<PAGE> 1
ANNUAL REPORT / JULY 31 2000
AIM ADVISOR FLEX FUND
[COVER IMAGE]
[AIM LOGO APPEARS HERE]
--Registered Trademark--
<PAGE> 2
[ COVER IMAGE ]
-------------------------------------
THE CIRCUS BY GEORGES PIERRE SEURAT
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 INVESTMENTS
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 they reflect
the reinvestment of 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 its Class A shares due to different sales-charge structure and class
expenses.
o Since our last report to you, the fund's fiscal year end was changed from
December 31 to July 31. Certain information in the financial pages of this
report and information concerning fund distributions, if any, are for the
period 12/31/99-7/31/00. The portfolio managers' discussion and the
performance information presented are for the period 7/31/99-7/31/00.
o For the seven-month period ended 7/31/00, the fund paid distributions of
$0.24 per Class A share and $0.18 per Class B and Class C share.
o The fund's cumulative total returns at net asset value for the seven-month
period ended 7/31/00 were as follows: Class A shares, -4.85%; Class B shares
-5.33%; Class C shares, -5.28%.
o The fund's average annual total returns (including sales charges) for
periods ended 6/30/00 (the most recent calendar quarter-end) are as
follows: Class A shares, one year, -15.90%; inception (12/31/96), 7.07%.
Class B shares, one year, -15.50%; inception (3/3/98), -0.59%. Class C
shares, one year, -12.37%; five years, 10.27%; ten years, 10.72%;
inception (2/24/88), 10.37%.
o The fund's investment return and principal value will fluctuate, so an
investor's shares (when redeemed) may be worth more or less than their
original cost.
ABOUT INDEXES AND OTHER PERFORMANCE BENCHMARKS CITED IN THIS REPORT:
o The unmanaged Lehman Government/Credit Bond Index, which represents the
performance of intermediate- and long-term government and investment-grade
corporate debt securities, is compiled by Lehman Brothers, a well-known
global investment bank.
o The unmanaged Lipper Flexible Portfolio Fund Index represents an average of
the 30 largest flexible-portfolio funds tracked by Lipper, Inc., an
independent mutual fund performance monitor.
o The unmanaged Standard & Poor's Composite Index of 500 Stocks (the S&P 500)
is widely regarded as representative of the performance of the U.S. stock
market.
o An investment cannot be made in an index. Unless otherwise indicated, index
results include reinvested dividends, and they do not reflect sales charges.
AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OF A BANK AND IS NEITHER GUARANTEED
NOR INSURED 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 shareholders or to persons
who have received a current prospectus of the fund.
AIM ADVISOR FLEX FUND
<PAGE> 3
ANNUAL REPORT / CHAIRMAN'S LETTER
Dear Fellow Shareholder:
When we started AIM in 1976, we had only a table, two chairs
[PHOTO OF and a telephone. At the time, Bob Graham, Gary Crum and I
Charles T. had the idea of creating a mutual fund company that put
Bauer, people first. Our slogan, "people are the product," means
Chairman of that people--our employees and our investors--are our
the Board of company.
THE FUND Almost a quarter-century later, we've grown to more
APPEARS HERE] than eight million investors, with $176 billion in assets
under management. Over that time, the industry as a whole
[PHOTO OF has grown from $51 billion in assets to more than $7
Robert H. trillion today. I never dreamed we would see such phenomenal
Graham growth. You are the main reason for our success, and I want
APPEARS HERE] you to know how much I appreciate your loyalty and trust
over the past 24 years.
Usually in this letter I review market activity during
the period covered by the report. This time, I'd just like
to say thank you. I am retiring as chairman of the AIM Funds effective September
30, and as chairman of AIM effective December 31, 2000. Bob Graham, whose
picture appears under mine, will succeed me as AIM's chairman and chairman of
the AIM Funds. Gary Crum will remain president of A I M Capital Management,
Inc., leading our investment division. I am enormously proud to leave AIM in
such capable hands.
I'm also very proud of our team of employees, now more than 2,500 strong.
Because of their collective commitment to excellence and ethical business
practices, AIM has earned the trust of investors and financial advisors alike.
And every employee, from portfolio managers to client services representatives,
is dedicated to serving our shareholders.
Rest assured that nothing at AIM will change because of my retirement. You
can still depend on this company to manage your money responsibly and provide
you with top-notch service. As chairman of AIM and chairman of the AIM Funds,
Bob is committed to preserving the things that have made AIM great in the past
and positioning it to succeed in the future. And Gary is dedicated to
maintaining the quality and long-term performance you've come to expect from
AIM.
In the pages that follow, the managers of your fund comment on recent market
activity, how they have managed your fund over the past year and their outlook
for the coming months. We trust you will find their comments helpful.
If you have any questions or comments, please contact us through our Web
site, www.aimfunds.com, or call our Client Services department at 800-959-4246
during normal business hours. Information about your account is available at our
Web site and on our automated AIM Investor Line, 800-246-5463.
Thank you again for the support and trust you've shown us. I feel privileged
to have helped you with your financial goals, and I wish you success in all your
endeavors.
Sincerely,
/s/ CHARLES T. BAUER
Charles T. Bauer
Chairman, A I M Advisors, Inc.
AIM ADVISOR FLEX FUND
<PAGE> 4
ANNUAL REPORT / MANAGERS' OVERVIEW
VOLATILE YEAR CRIMPS FUND'S EARNINGS
WHAT WERE THE FUND'S RESULTS DURING THE PAST YEAR?
A turbulent environment for both stocks and bonds produced disappointing results
for the fund this fiscal year. The cumulative total return on Class A shares was
-8.62%, while Class B and Class C shares returned -9.34%. These figures are
calculated at net asset value (that is, excluding sales charges).
WHAT WERE THE PREVAILING MARKET CONDITIONS DURING THE PERIOD?
While stock valuations continued to rise during the latter part of 1999,
volatility has been the strongest theme in the equity markets in 2000. In
particular, investors began to question the high market valuations of many
technology-oriented stocks. During the spring, they withdrew from that sector in
droves, effecting a major price correction.
For bonds, 1999 was one of the worst years on record. As the burgeoning
economy continued to drive up demand for credit, the Federal Reserve Board (the
Fed) worried that excessively rapid growth would set off inflation, and
continued to raise the federal funds rate to dampen demand. Fed moves, like
medicine, require time to work. In this case, it took all year. The tightening
cycle, which began in June 1999, began to show results six rate hikes later.
Leading economic indicators showed mixed signals, but some had begun to point to
slowing growth, and the Fed decided not to raise rates again in June.
Another event in 2000 may produce permanent changes in the U.S. bond market.
Capitalizing on the recent federal budget surplus, the Treasury Department
initiated a program of buying back 30-year Treasury bonds to reduce the federal
debt. This created a shortage of long-term Treasury bonds, driving their prices
up and their yields below those of shorter-term instruments, a condition called
an inverted yield curve. The Treasury has announced plans to issue fewer bonds
across all maturity ranges. This step appears likely to cause Treasury security
prices to rise in response to the more limited supply.
WHAT MEASURES DID THE FUND TAKE TO DEAL WITH THESE CONDITIONS?
The fund maintained its value-oriented investment discipline. As the period
began, the fund remained in an overweight position relative to the benchmark in
those sectors offering the strongest fundamentals with the most attractive
valuations, namely basic materials, capital goods and consumer cyclicals. The
third quarter of 1999 turned out to be a difficult one for equities overall. Ten
of the 11 sectors in the S&P 500 posted negative returns, with technology the
only sector in positive territory. Due to its value bias, the fund was
significantly underweight in technology stocks,
-------------------------------------
VOLATILITY HAS BEEN THE
STRONGEST THEME IN THE EQUITY
MARKETS IN 2000.
-------------------------------------
[IMAGE]
PORTFOLIO COMPOSITION
As of 7/31/00, based on total net assets
<TABLE>
<CAPTION>
=============================================================================================
TOP 10 INDUSTRIES TOP 10 EQUITY HOLDINGS
---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Financial (Diversified) 6.68% 1. Intel Corp. 2.49%
2. Real Estate Investment Trusts 5.98 2. Citigroup Inc. 2.36
3. Oil (International Integrated) 5.14 3. Exxon Mobil Corp. 2.00
4. Banks (Major Regional) 5.06 4. General Electric Co. 1.79
5. Manufacturing (Diversified) 4.81 5. Morgan Stanley Dean Witter & Co. 1.65
6. Electronics (Semiconductors) 3.86 6. Microsoft Corp 1.46
7. Telecommunications (Long Distance) 3.64 7. Marsh & McLennan Cos., Inc. 1.36
8. Health Care (Diversified) 3.56 8. AT&T Corp. 1.30
9. Computers (Software & Services) 3.47 9. Ford Motor Co. 1.30
10. Banks (Money Center) 2.89 10. FleetBoston Financial Corp. 1.30
=============================================================================================
</TABLE>
PERCENTAGE OF HOLDINGS
================================================================================
CORPORATE NOTES 11%
U.S. GOVERNMENT AGENCY 7%
U.S. TREASURY 7%
COMMON STOCKS 75%
NUMBER OF HOLDINGS: 159
================================================================================
The fund's portfolio composition is subject to change, and there is no assurance
that the fund will continue to hold any particular security.
================================================================================
See important fund and index disclosures inside front cover.
AIM ADVISOR FLEX FUND
2
<PAGE> 5
ANNUAL REPORT / MANAGERS' OVERVIEW
and this was the most significant drag on the fund's equity returns during the
third and fourth quarters.
By contrast, income from the fixed-income portion of the fund's portfolio
exceeded the market's performance, as measured by the Lehman Government/ Credit
Bond Index, during the fourth quarter. The fund's overweight position in
corporate bonds and mortgages was positive for performance. In line with the
inverted yield curve, securities with shorter durations provided better returns
during that quarter.
The first quarter of 2000 saw a great deal of volatility develop in both
bond and stock markets. Corporate bonds and mortgages, which had done well in
the previous quarter, now performed poorly, pulling down returns. On the equity
side, the fund's holdings within the communications-services and transportation
sectors outperformed the S&P 500's similar holdings, giving returns a boost. The
biggest contributor to the fund's underperformance was the market's continued
preference for growth over value. Among some technology-oriented stocks, share
prices had risen so much that investors became concerned that they might be
overvalued. In mid-April, this sentiment culminated in a steep drop in the
prices of tech stocks.
The fund's underweight position in technology stocks was a positive factor
in the second quarter of 2000, and the fund's specific technology holdings fared
much better than those in the S&P 500 during the market correction. But starting
in June, investors flooded back into high-growth tech stocks, which now had more
attractive valuations because they had been sold off in previous months. This
change in investor sentiment took a toll on value stocks, placing the fund at a
bit of a disadvantage at the end of the fiscal year.
WHAT EQUITY HOLDINGS LOOK PARTICULARLY ATTRACTIVE RIGHT NOW?
Among our significant holdings at the close of the fiscal year is Intel. This
manufacturer of microprocessors, boards, systems and software is a major
supplier to other industries. It produces components used in personal computers,
digital cellular communications devices, laser printers and automotive systems
as well as large Internet infrastructure installations such as hubs, switches
and routers. Its second-quarter revenue was up 23% from the second quarter of
1999, and its earnings per share (including acquisition-related costs) were up
80% for the same period.
Citigroup, a diversified financial-services corporation, provides banking,
loans, credit cards, insurance and other financial services to a global customer
base. Citigroup's core income for the first six months of 2000 rose 36% from the
first half of 1999.
Worldwide energy giant Exxon Mobil, formed by the November 1999 merger of
two major players in the petroleum and petrochemical industry, reports that the
benefits of the merger have turned out to be "significantly greater than
previously forecast." The combined entity's first-half cash surplus of more than
$8 billion enabled it to reduce net debt, leaving the company in a very strong
financial position.
WHAT IS YOUR OUTLOOK FOR THE COMING MONTHS?
As of the end of the fiscal year, the fund continued to hold more equities than
bonds, based on the expectation of higher risk-adjusted returns in the equity
markets. Over time, the historical spread between the expected return on stocks
and the yield-to-maturity of longer-term bonds has averaged 3%. At that level,
the normal asset mix would be 60% stocks and 40% bonds. However, in view of the
extreme fluidity of market conditions, the fund maintains a flexible approach to
the exact mix. The current spread is somewhat wider than historical norms, and
the fund maintains a higher-than-neutral equity position.
[IMAGE]
<TABLE>
<CAPTION>
=====================================================================================
TOP 10 FIXED-INCOME HOLDINGS
-------------------------------------------------------------------------------------
% OF NET
COUPON MATURITY ASSETS
<S> <C> <C> <C>
1. Manitoba (Province of) 7.50% 2/22/10 0.85%
2. Wal-Mart Stores, Inc. 6.55 8/10/04 0.82
3. Bayerische Landesbank NY 6.38 10/15/05 0.81
4. Motorola, Inc. 6.50 3/01/08 0.66
5. Wachovia Corp. 6.25 8/04/08 0.63
6. Atlantic Richfield Co. 5.55 4/15/03 0.62
7. Anheuser-Busch Cos., Inc. 5.38 9/15/08 0.61
8. Commercial Credit Co. 5.55 2/15/01 0.55
9. Diageo Capital PLC (United Kingdom) 6.63 6/24/04 0.54
10. Bank of America Corp. 6.63 6/15/04 0.54
=====================================================================================
</TABLE>
================================================================================
NEW FISCAL YEAR-END
Since our last report to you, AIM Advisor Flex Fund's fiscal year-end was
changed from December 31 to July 31. Going forward, you will receive an annual
report dated July 31 and a semiannual report dated January 31 each year.
================================================================================
See important fund and index disclosures inside front cover.
AIM ADVISOR FLEX FUND
3
<PAGE> 6
ANNUAL REPORT / PERFORMANCE HISTORY
YOUR FUND'S LONG-TERM PERFORMANCE
RESULTS OF A $10,000 INVESTMENT
AIM ADVISOR FLEX FUND VS. BENCHMARK INDEXES
7/31/90-7/31/00
in thousands
================================================================================
AIM Advisor Flex Fund, Class C Shares $27,483
Lipper Flexible Portfolio Fund Index $31,276
S&P 500 $50,755
================================================================================
================================================================================
AIM ADVISOR FLEX, LIPPER FLEXIBLE
CLASS C SHARES S&P'S 500 PORTFOLIO FUND INDEX
--------------------------------------------------------------------------------
7/90 10,000 9,097 9,500
7/91 11,227 11,273 11,332
7/92 12,912 12,712 12,805
7/93 13,779 13,820 14,136
7/94 14,460 14,532 14,601
7/95 17,409 18,320 17,009
7/96 19,165 21,353 18,507
7/97 25,202 23,851 32,480
7/98 27,664 38,750 26,658
7/99 30,312 46,579 29,443
7/00 27,483 50,755 31,276
Source: Lipper, Inc.
Past performance cannot guarantee comparable future results.
================================================================================
MARKET VOLATILITY CAN SIGNIFICANTLY IMPACT SHORT-TERM PERFORMANCE. RESULTS
OF AN INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL
PERFORMANCE SHOWN.
AVERAGE ANNUAL TOTAL RETURNS
As of 7/31/00, including sales charges
================================================================================
CLASS A SHARES
Inception (12/31/96) 6.62%
1 year -13.63*
*-8.62% excluding sales charges
CLASS B SHARES
Inception (3/3/98) -1.00%
1 year -13.35*
* -9.34% excluding CDSC
CLASS C SHARES
Inception (2/24/88) 10.20%
10 years 10.64
5 years 9.56
1 year -10.14*
*-9.34% excluding CDSC
================================================================================
Your fund's total return includes sales charges, expenses and management fees.
The performance of the fund's Class B and Class C shares will differ from that
of its Class A shares due to different sales-charge structure and expenses. For
fund performance calculations and descriptions of the indexes cited on this
page, please see the inside front cover.
================================================================================
ABOUT THIS CHART
This chart compares your fund's Class C shares to benchmark indexes. It is
intended to give you an idea of how your fund performed compared to those
indexes over the period 7/31/90-7/31/00. It is important to understand the
differences between your fund and an index. An index measures the performance of
a hypothetical portfolio. A market index such as the S&P 500 is unmanaged,
incurring no sales charges, expenses or fees. If you could buy all the
securities that make up a market index, you would incur expenses that would
affect the return on your investment. It is important to note that the S&P 500
represents the stock market only, while a portion of AIM Advisor Flex Fund is
invested in the bond market. An index of funds such as the Lipper Flexible
Portfolio Fund Index includes a number of mutual funds grouped by investment
objective. Each of those funds interprets that objective differently, and each
employs a different management style and investment strategy.
AIM ADVISOR FLEX FUND
4
<PAGE> 7
SCHEDULE OF INVESTMENTS
July 31, 2000
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS & OTHER EQUITY
INTERESTS-74.95%
ALUMINUM-0.59%
Alcoa Inc. 70,000 $ 2,117,500
--------------------------------------------------------------
AUTO PARTS & EQUIPMENT-0.36%
Cooper Tire & Rubber Co. 115,000 1,286,562
--------------------------------------------------------------
AUTOMOBILES-1.35%
Ford Motor Co. 100,000 4,656,250
--------------------------------------------------------------
Visteon Corp. 15,057 210,798
--------------------------------------------------------------
4,867,048
--------------------------------------------------------------
BANKS (MAJOR REGIONAL)-3.61%
FleetBoston Financial Corp. 130,000 4,655,625
--------------------------------------------------------------
National City Corp. 20,000 355,000
--------------------------------------------------------------
PNC Financial Services Group 70,000 3,561,250
--------------------------------------------------------------
State Street Corp. 15,000 1,505,625
--------------------------------------------------------------
Wells Fargo Co. 70,000 2,891,875
--------------------------------------------------------------
12,969,375
--------------------------------------------------------------
BANKS (MONEY CENTER)-2.08%
Bank of America Corp. 95,000 4,500,625
--------------------------------------------------------------
Chase Manhattan Corp. (The) 60,000 2,981,250
--------------------------------------------------------------
7,481,875
--------------------------------------------------------------
BEVERAGES (ALCOHOLIC)-0.90%
Anheuser-Busch Cos., Inc. 40,000 3,220,000
--------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO &
CABLE)-0.62%
Comcast Corp.-Class A(a) 65,000 2,211,016
--------------------------------------------------------------
CHEMICALS-1.35%
Dow Chemical Co. (The) 60,000 1,725,000
--------------------------------------------------------------
Du Pont (E. I.) de Nemours & Co. 20,000 906,250
--------------------------------------------------------------
Praxair, Inc. 45,000 1,780,312
--------------------------------------------------------------
Union Carbide Corp. 10,000 448,125
--------------------------------------------------------------
4,859,687
--------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-1.44%
ADC Telecommunications, Inc.(a) 40,000 1,677,500
--------------------------------------------------------------
Lucent Technologies Inc. 50,000 2,187,500
--------------------------------------------------------------
Tellabs, Inc.(a) 20,000 1,300,000
--------------------------------------------------------------
5,165,000
--------------------------------------------------------------
COMPUTERS (HARDWARE)-1.92%
Hewlett-Packard Co. 25,000 2,729,687
--------------------------------------------------------------
International Business Machines Corp. 23,000 2,586,062
--------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (HARDWARE)-(CONTINUED)
Sun Microsystems, Inc.(a) 15,000 $ 1,581,562
--------------------------------------------------------------
6,897,311
--------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES)-3.47%
Cadence Design Systems, Inc.(a) 45,000 939,375
--------------------------------------------------------------
Computer Associates International,
Inc. 90,000 2,233,125
--------------------------------------------------------------
Compuware Corp.(a) 170,000 1,360,000
--------------------------------------------------------------
Internap Voting Trust (Acquired
03/22/00; Cost $20,160)(a)(b)(c) 13,474 84,409
--------------------------------------------------------------
Microsoft Corp.(a) 75,000 5,235,937
--------------------------------------------------------------
Oracle Corp.(a) 20,000 1,503,750
--------------------------------------------------------------
Unisys Corp.(a) 115,000 1,128,437
--------------------------------------------------------------
12,485,033
--------------------------------------------------------------
CONSTRUCTION (CEMENT &
AGGREGATES)-0.12%
Hanson PLC-ADR (United Kingdom) 14,500 423,219
--------------------------------------------------------------
CONSUMER FINANCE-0.74%
Household International, Inc. 60,000 2,673,750
--------------------------------------------------------------
DISTRIBUTORS (FOOD & HEALTH)-0.50%
SUPERVALU INC. 102,200 1,807,662
--------------------------------------------------------------
ELECTRIC COMPANIES-1.13%
DTE Energy Co. 45,000 1,411,875
--------------------------------------------------------------
GPU, Inc. 40,000 1,060,000
--------------------------------------------------------------
Southern Co. (The) 65,000 1,588,437
--------------------------------------------------------------
4,060,312
--------------------------------------------------------------
ELECTRICAL EQUIPMENT-2.47%
Emerson Electric Co. 40,000 2,442,500
--------------------------------------------------------------
General Electric Co. 125,000 6,429,687
--------------------------------------------------------------
8,872,187
--------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS)-3.86%
Integrated Device Technology, Inc.(a) 19,500 1,033,500
--------------------------------------------------------------
Intel Corp. 134,000 8,944,500
--------------------------------------------------------------
Texas Instruments Inc. 66,000 3,873,375
--------------------------------------------------------------
13,851,375
--------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR)-0.35%
Applied Materials, Inc.(a) 8,100 614,587
--------------------------------------------------------------
Teradyne, Inc.(a) 10,000 633,750
--------------------------------------------------------------
1,248,337
--------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-6.68%
American General Corp. 60,000 4,001,250
--------------------------------------------------------------
Associates First Capital
Corp.-Class A 75,000 1,964,062
--------------------------------------------------------------
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FINANCIAL (DIVERSIFIED)-(CONTINUED)
Citigroup Inc. 120,000 $ 8,467,500
--------------------------------------------------------------
Fannie Mae 65,000 3,241,875
--------------------------------------------------------------
Freddie Mac 60,000 2,366,250
--------------------------------------------------------------
MGIC Investment Corp. 70,000 3,976,875
--------------------------------------------------------------
24,017,812
--------------------------------------------------------------
FOODS-0.28%
H.J. Heinz Co. 25,000 998,437
--------------------------------------------------------------
HEALTH CARE (DIVERSIFIED)-3.56%
Abbott Laboratories 60,000 2,497,500
--------------------------------------------------------------
American Home Products Corp. 40,000 2,122,500
--------------------------------------------------------------
Bristol-Myers Squibb Co. 80,000 3,970,000
--------------------------------------------------------------
Johnson & Johnson 45,000 4,187,812
--------------------------------------------------------------
12,777,812
--------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR
PHARMACEUTICALS)-2.81%
Merck & Co., Inc. 60,000 4,301,250
--------------------------------------------------------------
Pfizer Inc. 70,000 3,018,750
--------------------------------------------------------------
Schering-Plough Corp. 64,000 2,764,000
--------------------------------------------------------------
10,084,000
--------------------------------------------------------------
HEALTH CARE (MANAGED CARE)-0.32%
UnitedHealth Group Inc. 14,000 1,145,375
--------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-0.06%
Biomet, Inc. 5,000 223,750
--------------------------------------------------------------
HOUSEHOLD FURNISHING &
APPLIANCES-0.42%
Whirlpool Corp. 35,000 1,511,562
--------------------------------------------------------------
HOUSEHOLD PRODUCTS
(NON-DURABLES)-1.11%
Kimberly-Clark Corp. 30,000 1,723,125
--------------------------------------------------------------
Procter & Gamble, Co. (The) 40,000 2,275,000
--------------------------------------------------------------
3,998,125
--------------------------------------------------------------
INSURANCE (MULTI-LINE)-0.37%
American International Group, Inc. 15,000 1,315,312
--------------------------------------------------------------
INSURANCE BROKERS-1.36%
Marsh & McLennan Cos., Inc. 40,000 4,880,000
--------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE-1.65%
Morgan Stanley Dean Witter & Co. 65,000 5,931,250
--------------------------------------------------------------
IRON & STEEL-0.53%
Nucor Corp. 50,000 1,887,500
--------------------------------------------------------------
MANUFACTURING (DIVERSIFIED)-4.81%
Honeywell International 40,000 1,345,000
--------------------------------------------------------------
Illinois Tool Works, Inc. 55,000 3,148,750
--------------------------------------------------------------
Johnson Controls, Inc. 50,000 2,596,875
--------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MANUFACTURING (DIVERSIFIED)-(CONTINUED)
Minnesota Mining and Manufacturing
Co. 27,000 $ 2,431,687
--------------------------------------------------------------
National Service Industries, Inc. 45,000 919,687
--------------------------------------------------------------
Textron, Inc. 45,000 2,567,813
--------------------------------------------------------------
Tyco International Ltd. (Bermuda) 25,000 1,337,500
--------------------------------------------------------------
United Technologies Corp. 50,000 2,918,750
--------------------------------------------------------------
17,266,062
--------------------------------------------------------------
OIL & GAS (DRILLING &
EQUIPMENT)-0.47%
Diamond Offshore Drilling, Inc. 15,000 563,438
--------------------------------------------------------------
Transocean Sedco Forex Inc. 23,000 1,138,500
--------------------------------------------------------------
1,701,938
--------------------------------------------------------------
OIL (INTERNATIONAL INTEGRATED)-5.14%
BP Amoco PLC-ADR (United Kingdom) 59,000 3,086,438
--------------------------------------------------------------
Chevron Corp. 35,000 2,765,000
--------------------------------------------------------------
Exxon Mobil Corp. 90,000 7,200,000
--------------------------------------------------------------
Repsol S.A.-ADR (Spain) 77,608 1,464,851
--------------------------------------------------------------
Royal Dutch Petroleum Co.-New York
Shares (Netherlands) 51,100 2,976,575
--------------------------------------------------------------
Texaco Inc. 20,000 988,750
--------------------------------------------------------------
18,481,614
--------------------------------------------------------------
PAPER & FOREST PRODUCTS-0.57%
International Paper Co. 60,000 2,040,000
--------------------------------------------------------------
PHOTOGRAPHY/IMAGING-0.38%
Eastman Kodak Co. 25,000 1,371,875
--------------------------------------------------------------
PUBLISHING (NEWSPAPERS)-0.30%
Gannett Co., Inc. 20,000 1,077,500
--------------------------------------------------------------
RAILROADS-0.48%
Union Pacific Corp. 40,000 1,727,500
--------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS-5.98%
Arden Realty, Inc. 60,200 1,595,300
--------------------------------------------------------------
Avalonbay Communities, Inc. 44,300 2,087,638
--------------------------------------------------------------
Beacon Capital Partners, Inc.
(Acquired 03/17/98; Cost
$936,997)(b)(c) 60,000 495,000
--------------------------------------------------------------
CarrAmerica Realty Corp. 57,300 1,711,838
--------------------------------------------------------------
Charles E. Smith Residential
Realty, Inc. 21,800 963,288
--------------------------------------------------------------
Duke-Weeks Realty Corp. 60,000 1,470,000
--------------------------------------------------------------
Equity Office Properties Trust 68,279 2,082,510
--------------------------------------------------------------
Equity Residential Properties Trust 41,300 2,059,838
--------------------------------------------------------------
First Industrial Realty Trust, Inc. 20,800 665,600
--------------------------------------------------------------
Hospitality Properties Trust 28,500 705,375
--------------------------------------------------------------
Kimco Realty Corp. 27,400 1,130,250
--------------------------------------------------------------
Liberty Property Trust 35,000 1,006,250
--------------------------------------------------------------
Prentiss Properties Trust 42,500 1,067,813
--------------------------------------------------------------
Public Storage, Inc. 47,700 1,222,313
--------------------------------------------------------------
Simon Property Group, Inc. 66,100 1,726,863
--------------------------------------------------------------
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
REAL ESTATE INVESTMENT TRUSTS-(CONTINUED)
Vornado Realty Trust 33,000 $ 1,291,125
--------------------------------------------------------------
Wyndham Voting Trust (Acquired
08/27/99- 06/30/00; Cost
$260,621)(b)(c) 2,848 204,044
--------------------------------------------------------------
21,485,045
--------------------------------------------------------------
RESTAURANTS-0.61%
McDonald's Corp. 70,000 2,205,000
--------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-1.20%
Lowe's Cos., Inc. 70,000 2,953,125
--------------------------------------------------------------
Sherwin-Williams Co. (The) 65,000 1,352,813
--------------------------------------------------------------
4,305,938
--------------------------------------------------------------
RETAIL (FOOD CHAINS)-0.63%
Albertson's, Inc. 75,000 2,264,063
--------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE)-0.48%
Target Corp. 60,000 1,740,000
--------------------------------------------------------------
RETAIL (SPECIALTY)-0.25%
Office Depot, Inc.(a) 145,000 906,250
--------------------------------------------------------------
SERVICES (DATA PROCESSING)-0.96%
First Data Corp. 75,000 3,454,688
--------------------------------------------------------------
TELECOMMUNICATIONS (LONG
DISTANCE)-3.11%
AT&T Corp. 150,819 4,665,963
--------------------------------------------------------------
Cypress Communications, Inc.
(Acquired 01/05/00; Cost
$45,180)(a)(b)(c) 10,701 39,125
--------------------------------------------------------------
Sprint Corp. (PCS Group) 105,000 3,740,625
--------------------------------------------------------------
WorldCom, Inc.(a) 70,000 2,734,375
--------------------------------------------------------------
11,180,088
--------------------------------------------------------------
TELEPHONE-2.47%
ALLTEL Corp. 20,000 1,232,500
--------------------------------------------------------------
Qwest Communications International
Inc.(a) 25,940 1,217,559
--------------------------------------------------------------
SBC Communications Inc. 90,000 3,830,625
--------------------------------------------------------------
Verizon Communications 54,900 2,580,300
--------------------------------------------------------------
8,860,984
--------------------------------------------------------------
TEXTILES (APPAREL)-0.47%
Liz Claiborne, Inc. 35,000 1,365,000
--------------------------------------------------------------
VF Corp. 14,800 325,600
--------------------------------------------------------------
1,690,600
--------------------------------------------------------------
TOBACCO-0.63%
Philip Morris Cos. Inc. 90,000 2,272,500
--------------------------------------------------------------
Total Common Stocks & Other
Equity Interests (Cost
$225,079,998) 269,299,829
--------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
BONDS & NOTES-11.05%
AUTOMOBILES-0.30%
Ford Motor Co., Unsec. Bonds,
6.50%, 08/01/18 $1,250,000 $ 1,079,000
--------------------------------------------------------------
BANKS (MAJOR REGIONAL)-1.45%
Bank of America Corp., Notes,
6.63%, 06/15/04 2,000,000 1,946,340
--------------------------------------------------------------
National City Corp., Sub. Notes,
7.20%, 05/15/05 1,000,000 981,670
--------------------------------------------------------------
Wachovia Corp., Unsec. Sub. Notes,
6.25%, 08/04/08 2,500,000 2,277,050
--------------------------------------------------------------
5,205,060
--------------------------------------------------------------
BANKS (MONEY CENTER)-0.81%
Bayerische Landesbank NY, Sub.
Notes, 6.38%, 10/15/05 3,000,000 2,907,360
--------------------------------------------------------------
BEVERAGES (ALCOHOLIC)-0.61%
Anheuser-Busch Cos., Inc., Unsec.
Notes, 5.38%, 09/15/08 2,500,000 2,189,800
--------------------------------------------------------------
BEVERAGES-ALCOHOLIC-0.54%
Diageo Capital PLC (United
Kingdom), Unsec. Gtd. Notes,
6.63%, 06/24/04 2,000,000 1,947,414
--------------------------------------------------------------
BUILDING MATERIALS-0.26%
Masco Corp., Unsec. Deb., 7.75%,
08/01/29 1,000,000 919,738
--------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-0.66%
Motorola, Inc., Notes, 6.50%,
03/01/08 2,500,000 2,375,600
--------------------------------------------------------------
CONSUMER FINANCE-1.08%
Beneficial Corp.-Series I, Medium
Term Notes, 6.63%, 09/27/04 2,000,000 1,912,180
--------------------------------------------------------------
Commercial Credit Co., Unsec.
Notes, 5.55%, 02/15/01 2,000,000 1,985,880
--------------------------------------------------------------
3,898,060
--------------------------------------------------------------
ELECTRIC COMPANIES-0.50%
Penn Power & Lighting, First
Mortgage Notes, 6.55%, 03/01/06 1,900,000 1,815,374
--------------------------------------------------------------
ELECTRONICS (DEFENSE)-0.37%
Raytheon Co., Notes, 6.50%,
07/15/05 1,400,000 1,332,618
--------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-0.26%
Guidant Corp., Notes, 6.15%,
02/15/06 1,000,000 918,930
--------------------------------------------------------------
INSURANCE (PROPERTY-CASUALTY)-0.32%
Travelers Property Casualty Corp.,
Sr. Unsec. Notes, 6.75%, 11/15/06 1,200,000 1,137,360
--------------------------------------------------------------
INSURANCE BROKERS-0.54%
Marsh & McLennan Cos., Inc., Sr.
Unsec. Notes, 6.63%, 06/15/04 2,000,000 1,932,640
--------------------------------------------------------------
OIL (DOMESTIC INTEGRATED)-0.62%
Atlantic Richfield Co., Notes,
5.55%, 04/15/03 2,300,000 2,219,178
--------------------------------------------------------------
</TABLE>
7
<PAGE> 10
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
RAILROADS-0.25%
Norfolk Southern Corp., Sr. Unsec.
Notes, 6.20%, 04/15/09 $1,000,000 $ 900,161
--------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-0.28%
Sherwin-Williams Co. (The), Notes,
6.50%, 02/01/02 1,000,000 989,300
--------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE)-0.82%
Wal-Mart Stores, Inc., Sr. Unsec.
Notes, 6.55%, 08/10/04 3,000,000 2,959,560
--------------------------------------------------------------
SOVEREIGN DEBT-0.85%
Manitoba (Province of)
(Canada)-Series EM, Unsec. Unsub.
Notes, 7.50%, 02/22/10 3,000,000 3,060,798
--------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE)-0.53%
Sprint Capital Corp., Sr. Unsec.
Gtd. Notes, 6.88%, 11/15/28 2,200,000 1,923,284
--------------------------------------------------------------
Total Bonds & Notes (Cost
$40,877,208) 39,711,235
--------------------------------------------------------------
ASSET-BACKED SECURITIES-1.28%
CONSUMER FINANCE-0.62%
MBNA Master Credit Card
Trust-Series 2000-A, 7.35%,
07/16/07 2,200,000 2,222,165
--------------------------------------------------------------
SERVICES (COMMERCIAL &
CONSUMER)-0.66%
Discover Card Master Trust I,
Series. 1998-7 A, 5.60%, 05/16/06 2,500,000 2,381,563
--------------------------------------------------------------
Total Asset-Backed Securities
(Cost $4,722,841) 4,603,728
--------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES-5.85%
FEDERAL HOME LOAN BANK-2.50%
Bonds
5.17%, 04/12/01 1,000,000 988,550
--------------------------------------------------------------
Disc. Notes,
6.43%, 08/01/00(d) 7,990,000 7,990,000
--------------------------------------------------------------
8,978,550
--------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORP.
("FHLMC")-1.02%
Pass Through Certificates
6.50%, 07/01/01 to 05/01/29 3,833,047 3,667,273
--------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
FEDERAL NATIONAL MORTGAGE
ASSOCIATION ("FNMA")-1.77%
Debentures
5.75%, 04/15/03 $2,500,000 $ 2,426,075
--------------------------------------------------------------
Pass Through Certificates
8.50%, 03/01/10 793,770 810,384
--------------------------------------------------------------
7.50%, 05/01/29 3,151,719 3,110,337
--------------------------------------------------------------
6,346,796
--------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION ("GNMA")-0.56%
Pass Through Certificates
6.50%, 10/15/08 618,375 606,200
--------------------------------------------------------------
7.00%, 10/15/08 661,029 656,897
--------------------------------------------------------------
6.00%, 11/15/08 771,428 740,571
--------------------------------------------------------------
2,003,668
--------------------------------------------------------------
Total U.S. Government Agency
Securities (Cost $21,372,848) 20,996,287
--------------------------------------------------------------
U.S. TREASURY SECURITIES-6.06%
U.S. TREASURY BONDS-5.50%
9.38%, 02/15/06 2,500,000 2,860,950
--------------------------------------------------------------
9.25%, 02/15/16 4,000,000 5,232,960
--------------------------------------------------------------
7.25%, 08/15/22 5,000,000 5,695,200
--------------------------------------------------------------
7.63%, 02/15/25 5,000,000 5,985,450
--------------------------------------------------------------
19,774,560
--------------------------------------------------------------
U.S. TREASURY NOTES-0.56%
6.25%, 02/15/03 2,000,000 1,996,200
--------------------------------------------------------------
Total U.S. Treasury Securities
(Cost $20,959,207) 21,770,760
--------------------------------------------------------------
TOTAL INVESTMENTS-99.19% (Cost
$313,012,102) 356,381,839
--------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES-0.81% 2,904,302
--------------------------------------------------------------
NET ASSETS-100.00% $359,286,141
==============================================================
</TABLE>
Investment Abbreviations:
ADR - American Depositary Receipt
Deb. - Debentures
Disc. - Discounted
Gtd. - Guaranteed
Sr. - Senior
Sub. - Subordinated
Unsec. - Unsecured
Unsub. - Unsubordinated
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Security fair valued in accordance with the procedures established by the
Board of Directors.
(c) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined in
accordance with procedures established by the Board of Directors. The
aggregate market value of these securities at 07/31/00 was $822,578 which
represented 0.23% of the Fund's net assets.
(d) Interest rate shown represents the rate of discount paid or received at the
time of purchase by the Fund.
See Notes to Financial Statements.
8
<PAGE> 11
SCHEDULE OF INVESTMENTS
June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS & OTHER EQUITY
INTERESTS-75.23%
AIRLINES-0.07%
Southwest Airlines Co. 15,000 $ 284,062
--------------------------------------------------------------
ALUMINUM-0.53%
Alcoa Inc. 70,000 2,030,000
--------------------------------------------------------------
AUTO PARTS & EQUIPMENT-0.38%
Cooper Tire & Rubber Co. 130,000 1,446,250
--------------------------------------------------------------
AUTOMOBILES-1.33%
Ford Motor Co. 115,000 4,945,000
--------------------------------------------------------------
Visteon Corp.(a) 15,057 182,570
--------------------------------------------------------------
5,127,570
--------------------------------------------------------------
BANKS (MAJOR REGIONAL)-3.54%
FleetBoston Financial Corp. 155,000 5,270,000
--------------------------------------------------------------
National City Corp. 100,000 1,706,250
--------------------------------------------------------------
PNC Financial Services Group 85,000 3,984,375
--------------------------------------------------------------
Wells Fargo Co. 70,000 2,712,500
--------------------------------------------------------------
13,673,125
--------------------------------------------------------------
BANKS (MONEY CENTER)-2.55%
Bank of America Corp. 165,000 7,095,000
--------------------------------------------------------------
Chase Manhattan Corp. (The) 60,000 2,763,750
--------------------------------------------------------------
9,858,750
--------------------------------------------------------------
BEVERAGES (ALCOHOLIC)-0.83%
Anheuser-Busch Cos., Inc. 43,000 3,211,562
--------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO &
CABLE)-1.37%
Comcast Corp.-Class A(a) 65,000 2,632,500
--------------------------------------------------------------
MediaOne Group, Inc.(a) 40,000 2,645,000
--------------------------------------------------------------
5,277,500
--------------------------------------------------------------
CHEMICALS-1.03%
Dow Chemical Co. (The) 60,000 1,811,250
--------------------------------------------------------------
Praxair, Inc. 45,000 1,684,687
--------------------------------------------------------------
Union Carbide Corp. 10,000 495,000
--------------------------------------------------------------
3,990,937
--------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-1.35%
Lucent Technologies Inc. 30,000 1,777,500
--------------------------------------------------------------
Tellabs, Inc.(a) 50,000 3,421,875
--------------------------------------------------------------
5,199,375
--------------------------------------------------------------
COMPUTERS (HARDWARE)-2.00%
Hewlett-Packard Co. 33,000 4,120,875
--------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (HARDWARE)-(CONTINUED)
International Business Machines
Corp. 33,000 $ 3,615,562
--------------------------------------------------------------
7,736,437
--------------------------------------------------------------
COMPUTERS (PERIPHERALS)-0.41%
Adaptec, Inc.(a) 70,000 1,592,500
--------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES)-3.95%
Cadence Design Systems, Inc.(a) 45,000 916,875
--------------------------------------------------------------
Computer Associates International,
Inc. 90,000 4,606,875
--------------------------------------------------------------
Compuware Corp.(a) 185,000 1,919,375
--------------------------------------------------------------
Internap Voting Trust (Acquired
03/22/00; Cost $20,160)(a)(b)(c) 13,474 136,982
--------------------------------------------------------------
Microsoft Corp.(a) 75,000 6,000,000
--------------------------------------------------------------
Unisys Corp.(a) 115,000 1,674,687
--------------------------------------------------------------
15,254,794
--------------------------------------------------------------
CONSTRUCTION (CEMENT &
AGGREGATES)-0.35%
Hanson PLC-ADR (United Kingdom) 37,740 1,330,335
--------------------------------------------------------------
CONSUMER FINANCE-0.81%
Household International, Inc. 75,000 3,117,187
--------------------------------------------------------------
DISTRIBUTORS (FOOD & HEALTH)-0.67%
SUPERVALU INC 136,200 2,596,312
--------------------------------------------------------------
ELECTRIC COMPANIES-0.88%
DTE Energy Co. 60,000 1,833,750
--------------------------------------------------------------
GPU, Inc. 40,000 1,082,500
--------------------------------------------------------------
Southern Co. (The) 20,000 466,250
--------------------------------------------------------------
3,382,500
--------------------------------------------------------------
ELECTRICAL EQUIPMENT-1.99%
Emerson Electric Co. 40,000 2,415,000
--------------------------------------------------------------
General Electric Co. 99,000 5,247,000
--------------------------------------------------------------
7,662,000
--------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS)-2.08%
Intel Corp. 60,000 8,021,250
--------------------------------------------------------------
FINANCIAL (DIVERSIFIED)-6.19%
American General Corp. 60,000 3,660,000
--------------------------------------------------------------
Associates First Capital
Corp.-Class A 100,000 2,231,250
--------------------------------------------------------------
Citigroup Inc. 130,000 7,832,500
--------------------------------------------------------------
Fannie Mae 75,000 3,914,063
--------------------------------------------------------------
Freddie Mac 65,000 2,632,500
--------------------------------------------------------------
MGIC Investment Corp. 80,000 3,640,000
--------------------------------------------------------------
23,910,313
--------------------------------------------------------------
</TABLE>
9
<PAGE> 12
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FOODS-0.28%
H.J. Heinz Co. 25,000 $ 1,093,750
--------------------------------------------------------------
HEALTH CARE (DIVERSIFIED)-4.32%
Abbott Laboratories 75,000 3,342,188
--------------------------------------------------------------
American Home Products Corp. 60,000 3,525,000
--------------------------------------------------------------
Bristol-Myers Squibb Co. 90,000 5,242,500
--------------------------------------------------------------
Johnson & Johnson 45,000 4,584,375
--------------------------------------------------------------
16,694,063
--------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR
PHARMACEUTICALS)-3.29%
Lilly (Eli) & Co. 40,000 3,995,000
--------------------------------------------------------------
Merck & Co., Inc. 65,000 4,980,625
--------------------------------------------------------------
Schering-Plough Corp. 74,000 3,737,000
--------------------------------------------------------------
12,712,625
--------------------------------------------------------------
HEALTH CARE (SPECIALIZED
SERVICES)-0.27%
Quintiles Transnational Corp.(a) 75,000 1,059,375
--------------------------------------------------------------
HOUSEHOLD FURNISHING &
APPLIANCES-0.42%
Whirlpool Corp. 35,000 1,631,875
--------------------------------------------------------------
HOUSEHOLD PRODUCTS
(NON-DURABLES)-1.11%
Kimberly-Clark Corp. 30,000 1,721,250
--------------------------------------------------------------
Procter & Gamble, Co. (The) 45,000 2,576,250
--------------------------------------------------------------
4,297,500
--------------------------------------------------------------
INSURANCE BROKERS-1.22%
Marsh & McLennan Cos., Inc. 45,000 4,699,688
--------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE-1.62%
Morgan Stanley Dean Witter & Co. 75,000 6,243,750
--------------------------------------------------------------
IRON & STEEL-0.43%
Nucor Corp. 50,000 1,659,375
--------------------------------------------------------------
MANUFACTURING (DIVERSIFIED)-4.86%
Honeywell International 40,000 1,347,500
--------------------------------------------------------------
Illinois Tool Works, Inc. 70,000 3,990,000
--------------------------------------------------------------
Johnson Controls, Inc. 80,000 4,105,000
--------------------------------------------------------------
Minnesota Mining and Manufacturing
Co. 27,000 2,227,500
--------------------------------------------------------------
National Service Industries, Inc. 50,000 975,000
--------------------------------------------------------------
Textron, Inc. 50,000 2,715,625
--------------------------------------------------------------
Tyco International Ltd. (Bermuda) 10,000 473,750
--------------------------------------------------------------
United Technologies Corp. 50,000 2,943,750
--------------------------------------------------------------
18,778,125
--------------------------------------------------------------
MANUFACTURING (SPECIALIZED)-0.75%
Federal Signal Corp. 75,500 1,245,750
--------------------------------------------------------------
York International Corp. 65,000 1,641,250
--------------------------------------------------------------
2,887,000
--------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
OIL (INTERNATIONAL INTEGRATED)-4.41%
BP Amoco PLC-ADR (United Kingdom) 18,900 $ 1,069,031
--------------------------------------------------------------
Chevron Corp. 35,000 2,968,438
--------------------------------------------------------------
Exxon Mobil Corp. 90,000 7,065,000
--------------------------------------------------------------
Repsol S.A.-ADR (Spain) 297,908 5,902,302
--------------------------------------------------------------
17,004,771
--------------------------------------------------------------
PAPER & FOREST PRODUCTS-0.75%
International Paper Co. 60,000 1,788,750
--------------------------------------------------------------
Westvaco Corp. 45,000 1,116,563
--------------------------------------------------------------
2,905,313
--------------------------------------------------------------
PHOTOGRAPHY/IMAGING-1.39%
Eastman Kodak Co. 50,000 2,975,000
--------------------------------------------------------------
Xerox Corp. 115,000 2,386,250
--------------------------------------------------------------
5,361,250
--------------------------------------------------------------
PUBLISHING (NEWSPAPERS)-0.31%
Gannett Co., Inc. 20,000 1,196,250
--------------------------------------------------------------
RAILROADS-0.39%
Union Pacific Corp. 40,000 1,487,500
--------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS-5.11%
Arden Realty, Inc. 60,200 1,414,700
--------------------------------------------------------------
Avalonbay Communities, Inc. 44,300 1,849,525
--------------------------------------------------------------
Beacon Capital Partners, Inc.
(Acquired 03/17/98; Cost
$924,835)(b)(c) 60,000 660,000
--------------------------------------------------------------
CarrAmerica Realty Corp. 57,300 1,518,450
--------------------------------------------------------------
Charles E. Smith Residential
Realty, Inc. 21,800 828,400
--------------------------------------------------------------
Duke-Weeks Realty Corp. 60,000 1,342,500
--------------------------------------------------------------
Equity Office Properties Trust 68,279 1,881,940
--------------------------------------------------------------
Equity Residential Properties
Trust 41,300 1,899,800
--------------------------------------------------------------
First Industrial Realty Trust,
Inc. 20,800 613,600
--------------------------------------------------------------
Hospitality Properties Trust 28,500 643,031
--------------------------------------------------------------
Kimco Realty Corp. 27,400 1,123,400
--------------------------------------------------------------
Liberty Property Trust 35,000 907,813
--------------------------------------------------------------
Prentiss Properties Trust 42,500 1,020,000
--------------------------------------------------------------
Public Storage, Inc. 47,700 1,117,969
--------------------------------------------------------------
Simon Property Group, Inc. 66,100 1,466,594
--------------------------------------------------------------
Vornado Realty Trust 33,000 1,146,750
--------------------------------------------------------------
Wyndham Voting Trust (Acquired
08/27/99-06/30/00; Cost
$260,621)(b)(c) 2,848 262,847
--------------------------------------------------------------
19,697,319
--------------------------------------------------------------
RESTAURANTS-0.34%
McDonald's Corp. 40,000 1,317,500
--------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-1.35%
Lowe's Cos., Inc. 70,000 2,874,375
--------------------------------------------------------------
Sherwin-Williams Co. (The) 110,000 2,330,625
--------------------------------------------------------------
5,205,000
--------------------------------------------------------------
</TABLE>
10
<PAGE> 13
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (DEPARTMENT STORES)-0.00%
Dillards, Inc.-Class A 300 $ 3,675
--------------------------------------------------------------
RETAIL (FOOD CHAINS)-0.65%
Albertson's, Inc. 75,000 2,493,750
--------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE)-0.23%
Target Corp. 15,000 870,000
--------------------------------------------------------------
RETAIL (SPECIALTY)-0.47%
Office Depot, Inc.(a) 290,000 1,812,500
--------------------------------------------------------------
SERVICES (DATA PROCESSING)-1.22%
First Data Corp. 95,000 4,714,375
--------------------------------------------------------------
TELECOMMUNICATIONS (LONG
DISTANCE)-3.64%
AT&T Corp. 190,000 6,008,750
--------------------------------------------------------------
Cypress Communications, Inc.
(Acquired 01/05/00; Costs
$45,180)(a)(c) 10,701 77,580
--------------------------------------------------------------
Sprint Corp. (PCS Group) 125,000 6,375,000
--------------------------------------------------------------
WorldCom, Inc.(a) 35,000 1,605,625
--------------------------------------------------------------
14,066,955
--------------------------------------------------------------
TELEPHONE-2.39%
ALLTEL Corp. 20,000 1,238,750
--------------------------------------------------------------
GTE Corp. 45,000 2,801,250
--------------------------------------------------------------
SBC Communications Inc. 70,000 3,027,500
--------------------------------------------------------------
US WEST, Inc. 25,000 2,143,750
--------------------------------------------------------------
9,211,250
--------------------------------------------------------------
TEXTILES (APPAREL)-0.50%
Liz Claiborne, Inc. 35,000 1,233,750
--------------------------------------------------------------
VF Corp. 29,800 709,613
--------------------------------------------------------------
1,943,363
--------------------------------------------------------------
TOBACCO-1.20%
Philip Morris Cos. Inc. 175,000 4,648,438
--------------------------------------------------------------
Total Common Stocks & Other
Equity Interests (Cost
$236,592,293) 290,399,094
--------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
BONDS & NOTES-10.26%
AUTOMOBILES-0.28%
Ford Motor Co., Unsec. Bonds,
6.50%, 08/01/18 $ 1,250,000 1,082,000
--------------------------------------------------------------
BANKS (MAJOR REGIONAL)-1.34%
Bank of America Corp., Notes,
6.63%, 06/15/04 2,000,000 1,944,182
--------------------------------------------------------------
National City Corp., Sub. Notes,
7.20%, 05/15/05 1,000,000 979,800
--------------------------------------------------------------
Wachovia Corp., Unsec. Sub. Notes,
6.25%, 08/04/08 2,500,000 2,256,300
--------------------------------------------------------------
5,180,282
--------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
BANKS (MONEY CENTER)-0.75%
Bayerische Landesbank NY, Sub.
Notes, 6.38%, 10/15/05 $ 3,000,000 $ 2,907,870
--------------------------------------------------------------
BEVERAGES (ALCOHOLIC)-1.07%
Anheuser-Busch Cos., Inc., Unsec.
Notes, 5.38%, 09/15/08 2,500,000 2,194,975
--------------------------------------------------------------
Diageo Capital PLC, (United
Kingdom), Unsec. Gtd. Notes,
6.63%, 06/24/04 2,000,000 1,948,696
--------------------------------------------------------------
4,143,671
--------------------------------------------------------------
BUILDING MATERIALS-0.23%
Masco Corp., Unsec. Deb., 7.75%,
08/01/29 1,000,000 895,432
--------------------------------------------------------------
COMMUNICATIONS EQUIPMENT-0.62%
Motorola, Inc., Notes, 6.50%,
03/01/08 2,500,000 2,377,725
--------------------------------------------------------------
CONSUMER FINANCE-1.01%
Beneficial Corp.-Series I, Medium
Term Notes, 6.63%, 09/27/04 2,000,000 1,909,040
--------------------------------------------------------------
Commercial Credit Co., Unsec.
Notes, 5.55%, 02/15/01 2,000,000 1,978,820
--------------------------------------------------------------
3,887,860
--------------------------------------------------------------
ELECTRIC COMPANIES-0.46%
Penn Power & Lighting, First
Mortgage Notes, 6.55%, 03/01/06 1,900,000 1,781,421
--------------------------------------------------------------
ELECTRONICS (DEFENSE)-0.34%
Raytheon Co., Notes, 6.50%,
07/15/05 1,400,000 1,325,632
--------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES)-0.24%
Guidant Corp., Notes, 6.15%,
02/15/06 1,000,000 928,720
--------------------------------------------------------------
INSURANCE(PROPERTY-CASUALTY)-0.30%
Travelers Property Casualty Corp.,
Sr. Unsec. Notes, 6.75%,
11/15/06 1,200,000 1,134,276
--------------------------------------------------------------
INSURANCE BROKERS-0.50%
Marsh & McLennan Cos., Inc., Sr.
Unsec. Notes, 6.63%, 06/15/04 2,000,000 1,930,320
--------------------------------------------------------------
OIL (DOMESTIC INTEGRATED)-0.57%
Atlantic Richfield Co., Notes,
5.55%, 04/15/03 2,300,000 2,211,680
--------------------------------------------------------------
RAILROADS-0.23%
Norfolk Southern Corp., Sr. Unsec.
Notes, 6.20%, 04/15/09 1,000,000 897,963
--------------------------------------------------------------
RETAIL (BUILDING SUPPLIES)-0.26%
Sherwin-Williams Co. (The), Notes,
6.50%, 02/01/02 1,000,000 988,090
--------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE)-0.77%
Wal-Mart Stores, Inc., Sr. Unsec.
Notes, 6.55%, 08/10/04 3,000,000 2,954,400
--------------------------------------------------------------
</TABLE>
11
<PAGE> 14
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
SOVEREIGN DEBT-0.79%
Manitoba (Province of)
(Canada)-Series EM, Unsec.
Unsub. Notes 7.50%, 02/22/10 $ 3,000,000 $ 3,047,427
--------------------------------------------------------------
TELECOMMUNICATIONS (LONG
DISTANCE)-0.50%
Sprint Capital Corp., Sr. Unsec.
Gtd. Notes, 6.88%, 11/15/28 2,200,000 1,919,236
--------------------------------------------------------------
Total Bonds & Notes (Cost
$40,866,342) 39,594,005
--------------------------------------------------------------
ASSET-BACKED SECURITIES-1.19%
CONSUMER FINANCE-0.57%
MBNA Master Credit Card Trust-
Series 2000-A, 7.35%, 07/16/07 2,200,000 2,218,425
--------------------------------------------------------------
SERVICES (COMMERCIAL &
CONSUMER)-0.62%
Discover Card Master Trust I,
Series. 1998-7 A, 5.60%,
05/16/06 2,500,000 2,375,563
--------------------------------------------------------------
Total Asset-Backed Securities
(Cost $4,722,841) 4,593,988
--------------------------------------------------------------
U.S. GOVERNMENT AGENCY
SECURITIES-8.26%
FEDERAL HOME LOAN BANK-0.90%
Bonds
5.17%, 04/12/01 1,000,000 987,140
--------------------------------------------------------------
Sr. Unsec. Unsub. Notes
5.50%, 07/14/00 2,500,000 2,499,975
--------------------------------------------------------------
3,487,115
--------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORP.
("FHLMC")-0.96%
Pass Through Certificates
6.50%, 07/01/01 to 05/01/29 3,901,024 3,725,928
--------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE
ASSOCIATION ("FNMA")-5.87%
Debentures
5.75%, 04/15/03 2,500,000 2,422,075
--------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
FEDERAL NATIONAL MORTGAGE ASSOCIATION
("FNMA")-(CONTINUED)
Disc. Notes,
6.57%, 07/03/00(d) $16,262,000 $ 16,256,064
--------------------------------------------------------------
Pass Through Certificates
8.50%, 03/01/10 806,235 822,609
--------------------------------------------------------------
7.50%, 05/01/29 3,199,075 3,155,088
--------------------------------------------------------------
22,655,836
--------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION ("GNMA")-0.53%
Pass Through Certificates
6.50%, 10/15/08 633,847 620,574
--------------------------------------------------------------
7.00%, 10/15/08 676,184 671,532
--------------------------------------------------------------
6.00%, 11/15/08 777,871 746,025
--------------------------------------------------------------
2,038,131
--------------------------------------------------------------
Total U.S. Government Agency
Securities (Cost
$32,304,391) 31,907,010
--------------------------------------------------------------
U.S. TREASURY SECURITIES-5.58%
U.S. TREASURY BONDS-5.06%
9.38%, 02/15/06 2,500,000 2,861,900
--------------------------------------------------------------
9.25%, 02/15/16 4,000,000 5,182,320
--------------------------------------------------------------
7.25%, 08/15/22 5,000,000 5,615,550
--------------------------------------------------------------
7.63%, 02/15/25 5,000,000 5,900,300
--------------------------------------------------------------
19,560,070
--------------------------------------------------------------
U.S. TREASURY NOTES-0.52%
6.25%, 02/15/03 2,000,000 1,994,480
--------------------------------------------------------------
Total U.S. Treasury Securities
(Cost $20,958,448) 21,554,550
--------------------------------------------------------------
TOTAL INVESTMENTS-100.52% (Cost
$335,444,315) 388,048,647
--------------------------------------------------------------
LIABILITIES LESS OTHER
ASSETS-(0.52%) (1,997,456)
--------------------------------------------------------------
NET ASSETS-100.00% $386,051,191
==============================================================
</TABLE>
Investment Abbreviations:
ADR - American Depositary Receipt
Deb. - Debentures
Disc. - Discounted
Gtd. - Guaranteed
Sr. - Senior
Sub. - Subordinated
Unsec. - Unsecured
Unsub. - Unsubordinated
Notes to Schedule of Investments:
(a) Non-income producing security.
(b) Security fair valued in accordance with the procedures established by the
Board of Directors.
(c) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined in
accordance with procedures established by the Board of Directors. The
aggregate market value of these securities at 06/30/00 was $1,137,409 which
represented 0.29% of the Fund's net assets.
(d) Interest rate shown represents the rate of discount paid or received at the
time of purchase by the Fund.
See Notes to Financial Statements.
12
<PAGE> 15
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
JUNE 30,
JULY 31, 2000
2000 (UNAUDITED)
------------ ------------
<S> <C> <C>
ASSETS:
Investments, at market value (cost $313,012,102 and
$335,444,315, respectively) $356,381,839 $388,048,647
-----------------------------------------------------------------------------------------
Cash -- 9,308
-----------------------------------------------------------------------------------------
Receivables for:
Investments sold 11,140,890 272,818
-----------------------------------------------------------------------------------------
Capital stock sold 10,075 51,386
-----------------------------------------------------------------------------------------
Dividends and Interest 2,115,472 2,088,739
-----------------------------------------------------------------------------------------
Investment for deferred compensation plan 28,866 27,456
-----------------------------------------------------------------------------------------
Other assets 41,468 38,773
-----------------------------------------------------------------------------------------
Total assets 369,718,610 390,537,127
-----------------------------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 5,873,308 868,688
-----------------------------------------------------------------------------------------
Capital stock reacquired 3,658,273 2,214,651
-----------------------------------------------------------------------------------------
Deferred compensation plan 28,866 27,456
-----------------------------------------------------------------------------------------
Accrued advisory fees 230,606 251,391
-----------------------------------------------------------------------------------------
Accrued administrative services fees 7,976 8,448
-----------------------------------------------------------------------------------------
Accrued distribution fees 436,963 982,168
-----------------------------------------------------------------------------------------
Accrued transfer agent fees 26,633 33,175
-----------------------------------------------------------------------------------------
Accrued directors' fees and expenses 867 1,989
-----------------------------------------------------------------------------------------
Accrued operating expenses 168,977 97,970
-----------------------------------------------------------------------------------------
Total liabilities 10,432,469 4,485,936
-----------------------------------------------------------------------------------------
Net assets applicable to shares outstanding $359,286,141 $386,051,191
-----------------------------------------------------------------------------------------
NET ASSETS:
Class A $ 22,909,205 $ 26,024,478
=========================================================================================
Class B $ 6,557,995 $ 6,754,986
=========================================================================================
Class C $329,818,941 $353,271,727
=========================================================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Class A:
Authorized 100,000,000 100,000,000
-----------------------------------------------------------------------------------------
Outstanding 1,390,558 1,565,218
=========================================================================================
Class B:
Authorized 100,000,000 100,000,000
-----------------------------------------------------------------------------------------
Outstanding 398,140 406,086
=========================================================================================
Class C:
Authorized 100,000,000 100,000,000
-----------------------------------------------------------------------------------------
Outstanding 20,025,588 21,239,131
=========================================================================================
Class A:
Net asset value and redemption price per share $ 16.47 $ 16.63
-----------------------------------------------------------------------------------------
Offering price per share:
(Net asset value divided by 94.50%) $ 17.43 $ 17.60
=========================================================================================
Class B:
Net asset value and offering price per share $ 16.47 $ 16.63
=========================================================================================
Class C:
Net asset value and offering price per share $ 16.47 $ 16.63
=========================================================================================
</TABLE>
13
<PAGE> 16
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS
SEVEN MONTHS ENDED YEAR
ENDED JUNE 30, ENDED
JULY 31, 2000 DECEMBER 31,
2000 (UNAUDITED) 1999
------------- ------------ -------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax $55,355, $37,302
and $195,724, respectively) $ 5,134,377 $ 4,696,453 $ 12,609,266
---------------------------------------------------------------------------------------------------------
Interest 4,441,085 3,913,515 13,196,366
---------------------------------------------------------------------------------------------------------
Total investment income 9,575,462 8,609,968 25,805,632
---------------------------------------------------------------------------------------------------------
EXPENSES:
Advisory fees 2,047,261 1,816,654 5,635,894
---------------------------------------------------------------------------------------------------------
Administrative services fee 66,077 58,100 64,957
---------------------------------------------------------------------------------------------------------
Custodian fees 48,112 34,863 37,789
---------------------------------------------------------------------------------------------------------
Operating services fees -- -- 1,606,380
---------------------------------------------------------------------------------------------------------
Distribution fees-Class A 62,208 54,607 159,420
---------------------------------------------------------------------------------------------------------
Distribution fees-Class B 44,795 39,087 91,305
---------------------------------------------------------------------------------------------------------
Distribution fees-Class C 2,509,595 2,215,269 6,967,734
---------------------------------------------------------------------------------------------------------
Transfer agent fees-Class A 27,003 25,916 17,905
---------------------------------------------------------------------------------------------------------
Transfer agent fees-Class B 3,388 3,072 10,056
---------------------------------------------------------------------------------------------------------
Transfer agent fees-Class C 189,852 174,023 184,755
---------------------------------------------------------------------------------------------------------
Directors' fees and expenses 5,512 4,727 8,750
---------------------------------------------------------------------------------------------------------
Other 162,130 122,673 87,966
---------------------------------------------------------------------------------------------------------
Total expenses 5,165,933 4,548,991 14,872,911
---------------------------------------------------------------------------------------------------------
Less: Fees waived (17,774) (15,602) (1,208,175)
---------------------------------------------------------------------------------------------------------
Expenses paid indirectly (3,260) (2,721) (4,752)
---------------------------------------------------------------------------------------------------------
Net expenses 5,144,899 4,530,668 13,659,984
---------------------------------------------------------------------------------------------------------
Net investment income 4,430,563 4,079,300 12,145,648
---------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES
Net realized gain from investment securities 13,272,106 7,721,709 98,684,082
---------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities (51,778,138) (42,543,544) (110,583,574)
---------------------------------------------------------------------------------------------------------
Net gain (loss) on investment securities (38,506,032) (34,821,835) (11,899,492)
---------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations $(34,075,469) $(30,742,535) $ 246,156
=========================================================================================================
</TABLE>
See Notes to Financial Statements.
14
<PAGE> 17
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
SEVEN MONTHS ENDED YEAR YEAR
ENDED JUNE 30, ENDED ENDED
JULY 31, 2000 DECEMBER 31, DECEMBER 31,
2000 (UNAUDITED) 1999 1998
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income $ 4,430,563 $ 4,079,300 $ 12,145,648 $ 8,482,076
--------------------------------------------------------------------------------------------------------------------------
Net realized gain from investment securities 13,272,106 7,721,709 98,684,082 59,176,179
--------------------------------------------------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities (51,778,138) (42,543,544) (110,583,574) 11,782,197
--------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
operations (34,075,469) (30,742,535) 246,156 79,440,452
--------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income:
Class A (426,080) (426,080) (1,034,236) (693,499)
--------------------------------------------------------------------------------------------------------------------------
Class B (80,109) (80,109) (160,013) (14,661)
--------------------------------------------------------------------------------------------------------------------------
Class C (4,384,768) (4,384,768) (10,863,435) (7,001,855)
--------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from net realized gains:
Class A -- -- (3,757,847) (3,877,358)
--------------------------------------------------------------------------------------------------------------------------
Class B -- -- (958,788) (270,410)
--------------------------------------------------------------------------------------------------------------------------
Class C -- -- (58,115,071) (56,203,971)
--------------------------------------------------------------------------------------------------------------------------
Share transactions-net:
Class A (13,938,126) (11,032,994) (3,267,326) 21,305,857
--------------------------------------------------------------------------------------------------------------------------
Class B (2,906,169) (2,770,729) 7,515,438 3,715,719
--------------------------------------------------------------------------------------------------------------------------
Class C (244,215,314) (223,823,770) 9,573,755 55,402,752
--------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets (300,026,035) (273,260,985) (60,821,367) 91,803,026
--------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 659,312,176 659,312,176 720,133,543 628,330,517
--------------------------------------------------------------------------------------------------------------------------
End of period $359,286,141 $ 386,051,191 $659,312,176 $720,133,543
==========================================================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $269,218,777 $ 292,816,999 $530,444,492 $510,018,210
--------------------------------------------------------------------------------------------------------------------------
Undistributed net investment income 838,102 141,023 952,680 938,111
--------------------------------------------------------------------------------------------------------------------------
Undistributed net realized gain from investment securities 45,859,524 40,488,837 32,767,128 3,445,772
--------------------------------------------------------------------------------------------------------------------------
Unrealized appreciation of investment securities 43,369,738 52,604,332 95,147,876 205,731,450
--------------------------------------------------------------------------------------------------------------------------
$359,286,141 $ 386,051,191 $659,312,176 $720,133,543
==========================================================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
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 registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
series management investment company consisting of three separate portfolios.
The Board of Directors of the Company approved a change in the Fund's fiscal
year-end from December 31 to July 31. As a result, this report includes
financial information for the period ended July 31, 2000 (seven months), the six
months ended June 30, 2000 and the year ended December 31, 1999. Financial
information for the six months ended June 30, 2000 is unaudited. 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 high total return.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues
15
<PAGE> 18
and expenses during the reporting period. Actual results could differ from those
estimates. The following is a summary of the significant accounting policies
followed by the Fund in the preparation of its financial statements.
A. Security Valuations -- A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price as of the close of the
customary trading session 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 as of the close of
the customary trading session on the valuation date or absent a last sales
price, at the closing bid price. Debt obligations (including convertible
bonds) are valued on the basis of prices provided by an independent pricing
service. Prices provided by the pricing service may be determined without
exclusive reliance on quoted prices, and may reflect appropriate factors such
as yield, type of issue, coupon rate and maturity date. Securities for which
market prices are not provided by any of the above methods are valued based
upon quotes furnished by independent sources and are valued at the last bid
price in the case of equity securities and in the case of debt obligations,
the mean between the last bid and asked prices. Securities for which market
quotations are not readily available or are questionable are valued at fair
value as determined in good faith by or under the supervision of the
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. For
purposes of determining net asset value per share, futures and option
contracts generally will be valued 15 minutes after the close of the
customary trading session of the New York Stock Exchange ("NYSE").
Generally, trading in foreign securities is substantially completed each
day at various times prior to the close of the NYSE. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the customary
trading session of the NYSE which would not be reflected in the computation
of the Fund's net asset value. If events materially affecting the value of
such securities occur during such period, then these securities will be
valued at their fair value as determined in good faith by or under the
supervision of the Board of Directors.
B. Securities Transactions and Investment Income -- Securities transactions are
accounted for on a trade date basis. Realized gains or losses on sales are
computed on the basis of specific identification of the securities sold.
Interest income is recorded on the accrual basis from settlement date.
Dividend income is recorded on the ex-dividend date.
On July 31, 2000, undistributed net investment income was increased by
$345,816, undistributed net realized gains decreased by $179,710 and paid-in
capital decreased by $166,106 as a result of REIT distribution
reclassifications. Net assets of the Fund were unaffected by the
reclassifications.
C. Distributions -- Distributions from income are recorded on ex-dividend date,
and are declared and paid quarterly. Distributions from net realized capital
gains, if any, are generally paid annually and recorded on ex-dividend date.
The Fund may elect to use a portion of the proceeds from redemptions as
distributions for federal income tax purposes.
D. Federal Income Taxes -- The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income taxes
is recorded in the financial statements.
E. Bond Premiums -- It is the policy of the Fund not to amortize market premiums
on bonds for financial reporting purposes.
F. Expenses -- Distribution expenses and certain transfer agency expenses
directly attributable to a class of shares are charged to those classes'
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 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, Inc. ("INVESCO") whereby AIM pays INVESCO an annual rate of 0.20% of
the Fund's average daily net assets. During the seven-month period ended July
31, 2000 and the six months ended June 30, 2000, AIM waived fees of $1,836 and
$1,836, respectively.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to pay AIM for certain administrative costs incurred in providing
accounting services to the Fund. For the seven-month period ended July 31, 2000,
the six months ended June 30, 2000 and for the period July 1, 1999 through
December 31, 1999, AIM was paid $66,077, $58,100 and $64,957, respectively, for
such services.
The Fund, pursuant to a transfer agency and service agreement, has agreed to
pay A I M Fund Services, Inc. ("AFS") a fee for providing transfer agency and
shareholder services to the Fund. For the seven-month period ended July 31,
2000, the six months ended June 30, 2000 and for the period July 1, 1999 through
December 31, 1999, AFS was paid $115,561, $102,464 and $135,055, respectively,
for such services.
The Fund, pursuant to an operating services agreement, paid AIM $443,754 for
operating services fees during the period January 1, 1999 through July 31, 1999.
AIM waived operating services fees of $1,162,626 during the period January 1,
1999 through July 31, 1999.
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.
16
<PAGE> 19
The Company has adopted plans pursuant to Rule 12b-1 under the 1940 Act with
respect to the Fund's Class A shares, Class B shares and Class C shares
(collectively the "Plans"). The Fund, pursuant to the Plans, pays AIM
Distributors compensation at the annual rate of 0.35% of the Fund's average
daily net assets of Class A shares and 1.00% of the average daily net assets of
Class B and C shares. AIM Distributors has contractually agreed to limit the
Class A shares plan payments to 0.25%. Of these amounts, the Fund may pay a
service fee of 0.25% of the average daily net assets of the Class A, Class B or
Class C shares to selected dealers and financial institutions who furnish
continuing personal shareholder services to their customers who purchase and own
the appropriate class of shares of the Fund. Any amounts not paid as a service
fee under the Plans would constitute an asset-based sales charge. The Plans also
impose a cap on the total sales charges, including asset-based sales charges
that may be paid by the respective classes. For the seven-month period ended
July 31, 2000, the Class A, Class B and Class C shares paid AIM Distributors
$62,208, $44,795 and $2,509,595, respectively, as compensation under the Plans.
For the six months ended June 30, 2000, the Class A, Class B and Class C shares
paid AIM Distributors $54,607, $39,087 and $2,215,269, respectively, as
compensation under the Plans. For the year ended December 31, 1999, the Class A,
Class B and Class C shares paid AIM Distributors $113,871, $91,305 and
$6,967,734, respectively, as compensation under the Plans. During the
seven-month period ended July 31, 2000, the six months ended June 30, 2000 and
the year ended December 31, 1999, AIM Distributors waived fees of $17,774,
$15,602 and $45,549, respectively, for Class A shares.
AIM Distributors received commissions of $6,139, $5,395 and $22,488 from sales
of the Class A shares of the Fund during the seven-month period ended July 31,
2000, the six months ended June 30, 2000 and the year ended December 31, 1999,
respectively. Such commissions are not an expense of the Fund. They are deducted
from, and are not included in, the proceeds from sales of Class A shares. During
the seven-month period ended July 31, 2000, the six months ended June 30, 2000
and the year ended December 31, 1999, AIM Distributors received $56,485, $51,727
and $133,285, respectively, in contingent deferred sales charges imposed on
redemptions of Fund shares.
Certain officers and directors of the Company are officers and directors of
AIM, AFS and AIM Distributors.
During the seven-month period ended July 31, 2000, the six months ended June
30, 2000 and the year ended December 31, 1999, the Fund paid legal fees of
$2,730, $2,124 and $1,446, respectively, for services rendered by Kramer, Levin,
Naftalis & Frankel LLP as counsel to the Company's directors. A member of that
firm is a director of the Company.
NOTE 3-INDIRECT EXPENSES
For the seven-month period ended July 31, 2000, the six months ended June 30,
2000 and the year ended December 31, 1999, the Fund received reductions in
transfer agency fees from AFS (an affiliate of AIM) of $3,260, $2,721 and
$4,752, respectively, under expense offset arrangements which resulted in a
reduction of the Fund's total expenses of $3,260, $2,721 and $4,752 for the
seven-month period ended July 31, 2000, the six months ended June 30, 2000 and
the year ended December 31, 1999, respectively.
NOTE 4-DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests directors' fees, if so elected
by a director, in mutual fund shares in accordance with a deferred compensation
plan.
NOTE 5-BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by Citibank, N.A. The Fund may borrow up to the lesser of
(i) $1,000,000,000 or (ii) the limits set by its prospectus for borrowings. The
Fund and other funds advised by AIM which are parties to the line of credit may
borrow on a first come, first served basis. During the seven-month period ended
July 31, 2000, 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.
NOTE 6-INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term securities)
purchased and sold by the Fund during the seven-month period ended July 31, 2000
was $193,277,600 and $467,378,407, respectively, and during the six months ended
June 30, 2000 was $150,525,591 and $404,894,919, respectively. The amount of
unrealized appreciation (depreciation) of investment securities, for tax
purposes, is as follows:
<TABLE>
<CAPTION>
JUNE 30,
JULY 31, 2000
2000 (UNAUDITED)
------------ ------------
<S> <C> <C>
Aggregate unrealized
appreciation of investment
securities $ 63,316,101 $ 76,401,166
-------------------------------------------------------------
Aggregate unrealized
(depreciation) of investment
securities (20,135,044) (23,796,833)
-------------------------------------------------------------
Net unrealized appreciation of
investment securities $ 43,181,057 $ 52,604,333
=============================================================
Cost of investments for tax purposes for the seven month
period ended July 31, 2000 and the six month period ended
June 30, 2000 is $313,200,782 and $335,616,741, respectively.
</TABLE>
17
<PAGE> 20
NOTE 7-CAPITAL STOCK
Changes in capital stock outstanding during the seven-month period ended July
31, 2000, the six months ended June 30, 2000 and the years ended December 31,
1999 and 1998 were as follows:
<TABLE>
<CAPTION>
JUNE 30, 2000
JULY 31, 2000 (UNAUDITED) DECEMBER 31, 1999
--------------------------- --------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Sold:
Class A 150,019 $ 2,564,310 138,619 $ 2,372,672 647,940 $ 13,033,761
------------------------------------------------------------------------------------------------------------------------
Class B 59,840 996,864 52,713 878,095 289,189 5,853,184
------------------------------------------------------------------------------------------------------------------------
Class C 355,302 6,018,154 314,580 5,328,433 3,933,740 79,330,393
------------------------------------------------------------------------------------------------------------------------
Issued as reinvestment of
dividends:
Class A 22,720 378,080 22,720 378,082 240,465 4,199,593
------------------------------------------------------------------------------------------------------------------------
Class B 4,095 68,135 4,122 68,588 59,674 1,031,441
------------------------------------------------------------------------------------------------------------------------
Class C 221,341 3,681,465 221,372 3,682,003 3,685,888 63,875,426
------------------------------------------------------------------------------------------------------------------------
Issued in connection with
acquisitions*:
Class A -- -- -- -- 623,953 11,614,157
------------------------------------------------------------------------------------------------------------------------
Class B -- -- -- -- 256,293 4,785,508
------------------------------------------------------------------------------------------------------------------------
Class C -- -- -- -- 7,871,114 146,770,808
------------------------------------------------------------------------------------------------------------------------
Reacquired:
Class A (1,012,493) (16,880,516) (826,433) (13,783,748) (1,589,802) (32,114,838)
------------------------------------------------------------------------------------------------------------------------
Class B (238,761) (3,971,168) (223,715) (3,717,412) (211,198) (4,154,695)
------------------------------------------------------------------------------------------------------------------------
Class C (15,243,967) (253,914,933) (13,989,733) (232,834,206) (14,205,464) (280,402,871)
------------------------------------------------------------------------------------------------------------------------
(15,681,904) $(261,059,609) (14,285,755) $(237,627,493) 1,601,792 $ 13,821,867
========================================================================================================================
<CAPTION>
DECEMBER 31, 1998
---------------------------
SHARES AMOUNT
----------- -------------
<S> <C> <C>
Sold:
Class A 1,076,842 $ 22,390,887
------------------------------------------------------------
Class B 175,059 3,648,126
------------------------------------------------------------
Class C 5,318,582 109,967,149
------------------------------------------------------------
Issued as reinvestment of
dividends:
Class A 223,596 4,399,200
------------------------------------------------------------
Class B 14,140 277,225
------------------------------------------------------------
Class C 3,067,888 60,325,811
------------------------------------------------------------
Issued in connection with
acquisitions*:
Class A -- --
------------------------------------------------------------
Class B -- --
------------------------------------------------------------
Class C -- --
------------------------------------------------------------
Reacquired:
Class A (266,823) (5,484,230)
-------------------------------------------------------------
Class B (10,191) (209,632)
-------------------------------------------------------------
Class C (5,531,566) (114,890,208)
-------------------------------------------------------------
4,067,527 $ 80,424,328
============================================================
</TABLE>
* 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.
NOTE 8-FINANCIAL HIGHLIGHTS
The following schedule presents financial highlights for a share of the Fund
outstanding throughout the periods indicated.
<TABLE>
<CAPTION>
CLASS A(a)
-------------------------------------------------------------
SIX MONTHS
ENDED
SEVEN MONTHS JUNE 30, YEAR ENDED DECEMBER 31,
ENDED 2000 ------------------------------
JULY 31, 2000 (UNAUDITED) 1999 1998 1997(b)
------------- ----------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 17.57 $ 17.57 $ 20.06 $ 19.74 $ 16.63
------------------------------------------------------------ ------- ------- ------- ------- -------
Income from investment operations:
Net investment income 0.24 0.21 0.46 0.39 0.41
------------------------------------------------------------ ------- ------- ------- ------- -------
Net gains (losses) on securities (both realized and
unrealized) (1.10) (0.91) (0.68) 2.16 3.63
------------------------------------------------------------ ------- ------- ------- ------- -------
Total from investment operations (0.86) (0.70) (0.22) 2.55 4.04
------------------------------------------------------------ ------- ------- ------- ------- -------
Less distributions:
Dividends from net investment income (0.24) (0.24) (0.48) (0.39) (0.43)
------------------------------------------------------------ ------- ------- ------- ------- -------
Distributions from net realized gains -- -- (1.79) (1.84) (0.50)
------------------------------------------------------------ ------- ------- ------- ------- -------
Total distributions (0.24) (0.24) (2.27) (2.23) (0.93)
------------------------------------------------------------ ------- ------- ------- ------- -------
Net asset value, end of period $ 16.47 $ 16.63 $ 17.57 $ 20.06 $ 19.74
============================================================ ======= ======= ======= ======= =======
Total return(c) (4.91)% (3.99)% (0.85)% 13.26% 24.60%
============================================================ ======= ======= ======= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $22,909 $26,024 $39,195 $46,286 $25,151
============================================================ ======= ======= ======= ======= =======
Ratio of expenses to average net assets:
With fee waivers 1.26%(d) 1.26%(d) 1.13% 1.23% 1.45%
------------------------------------------------------------ ------- ------- ------- ------- -------
Without fee waivers 1.36%(d) 1.36%(d) 1.39% 1.52% 1.55%
============================================================ ======= ======= ======= ======= =======
Ratio of net investment income to average net assets 2.25%(d) 2.31%(d) 2.30% 1.99% 2.34%
============================================================ ======= ======= ======= ======= =======
Portfolio turnover rate 41% 31% 55% 34% 17%
============================================================ ======= ======= ======= ======= =======
</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) Calculated using average shares outstanding
(c) Does not include sales charges and is not annualized for periods less than
one year.
(d) Ratios are annualized and based on average net assets of $30,540,970 and
$31,375,679 for July 31, 2000 and June 30, 2000, respectively.
18
<PAGE> 21
NOTE 8-FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
CLASS B
------------------------------------------------------------
MARCH 3, 1998
SIX MONTHS (DATE SALES
ENDED COMMENCED)
SEVEN MONTHS JUNE 30, YEAR ENDED TO
ENDED 2000 DECEMBER 31, DECEMBER 31,
JULY 31, 2000 (UNAUDITED) 1999 1998
------------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $17.59 $17.59 $ 20.06 $20.69
------------------------------------------------------------ ------ ------ ------- ------
Income from investment operations:
Net investment income 0.17 0.16 0.31 0.22
------------------------------------------------------------ ------ ------ ------- ------
Net gains (losses) on securities (both realized and
unrealized) (1.11) (0.94) (0.66) 1.22
------------------------------------------------------------ ------ ------ ------- ------
Total from investment operations (0.94) (0.78) (0.35) 1.44
------------------------------------------------------------ ------ ------ ------- ------
Less distributions:
Dividends from net investment income (0.18) (0.18) (0.33) (0.23)
------------------------------------------------------------ ------ ------ ------- ------
Distributions from net realized gains -- -- (1.79) (1.84)
------------------------------------------------------------ ------ ------ ------- ------
Total distributions (0.18) (0.18) (2.12) (2.07)
------------------------------------------------------------ ------ ------ ------- ------
Net asset value, end of period $16.47 $16.63 $ 17.59 $20.06
============================================================ ====== ====== ======= ======
Total return(a) (5.33)% (4.41)% (1.50)% 7.25%
============================================================ ====== ====== ======= ======
Ratios/supplemental data:
Net assets, end of period (000s omitted) $6,558 $6,755 $10,076 $3,592
============================================================ ====== ====== ======= ======
Ratio of expenses to average net assets:
With fee waivers 1.93%(b) 1.92%(b) 1.86% 2.00%(c)
------------------------------------------------------------ ------ ------ ------- ------
Without fee waivers 1.93%(b) 1.92%(b) 2.02% 2.19%(c)
============================================================ ====== ====== ======= ======
Ratio of net investment income to average net assets 1.58%(b) 1.65%(b) 1.57% 1.22%(c)
============================================================ ====== ====== ======= ======
Portfolio turnover rate 41% 31% 55% 34%
============================================================ ====== ====== ======= ======
</TABLE>
(a) Does not include contingent deferred sales charges and is not annualized for
periods less than one year.
(b) Ratios are annualized and based on average net assets of $7,697,177 and
$7,860,316 for July 31, 2000 and June 30, 2000, respectively.
(c) Annualized.
<TABLE>
<CAPTION>
CLASS C(a)
---------------------------------------------------------------------------------------
SIX MONTHS
ENDED
SEVEN MONTHS JUNE 30, YEAR ENDED DECEMBER 31,
ENDED 2000 --------------------------------------------------------
JULY 31, 2000 (UNAUDITED) 1999(b) 1998 1997(b) 1996 1995
------------- ----------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 17.58 $ 17.58 $ 20.06 $ 19.74 $ 16.63 $ 15.66 $ 12.63
---------------------------------------- -------- -------- -------- -------- -------- -------- --------
Income from investment operations:
Net investment income 0.18 0.17 0.32 0.25 0.30 0.30 0.32
---------------------------------------- -------- -------- -------- -------- -------- -------- --------
Net gains (losses) on securities (both
realized and unrealized) (1.11) (0.94) (0.68) 2.14 3.60 1.81 3.09
---------------------------------------- -------- -------- -------- -------- -------- -------- --------
Total from investment operations (0.93) (0.77) (0.36) 2.39 3.90 2.11 3.41
---------------------------------------- -------- -------- -------- -------- -------- -------- --------
Less distributions:
Dividends from net investment income (0.18) (0.18) (0.33) (0.23) (0.29) (0.29) (0.32)
---------------------------------------- -------- -------- -------- -------- -------- -------- --------
Distributions from net realized gains -- -- (1.79) (1.84) (0.50) (0.85) (0.06)
---------------------------------------- -------- -------- -------- -------- -------- -------- --------
Total distributions (0.18) (0.18) (2.12) (2.07) (0.79) (1.14) (0.38)
---------------------------------------- -------- -------- -------- -------- -------- -------- --------
Net asset value, end of period $ 16.47 $ 16.63 $ 17.58 $ 20.06 $ 19.74 $ 16.63 $ 15.66
======================================== ======== ======== ======== ======== ======== ======== ========
Total return(c) (5.28)% (4.36)% (1.56)% 12.41% 23.64% 13.61% 27.30%
======================================== ======== ======== ======== ======== ======== ======== ========
Ratios/supplemental data:
Net assets, end of period (000s omitted) $329,819 $353,271 $610,041 $670,256 $603,179 $489,918 $399,162
======================================== ======== ======== ======== ======== ======== ======== ========
Ratio of expenses to average net assets:
With fee waivers 1.93%(d) 1.92%(d) 1.86% 2.00% 2.20% 2.26% 2.28%
---------------------------------------- -------- -------- -------- -------- -------- -------- --------
Without fee waivers 1.93%(d) 1.92%(d) 2.02% 2.19% 2.20% 2.26% 2.28%
======================================== ======== ======== ======== ======== ======== ======== ========
Ratio of net investment income to
average net assets 1.58%(d) 1.65%(d) 1.57% 1.22% 1.59% 1.81% 2.28%
======================================== ======== ======== ======== ======== ======== ======== ========
Portfolio turnover rate 41% 31% 55% 34% 17% 26% 5%
======================================== ======== ======== ======== ======== ======== ======== ========
</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) Calculated using average shares outstanding.
(c) Does not include contingent deferred sales charges and is not annualized for
periods less than one year.
(d) Ratios are annualized and based on average net assets of $431,226,216 and
$445,488,083 for July 31, 2000 and June 30, 2000, respectively.
19
<PAGE> 22
INDEPENDENT AUDITORS' REPORT
The Board of Trustees and Shareholders of
AIM Advisor Flex Fund:
We have audited the accompanying statement of assets and
liabilities of AIM Advisor Flex Fund (a portfolio of AIM
Advisor Funds, Inc.), including the schedule of
investments, as of July 31, 2000, and the related
statement of operations for the seven months ended July
31, 2000 and the year ended December 31, 1999, the
statement of changes in net assets for the seven months
ended July 31, 2000 and the two-years ended December 31,
1999 and the financial highlights for the seven months
ended July 31, 2000 and for each of the years in the
two-year period ended December 31, 1999. These financial
statements and financial highlights are the
responsibility of the Fund's management. Our
responsibility is to express an opinion on these
financial statements and financial highlights based on
our audits.
We conducted our audits in accordance with auditing
standards generally accepted in the United States of
America. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether
the financial statements and financial highlights are
free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as
of July 31, 2000, by correspondence with the custodian
and brokers. An audit also includes assessing the
accounting principles used and significant estimates made
by management, as well as evaluating the overall
financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial
highlights referred to above present fairly, in all
material respects, the financial position of AIM Advisor
Flex Fund as of July 31, 2000, the results of its
operations for the seven months ended July 31, 2000 and
the year ended December 31, 1999, and the changes in its
net assets for the seven months ended July 31, 2000 and
the two-years ended December 31, 1999 and the financial
highlights for the seven months ended July 31, 2000 and
for each of the years in the two-year period ended
December 31, 1999, in conformity with accounting
principles generally accepted in the United States of
America.
/s/ KPMG LLP
September 1, 2000
Houston, Texas
20
<PAGE> 23
<TABLE>
<CAPTION>
BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
<S> <C> <C>
Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
Director and 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
Formerly Director Dana R. Sutton
Cortland Trust Inc. Vice President and Treasurer INVESCO, 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, President and TRANSFER AGENT
Chief Operating Officer, Stuart W. Coco
Mercantile-Safe Deposit & Trust Co.; and Vice President A I M Fund Services, Inc.
President, Mercantile Bankshares P.O. Box 4739
Melville B. Cox Houston, TX 77210-4739
Jack Fields Vice President
Chief Executive Officer CUSTODIAN
Texana Global, Inc. and Karen Dunn Kelley
Twenty First Century Group, Inc.; Vice President State Street Bank and Trust Company
Formerly Member 225 Franklin Street
of the U.S. House of Representatives Edgar M. Larsen Boston, MA 02110
Vice President
Carl Frischling COUNSEL TO THE FUND
Partner Mary J. Benson
Kramer, Levin, Naftalis & Frankel LLP Assistant Vice President and Ballard Spahr
Assistant Treasurer Andrews & Ingersoll, LLP
Robert H. Graham 1735 Market Street
Director, President and Chief Executive Officer Sheri Morris Philadelphia, PA 19103
A I M Management Group Inc. Assistant Vice President and
Assistant Treasurer COUNSEL TO THE DIRECTORS
Prema Mathai-Davis
Formerly, Chief Executive Officer, Renee A. Friedli Kramer, Levin, Naftalis & Frankel LLP
YWCA of the U.S.A. Assistant Secretary 919 Third Avenue
New York, NY 10022
Lewis F. Pennock P. Michelle Grace
Attorney Assistant Secretary DISTRIBUTOR
Louis S. Sklar Nancy L. Martin A I M Distributors, Inc.
Executive Vice President, Assistant Secretary 11 Greenway Plaza
Development and Operations, Suite 100
Hines Interests Ofelia M. Mayo Houston, TX 77046
Limited Partnership Assistant Secretary
AUDITORS
Lisa A. Moss
Assistant Secretary KPMG LLP
700 Louisiana
Kathleen J. Pflueger Houston, TX 77002
Assistant Secretary
</TABLE>
REQUIRED FEDERAL INCOME TAX INFORMATION (UNAUDITED)
AIM Advisor Flex Fund Class A, Class B and Class C shares paid ordinary
dividends in the amount of $0.239, $0.184 and $0.184 per share, respectively, to
shareholders during the Fund's tax year ended July 31, 2000. Of these amounts,
74.97% is eligible for the dividends received deduction for corporations.
REQUIRED STATE INCOME TAX INFORMATION
Of the ordinary dividends paid, 9.99% of Class A, 9.99% of Class B and 9.99% of
Class C shares were derived from U.S. Treasury Obligations.
<PAGE> 24
THE AIM FAMILY OF FUNDS--Registered Trademark--
<TABLE>
<S> <C> <C>
EQUITY FUNDS
DOMESTIC EQUITY FUNDS INTERNATIONAL/GLOBAL EQUITY FUNDS A I M Management Group Inc. has provided
leadership in the mutual fund industry since 1976
MORE AGGRESSIVE MORE AGGRESSIVE and managed approximately $176 billion in assets
for more than 8 million shareholders, including
AIM Small Cap Opportunities(1) AIM Latin American Growth individual investors, corporate clients and
AIM Mid Cap Opportunities(2) AIM Developing Markets financial institutions, as of June 30, 2000.
AIM Large Cap Opportunities(6) AIM European Small Company The AIM Family of Funds--Registered
AIM Emerging Growth AIM Asian Growth Trademark-- is distributed nationwide, and AIM
AIM Small Cap Growth(3) AIM Japan Growth today is the eighth-largest mutual fund complex in
AIM Aggressive Growth AIM International Emerging Growth the United States in assets under management,
AIM Mid Cap Growth AIM European Development according to Strategic Insight, an independent
AIM Small Cap Equity AIM Euroland Growth mutual fund monitor.
AIM Capital Development AIM Global Aggressive Growth AIM is a subsidiary of AMVESCAP PLC, one of
AIM Constellation(4) AIM International Equity the world's largest independent financial services
AIM Dent Demographic Trends AIM Advisor International Value companies with $389 billion in assets under
AIM Select Growth AIM Global Trends management as of June 30, 2000.
AIM Large Cap Growth AIM Global Growth
AIM Weingarten
AIM Mid Cap Equity MORE CONSERVATIVE
AIM Value II
AIM Charter SECTOR EQUITY FUNDS
AIM Value
AIM Blue Chip MORE AGGRESSIVE
AIM Basic Value
AIM Large Cap Basic Value AIM New Technology
AIM Balanced AIM Global Telecommunications and Technology
AIM Advisor Flex AIM Global Resources
AIM Global Financial Services
MORE CONSERVATIVE AIM Global Health Care
AIM Global Consumer Products and Services
AIM Global Infrastructure
AIM Advisor Real Estate
AIM Global Utilities
MORE CONSERVATIVE
FIXED-INCOME FUNDS
TAXABLE FIXED-INCOME FUNDS TAX-FREE FIXED-INCOME FUNDS
MORE AGGRESSIVE MORE AGGRESSIVE
AIM Strategic Income AIM High Income Municipal
AIM High Yield II AIM Tax-Exempt Bond of Connecticut
AIM High Yield AIM Municipal Bond
AIM Income AIM Tax-Free Intermediate
AIM Global Income AIM Tax-Exempt Cash
AIM Floating Rate(5)
AIM Intermediate Government MORE CONSERVATIVE
AIM Limited Maturity Treasury
AIM Money Market
MORE CONSERVATIVE
</TABLE>
The AIM Risk Spectrum illustrates equity and fixed-income funds from more
aggressive to more conservative. When assessing the degree of risk, three
factors were considered: the funds' portfolio holdings, volatility patterns over
time and diversification permitted within the fund. Fund rankings are relative
to one another within The AIM Family of Funds--Registered Trademark-- and should
not be compared with other investments. There is no guarantee that any one AIM
fund will be less volatile than any other. (1) AIM Small Cap Opportunities Fund
closed to new investors Nov. 4, 1999. (2) AIM Mid Cap Opportunities Fund closed
to new investors March 21, 2000. (3) AIM Small Cap Growth Fund closed to new
investors Nov. 8, 1999. (4) AIM Constellation Fund's investment strategy
broadened to allow investments across all market capitalizations Dec. 1, 1999.
(5) AIM Floating Rate Fund was restructured to offer multiple share classes
April 3, 2000. Existing shares were converted to Class B shares, and Class C
shares commenced offering. (6) AIM Large Cap Opportunities Fund will close to
new investors Sept. 29, 2000, or when the fund reaches a total net asset value
of $750 million, whichever occurs first.
FOR MORE COMPLETE INFORMATION ABOUT ANY AIM FUND, INCLUDING SALES CHARGES
AND EXPENSES, OBTAIN THE APPROPRIATE PROSPECTUS(ES) FROM YOUR FINANCIAL ADVISOR.
PLEASE READ THE PROSPECTUS(ES) CAREFULLY BEFORE YOU INVEST OR SEND MONEY. This
report is not authorized for distribution to prospective investors unless
preceded or accompanied by a currently effective fund prospectus. If used as
sales material after Oct. 20, 2000, this report must be accompanied by a fund
Performance & Commentary or by an AIM Quarterly Review of Performance for the
most recent quarter end.
[DALBAR LOGO APPEARS HERE] [AIM LOGO APPEARS HERE]
--Registered Trademark--
[INVEST WITH DISCIPLINE]
--Registered Trademark--
A I M Distributors, Inc. FLX-AR-1
