
1998, for a share of Class B capital stock outstanding during the period March
3, 1998 (date sales commenced) through December 31, 1998 and for a share of
Class C capital stock outstanding during each of the years in the five-year
period ended December 31, 1998.
<TABLE>
<CAPTION>
CLASS A(a) CLASS B
----------------------- ------------
1998 1997(b) 1998
------- ------------ ------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 14.21 $ 13.14 $ 14.79
- ------------------------------------------------------------ ------- ------- -------
Income from investment operations:
Net investment income 0.24 0.23 0.14
- ------------------------------------------------------------ ------- ------- -------
Net gains (losses) on securities (both realized and
unrealized) (0.20) 2.26 (0.75)
- ------------------------------------------------------------ ------- ------- -------
Total from investment operations 0.04 2.49 (0.61)
- ------------------------------------------------------------ ------- ------- -------
Less distributions:
Dividends from net investment income (0.26) (0.22) (0.16)
- ------------------------------------------------------------ ------- ------- -------
Distributions from net realized gains (0.54) (1.20) (0.54)
- ------------------------------------------------------------ ------- ------- -------
Total distributions (0.80) (1.42) (0.70)
- ------------------------------------------------------------ ------- ------- -------
Net asset value, end of period $ 13.45 $ 14.21 $ 13.48
============================================================ ======= ======= =======
Total return(c) 0.51% 19.40% (3.96)%
============================================================ ======= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $16,485 $ 9,066 $ 7,222
============================================================ ======= ======= =======
Ratio of expenses to average net assets(d) 1.52%(e) 1.67% 2.27%(e)(f)
============================================================ ======= ======= =======
Ratio of net investment income to average net assets(g) 1.91%(e) 1.67% 1.16%(e)(f)
============================================================ ======= ======= =======
Portfolio turnover rate 72% 62% 72%
============================================================ ======= ======= =======
</TABLE>
(a) Per share information and shares have been restated to reflect a 4 for 1
stock split, effected in the form of a 300% stock dividend, on November 7,
1997.
(b) The Fund changed investment advisors on August 4, 1997.
(c) Does not deduct sales charges and are not annualized for periods less than
one year.
(d) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.79% and 1.77% for 1998-1997 for Class A and 2.44% (annualized) for 1998
for Class B.
(e) Ratios are based on average net assets of $15,519,872 and $4,667,498 for
Class A and Class B, respectively.
(f) Annualized.
(g) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 1.64% and 1.57% for 1998-1997 for Class A and 0.99%
(annualized) for 1998 for Class B.
<TABLE>
<CAPTION>
CLASS C(a)
-----------------------------------------------------
1998 1997(b) 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 14.22 $ 13.14 $ 11.68 $ 9.78 $ 10.04
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.17 0.13 0.14 0.16 0.16
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Net gains (losses) on securities (both realized and
unrealized) (0.23) 2.26 1.83 1.94 (0.26)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Total from investment operations (0.06) 2.39 1.97 2.10 (0.10)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.16) (0.11) (0.13) (0.16) (0.16)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Distributions from net realized gains (0.54) (1.20) (0.38) (0.04) --
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Total distributions (0.70) (1.31) (0.51) (0.20) (0.16)
- ------------------------------------------------------------ -------- -------- -------- -------- --------
Net asset value, end of period $ 13.46 $ 14.22 $ 13.14 $ 11.68 $ 9.78
============================================================ ======== ======== ======== ======== ========
Total return(c) (0.26)% 18.55% 17.03% 21.58% (1.02)%
============================================================ ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $312,183 $376,804 $266,843 $174,592 $120,220
============================================================ ======== ======== ======== ======== ========
Ratio of expenses to average net assets(d) 2.27%(e) 2.42% 2.45% 2.50% 2.49%
============================================================ ======== ======== ======== ======== ========
Ratio of net investment income to average net assets(f) 1.16%(e) 0.92% 1.16% 1.53% 2.01%
============================================================ ======== ======== ======== ======== ========
Portfolio turnover rate 72% 62% 62% 50% 81%
============================================================ ======== ======== ======== ======== ========
</TABLE>
(a) Per share information and shares have been restated to reflect a 4 for 1
stock split, effected in the form of a 300% stock dividend, on November 7,
1997.
(b) The Fund changed investment advisors on August 4, 1997.
(c) Does not deduct contingent deferred sales charges.
(d) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements was
2.44%.
(e) Ratios are based on average net assets of $366,128,391.
(f) After fee waivers and/or expense reimbursements. Ratio of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements was 0.99%.
18
<PAGE> 21
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of
AIM Advisor Multiflex Fund:
We have audited the accompanying statement of assets and
liabilities of AIM Advisor Multiflex Fund (a portfolio of
AIM Advisor Funds, Inc.), including the schedule of
investments, as of December 31, 1998, and the related
statement of operations, the statement of changes in net
assets, and the financial highlights for the year 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 audit. The accompanying statement of changes
in net assets for the year ended December 31, 1997 and
the financial highlights for each of the years in the
four-year period ended December 31, 1997, were audited by
other auditors whose report thereon dated February 5,
1998, expressed an unqualified opinion on such statement
and financial highlights.
We conducted our audit 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, 1998, 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 audit provides a reasonable basis for
our opinion.
In our opinion, the 1998 financial statements and
financial highlights referred to above present fairly, in
all material respects, the financial position of AIM
Advisor Multiflex Fund as of December 31, 1998, the
results of its operations, the changes in its net assets
and the financial highlights for the year then ended, in
conformity with generally accepted accounting principles.
KPMG LLP
Houston, Texas
February 5, 1999
19
<PAGE> 22
<TABLE>
<CAPTION>
BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
<S> <C> <C>
Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
Chairman Chairman Suite 100
A I M Management Group Inc. Houston, TX 77046
Robert H. Graham
Bruce L. Crockett President INVESTMENT ADVISOR
Director
ACE Limited; John J. Arthur A I M Advisors, Inc.
Formerly Director, President, and Senior Vice President and Treasurer 11 Greenway Plaza
Chief Executive Officer Suite 100
COMSAT Corporation Carol F. Relihan Houston, TX 77046
Senior Vice President and Secretary
Owen Daly II SUB-ADVISOR
Director Gary T. Crum
Cortland Trust Inc. Senior Vice President INVESCO Management & Research, Inc.
101 Federal Street
Edward K. Dunn Jr. Dana R. Sutton Boston, MA 02110
Chairman, Mercantile Mortgage Corp.; Vice President and Assistant Treasurer
Formerly Vice Chairman and President, TRANSFER AGENT
Mercantile-Safe Deposit & Trust Co.; and Robert G. Alley
President, Mercantile Bankshares Vice President A I M Fund Services, Inc.
P.O. Box 4739
Jack Fields Stuart W. Coco Houston, TX 77210-4739
Chief Executive Officer Vice President
Texana Global, Inc.; CUSTODIAN
Formerly Member Melville B. Cox
of the U.S. House of Representatives Vice President State Street Bank and Trust Company
225 Franklin Street
Carl Frischling Karen Dunn Kelley Boston, MA 02110
Partner Vice President
Kramer, Levin, Naftalis & Frankel COUNSEL TO THE FUND
Jonathan C. Schoolar
Robert H. Graham Vice President Ballard Spahr
President and Chief Executive Officer Andrews & Ingersoll, LLP
A I M Management Group Inc. Renee A. Friedli 1735 Market Street
Assistant Secretary Philadelphia, PA 19103
Prema Mathai-Davis
Chief Executive Officer, YWCA of the U.S.A.; P. Michelle Grace COUNSEL TO THE DIRECTORS
Commissioner, New York City Dept. for Assistant Secretary
the Aging; and member of the Board of Directors, Kramer, Levin, Naftalis & Frankel
Metropolitan Transportation Authority of Jeffrey H. Kupor 919 Third Avenue
New York State Assistant Secretary New York, NY 10022
Lewis F. Pennock Nancy L. Martin DISTRIBUTOR
Attorney Assistant Secretary
A I M Distributors, Inc.
Ian W. Robinson Ofelia M. Mayo 11 Greenway Plaza
Consultant; Formerly Executive Assistant Secretary Suite 100
Vice President and Houston, TX 77046
Chief Financial Officer Lisa A. Moss
Bell Atlantic Management Assistant Secretary AUDITORS
Services, Inc.
Kathleen J. Pflueger KPMG LLP
Louis S. Sklar Assistant Secretary 700 Louisiana
Executive Vice President Houston, TX 77002
Hines Interests Samuel D. Sirko
Limited Partnership Assistant Secretary
Stephen I. Winer
Assistant Secretary
Mary J. Benson
Assistant Treasurer
</TABLE>
REQUIRED FEDERAL INCOME TAX INFORMATION
AIM MultiFlex Class A, Class B and Class C shares paid ordinary dividends in the
amount of $0.2975, $0.1915 and $0.1915 per share, respectively, to shareholders
during the Fund's tax year ended December 31, 1998. Of this amount 42.50% is
eligible for the dividends received deduction for corporations.
The Fund also distributed long-term capital gains of $13,890,332 for the
Fund's tax year ended December 31, 1998. Of long-term capital gains distributed,
100% is 20% rate gain.
REQUIRED STATE INCOME TAX INFORMATION
Of the total ordinary dividends paid, 7.40% was derived from U.S. Treasury
obligations.
20
<PAGE> 23
HOW AIM MAKES INVESTING
EASY FOR YOU
o LOW INITIAL INVESTMENT. You can get your investment program started for as
little as $500. Subsequent investments can be made for only $50.
o AUTOMATIC REINVESTMENT OF DIVIDENDS AND/OR CAPITAL GAINS. Distributions may
be received in cash or reinvested in the Fund free of charge. Over time, the
power of compounding can significantly increase the value of your assets.
o AUTOMATIC INVESTMENT PLAN. You may build your investment by regularly
purchasing additional shares. Pre-authorized checks for $50 or more can be
drafted monthly from your personal checking account.
o EASY ACCESS TO YOUR MONEY. Your shares may be redeemed at net asset value
any day the New York Stock Exchange is open. The price of shares sold may be
more or less than their original cost, depending on market conditions.
o SYSTEMATIC WITHDRAWAL PLAN. You may elect to receive checks of at least $50
monthly or quarterly through a systematic withdrawal plan.
o EXCHANGE PRIVILEGE. As your goals change, you may exchange all or part of
your assets for those of other funds within the same share class of The AIM
Family of Funds--Registered Trademark--. The exchange privilege may be
modified or discontinued for any of the AIM funds. Certain restrictions
apply.
o RETIREMENT PLANS. You may purchase shares of an AIM fund for your Individual
Retirement Account (IRA), Roth IRA, or any other type of retirement plan,
and earn tax-deferred dollars for your retirement.
o TOLL-FREE ACCESS. Current shareholders can call our AIM Investor Line at
800-246-5463 for 24-hour-a-day account information. Or, of course, you may
contact your financial consultant for assistance.
o www.aimfunds.com. As a current shareholder, you can check account balances
24 hours a day over the Internet. State-of-the-art encryption lets you send
us questions that include confidential information without the fear of
eavesdropping, tampering, or forgery.
------------------------------------
Current shareholders
can call our
AIM Investor Line at
800-246-5463
for 24-hour-a-day
account information.
------------------------------------
<PAGE> 24
THE AIM FAMILY OF FUNDS--Registered Trademark--
<TABLE>
<CAPTION>
GROWTH FUNDS MONEY MARKET FUNDS
<S> <C> <C>
AIM Aggressive Growth Fund(1) AIM Money Market Fund A I M Management Group Inc. has provided
AIM Blue Chip Fund AIM Tax-Exempt Cash Fund leadership in the mutual fund industry
AIM Capital Development Fund since 1976 and managed approximately
AIM Constellation Fund INTERNATIONAL GROWTH FUNDS $109 billion in assets for more than 6.2
AIM Mid Cap Equity Fund(2), (A) million shareholders, including individual
AIM Select Growth Fund(3) AIM Advisor International Value Fund investors, corporate clients, and
AIM Small Cap Growth Fund(2), (B) AIM Asian Growth Fund financial institutions, as of December 31, 1998.
AIM Small Cap Opportunities Fund AIM Developing Markets Fund(2) The AIM Family of Funds--Registered Trademark--
AIM Value Fund AIM Europe Growth Fund(2) is distributed nationwide, and AIM today is the
AIM Weingarten Fund AIM European Development Fund 10th-largest mutual fund complex in the U.S. in
AIM International Equity Fund assets under management, according to Strategic
GROWTH & INCOME FUNDS AIM Japan Growth Fund(2) Insight, an independent mutual fund monitor.
AIM Latin American Growth Fund(2)
AIM Advisor Flex Fund AIM New Pacific Growth Fund(2)
AIM Advisor Large Cap Value Fund
AIM Advisor MultiFlex Fund GLOBAL GROWTH FUNDS
AIM Advisor Real Estate Fund
AIM Balanced Fund AIM Global Aggressive Growth Fund
AIM Basic Value Fund(2), (C) AIM Global Growth Fund
AIM Charter Fund
GLOBAL GROWTH & INCOME FUNDS
INCOME FUNDS
AIM Global Growth & Income Fund(2)
AIM Floating Rate Fund(2) AIM Global Utilities Fund
AIM High Yield Fund
AIM High Yield Fund II GLOBAL INCOME FUNDS
AIM Income Fund
AIM Intermediate Government Fund AIM Emerging Markets Debt Fund(2), (D)
AIM Limited Maturity Treasury Fund AIM Global Government Income Fund(2)
AIM Global Income Fund
TAX-FREE INCOME FUNDS AIM Strategic Income Fund(2)
AIM High Income Municipal Fund THEME FUNDS
AIM Municipal Bond Fund
AIM Tax-Exempt Bond Fund of Connecticut AIM Global Consumer Products and Services Fund(2)
AIM Tax-Free Intermediate Fund AIM Global Financial Services Fund(2)
AIM Global Health Care Fund(2)
AIM Global Infrastructure Fund(2)
AIM Global Resources Fund(2)
AIM Global Telecommunications Fund(2)
AIM Global Trends Fund(2), (E)
</TABLE>
(1) AIM Aggressive Growth Fund reopened to new investors November 16, 1998. (2)
Effective May 29, 1998, A I M Advisors, Inc. became advisor to the former GT
Global Funds. (3) On May 1, 1998, AIM Growth Fund was renamed AIM Select Growth
Fund. (A) On September 8, 1998, AIM Mid Cap Growth Fund was renamed AIM Mid Cap
Equity Fund. (B) On September 8, 1998, AIM Small Cap Equity Fund was renamed AIM
Small Cap Growth Fund. (C) On September 8, 1998, AIM America Value Fund was
renamed AIM Basic Value Fund. (D) On September 8, 1998, AIM Global High Income
Fund was renamed AIM Emerging Markets Debt Fund. (E) On September 8, 1998, AIM
New Dimension Fund was renamed AIM Global Trends Fund. For more complete
information about any AIM Fund(s), including sales charges and expenses, ask
your financial consultant or securities dealer for a free prospectus(es). Please
read the prospectus(es) carefully before you invest or send money.
