<PAGE> 1
[COVER IMAGE]
AIM ADVISOR FLEX FUND
[AIM LOGO APPEARS HERE] SEMIANNUAL REPORT JUNE 30 1999
INVEST WITH DISCIPLINE--Registered Trademark--
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(COVER IMAGE)
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THE CIRCUS BY GEORGES PIERRE SEURAT, 1859-1891, FRENCH
ONE OF FRENCH ARTIST GEORGES SEURAT'S MOST FAMOUS PAINTINGS, THE CIRCUS
FEATURES A GRACEFUL RIDER BALANCING ON THE BACK OF A WHITE HORSE. WHILE THE
MOOD OF THE PAINTING IS CAREFREE, THE WORK WAS PAINSTAKINGLY EXECUTED. SEURAT
PIONEERED A TECHNIQUE CALLED "POINTILLISM" USING TINY BRUSHSTROKES OF
CONTRASTING COLORS. SEURAT PLANNED HIS PAINTINGS TO THE LAST DETAIL AND
CAREFULLY PLACED EACH DOT, MUCH THE SAME WAY A FUND MANAGER CHOOSES THE
STOCKS FOR A PORTFOLIO. VIEWED AS A WHOLE, THE POINTS FORM A HARMONIOUS
COMPOSITION.
------------------------------------
AIM Advisor Flex Fund is for shareholders who seek to achieve a high total
return on investment through growth of capital and current income, without
regard to federal income-tax considerations. The fund invests in a
combination of equity securities and fixed- and variable-income securities.
ABOUT FUND PERFORMANCE AND PORTFOLIO DATA THROUGHOUT THIS REPORT:
o AIM Advisor Flex Fund's performance figures are historical and reflect
reinvestment of all distributions and changes in net asset value.
o When sales charges are included in performance figures, Class A share
performance reflects the maximum 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
expenses.
o The fund's investment return and principal value will fluctuate, so an
investor's shares, when redeemed, may be worth more or less than their
original cost.
o As a result of a shareholder vote, the assets of AIM Advisor MultiFlex Fund
were incorporated into AIM Advisor Flex Fund on June 21, 1999.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o The Standard & Poor's Composite Index of 500 Stocks (the S&P 500) is a group
of unmanaged securities widely regarded by investors to be representative of
the stock market in general.
o The unmanaged Lipper Flexible Portfolio Index represents an average of the
performance of the 30 largest funds in the flexible-portfolio fund category.
It is compiled by Lipper Inc., an independent mutual-fund performance
monitor. Results shown reflect reinvestment of dividends.
o The Lehman Government/Corporate Bond Index is an unmanaged index generally
considered representative of intermediate and long-term government and
investment-grade debt securities.
o An investment cannot be made in any index listed. Unless otherwise
indicated, index results include reinvested dividends and do not reflect
sales charges.
AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OF A BANK AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY. THERE IS A RISK THAT YOU COULD LOSE SOME OR ALL OF YOUR MONEY.
This report may be distributed only to current shareholders or to persons
who have received a current prospectus of the fund.
AIM ADVISOR FLEX FUND
<PAGE> 3
SEMIANNUAL REPORT / CHAIRMAN'S LETTER
Dear Fellow Shareholder:
With only several months remaining in 1999, the question on
[PHOTO OF many of your minds may be, "How will the year 2000 computer
Charles T. issue affect AIM and my investments?" We would like you to
Bauer, feel comfortable. We are pleased to be able to report to you
Chairman of that as of June 1999 we acheived a major milestone toward
the Board of year 2000 compliance status: we have successfully completed
THE FUND the testing of all of our mission-critical systems.
APPEARS HERE] Earlier this year, AIM participated in an industrywide
test that gave us a chance to see how our technology systems
might be affected by the changeover to the year 2000 (Y2K).
Everything went as well as we had hoped; in general, the
industry sailed through the testing process with flying
colors. The financial industry has been seen as a leader in
planning for year 2000 concerns. Thus, it was no surprise to
most participants that the test was an overwhelming success.
The general purpose of the process was to test
electronic interfaces among financial industry members in the United States and
to follow transactions through a typical trading cycle -- from order entry to
the settlement process. Investment banks, broker-dealers, custodian banks and
mutual fund companies all worked together to make this possible. Approximately
400 firms were involved in the testing; AIM was one of 70 asset managers.
During the testing process, thousands of transactions were submitted and
approximately 260,000 steps were tested. Of those, only a handful experienced
minor glitches -- just 0.02% of the total number of transactions. All problems
were worked through quickly before the hypothetical trades were settled. Of
course, AIM will keep testing and planning throughout 1999 as a precaution.
AIM'S INTERNAL EFFORTS CONTINUE
As you know from our previous communications to you, AIM has been addressing the
year 2000 issue for several years. Now that we have finished adjusting our
applications and systems, our focus for the rest of 1999 is to continue
monitoring the year 2000 readiness status of outside sources we're linked to
electronically. On the investment side, our portfolio management staff is
continually evaluating the Y2K preparedness of the domestic and foreign
companies in which we invest.
We feel that our preparations for 2000 are very comprehensive, and the
industrywide testing showed that our colleagues in the financial industry are
also working hard to be ready for the new year. We do not think shareholders
need to take any extraordinary measures with their investments to prepare for
2000. However, if you have any lingering concerns, it may reassure you to know
that AIM is finalizing contingency plans that will be ready if necessary. Our
plans will give AIM employees guidelines to follow for a wide variety of
situations.
For a more comprehensive discussion of our Y2K efforts and for periodic
updates, please visit our Web site, www.aimfunds.com.
We are pleased to send you this report covering your fund's performance over
the last six months. If you have any questions or comments, please contact our
Client Services department at 800-959-4246, or e-mail your inquiry to us at
[email protected]. You can access information about your account through our
automated AIM Investor Line at 800-246-5463 or at our Web site.
Thank you for your continued participation in The AIM Family of
Funds--Registered Trademark--. We appreciate your business.
Sincerely,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman
A I M Advisors, Inc.
PLEASE NOTE THAT THE INFORMATION ABOUT THE YEAR 2000 IN THIS LETTER IS DEEMED
AIM'S YEAR 2000 READINESS DISCLOSURE.
------------------------------------
THE FINANCIAL INDUSTRY
HAS BEEN SEEN AS A
LEADER IN PLANNING FOR
YEAR 2000 CONCERNS.
------------------------------------
AIM ADVISOR FLEX FUND
<PAGE> 4
SEMIANNUAL REPORT / MANAGERS' OVERVIEW
STOCK SELECTION BOOSTS FUND'S PERFORMANCE
HOW DID AIM ADVISOR FLEX FUND PERFORM OVER THE PAST SIX MONTHS?
The fund produced solid returns over the period ended June 30, 1999. Its Class C
and Class B shares each returned 6.56%, while Class A shares returned 6.96%.
These returns are at net asset value, excluding sales charges. From December 31,
1998, to June 30, 1999, the fund's net assets grew from $720 million to $896.4
million, principally because of the reorganization of AIM Advisor MultiFlex Fund
into the fund.
WHAT WERE MARKET CONDITIONS DURING THE REPORTING PERIOD?
Despite rising interest rates, the stock market continued its upward march
through the first six months of 1999, with the S&P 500 rising 12.38%. The
market's strength was broad-based in the second quarter as earnings improved
across a wide array of companies. Economically sensitive stocks performed
particularly well, led by basic-materials companies such as chemical, paper and
steel. Stocks of capital-goods companies -- electrical equipment, defense
contractors, machinery, waste management and manufacturing -- also performed
well.
Bond performance was generally disappointing through the first half of 1999.
This poor performance stemmed from heightened concerns that the Federal Reserve
Board (the Fed) would raise interest rates to slow economic growth and combat
inflation. These concerns surfaced early in the reporting period after economic
data showed that the U.S. gross domestic product continued to expand at a
blistering pace. But the primary catalyst for concerns about a Fed rate hike was
the dramatic and unexpected rise in the inflation rate in April.
Uncertainty regarding the extent that the Fed might raise interest rates
eroded bond prices in May and June, sending their yields higher. The yield of
the benchmark 30-year U.S. Treasury bond soared from 5.09% at the beginning of
the reporting period to 6.16% on June 24, its highest level since 1997.
Speculation surrounding the Fed's possible action did not end until June 30,
when it raised the federal funds rate from 4.75% to 5%. At the same time, the
Fed announced that it had shifted from a tightening to a neutral bias,
indicating that it planned no further rate hikes in the near future. That
sparked a "relief rally" in the bond market, dropping the yield on the 30-year
Treasury to 5.97% at the close of the reporting period.
===============================================================================
AVERAGE ANNUAL TOTAL RETURNS
As of 6/30/99, including sales charges
CLASS C SHARES
10 years 12.81%
5 years 17.35
1 year 9.07*
*10.07% excluding sales charges
CLASS B SHARES
Inception (3/3/98) 7.66%
1 year 5.08**
**10.06% excluding sales charges
CLASS A SHARES
Inception (12/31/96) 15.29%
1 year 4.82***
***10.91% excluding sales charges
MARKET VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE. RESULTS OF AN
INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL PERFORMANCE
SHOWN.
===============================================================================
HOW DID YOU MANAGE THE FUND DURING THIS PERIOD?
The fund's asset allocation is driven by the relative attractiveness of stocks
compared to bonds, based on the return spreads between equities and Treasuries.
Historically, this spread has been about 3%. At this level, our stock/bond
allocation would be about 60/40. When this spread widens or contracts, we change
our allocation accordingly.
Over the past six months, the spread between stocks and bonds narrowed,
causing us to decrease our stock holdings somewhat and shift toward bonds. This
change was prompted by the significant rise in interest rates and stock prices
over the past six months. In addition, we saw weakness in the bond market as a
buying opportunity. We reduced our stock holdings to 63% as of June 30, 1999,
from 79% as of December 31, 1998. At the same time, we increased our bond
allocation from 19% to 29%.
HOW DID THE FUND'S EQUITY HOLDINGS PERFORM?
Our equity holdings led the fund to outperform the S&P 500 in the second quarter
of 1999. Class A shares returned 8.98% for the three-month period, and Class B
and C shares returned 8.72%. (These returns exclude sales charges.) Meanwhile,
the S&P 500 returned 7.05%.
Stock selection contributed most to the fund's performance over the past six
months, especially our positions in basic-materials and capital-goods stocks.
The main sectors for the portfolio included computer hardware, electric company,
telephone and oil stocks. Our leading stock, IBM, reached a record high in May
after Chairman and CEO Louis Gerstner said the company is on track for
double-digit revenue growth. IBM generates about a quarter of its revenue --
about $20 billion -- from Internet-related sales. That beats the sales of the
top 25 Internet companies combined, including Amazon.com and Yahoo. We reduced
our holdings in Compaq over the reporting period because the computer company
has lost ground. Its
------------------------------------
STOCK SELECTION
CONTRIBUTED MOST TO THE
FUND'S PERFORMANCE OVER
THE PAST SIX MONTHS,
ESPECIALLY OUR POSITIONS
IN BASIC-MATERIALS AND
CAPITAL-GOODS STOCKS.
------------------------------------
See important fund and index disclosures inside front cover.
AIM ADVISOR FLEX FUND
2
<PAGE> 5
SEMIANNUAL REPORT / MANAGERS' OVERVIEW
PORTFOLIO COMPOSITION
As of 6/30/99, based on total net assets
=========================================================
PERCENTAGE OF HOLDINGS
- ----------------------------------------------------------
U.S. Government 17.08%
Corporate Notes 11.88%
Cash Equivalents 7.57%
Common Stocks 63.07%
Assets Less Liabilities 0.40%
NUMBER OF HOLDINGS 174
=========================================================
<TABLE>
<CAPTION>
=================================================================================================================================
TOP 10 EQUITY HOLDINGS TOP 10 INDUSTRIES TOP 10 FIXED-INCOME HOLDINGS
- ---------------------------------------------------------------------------------------------------------------------------------
COUPON MATURITY %
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1. International Business 1.92% 1. Computers (Hardware) 3.72% 1. U.S. Treasury Note 7.50% 5/15/02 1.29%
Machines Corp.
2. Merck & Co., Inc. 1.39 2. Real Estate Investment 3.22 2. U.S. Treasury Note 8.75 8/15/00 1.27
Trusts
3. Nucor Corp. 1.20 3. Manufacturing (Diversified) 2.86 3. U.S. Treasury Bond 7.25 8/15/22 1.25
4. Morgan Stanley, Dean Witter, 1.14 4. Oil (International Integrated) 2.56 4. U.S. Treasury Note 6.25 2/15/03 1.02
Discover & Co.
5. Repsol S.A.-ADR 1.08 5. Electric Companies 2.49 5. U.S. Treasury Note 5.75 8/15/03 1.00
(International Integrated)
6. Abbott Laboratories 1.04 6. Health Care (Drugs-Major 2.42 6. U.S. Treasury Note 7.875 8/15/01 0.93
Pharmaceuticals)
7. American Home Products Corp. 1.03 7. Health Care (Diversified) 2.37 7. Federal Home Loan 5.50 7/14/00 0.89
Bank
8. Hewlett-Packard Co. 0.95 8. Telephone 2.20 8. U.S. Treasury Bond 9.25 8/15/22 0.87
9. Electronic Data Systems Corp. 0.95 9. Banks (Major Regional) 2.07 9. U.S. Treasury Note 6.50 8/15/05 0.81
10.GPU, Inc. 0.94 10.Computers (Software & 1.97 10.U.S. Treasury Bond 7.625 2/15/25 0.79
Services)
The fund's portfolio composition is subject to change, and there is no assurance that the fund will continue to hold any
particular security.
=================================================================================================================================
</TABLE>
first-quarter earnings disappointed investors, and its board of directors ousted
long-time CEO Eckhard Pfeiffer.
Compared to the S&P 500, the fund was underweighted in consumer staples,
health care and financials -- sectors with weak performance over the period.
This also helped the fund's performance against the benchmark index.
HOW DO YOU CHOOSE STOCKS FOR THE PORTFOLIO?
As value investors, we look for stocks that are undervalued to the market as a
whole. We base our stock-selection decisions on a proprietary database of the
largest 800 U.S. stocks. From this list, we choose 250 stocks as potential
candidates, based on the price of the stock in relation to the company's
earnings track record. With each of these 250 stocks, we ask, "Can this earnings
record be continued?" This list is then culled to 100 candidates. To make the
portfolio, the stock must be in the top 30% of our database, based on valuation.
HOW DID THE FUND'S FIXED-INCOME HOLDINGS AFFECT ITS PERFORMANCE?
Fixed-income holdings pulled down the fund's performance over the first half of
1999. The bond market, represented by the Lehman Government/Corporate Index,
returned -2.28% over the past six months. Compared to the bond market as a
whole, the fund was overweighted in long-term bonds, which were battered by
rising interest rates. The fund also was overweighted in high-quality corporate
bonds, which underperformed during the period compared to high-yield issues. In
June, we began investing in bonds with shorter duration. Our best-performing
fixed-income sector was mortgage-backed securities, as expected during a period
of rising interest rates.
WHAT IS YOUR OUTLOOK FOR THE FUND AND THE MARKETS IN GENERAL?
Our asset-allocation model continues to support a high concentration in stocks,
despite the narrowing of the stock/bond spread. We expect the stock market to
remain volatile and the U.S. economy to continue its advance. We expect to see
strength throughout broad segments of the stock market, which bodes well for
actively managed funds.
Fundamentals appear to be improving for the bond market. The current
economic environment is very favorable: corporate earnings improvements, modest
inflationary pressures, full employment, income growth and capital formation.
That long list makes the bond market attractive for investors, despite recent
volatility.
See important fund and index disclosures inside front cover.
AIM ADVISOR FLEX FUND
3
<PAGE> 6
SEMIANNUAL REPORT / FOR CONSIDERATION
CHOOSE YOUR INVESTMENT PALETTE
No two pieces of art are exactly alike. Just as an artist may use different
paints to create a piece, so does an investor use different kinds of investments
to create a portfolio. And as with art, tastes can change over time -- most
investors have different goals at different stages in their lives, as well as
varying tolerance for risk. The biggest advantage mutual funds offer is the
potential for diversification. Providing funds with assorted objectives and
goals allows investors to shape their portfolios to their specific needs and
spread their risk over several different funds, rather than painting their
portfolios all one color.
GROWTH VS. INCOME
If you look at the list of AIM's retail mutual funds on the back of your fund
report, you'll notice that they are divided into different types. Two that
frequently appear are growth and income. Common stock is normally the growth
component of a mutual fund with growth as a primary or secondary objective.
Bonds are typically the income components of a mutual fund with income as a
primary or secondary objective.
Let's take a closer look at the categories into which AIM's retail mutual
funds are divided. Keep in mind that funds listed under the same category don't
necessarily have the same kind of investment strategy or portfolio, even if they
have the same objective.
DOMESTIC MUTUAL FUNDS
GROWTH FUNDS
Growth funds typically invest in common stocks of companies whose businesses are
growing. Growth companies tend to reinvest their profits toward expansion of
their potential to produce greater returns instead of paying dividends. So
growth mutual funds focus on generating capital gains -- increasing the value of
the stocks they hold -- rather than current income, which means they generally
don't pay regular income dividends. Growth funds usually do, however, make one
capital-gains distribution per year, when there are gains.
An increase over time in the value of a growth fund's portfolio means the
fund's value, or share price, increases over time also. Shareholders in a growth
fund, then, make money by selling their shares for more than they paid for them.
Of course, the opposite is also true -- shareholders can lose money by selling
their shares for less than they paid for them. Growth funds usually range from
moderate to very aggressive, depending on the size and types of companies in
which they invest.
GROWTH AND INCOME FUNDS
A growth and income fund generally invests in common and preferred stocks and
bonds of older, more established companies that have a longer track record of
growth and paying dividends.
A typical growth and income mutual fund will pay quarterly or annual income
dividends to its shareholders. (Monthly dividends are not common.) In this way,
growth and income funds can potentially provide long-term growth of investments
and also current income. These funds tend to be more conservative than growth
funds.
INCOME FUNDS
Income funds are generally designed to provide high current income rather than
long-term growth. To that end, income funds usually invest chiefly in
interest-paying corporate and government bonds. They may also own stocks of
companies that pay regular dividends. Some income funds are more aggressive than
others. The aggressiveness of a particular fund depends not only on the kinds of
securities in which it invests, but also on the fund's sector allocation and
maturity structure.
For example, Treasury securities are considered a relatively safe investment
because they are guaranteed by the U.S. government. However, lower risk also
means lower return potential. On the other hand, lower-rated corporate bonds,
often called junk bonds, involve more risk because they are not guaranteed --
they are only as good as the companies that issue them. But the added risk also
means higher return potential.
Income funds are considered more conservative and are suited for investors
seeking income rather than growth.
AIM ADVISOR FLEX FUND
4
<PAGE> 7
SEMIANNUAL REPORT / FOR CONSIDERATION
TAX-FREE INCOME OR MUNICIPAL FUNDS
These funds provide shareholders with current income that is tax-exempt at
some level, depending on the securities in which they invest. So municipal
mutual funds appeal to investors who are looking to reduce income that would
otherwise be subject to tax. Municipal bonds or notes, which are issued by
state or local governments, are generally exempt from federal taxes. Federal
securities, like Treasury bonds, are usually exempt from state taxes. And
then there are some securities that are exempt from both federal and state
taxes.(1)
MONEY-MARKET FUNDS
A money-market fund is one of the safest types of mutual funds available
because its main goal is preserving your investment while paying current
income in the form of interest. As a result, these funds tend to appeal to
investors looking for safety, liquidity and some income from their
investment. Money-market funds invest in high-quality, short-term securities
such as commercial paper and U.S. government agency securities. Although
money-market funds are not guaranteed or insured by the U.S. government, the
securities they hold are less risky than other types of fixed-income
securities. The trade-off for safety of principal investment is a lower rate
of return.(2)
INTERNATIONAL AND GLOBAL MUTUAL FUNDS
INTERNATIONAL GROWTH FUNDS
An international growth fund has the same objective as a domestic growth fund,
except it invests in stocks of companies located outside the United States. Like
their domestic counterparts, international growth funds tend to pay
distributions in the form of capital gains rather than dividends. An
international growth mutual fund might invest in a particular country, region or
continent depending on the investment strategy shown in its prospectus.
International funds carry different risks than domestic funds because most
foreign markets are not as established as the markets in the United States.
Other risks include changes in the value of the U.S. dollar compared to foreign
currencies, accounting differences, political risks and foreign regulatory
differences.
GLOBAL GROWTH, GLOBAL GROWTH AND INCOME, AND GLOBAL INCOME FUNDS
These funds are similar to their domestic equivalents in terms of their goals
and the income distributions they pay. Global funds are comparable to
international funds in that they can invest in stocks of companies outside the
United States. But global funds can also invest substantially in U.S. stocks;
international funds generally do not. The amount of a global fund's portfolio
that can be invested in the United States varies greatly from fund to fund,
according to a fund's prospectus. Global funds carry the same risks as
international funds.
SPECIALIZED FUNDS
THEME FUNDS
Theme or sector funds invest primarily in a particular industry or sector
of the economy, either domestically or globally. Theme funds are required
by prospectus to invest a certain percentage of their assets in their industry
or sector of choice under normal market conditions. As a result, theme funds
present greater risk and potential reward than more diversified funds. The types
of securities held by a theme fund determine its goal of growth and/or income.
TYPES OF FUND DISTRIBUTIONS
INCOME DIVIDENDS are paid from dividends and/or interest from securities in a
fund's portfolio. For example, if a company in which a mutual fund owns stock
distributes some of its earnings to its shareholders as a dividend, the fund
passes on those earnings to its own shareholders. Income dividends are usually
taxed as ordinary income.
CAPITAL GAINS represent the net profit realized from the growth in value of the
holdings in a fund's portfolio. These distributions are usually made once per
year. There are two types of capital gains:
o Short-term capital gains are paid from net profits gained when a mutual fund
sells stocks or bonds it has held for less than a year. Short-term capital
gains are taxed as ordinary income.
o Long-term capital gains are paid from net profits gained when a mutual fund
sells stocks or bonds it has held for more than a year. Long-term capital
gains are usually taxed at the capital-gains rate, which is typically lower
than ordinary income-tax rates.
(1) Investors in tax-free income funds still have a risk of incurring taxes on
capital-gains distributions, for example, so it's wise to see your tax
advisor before investing in such funds.
(2) There is no guarantee that a money-market fund will be able to maintain a
stable net asset value of $1.00 per share.
See the back cover for a complete list of AIM's retail mutual funds. For more
information about your fund's objective, read your fund prospectus. For more
complete information about any AIM fund(s), including sales charges and
expenses, ask your financial consultant or securities dealer for a free
prospectus(es). Please read the prospectus(es) carefully before you invest or
send money.
AIM ADVISOR FLEX FUND
5
<PAGE> 8
SCHEDULE OF INVESTMENTS
June 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS-58.04%
AEROSPACE/DEFENSE-1.49%
Boeing Co. (The) 65,000 $ 2,872,187
- --------------------------------------------------------------
Lockheed Martin Corp. 105,000 3,911,250
- --------------------------------------------------------------
Precision Castparts Corp. 154,500 6,566,250
- --------------------------------------------------------------
13,349,687
- --------------------------------------------------------------
AGRICULTURAL PRODUCTS-0.51%
Archer-Daniels-Midland Co. 296,250 4,573,359
- --------------------------------------------------------------
AIRLINES-0.67%
Southwest Airlines Co. 192,350 5,986,894
- --------------------------------------------------------------
AUTO PARTS & EQUIPMENT-1.63%
Cooper Tire & Rubber Co. 160,000 3,780,000
- --------------------------------------------------------------
Genuine Parts Co. 180,000 6,300,000
- --------------------------------------------------------------
Snap-on, Inc. 125,000 4,523,437
- --------------------------------------------------------------
14,603,437
- --------------------------------------------------------------
AUTOMOBILES-0.77%
Ford Motor Co. 121,600 6,862,800
- --------------------------------------------------------------
BANKS (MAJOR REGIONAL)-2.07%
Bank One Corp. 110,000 6,551,875
- --------------------------------------------------------------
National City Corp. 85,000 5,567,500
- --------------------------------------------------------------
Wachovia Corp. 75,000 6,417,187
- --------------------------------------------------------------
18,536,562
- --------------------------------------------------------------
BANKS (MONEY CENTER)-1.30%
Bank of America Corp. 95,000 6,964,687
- --------------------------------------------------------------
First Union Corp. 100,000 4,700,000
- --------------------------------------------------------------
11,664,687
- --------------------------------------------------------------
BANKS (REGIONAL)-0.02%
Independent Bank Corp. 10,300 162,225
- --------------------------------------------------------------
BEVERAGES (ALCOHOLIC)-0.47%
Anheuser Busch Co., Inc. 60,000 4,256,250
- --------------------------------------------------------------
CHEMICALS-0.85%
Dow Chemical Co. (The) 60,000 7,612,500
- --------------------------------------------------------------
CHEMICALS (SPECIALTY)-0.51%
Great Lakes Chemical Corp. 100,000 4,606,250
- --------------------------------------------------------------
COMPUTERS (HARDWARE)-3.72%
Compaq Computer Corp. 322,000 7,627,375
- --------------------------------------------------------------
Hewlett-Packard Co. 85,000 8,542,500
- --------------------------------------------------------------
International Business Machines
Corp. 133,000 17,190,250
- --------------------------------------------------------------
33,360,125
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (SOFTWARE &
SERVICES)-1.96%
Computer Associates International,
Inc. 148,000 $ 8,140,000
- --------------------------------------------------------------
Electronic Data Systems Corp. 150,000 8,484,375
- --------------------------------------------------------------
Oracle Corp.(a) 26,700 991,237
- --------------------------------------------------------------
17,615,612
- --------------------------------------------------------------
DISTRIBUTORS (FOOD & HEALTH)-0.82%
SUPERVALU, INC 285,000 7,320,937
- --------------------------------------------------------------
ELECTRIC COMPANIES-2.49%
Edison International 200,000 5,350,000
- --------------------------------------------------------------
Entergy Corp. 255,000 7,968,750
- --------------------------------------------------------------
GPU, Inc. 200,000 8,437,500
- --------------------------------------------------------------
Southern Co. 19,800 524,700
- --------------------------------------------------------------
22,280,950
- --------------------------------------------------------------
ELECTRICAL EQUIPMENT-1.50%
General Electric Co. 71,000 8,023,000
- --------------------------------------------------------------
Rockwell International Corp. 90,000 5,467,500
- --------------------------------------------------------------
13,490,500
- --------------------------------------------------------------
ELECTRONICS (COMPONENT
DISTRIBUTORS)-0.39%
W.W. Grainger, Inc. 65,500 3,524,719
- --------------------------------------------------------------
ELECTRONICS (DEFENSE)-0.81%
Raytheon Co.-Class A 85,000 5,854,375
- --------------------------------------------------------------
Raytheon Co.-Class B 20,000 1,407,500
- --------------------------------------------------------------
7,261,875
- --------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-1.61%
American General Corp. 94,900 7,153,087
- --------------------------------------------------------------
MGIC Investment Corp. 150,000 7,293,750
- --------------------------------------------------------------
14,446,837
- --------------------------------------------------------------
FOODS-0.39%
H.J. Heinz Co. 69,000 3,458,625
- --------------------------------------------------------------
FOOTWEAR-0.42%
Reebok International Ltd.(a) 200,000 3,725,000
- --------------------------------------------------------------
HEALTH CARE (DIVERSIFIED)-2.37%
Abbott Laboratories 204,500 9,304,750
- --------------------------------------------------------------
American Home Products Corp. 160,000 9,200,000
- --------------------------------------------------------------
Bristol-Myers Squibb Co. 24,000 1,690,500
- --------------------------------------------------------------
Johnson & Johnson 10,800 1,058,400
- --------------------------------------------------------------
21,253,650
- --------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC &
OTHER)-0.74%
Mylan Laboratories, Inc. 250,000 6,625,000
- --------------------------------------------------------------
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HEALTH CARE (DRUGS-MAJOR
PHARMACEUTICALS)-2.42%
Lilly (Eli) & Co. 50,000 $ 3,581,250
- --------------------------------------------------------------
Merck & Co., Inc. 168,000 12,432,000
- --------------------------------------------------------------
Schering-Plough Corp. 107,200 5,681,600
- --------------------------------------------------------------
21,694,850
- --------------------------------------------------------------
HEALTH CARE (HOSPITAL
MANAGEMENT)-0.80%
Columbia/HCA Healthcare Corp. 305,000 6,957,812
- --------------------------------------------------------------
Triad Hospitals, Inc.(a) 16,052 216,702
- --------------------------------------------------------------
7,174,514
- --------------------------------------------------------------
HOUSEHOLD FURN. & APPLIANCES-0.70%
Whirlpool Corp. 85,000 6,290,000
- --------------------------------------------------------------
HOUSEWARES-0.23%
Fortune Brands, Inc. 50,000 2,068,750
- --------------------------------------------------------------
INSURANCE (MULTI-LINE)-0.71%
Loews Corp. 80,000 6,330,000
- --------------------------------------------------------------
INSURANCE
(PROPERTY-CASUALTY)-1.78%
Ohio Casualty Corp. 175,000 6,321,875
- --------------------------------------------------------------
Old Republic International Corp. 200,000 3,462,500
- --------------------------------------------------------------
SAFECO Corp. 140,000 6,177,500
- --------------------------------------------------------------
15,961,875
- --------------------------------------------------------------
INSURANCE BROKERS-0.82%
Marsh & McLennan Co. 97,075 7,329,162
- --------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE-1.14%
Morgan Stanley, Dean Witter,
Discover & Co. 99,850 10,234,625
- --------------------------------------------------------------
IRON & STEEL-1.20%
Nucor Corp. 227,000 10,768,312
- --------------------------------------------------------------
LODGING-HOTELS-0.16%
Host Marriott Corp. 124,515 1,478,616
- --------------------------------------------------------------
MACHINERY (DIVERSIFIED)-1.40%
Caterpillar, Inc. 85,000 5,100,000
- --------------------------------------------------------------
Deere & Co. 100,000 3,962,500
- --------------------------------------------------------------
Dover Corp. 100,000 3,500,000
- --------------------------------------------------------------
12,562,500
- --------------------------------------------------------------
MANUFACTURING (DIVERSIFIED)-1.47%
Illinois Tool Works, Inc. 74,000 6,068,000
- --------------------------------------------------------------
Minnesota Mining and Manufacturing
Co. 50,000 4,346,875
- --------------------------------------------------------------
Textron, Inc. 33,700 2,773,931
- --------------------------------------------------------------
13,188,806
- --------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-0.97%
Federal Signal Corp. 160,000 3,390,000
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MANUFACTURING (SPECIALIZED)-(CONTINUED)
York International Corp. 124,600 $ 5,334,437
- --------------------------------------------------------------
8,724,437
- --------------------------------------------------------------
METALS MINING-0.62%
Phelps Dodge Corp. 90,000 5,574,375
- --------------------------------------------------------------
OIL (INTERNATIONAL
INTEGRATED)-0.84%
Exxon Corp. 97,400 7,511,975
- --------------------------------------------------------------
PAPER & FOREST PRODUCTS-0.49%
Westvaco Corp. 150,000 4,350,000
- --------------------------------------------------------------
PHOTOGRAPHY/IMAGING-0.71%
IKON Office Solutions, Inc. 340,000 5,100,000
- --------------------------------------------------------------
Xerox Corp. 21,000 1,240,313
- --------------------------------------------------------------
6,340,313
- --------------------------------------------------------------
PUBLISHING (NEWSPAPERS)-0.61%
Gannett Co., Inc. 76,600 5,467,325
- --------------------------------------------------------------
RAILROADS-0.56%
CSX Corp. 110,000 4,984,375
- --------------------------------------------------------------
REAL ESTATE INVESTMENT
TRUSTS-3.22%
Arden Realty Group, Inc. 75,200 1,851,800
- --------------------------------------------------------------
Avalonbay Communities, Inc. 59,100 2,186,700
- --------------------------------------------------------------
Beacon Capital 60,000 922,500
- --------------------------------------------------------------
CarrAmerica Realty Corp. 57,300 1,432,500
- --------------------------------------------------------------
CBL & Associates Properties, Inc. 39,800 1,049,725
- --------------------------------------------------------------
Charles E. Smith Residential
Realty, Inc. 21,800 739,838
- --------------------------------------------------------------
Equity Office Properties Trust 90,979 2,331,337
- --------------------------------------------------------------
Equity Residential Properties
Trust 55,100 2,482,944
- --------------------------------------------------------------
First Industrial Realty Trust,
Inc. 41,500 1,138,656
- --------------------------------------------------------------
Highwoods Properties, Inc. 46,800 1,284,075
- --------------------------------------------------------------
Hospitality Properties Trust 45,700 1,239,613
- --------------------------------------------------------------
Kimco Realty Corp. 34,200 1,338,075
- --------------------------------------------------------------
Liberty Property Trust 67,500 1,679,063
- --------------------------------------------------------------
New Plan Excel Realty Trust 35,060 631,080
- --------------------------------------------------------------
Prentiss Properties Trust 85,100 1,999,850
- --------------------------------------------------------------
Public Storage, Inc. 95,400 2,671,200
- --------------------------------------------------------------
Simon Property Group, Inc. 73,500 1,865,063
- --------------------------------------------------------------
Vornado Realty Trust 36,700 1,295,969
- --------------------------------------------------------------
Weeks Corp. 22,400 683,200
- --------------------------------------------------------------
28,823,188
- --------------------------------------------------------------
RESTAURANTS-0.56%
McDonald's Corp. 122,600 5,064,913
- --------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-0.92%
Lowe's Companies, Inc. 50,000 2,834,375
- --------------------------------------------------------------
</TABLE>
7
<PAGE> 10
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (BUILDING SUPPLIES)-(CONTINUED)
Sherwin-Williams Co. 195,000 $ 5,411,250
- --------------------------------------------------------------
8,245,625
- --------------------------------------------------------------
RETAIL (DEPARTMENT STORES)-1.15%
Dillards, Inc.-Class A 135,000 4,741,875
- --------------------------------------------------------------
J.C. Penney Co., Inc. 115,000 5,584,688
- --------------------------------------------------------------
10,326,563
- --------------------------------------------------------------
RETAIL (DRUG STORES)-0.35%
Rite Aid Corp. 127,900 3,149,538
- --------------------------------------------------------------
RETAIL (SPECIALTY)-0.29%
Toys "R" Us, Inc.(a) 125,000 2,585,938
- --------------------------------------------------------------
SERVICES (COMMERCIAL &
CONSUMER)-0.69%
Dun & Bradstreet Corp. (The) 175,000 6,201,563
- --------------------------------------------------------------
SPECIALTY PRINTING-0.80%
Deluxe Corp. 183,900 7,160,606
- --------------------------------------------------------------
TELEPHONE-1.34%
Ameritech Corp. 65,000 4,777,500
- --------------------------------------------------------------
Bell Atlantic Corp. 110,000 7,191,250
- --------------------------------------------------------------
11,968,750
- --------------------------------------------------------------
TEXTILES (APPAREL)-1.23%
Liz Claiborne, Inc. 150,000 5,475,000
- --------------------------------------------------------------
VF Corp. 130,000 5,557,500
- --------------------------------------------------------------
11,032,500
- --------------------------------------------------------------
TEXTILES (SPECIALTY)-0.47%
Unifi, Inc.(a) 200,000 4,250,000
- --------------------------------------------------------------
TOBACCO-0.90%
Philip Morris Companies, Inc. 201,450 8,095,772
- --------------------------------------------------------------
WASTE MANAGEMENT-0.98%
Browning-Ferris Industries, Inc. 110,000 4,730,000
- --------------------------------------------------------------
Waste Management, Inc. 75,000 4,031,250
- --------------------------------------------------------------
8,761,250
- --------------------------------------------------------------
Total Domestic Common Stocks
(Cost $324,841,152) 520,279,497
- --------------------------------------------------------------
FOREIGN STOCKS-5.03%
MEXICO-0.87%
Telefonos de Mexico S.A.-ADR
(Telephone) 96,500 7,798,406
- --------------------------------------------------------------
NETHERLANDS-1.42%
Koninklijke (Royal) Philips
Electronics N.V.-ADR (Electrical
Equipment) 6,440 649,635
- --------------------------------------------------------------
Royal Dutch Petroleum Co.-New York
Shares-ADR (Oil-International
Integrated) 96,100 5,790,025
- --------------------------------------------------------------
Unilever N.V.-ADR (Foods) 90,249 6,294,868
- --------------------------------------------------------------
12,734,528
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
NORWAY-0.45%
Norsk Hydro A.S.A.-ADR
(Manufacturing- Diversified) 105,000 $ 4,016,250
- --------------------------------------------------------------
SPAIN-1.08%
Repsol S.A.-ADR (Oil-International
Integrated) 475,000 9,648,437
- --------------------------------------------------------------
UNITED KINGDOM-1.21%
Gallaher Group PLC-ADR (Tobacco) 100,000 2,443,750
- --------------------------------------------------------------
Hanson PLC-ADR
(Manufacturing-Diversified) 190,000 8,431,250
- --------------------------------------------------------------
10,875,000
- --------------------------------------------------------------
Total Foreign Stocks (Cost
$24,616,998) 45,072,621
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
U.S. DOLLAR DENOMINATED
CONVERTIBLE BONDS & NOTES-1.12%
COMMUNICATIONS EQUIPMENT-0.45%
Diageo Capital PLC, Unsec. Gtd.
Notes, 6.625%, 06/24/04 $ 4,000,000 $ 4,010,928
- --------------------------------------------------------------
INSURANCE (BROKER)-0.67%
Marsh & McLennan Companies, Inc.,
Sr. Unsec. Notes, 6.625%,
06/15/04 6,000,000 6,018,540
- --------------------------------------------------------------
Total U.S. Dollar Denominated
Convertible Bonds & Notes
(Cost $9,965,930) 10,029,468
- --------------------------------------------------------------
U.S. DOLLAR DENOMINATED
NON-CONVERTIBLE BONDS &
NOTES-10.76%
AUTO PARTS & EQUIPMENT-0.22%
Dana Corp., Unsec. Notes, 6.25%,
03/01/04 2,000,000 1,961,978
- --------------------------------------------------------------
AUTOMOBILES-1.22%
Ford Motor Co.,
Notes, 7.50%, 11/15/99 750,000 755,550
- --------------------------------------------------------------
Unsec. Bonds, 6.50%, 08/01/18 5,250,000 4,794,930
- --------------------------------------------------------------
General Motors Acceptance Corp.,
Unsec. Bonds, 5.50%, 01/14/02 5,500,000 5,392,970
- --------------------------------------------------------------
10,943,450
- --------------------------------------------------------------
BANKS (MAJOR REGIONAL)-1.54%
Bank of America Corp., Notes,
6.625%, 06/15/04 5,000,000 4,999,330
- --------------------------------------------------------------
National City Corp., Sub. Notes,
7.20%, 05/15/05 1,000,000 1,020,340
- --------------------------------------------------------------
Nationsbank Corp., Sr. Notes,
5.375%, 04/15/00 1,550,000 1,546,109
- --------------------------------------------------------------
Wachovia Corp., Unsec. Sub. Notes,
6.25%, 08/04/08 6,500,000 6,199,830
- --------------------------------------------------------------
13,765,609
- --------------------------------------------------------------
BANKS (MONEY CENTER)-0.53%
First Union Corp., Unsec. Sub.
Notes, 6.40%, 04/01/08 5,000,000 4,779,900
- --------------------------------------------------------------
</TABLE>
8
<PAGE> 11
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
BEVERAGES (ALCOHOLIC)-0.56%
Anheuser Busch Co. Inc., Unsec.
Notes, 5.375%, 09/15/08 $ 5,500,000 $ 5,011,215
- --------------------------------------------------------------
CHEMICALS-0.11%
Eastman Chemical Co., Notes,
6.375%, 01/15/04 1,000,000 978,480
- --------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-0.66%
Motorola, Inc., Notes, 6.50%,
03/01/08 6,000,000 5,897,280
- --------------------------------------------------------------
CONSUMER FINANCE-1.21%
Beneficial Corp., Medium Term
Series I Notes, 6.625%, 09/27/04 3,000,000 2,975,940
- --------------------------------------------------------------
Commercial Credit Co., Unsec.
Notes, 5.55%, 02/15/01 3,000,000 2,975,130
- --------------------------------------------------------------
Ford Motor Credit Co., Sr. Unsec.
Notes, 5.125%, 10/15/01 5,000,000 4,881,715
- --------------------------------------------------------------
10,832,785
- --------------------------------------------------------------
ELECTRIC COMPANIES-0.56%
Penn Power & Lighting, First
Mortgage Notes, 6.55%, 03/01/06 3,900,000 3,850,431
- --------------------------------------------------------------
6.875%, 02/01/03 1,000,000 1,010,320
- --------------------------------------------------------------
Union Electric Co., First Mortgage
Notes, 6.75%, 10/15/99 150,000 150,650
- --------------------------------------------------------------
5,011,401
- --------------------------------------------------------------
ELECTRICAL EQUIPMENT-0.17%
Boeing Co., Notes, 6.625%,
06/01/05 1,500,000 1,493,670
- --------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-0.89%
Federal Home Loan Bank, Unsec. Sr.
Unsub. Notes, 5.50%, 07/14/00 8,000,000 8,003,440
- --------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-0.21%
Guidant Corp., Notes, 6.15%,
02/15/06 2,000,000 1,897,940
- --------------------------------------------------------------
INSURANCE
(PROPERTY-CASUALTY)-0.24%
Travelers Property Casualty Corp.,
Sr. Unsec. Notes, 6.75%,
11/15/06 2,200,000 2,163,590
- --------------------------------------------------------------
OIL (DOMESTIC INTEGRATED)-0.68%
Atlantic Richfield Company, Notes,
5.55%, 04/15/03 6,300,000 6,132,987
- --------------------------------------------------------------
RAILROADS-0.68%
Norfolk Southern Corp., Sr. Unsec.
Notes, 6.20%, 04/15/09 6,500,000 6,123,286
- --------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-0.34%
Sherwin-Williams Co., Notes,
6.50%, 02/01/02 3,000,000 3,018,270
- --------------------------------------------------------------
RETAIL (DEPARTMENT STORES)-0.31%
Dillard Dept. Stores, Inc., Unsec.
Notes, 6.30%, 02/15/08 3,000,000 2,797,620
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
TELECOMMUNICATIONS (CELLULAR/
WIRELESS)-0.63%
AT&T Corp., Notes, 6.50%, 03/15/29 $ 6,200,000 $ 5,620,672
- --------------------------------------------------------------
Total U.S. Dollar Denominated
Non-Convertible Bonds &
Notes (Cost $98,936,907) 96,433,573
- --------------------------------------------------------------
ASSET-BACKED SECURITIES-0.27%
SERVICES (COMMERCIAL &
CONSUMER)-0.27%
Discover Card Master Trust I,
Series. 1998-7 A, 5.60%,
05/16/06 (Cost $2,523,340) 2,500,000 2,422,663
- --------------------------------------------------------------
U.S. GOVERNMENT AGENCY
SECURITIES-3.01%
FEDERAL HOME LOAN MORTGAGE CORP.
("FHLMC")-1.18%
Pass Through Certificates
8.00%, 10/01/10 1,183,598 1,219,840
- --------------------------------------------------------------
5.50%, 01/01/14 3,975,063 3,765,100
- --------------------------------------------------------------
6.50%, 07/01/01 to 05/01/29 5,788,328 5,644,717
- --------------------------------------------------------------
10,629,657
- --------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION ("FNMA")-1.31%
Pass Through Certificates
8.50%, 03/01/10 1,071,604 1,111,446
- --------------------------------------------------------------
6.50%, 06/01/11 to 05/01/26 5,444,962 5,322,444
- --------------------------------------------------------------
7.50%, 11/01/26 to 05/01/29 5,226,656 5,288,874
- --------------------------------------------------------------
11,722,764
- --------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION ("GNMA")-0.52%
Pass Through Certificates
7.00%, 01/16/07 to 10/15/08 1,001,504 1,010,589
- --------------------------------------------------------------
6.00%, 11/15/08 973,002 945,631
- --------------------------------------------------------------
6.50%, 10/15/08 802,346 796,578
- --------------------------------------------------------------
7.50%, 03/15/26 1,858,785 1,885,496
- --------------------------------------------------------------
4,638,294
- --------------------------------------------------------------
Total U.S. Government Agency
Securities (Cost
$27,196,043) 26,990,715
- --------------------------------------------------------------
U.S. TREASURY SECURITIES-14.07%
U.S. TREASURY BONDS-3.47%
7.50%, 11/15/16 4,500,000 5,075,550
- --------------------------------------------------------------
9.25%, 02/15/16 6,000,000 7,822,980
- --------------------------------------------------------------
7.25%, 08/15/22 10,000,000 11,179,300
- --------------------------------------------------------------
7.625%, 02/15/25 6,000,000 7,061,400
- --------------------------------------------------------------
31,139,230
- --------------------------------------------------------------
U.S. TREASURY NOTES-10.60%
8.75%, 08/15/00 11,000,000 11,401,610
- --------------------------------------------------------------
7.875%, 08/15/01 8,000,000 8,364,720
- --------------------------------------------------------------
7.50%, 05/15/02 11,000,000 11,528,330
- --------------------------------------------------------------
</TABLE>
9
<PAGE> 12
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
U.S. TREASURY NOTES-(CONTINUED)
6.25%, 02/15/03 $ 9,000,000 $ 9,158,040
- --------------------------------------------------------------
5.75%, 08/15/03 9,000,000 9,002,970
- --------------------------------------------------------------
7.25%, 05/15/04 6,000,000 6,370,440
- --------------------------------------------------------------
7.25%, 08/15/04 6,000,000 6,381,300
- --------------------------------------------------------------
7.875%, 11/15/04 5,000,000 5,468,000
- --------------------------------------------------------------
6.50%, 08/15/05 7,000,000 7,232,260
- --------------------------------------------------------------
9.375%, 02/15/06 4,000,000 4,753,400
- --------------------------------------------------------------
6.50%, 10/15/06 9,000,000 9,298,710
- --------------------------------------------------------------
6.125%, 08/15/07 6,000,000 6,072,120
- --------------------------------------------------------------
95,031,900
- --------------------------------------------------------------
Total U.S. Treasury Securities
(Cost $126,976,054) 126,171,130
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
REPURCHASE AGREEMENT-7.30%(B)
Greenwich Capital Markets, Inc.,
5.00%, 07/01/99 (Cost
$65,499,284)(c) $65,499,284 $ 65,499,284
- --------------------------------------------------------------
TOTAL INVESTMENTS-99.60% 892,898,951
- --------------------------------------------------------------
OTHER ASSETS LESS
LIABILITIES-0.40% 3,546,198
- --------------------------------------------------------------
NET ASSETS-100.00% $896,445,149
==============================================================
</TABLE>
Investment Abbreviations:
ADR - American Depositary Receipt
Conv. - Convertible
Gtd. - Guaranteed
Sec. - Secured
Sr. - Senior
Sub. - Subordinated
Unsec. - Unsecured
Unsub. - Unsubordinated
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 6/30/99 with a maturing value of
$100,013,889. Collateralized by U.S. Government obligations.
See Notes to Financial Statements.
10
<PAGE> 13
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost
$680,555,708) $892,898,951
- ---------------------------------------------------------
Cash 7,491
- ---------------------------------------------------------
Receivables for:
Capital stock sold 1,258,693
- ---------------------------------------------------------
Interest and dividends 5,896,856
- ---------------------------------------------------------
Investment for deferred compensation plan 17,342
- ---------------------------------------------------------
Other assets 41,675
- ---------------------------------------------------------
Total assets 900,121,008
- ---------------------------------------------------------
LIABILITIES:
Payables for:
Capital stock reacquired 1,933,506
- ---------------------------------------------------------
Deferred compensation plan 17,342
- ---------------------------------------------------------
Accrued distribution fees 1,667,252
- ---------------------------------------------------------
Accrued directors' fees and expenses 6,509
- ---------------------------------------------------------
Accrued operating services fees 51,250
- ---------------------------------------------------------
Total liabilities 3,675,859
- ---------------------------------------------------------
Net assets applicable to shares outstanding $896,445,149
=========================================================
NET ASSETS:
Class A $ 51,100,094
=========================================================
Class B $ 13,145,652
=========================================================
Class C $832,199,403
=========================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Class A:
Authorized 100,000,000
- ---------------------------------------------------------
Outstanding 2,402,741
=========================================================
Class B:
Authorized 100,000,000
- ---------------------------------------------------------
Outstanding 617,898
=========================================================
Class C:
Authorized 100,000,000
- ---------------------------------------------------------
Outstanding 39,121,391
=========================================================
Class A:
Net asset value and redemption price per
share $ 21.27
- ---------------------------------------------------------
Offering price per share:
(Net asset value of $21.27 divided
by 94.50%) $ 22.51
=========================================================
Class B:
Net asset value and offering price per
share $ 21.27
=========================================================
Class C:
Net asset value and offering price per
share $ 21.27
=========================================================
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 5,338,014
- ---------------------------------------------------------
Dividends (net of $173,484 foreign
withholding tax) 6,067,740
- ---------------------------------------------------------
Total investment income 11,405,754
- ---------------------------------------------------------
EXPENSES:
Advisory fees 2,677,301
- ---------------------------------------------------------
Operating services fees 1,606,380
- ---------------------------------------------------------
Distribution fees-Class A 78,164
- ---------------------------------------------------------
Distribution fees-Class B 31,023
- ---------------------------------------------------------
Distribution fees-Class C 3,320,258
- ---------------------------------------------------------
Directors' fees and expenses 2,317
- ---------------------------------------------------------
Total expenses 7,715,443
- ---------------------------------------------------------
Less: Fees waived by advisor (1,184,959)
- ---------------------------------------------------------
Net expenses 6,530,484
- ---------------------------------------------------------
Net investment income 4,875,270
- ---------------------------------------------------------
REALIZED AND UNREALIZED GAIN FROM
INVESTMENT SECURITIES:
Net realized gain from investment
securities 56,929,335
- ---------------------------------------------------------
Change in net unrealized appreciation of
investment securities 6,611,793
- ---------------------------------------------------------
Net gain from investment securities 63,541,128
- ---------------------------------------------------------
Net increase in net assets resulting from
operations $ 68,416,398
- ---------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
11
<PAGE> 14
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND THE YEAR ENDED DECEMBER 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 4,875,270 $ 8,482,076
- -----------------------------------------------------------------------------------------
Net realized gain from investment securities 56,929,335 59,176,179
- -----------------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities 6,611,793 11,782,197
- -----------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 68,416,398 79,440,452
- -----------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (374,318) (693,499)
- -----------------------------------------------------------------------------------------
Class B (33,788) (14,661)
- -----------------------------------------------------------------------------------------
Class C (3,249,432) (7,001,855)
- -----------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains on
investment securities:
Class A -- (3,877,358)
- -----------------------------------------------------------------------------------------
Class B -- (270,410)
- -----------------------------------------------------------------------------------------
Class C -- (56,203,971)
- -----------------------------------------------------------------------------------------
Share transactions-net:
Class A 377,567 21,305,857
- -----------------------------------------------------------------------------------------
Class B 8,467,839 3,715,719
- -----------------------------------------------------------------------------------------
Class C 102,707,340 55,402,752
- -----------------------------------------------------------------------------------------
Net increase in net assets 176,311,606 91,803,026
- -----------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 720,133,543 628,330,517
- -----------------------------------------------------------------------------------------
End of period $896,445,149 $720,133,543
=========================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $621,570,956 $510,018,210
- -----------------------------------------------------------------------------------------
Undistributed net investment income 2,155,843 938,111
- -----------------------------------------------------------------------------------------
Undistributed net realized gain from investment securities 60,375,107 3,445,772
- -----------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 212,343,243 205,731,450
- -----------------------------------------------------------------------------------------
$896,445,149 $720,133,543
- -----------------------------------------------------------------------------------------
</TABLE>
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
(UNAUDITED)
NOTE 1-SIGNIFICANT ACCOUNTING POLICIES
AIM Advisor Flex Fund (the "Fund") is a series portfolio of AIM Advisor Funds,
Inc. (the "Company"). The Company is a Maryland corporation and is registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end series management investment company consisting of four 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 closing bid price on that day. Each
security reported on the NASDAQ National Market System is valued at the last
sales price on the valuation date, or absent a last sales price, at the
closing bid price. Debt obligations (including convertible
12
<PAGE> 15
bonds) are valued on the basis of prices provided by an independent pricing
service. Prices provided by the pricing service may be determined without
exclusive reliance on quoted prices, and may reflect appropriate factors
such as yield, type of issue, coupon rate and maturity date. Securities for
which market prices are not provided by any of the above methods are valued
based upon quotes furnished by independent sources and are valued at the
last bid price in the case of equity securities and in the case of debt
obligations, the mean between the last bid and asked prices. Securities for
which market quotations are not readily available or are questionable are
valued at fair value as determined in good faith by or under the supervision
of the Company's officers in a manner specifically authorized by the Board
of Directors of the Company. Short-term obligations having 60 days or less
to maturity are valued at amortized cost which approximates market value.
Generally, trading in foreign securities is substantially completed each day
at various times prior to the close of the New York Stock Exchange. The
values of such securities used in computing the net asset value of the
Fund's shares are determined as of such times. Foreign currency exchange
rates are also generally determined prior to the close of the New York Stock
Exchange. Occasionally, events affecting the values of such securities and
such exchange rates may occur between the times at which they are determined
and the close of the New York Stock Exchange which will not be reflected in
the computation of the Fund's net asset value. If events materially
affecting the value of such securities occur during such period, then these
securities will be valued at their fair value as determined in good faith by
or under the supervision of the Board of Directors.
B. Securities Transactions, Investment Income and Distributions-Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date. Such distributions are
declared and paid quarterly.
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 0.75% of
the Fund's average daily net assets. AIM has entered into a sub-advisory
agreement with INVESCO Capital Management, Inc. ("ICM") whereby AIM pays ICM an
annual rate of 0.20% of the Fund's average daily net assets.
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
six months ended June 30, 1999, AIM was paid $443,754 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 six months ended June 30, 1999, AIM voluntarily waived
operating services fees in the amount of $1,162,626.
Pursuant to the amended operating services agreement effective July 1, 1999
the Fund shall pay costs incurred for providing operating services, such as
accounting, legal (except litigation), dividend disbursing, transfer agency,
registrar, custodial, shareholder reporting, sub-accounting and recordkeeping
services and functions, including, but not limited to, registration fees,
shareholder meeting fees, and proxy statement and shareholder report expenses.
Further, the Fund's operating expenses are limited to 0.45% of the Fund's
average daily net assets. AIM no longer receives payments under the amended
operating services agreement.
Effective July 1, 1999, the Company entered into a master administrative
services agreement with AIM. The Fund has agreed to pay AIM for certain
administrative costs incurred in providing accounting services to the Fund.
Effective July 1, 1999, the Company entered into a transfer agency and service
agreement with A I M Fund Services, Inc. ("AFS"). The fund has agreed to pay AFS
a fee for providing transfer agency and shareholder services to the Fund.
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 contractually 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 six months ended June 30, 1999 the Class A, Class B and
Class C shares paid AIM Distributors $55,830,
13
<PAGE> 16
$31,023 and $3,320,258, respectively, as compensation under the Plans. During
the six months ended June 30, 1999, AIM Distributors waived fees of $22,333 for
the Class A shares.
AIM Distributors received commissions of $13,396 from sales of Class A shares
of the Fund during the six months ended June 30, 1999. 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 six months ended June 30,
1999, AIM Distributors received commissions of $60,099 in contingent deferred
sales charges imposed on redemptions of shares. Certain officers and directors
of the Company are officers and directors of AIM, AFS, and AIM Distributors.
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) $975,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. Interest on
borrowings under the line of credit is payable on maturity or prepayment date.
During the six months ended June 30, 1999, the Fund did not borrow under the
line of credit agreement. The funds which are party to the line of credit are
charged a commitment fee of 0.09% on the unused balance of the committed line.
The commitment fee is allocated among the funds based on their respective
average net assets for the period. Prior to May 28, 1999, the commitment fee was
0.05%.
NOTE 5-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the six months ended June 30, 1999 was
$220,710,263 and $160,641,066, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of June 30, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment
securities $ 226,687,224
- ---------------------------------------------------------------
Aggregate unrealized (depreciation) of
investment securities (14,343,981)
- ---------------------------------------------------------------
Net unrealized appreciation of investment
securities $ 212,343,243
===============================================================
Investments have the same cost for tax and financial statement
purposes.
</TABLE>
14
<PAGE> 17
NOTE 6-CAPITAL STOCK
Changes in the Fund's capital stock outstanding during the six months ended June
30, 1999 and the year ended December 31, 1998 were as follows:
<TABLE>
<CAPTION>
JUNE 30, 1999 DECEMBER 31, 1998
-------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Sold:
Class A 441,954 $ 8,940,200 1,076,842 $ 22,390,887
- ---------------------------------------------------------------------------------------------------------------------
Class B* 217,331 4,392,826 175,059 3,648,126
- ---------------------------------------------------------------------------------------------------------------------
Class C 2,984,899 60,418,223 5,318,582 109,967,149
- ---------------------------------------------------------------------------------------------------------------------
Issued in connection with acquisition**:
Class A 623,953 11,614,157 -- --
- ---------------------------------------------------------------------------------------------------------------------
Class B 256,293 4,785,508 -- --
- ---------------------------------------------------------------------------------------------------------------------
Class C 7,871,114 146,770,808 -- --
- ---------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of dividends:
Class A 17,529 357,816 223,596 4,399,200
- ---------------------------------------------------------------------------------------------------------------------
Class B* 1,526 31,411 14,140 277,225
- ---------------------------------------------------------------------------------------------------------------------
Class C 148,230 3,041,326 3,067,888 60,325,811
- ---------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (988,451) (20,534,606) (266,823) (5,484,230)
- ---------------------------------------------------------------------------------------------------------------------
Class B* (36,260) (741,906) (10,191) (209,632)
- ---------------------------------------------------------------------------------------------------------------------
Class C (5,290,486) (107,523,017) (5,531,566) (114,890,208)
- ---------------------------------------------------------------------------------------------------------------------
6,247,632 $ 111,552,746 4,067,527 $ 80,424,328
=====================================================================================================================
</TABLE>
* Class B shares commenced sales on March 3, 1998.
** On June 21, 1999, pursuant to a plan of reorganization and termination, AIM
MultiFlex Fund ("MultiFlex Fund") transferred all of its assets to the Fund.
The Fund assumed all of the liabilities of the MultiFlex Fund. Shareholders
of the MultiFlex Fund were issued full and fractional shares of the
applicable class of the Fund. The acquisition, which was approved by the
shareholders of MultiFlex Fund on June 16, 1999, was accomplished by an
exchange of 8,751,360 shares of the Fund for the 15,054,075 shares then
outstanding of the MultiFlex Fund. Based on the opinion of Fund counsel, the
reorganization qualified as a tax-free reorganization for federal income tax
purposes with no gain or loss recognized to the Funds or its shareholders.
MultiFlex Fund's net assets, including $21,805,397 of unrealized
appreciation, were combined with the Fund for total net assets after the
acquisition of $892,863,343.
15
<PAGE> 18
NOTE 7-FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share of Class A capital stock
outstanding during the six months ended June 30, 1999 and each of the years in
the two-year period ended December 31, 1998, for a share of Class B capital
stock outstanding during the six months ended June 30, 1999 and the period March
3, 1998 (date sales commenced) through December 31, 1998, and for a share of
Class C capital stock outstanding during the six months ended June 30, 1999 and
each of the years in the five-year period ended December 31, 1998.
<TABLE>
<CAPTION>
CLASS A(A) CLASS B
--------------------------------- ------------------------
DECEMBER 31,
JUNE 30, --------------------- JUNE 30, DECEMBER 31,
1999 1998 1997(B)(C) 1999 1998
-------- ------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 20.06 $ 19.74 $ 16.63 $ 20.06 $20.69
- ------------------------------------------------------------ ------- ------- ---------- ------- ------
Income from investment operations:
Net investment income 0.21 0.39 0.41 0.13 0.22
- ------------------------------------------------------------ ------- ------- ---------- ------- ------
Net gains on securities (both realized and unrealized) 1.18 2.16 3.63 1.18 1.22
- ------------------------------------------------------------ ------- ------- ---------- ------- ------
Total from investment operations 1.39 2.55 4.04 1.31 1.44
- ------------------------------------------------------------ ------- ------- ---------- ------- ------
Less distributions:
Dividends from net investment income (0.18) (0.39) (0.43) (0.10) (0.23)
- ------------------------------------------------------------ ------- ------- ---------- ------- ------
Distributions from net realized gains -- (1.84) (0.50) -- (1.84)
- ------------------------------------------------------------ ------- ------- ---------- ------- ------
Total distributions (0.18) (2.23) (0.93) (0.10) (2.07)
- ------------------------------------------------------------ ------- ------- ---------- ------- ------
Net asset value, end of period $ 21.27 $ 20.06 $ 19.74 $ 21.27 $20.06
============================================================ ======= ======= ========== ======= ======
Total return(d) 6.96% 13.26% 24.60% 6.56% 7.25%
============================================================ ======= ======= ========== ======= ======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $51,100 $46,286 $ 25,151 $13,146 $3,592
============================================================ ======= ======= ========== ======= ======
Ratio of expenses to average net assets(e) 1.12%(f) 1.23% 1.45% 1.87%(f) 2.00%(g)
============================================================ ======= ======= ========== ======= ======
Ratio of net investment income to average net assets(h) 2.07%(f) 1.99% 2.34% 1.32%(f) 1.22%(g)
============================================================ ======= ======= ========== ======= ======
Portfolio turnover rate 22% 34% 17% 22% 34%
============================================================ ======= ======= ========== ======= ======
</TABLE>
<TABLE>
<S> <C>
(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) Calculated using average shares outstanding.
(d) Does not deduct sales charges and for periods less than one
year is not annualized.
(e) After fee waivers and/or expense reimbursements. Ratio of
expenses to average net assets prior to fee waivers and/or
expense reimbursements were 1.55% (annualized), 1.52% and
1.55% for 1999-1997 for Class A and 2.20% (annualized), and
2.19% (annualized) for 1999-1998 for Class B.
(f) Ratios are annualized and based on average net assets of
$45,035,263 and $6,256,011 for Class A and Class B,
respectively.
(g) Annualized.
(h) After fee waivers and/or expense reimbursements. Ratio of
net investment income to average net assets prior to fee
waivers and/or expense reimbursements were 1.64%
(annualized), 1.70% and 2.24% for 1999-1997 for Class A and
0.99% (annualized) and 1.03% (annualized) for 1998 for Class
B.
</TABLE>
<TABLE>
<CAPTION>
CLASS C(A)
---------------------------------------------------------------------
DECEMBER 31,
JUNE 30, --------------------------------------------------------
1999 1998 1997(B)(C) 1996 1995 1994
-------- -------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 20.06 $ 19.74 $ 16.63 $ 15.66 $ 12.63 $ 13.54
- ---------------------------------------------------------- -------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.13 0.25 0.30 0.30 0.32 0.32
- ---------------------------------------------------------- -------- -------- -------- -------- -------- --------
Net gains (losses) on securities (both realized and
unrealized) 1.18 2.14 3.60 1.81 3.09 (0.23)
- ---------------------------------------------------------- -------- -------- -------- -------- -------- --------
Total from investment operations 1.31 2.39 3.90 2.11 3.41 0.09
- ---------------------------------------------------------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.10) (0.23) (0.29) (0.29) (0.32) (0.31)
- ---------------------------------------------------------- -------- -------- -------- -------- -------- --------
Distributions from net realized gains -- (1.84) (0.50) (0.85) (0.06) (0.69)
- ---------------------------------------------------------- -------- -------- -------- -------- -------- --------
Total distributions (0.10) (2.07) (0.79) (1.14) (0.38) (1.00)
- ---------------------------------------------------------- -------- -------- -------- -------- -------- --------
Net asset value, end of period $ 21.27 $ 20.06 $ 19.74 $ 16.63 $ 15.66 $ 12.63
========================================================== ======== ======== ======== ======== ======== ========
Total return(d) 6.56% 12.41% 23.64% 13.61% 27.30% 0.64%
========================================================== ======== ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $832,199 $670,256 $603,179 $489,918 $399,162 $243,848
========================================================== ======== ======== ======== ======== ======== ========
Ratio of expenses to average net assets 1.87%(f) 2.00%(e) 2.20% 2.26% 2.28% 2.25%
========================================================== ======== ======== ======== ======== ======== ========
Ratio of net investment income to average net assets 1.32%(f) 1.22%(g) 1.59% 1.81% 2.28% 2.32%
========================================================== ======== ======== ======== ======== ======== ========
Portfolio turnover rate 22% 34% 17% 26% 5% 36%
========================================================== ======== ======== ======== ======== ======== ========
</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) Calculated using average shares outstanding.
(d) Does not deduct contingent deferred sales charges and is not annualized for
periods less than one year.
(e) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
2.19% (annualized) and 2.19% for 1999-1998.
(f) Ratios are annualized and based on average net assets of $669,554,859.
(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 0.99% (annualized) and 1.03% for 1999-1998.
16
<PAGE> 19
<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; Carol F. Relihan A I M Advisors, Inc.
Formerly Director, President, and Senior Vice President and Secretary 11 Greenway Plaza
Chief Executive Officer Suite 100
COMSAT Corporation Gary T. Crum Houston, TX 77046
Senior Vice President
Owen Daly II SUB-ADVISOR
Director Dana R. Sutton
Cortland Trust Inc. Vice President and Treasurer INVESCO Capital Management, Inc.
1315 Peachtree Street, N.E.
Edward K. Dunn Jr. Robert G. Alley Atlanta, GA 30309
Chairman, Mercantile Mortgage Corp.; Vice President
Formerly Vice Chairman and President, TRANSFER AGENT
Mercantile-Safe Deposit & Trust Co.; and Stuart W. Coco
President, Mercantile Bankshares Vice President A I M Fund Services, Inc.
P.O. Box 4739
Jack Fields Melville B. Cox Houston, TX 77210-4739
Chief Executive Officer Vice President
Texana Global, Inc.; CUSTODIAN
Formerly Member Karen Dunn Kelley
of the U.S. House of Representatives Vice President State Street Bank and Trust Company
225 Franklin Street
Carl Frischling Edgar M. Larsen Boston, MA 02110
Partner Vice President
Kramer, Levin, Naftalis & Frankel LLP COUNSEL TO THE FUND
Mary J. Benson
Robert H. Graham Assistant Vice President and Ballard Spahr
President and Chief Executive Officer Assistant Treasurer Andrews & Ingersoll, LLP
A I M Management Group Inc. 1735 Market Street
Sheri Morris Philadelphia, PA 19103
Prema Mathai-Davis Assistant Vice President and
Chief Executive Officer, YWCA of the U.S.A., Assistant Treasurer COUNSEL TO THE DIRECTORS
Commissioner, New York City Dept. for
the Aging; and member of the Board of Directors, Renee A. Friedli Kramer, Levin, Naftalis & Frankel LLP
Metropolitan Transportation Authority of Assistant Secretary 919 Third Avenue
New York State New York, NY 10022
P. Michelle Grace
Lewis F. Pennock Assistant Secretary DISTRIBUTOR
Attorney
Jeffrey H. Kupor A I M Distributors, Inc.
Louis S. Sklar Assistant Secretary 11 Greenway Plaza
Executive Vice President Suite 100
Hines Interests Nancy L. Martin Houston, TX 77046
Limited Partnership Assistant Secretary
Ofelia M. Mayo
Assistant Secretary
Lisa A. Moss
Assistant Secretary
Kathleen J. Pflueger
Assistant Secretary
Samuel D. Sirko
Assistant Secretary
Stephen I. Winer
Assistant Secretary
</TABLE>
FORMER AIM MULTIFLEX FUND SHAREHOLDERS -- REQUIRED FEDERAL INCOME TAX
INFORMATION
AIM MultiFlex Class A, Class B and Class C shares paid ordinary dividends in the
amount of $0.12, $0.0715 and $0.0715 per share, respectively, to shareholders
during the Fund's tax year ended June 21, 1999. Of this amount, 59.52% is
eligible for the dividends received deduction for corporations.
The Fund also distributed long-term capital gains of $21,129,138 for the
Fund's tax year ended June 21, 1999. Of long-term capital gains distributed,
100% is 20% rate gain.
REQUIRED STATE INCOME TAX INFORMATION
Of the total ordinary dividends paid, 7.52% was derived from U.S. Treasury
obligations.
<PAGE> 20
THE AIM FAMILY OF FUNDS --Registered Trademark--
<TABLE>
<S> <C> <C>
GROWTH FUNDS MONEY MARKET FUNDS A I M Management Group Inc. has
AIM Aggressive Growth Fund(1) AIM Money Market Fund provided leadership in the
AIM Blue Chip Fund AIM Tax-Exempt Cash Fund mutual-fund industry since 1976 and
AIM Capital Development Fund managed approximately $121 billion
AIM Constellation Fund INTERNATIONAL GROWTH FUNDS in assets for more than 6.3 million
AIM Dent Demographic Trends Fund AIM Advisor International Value Fund shareholders, including individual
AIM Large Cap Growth Fund AIM Asian Growth Fund investors, corporate clients, and
AIM Mid Cap Equity Fund(A) AIM Developing Markets Fund financial institutions as of June 30,
AIM Select Growth Fund AIM Europe Growth Fund 1999.
AIM Small Cap Growth Fund(B) AIM European Development Fund The AIM Family of Funds
AIM Small Cap Opportunities Fund AIM International Equity Fund --Registered Trademark--is distributed
AIM Value Fund AIM Japan Growth Fund nationwide, and AIM today is the
AIM Weingarten Fund AIM Latin American Growth Fund 10th-largest mutual-fund complex in
AIM New Pacific Growth Fund the United States in assets under
GROWTH & INCOME FUNDS management, according to Strategic
AIM Advisor Flex Fund GLOBAL GROWTH FUNDS Insight, an independent mutual-fund
AIM Advisor Large Cap Value Fund AIM Global Aggressive Growth Fund monitor.
AIM Advisor Real Estate Fund AIM Global Growth Fund
AIM Balanced Fund
AIM Basic Value Fund(C) GLOBAL GROWTH & INCOME FUNDS
AIM Charter Fund AIM Global Growth & Income Fund
AIM Global Utilities Fund
INCOME FUNDS
AIM Floating Rate Fund GLOBAL INCOME FUNDS
AIM High Yield Fund AIM Emerging Markets Debt Fund(D)
AIM High Yield Fund II AIM Global Government Income Fund
AIM Income Fund AIM Global Income Fund
AIM Intermediate Government Fund AIM Strategic Income Fund
AIM Limited Maturity Treasury Fund
THEME FUNDS
TAX-FREE INCOME FUNDS AIM Global Consumer Products and Services Fund
AIM High Income Municipal Fund AIM Global Financial Services Fund
AIM Municipal Bond Fund AIM Global Health Care Fund
AIM Tax-Exempt Bond Fund of Connecticut AIM Global Infrastructure Fund
AIM Tax-Free Intermediate Fund AIM Global Resources Fund
AIM Global Telecommunications and Technology Fund(E)
AIM Global Trends Fund(F)
</TABLE>
(1) AIM Aggressive Growth Fund reopened to new investors November 16, 1998. (A)
On September 8, 1998, AIM Mid Cap Growth Fund was renamed AIM Mid Cap Equity
Fund. (B) On September 8, 1998, AIM Small Cap Equity Fund was renamed AIM Small
Cap Growth Fund. (C) On September 8, 1998, AIM America Value Fund was renamed
AIM Basic Value Fund. (D) On September 8, 1998, AIM Global High Income Fund was
renamed AIM Emerging Markets Debt Fund. (E) On June 1, 1999, AIM Global
Telecommunications Fund was renamed AIM Global Telecommunications and Technology
Fund. (F) On September 8, 1998, AIM New Dimension Fund was renamed AIM Global
Trends Fund. For more complete information about any AIM Fund(s), including
sales charges and expenses, ask your financial consultant or securities dealer
for a free prospectus(es). Please read the prospectus(es) carefully before you
invest or send money.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE--Registered Trademark--
